SaaS Math - What I’ve learned about Subscription Economics

$Really basic... SaaS is a subscription to your software or service It’s not something new. It’s not necessarily better.$

$What’s bad. Instead of paying you now, customers will pay you over a period of maybe several years. Cashﬂow is often a p...$

$What’s good. Predictable: Once you get some data, you can easily estimate your revenue for the months to come. Customers ...$

$Glossary of KPIs$

$Glossary of KPIs AIV: Average Invoice Value per customer: How much you bill each customer (on average) every month.$

$Glossary of KPIs AIV: Average Invoice Value per customer: How much you bill each customer (on average) every month. MRR: M...$

$What to watch$

$What to watch You want to grow faster than you churn. Or you die.$

$What to watch You want to grow faster than you churn. Or you die. Increasing AIV is often very proﬁtable. Decreasing chur...$

$Create a dashboard Preferably automated based on real invoicing, but can also be a Google Doc. Keep it simple. Take the ...$

$Our dashboard For each month since the dawn of time (feb 2010): Month # Customers Amount invoiced % Churn % Aver...$

$Once you get this...$

$Once you get this... Make a spreadsheet showing how much sales, development, support and marketing costs you.$

$Once you get this... Make a spreadsheet showing how much sales, development, support and marketing costs you. Break it dow...$

$You will ﬁnd that...$

$You will ﬁnd that... Sales will always be expensive. This is why decreasing churn and increasing AIV is good.$

$You will ﬁnd that... Sales will always be expensive. This is why decreasing churn and increasing AIV is good. Development...$

$What business are you in? http://chaotic-ﬂow.com/media/saas-sales-models.pdf$

$What business are you in?$

$What business are you in? Self-Service: Generally low price point. Customers must be willing and able to service themselv...$

$What business are you in?$

$What business are you in? The average Internet entrepreneur dreams of a self-service SaaS model. More often than not howev...$

$Pro tips:$

$Pro tips: Don’t get too mathematical.$

$Pro tips: Don’t get too mathematical. Fifty or so customers are not something to draw statistical conclusions from....$

$Pro tips: Don’t get too mathematical. Fifty or so customers are not something to draw statistical conclusions from.... U...$