For any Software as a Service (SaaS) business, it’s always going to be about investing in customer acquisition first and foremost, and it is often going to be a while before profits start to reveal themselves. It’s a slow burn sector, but it’s also one that boasts some significant long-term revenue if the business is pitched the right way.
Almost two-thirds of small businesses fail to generate a profit but SaaS is a booming industry, worth an estimated $141 billion a year by 2022. With that in mind, we’ve put together a definitive list of tips all SaaS businesses should be implementing to maximize total revenue.
1. Set your goals
Generate clear revenue goals so you know what success looks like to your business and reevaluate those goals at every fresh stage of the business. For a SaaS business, scaling is all about developing a user base at the beginning but also continuing to develop your product to retain customers. It’s a balancing act you’ll need to perfect.
2. Perfect your pricing strategy
Your price is going to determine not only who your customers are, but how likely they are to choose your software over the competition. Research both your direct competitors and other SaaS pricing models and do your own market research to help settle on a price that positions your company either as budget, premium, or somewhere in-between.
3. Focus your KPIs
Your key performance indicators are how you measure your business growth. When your business is providing software as a service, those KPIs should center around four things:
number of subscribers
the cost of customer acquisition
lifetime customer value
If you streamline your metrics around these four areas you’ll be focusing your business around what really matters when it comes to generating long-term revenue.
4. Streamline your expenses
Particularly given the move towards remote working catalyzed by the COVID-19 pandemic, there are more employees than ever before working from home in 2021. As a cloud-based company, you are perfectly placed to prioritized remote working, which will cut down significantly on costs such as office rental. There is also the possibility of automating certain tasks if you decide to scale down your workforce.
5. Hone your marketing strategy
Without a firm strategy in place, you are likely to get lost quickly and won’t be able to visualize exactly where you want to be. A good marketing strategy for SaaS knows exactly who you’re trying to reach and how to reach them. Pinpoint your customers, being as specific as possible, and optimize your strategy around them. This will include taking the following steps:
Understanding that marketing is all about customer acquisition and so might not lead to immediate positive revenue results.
Optimizing website design triggers subtle visual cues to highlight certain items, using descriptive language to tell visitors exactly what they’ll be getting for their subscription/investment and placing testimonials to create trust in your brand.
Offering a free trial to entice new customers and using that trial period to reinforce what makes your service so special.
Reducing all barriers to entry. Make it as easy as possible for new customers to sign up. An interesting tactic is to remove the need for credit card registration, as this can negatively affect a potential customer’s perception. 30-day trials are also typically better at converting customers as it gives them more time to familiarize themselves with the software.
In it for the long haul
Revenue maximization in the short term is easy. It’s building those short-term gains into something long term that spells the difference between the SaaS companies that are a flash in the pan and those that create a lasting impression on the market.
It’s all about balancing the acquisition of new customers with the retention of existing subscribers and with practice — a balancing act it’s surprisingly easy to perfect.
We can help
If you’re interested in learning more about SaaS and revenue maximization then get in touch with our financial experts today. Find out how GoCardless can help you with ad hoc payments or recurring payments.