The B2B Tech world is booming the SaaS business models. And statistics back that up. 50% of the enterprises run their operations by depending on a SaaS platform, of which 38% work exclusively on the SaaS module. As the applications run mostly in the cloud, they are often accessible both via a desktop version or with a web interface. Let us dive right into this article and explore the world of SaaS and its facets deeply.
What Is the SaaS Business Model?
The SaaS business model is basically a subscription-based service. Simply put, you pay as you go. You will only have to worry about the recurring payments, which is otherwise known as MRR, monthly recurring revenue.
Aside from this, customer loyalty is of huge importance to all of these models, as that is the only thing that keeps them afloat. Not only that, but software vulnerabilities may also put the subject of data breach and security under the spotlight, so that again is something that the models delve into.
Benefits of SaaS Business Model
- Lesser Price: As SaaS business models are distributed on a subscription basis, this eliminates the licensing fees involved in traditional software installs.
- Higher Flexibility: SaaS provides the customers with the opportunity to grow your business with your software and thus higher flexibility and reduced churn.
- Greater adoption rates: The ability to use these models and access them from almost anywhere in the world has given a pep up to their adoption rates.
- Quicker Upgrades: SaaS software generally upgrades without experiencing any user downtime or even with a shorter maintenance window.
Stages of a SaaS Business
The Early Stage: Here in this stage, you are still operating at the bare-bones level. It is possible that you might not have entertained a lot of audiences, yet. Your product will still be taking baby steps and you may have decided to take in the bootstrapping technique to take better control of your actions.
The Growth Stage: It is the growth stage, where you actually get to see some productivity flowing in and out. You will now have to raise some substantial amount of funds, you will have to increase the team members, invest in product development, and scale-up.
The Mature Stage: This is the stage where you can take a sigh of relief as you have finally established yourself in the market. Now you have a well-targeted audience and the company is bringing in good MRR. All of the key KPIs are stable. Now that you are on a pile of potential revenue, you can still do better.
Factors Favouring B2B Technology SaaS Now
The Incumbent: In SaaS, B2B tech is unfurling its wings with the importance of retention. Customer loyalty plays a key part in every marketing strategy. The incumbent SaaS provider is likely to be working hard to retain the clients, for which you will have to know the weak points of the competitor’s solutions and focus on efforts.
The Clients: Every SaaS B2B tech has a lot to do with the number of clients. A larger number of customers means bigger is the chance of switching and hence the costs induced. It is only dependent on the satisfaction factor who will resist unless the value is more compelling while addressing the other issues.
Examples of Hugely Successful B2B Tech SaaS Companies
- Google: Goes without saying, the first name on the list is Google. Some of the widely used products are Google Drive, Google Docs, and Google Hangouts, etc. Statistics claim that it bagged an overall score of 93 out of 100.
- Slack: Slack too is a big name in the software world. It is basically a collaboration and chat tool that allows businesses to work together. The same report states its overall score of 94.
- Microsoft: Microsoft offers more than 100 cloud products and that too in different industries. Some of which include Windows, Office, SharePoint, Skype, etc. It too bagged an overall score of 94.
- SurveyMonkey: Being a web-based survey provider, it serves businesses of all sorts and shapes. Some of its categories include Survey, Online form Builder, and Market Research Services. While this scored a whopping 91 in the same report.
Essential SaaS Business Metrics
Metrics for any business accounts for the health and wellness of the SaaS business model. Here are a few that you need to keep a close eye on:
Churn: Churn rate is nothing but the number of clients that leave or unsubscribe you in a matter of time. It is no surprise that products evolve all the time and users leave in a fraction of second when they see a better offer. It is the churn rate that decides how satisfied your customers are on a reality check. Given the statistics, a churn rate of 7-8% is deemed acceptable.
Formula: Number of Churned Customers/ Total number of customers
CAC: Customer Acquisition Cost tells you how much time and money you need to invest in order to acquire a new client. This is said to be one of the best ways to ascertain how profitable your company is going at the moment.
Formula: Total investment in sales and marketing/ Number of acquired customers
ARPA: The average revenue per account is the metric that shows how much revenue is derived from one customer. It is calculated in monthly, quarterly or even yearly basis.
Formula: Total MRR/ Total number of Customers
CLV: Customer Lifetime Value is the average revenue that you receive from the users during the period that they are subscribed to the software.
Formula: ARPA X Gross Margin %/ Churn rate
If you are into e-commerce business and wish to gain more than usual, B2B tech products are highly recommended for you. The SaaS business models provide you with a world of endless opportunities. Moreover, its adoption is all set to rise. All you need to do is pay heed to the ever-changing dynamics and render unique solutions to the customers.