Why Churn is SO critical to success in SaaS
Summary: Illustrates graphically why churn is a huge problem a SaaS company gets larger. It also looks at a very surprising factor that can massively accelerate SaaS growth: negative churn. (This article is applicable to any recurring revenue business, not just SaaS.) Introduction As a SaaS company becomes larger, the size of the subscription base becomes large enough that any kind of churn against that base becomes a large number.
5 crucial stages in designing your viral loop
Designing a viral loop has multiple stagesViral loops have been featured in mainstream media and there’s even a book coming out on it – but the step-by-step design of creating a new loop remains obscure, and for good reason. I’ve come to believe that creating viral loops is akin to building a software project – at best, it still comes down to a great team, a strong understanding of the tools available, and relentless iteration. There’s no recipe at the heart of it which guarantees a viral process every time, the same way that you can’t guarantee that any software project will result in market success.
How Sales Complexity impacts startup viability
There is no question that success for the entrepreneur starts with a breakthrough (or at the very least great) product or service. Yet too often, entrepreneurs fall into the “field of dreams” mentality (in the words of Terence Mann, AKA James Earl Jones: “build it and they’ll come”). But the truth is that defining the product is just the beginning. Entrepreneurs must spend significant time thinking about the complexity of their sales process and the cost of customer acquisition, as these factors will strongly impact a company’s ability to make money and attract investors. An obvious requirement for a successful startup is that they are able to make more money from a customer than they spend for a customer, i.e.
Multi-axis Pricing: a key tool for increasing SaaS revenue
Scalable pricing is a powerful tool to grow revenue in a SaaS or software business. It allows you to capture more of the revenue that your customers are willing to pay, without putting off smaller customers that are not able to pay high prices. It also provides a great way to continue to grow revenue from your existing customers. This post looks at how to create scalable pricing using multiple pricing axes, and discusses the different types of axes that can be used. Introduction Many SaaS startups begin life with one product that has a simple pricing model.
Facebook App Virality: Not Dead Yet But Dying Slowly
At the Social Gaming Summit in San Francisco today, the overall consensus among many speakers and attendees was that viral growth on Facebook isn’t dead yet, but it is definitely dying slowly. Kavin Stewart of LOLapps articulated the state of development on Facebook effectively when he suggested that with the ongoing changes on the Platform, it’s necessary to “keep your chin up”, as developers have historically figured out a way to continue growing. The term “viral growth” essentially means the art and science of free user acquisition.
Optimizing your Customer Acquisition Funnel
This blog post focuses on how B2B companies can optimize their customer acquisition funnels using a customer-centric methodology to analyze and remove blockage points. Acquiring customers in the B2B world involves using a variety of marketing and sales steps with the goal of converting prospective customers into paying customers. The process is often thought of as a funnel (see diagram above) where you pour in suspects at the top, and various steps in the process, some percentage of prospects successfully convert to the next stage, making the funnel narrower as the process evolves. No matter how large or successful your business is, you will have at least one place that is a blockage point in your customer acquisition funnel.
SaaS Economics - Part 2: Scaling the Business
This is the second part of a 2 part series that discusses the cash flow trough that happens to SaaS, or other subscription/recurring revenue businesses when they decide to scale their business by ramping sales and marketing. These kinds of SaaS businesses face a cash flow problem in the early days, because they have to invest up front in sales and marketing expenses to acquire customers, and only get payments from those customers over a delayed period of time. The first part of the series can be found here: SaaS Econonics – Part 1: The SaaS Cash Flow Trough. The greatest value from this post will come from downloading the model and inputting your own variables.
Top 5 Elements for Virality of Social Games
For today’s social game developer, virality is key to driving user growth and lowering customer acquisition costs. Here’s a look at five elements that boost the virality of social games: 1. Publishing updates about the game through users Every game developer should allow users to publish their top scores or milestones on their news feeds and Twitter streams.
SaaS Economics - Part 1: The SaaS Cash Flow Trough
This post provides SaaS entrepreneurs with an Excel spreadsheet model and graphs that show the cash flow trough that happens to SaaS, or other subscription/recurring revenue businesses that use a sales organization. These kinds of SaaS businesses face a cash flow problem in the early days, because they have to invest up front in sales and marketing expenses to acquire customers, and only get payments from those customers over a delayed period of time. I refer to this phenomenon as the the SaaS Cash Flow Trough. The model also compares the cash flows of businesses that charge monthly to those that are able to charge their customers for a year’s payment in advance. The greatest value from this post will come from downloading the model and inputting your own variables. The Excel Spreadsheet and associated PowerPoint file can be downloaded by clicking here.
The 5$ SaaS
The the relatively recent rise of two big types of software pricing & distribution is a opportunity to notice how different things in markets interact in these markets. If you spend your career in software you forget how weird an industry with n marginal costs is. An app store lends well to $1-$10 apps creating a demand creating a supply. Web based Saas lends well to $5-$50 apps creating a demand creating a supply. If you need a sales consultant or a long decision making process you need to go into the 5-6 figures realm. These things didn't happen because consumers really wanted smartphone apps that happened to cost around $1 or webapps that happened to cost $5 per month.
Motivating Virality in Facebook Games
Motivating Virality in Facebook Games [Editor's note: Brenda Brathwaite is a game designer with over 20 years of experience and credits on classic titles like Jagged Alliance and the Wizardry series. She is currently creative director at social game developer LOLapps, and a regular Inside Social Games contributor.] Getting players to post to the viral channel is a challenge every game designer faces when he or she is making Facebook games.
Will your 2011 Plan stand up to investor scrutiny?
We have just gone through the time of year when startups present their 2011 plans to their boards for approval. In many ways, these meetings are very similar to the meetings we have with new startups that have projections for how they believe their revenue will grow. What I always find interesting in this process is looking at how the management team came up with the bookings forecast, and what steps they took to validate the number.
Understanding SaaS: Why the Pundits Have It Wrong
Tune into any cable network stock market channel and the airwaves resonate with one consistent theme: SaaS companies are simply too expensive. In fact, we might even be in a bubble! The argument goes as follows — high revenue growth coupled with lack of profits means these businesses are fundamentally broken. Just as we saw in 1999-2000, investors’ willingness to pay for growth at any cost will end and many SaaS companies will be left behind. image: Andreessen Horowitz But that line of reasoning conflates the lessons of the 1999-2000 tech bubble.
