6. Excel Spreadsheet Available here: www.forEntrepreneurs.com/saas-economics-1 Part of a blog post that describes the model The figures I have used should not be taken as a default set of values for any SaaS business There are going to be wide variations in funnel efficiencies that will make each individual business considerably different
16. Our Example Marketing Funnel Visitors to Web Site Organic Traffic SEM Other Paidlead sources Top of Funnel Raw Leads Registered Visitors Middle of Funnel Qualified Leads Inside Sales Inside Sales Closed Deal Closed Deal
40. Conserve Cash Invest Aggressively Search for Product/Market Fit Search for Repeatable & Scalable Sales Model Scaling the Business
41. What happens at the company level when we add 2 new sales hires every month? 32 Months to get back the investment Total amount invested: $2.6m First profitable month: 21 Worst loss: $190k in month 11
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44. What’s the blocker to faster growth? Usually it is the rate at which you can grow leads Typically each lead source maxes out Adding new lead sources often means paying more per lead Leads Source C Source B Source A Time Another blocker: The rate at which you can hire and train really high quality sales people
45. The Key Metrics CAMPAIGNS TO DRIVE TRAFFIC VISITORS OVERALL CONVERSION % CONVERSION % TRIALS (BY LEAD SOURCE) CONVERSION % CLOSED DEALS
47. What happens if we collect a year’s payment in advance? Looking at the whole company picture when hiring 2 sales people per month Year in advance Eliminates the cash flow trough, and means $35m more cash in this scenario Monthly
48. Lesson Learned Look for ways to get customers to pay in advance Depending on the cost of your capital, this can be worth fairly large discounts
56. A way to get to negative Churn Top of Funnel Middle of Funnel Inside Sales Increasing revenue per client over time will create negative churn Closed Deal Expand, Upsell, Cross Sell
63. High CAC requires higher pricing … which leads to greater approval complexity
64. SaaS Sales Complexity Low risk to customer Easy to try before buying Small initial financial commitment Easy to cancel if not working Low IT involvement in decision process No infrastructure or IT
65. How SaaS changes Sales Complexity Value / Pain / Urgency = LTV (logarithmic) Sales Complexity
67. Product Development Single version of the product at all customers Can be improved monthly Provides clear feedback on what is working Great indicator of customer happiness Which is a predictor of churn
