March 12, 2019

Where's the money?

Hey folks, it's my first time posting here!

I'm taking a SaaS company through an accelerator and I was wondering about monetization. Where do SaaS companies generate the majority of revenue? Is it the (hopefully) thousands of users who pay a small amount? Or the enterprise users who pay a large amount?

Any / all thoughts are welcome! I appreciate this will vary depending on the company

  1. 4

    This varies across the entire spectrum.

    Lots of users paying a small amount:

    • It's harder to get lots of users, but reduces your risk as you do so (no single user or group of users can bring you down)

    • Therefore, your business can be more stable

    • It can take longer to build a customer base

    • It's more expensive to maintain and support many users

    • They may be more price sensitive, so pricing changes can be painful or difficult

    • You probably don't need a sales team

    Fewer users paying a high amount:

    • Cost to support and maintain your systems is generally lower (but not always, especially if you're in a highly-compliant industry like healthcare)

    • You can probably land customers sooner

    • You need fewer of them, but each user represents more risk to your business as losing them could have a material impact on revenue

    • They have higher/more influential demands, and you might end up building your features for specific users in order to keep them

    • You probably need a sales team/process

    Food for thought!

  2. 3

    I think it's a mistake to think of SaaS companies as a "sector" with consistent patterns running through it. I don't think that kind of uniformity exists.

    There are SaaS companies that are targeted to individual customers.

    There are SaaS companies that are targeted towards enterprise.

    And there are thousands in the middle somewhere.

    If you're trying to position your SaaS, a good question to ask is: How high touch is your sales and onboarding?

    If you can go 100% self-serve (low touch), then you can easily focus on individual users / mass markets. If you have a complex onboarding process that requires 1-on-1 sales and unique system-integration issues, then your revenues will likely need to come form enterprise -- and your price point will need to be significantly higher.

    If your pricepoint is more like $10 per month: Unless you're selling massive multi-seat accounts, the money had better be coming from the mass market. (It's usually not viable to pay sales reps for monthly subscription costs under $250'ish -- so take that into account as well).

    So the question isn't "Where's the money". The question is "What revenue streams are viable for your SaaS?"... in other words, "Where's the money for you?"

    1. 1

      100% agree with @Bangkokian

  3. 3

    Yes.

    It depends on your market. B2C will usually be high user count, low price; while B2B will be the opposite. There’s no one-size-fits-all.

  4. 1

    You can discover some great data here: https://baremetrics.com/open-benchmarks