The Five Characteristics Of An Perfect SaaS Firm

De Wikifliping

With more than 80% of venture capital investments occurring in enterprise and with the general public markets disproportionately rewarding SaaS companies with large enterprise value-to-revenue multiples (median is 7.6), it’s no shock that interest Software-as-a-Service is booming. After meeting quite a few SaaS companies, I’ve compiled a list of my perfect characteristics for a SaaS enterprise below.

Attribute 1: Product Is Core to the Operation of the Enterprise The product is essential to the operation of a customer’s business. For instance, Zuora enables subscription billing; Expensify manages employee expenses; ZenDesk builds buyer assist systems. Prospects can’t perform without it.

Characteristic 2: Cost/Value Proposition is Straightforward The product is either cheaper than the choice: hiring an engineering workforce to build and keep a customized implementation of the product;

Or provides network effect benefits otherwise not possible to seek out: LinkedIn’s network effects drive the adoption of LinkedIn’s applicant tracking system;

Or affords sophisticated technology that's troublesome to replicate: Infer builds machine learning models on top of sales data to improve firm performance. Not each firm has ML expertise.

Attribute 3: Finances Its Own Growth
The company benefits from negative working capital and shorter time-to-market.

Negative working capital means customers pay initially of a month or quarter or year to make use of the product. These customers pay to improve the software over time by providing money up front, reducing the cash wants of the business. Because clients are paying to improve the product, somewhat than shopping for a "production-ready" enterprise product, the company can go to market a lot earlier in their development.

On the outset, the company targets the less sophisticated SMB segment which doesn’t demand the compliance, heavy security and integration options wanted by enterprise customers. This also decreasing time to market and provides revenues and product feedback in the brief term.

Attribute four: Environment friendly Sales Model
The company is able to recoup its cost of customer acquisition, be it on-line marketing or inside/outside sales, in less than a year. Ideally, the corporate presents 12 month contracts and the corporate can be profitable on a customer earlier than the client has an option to churn. Hand-in-hand with this concept is strong buyer retention.

Attribute 5: Market Leadership The corporate is already a market leader, is on the trail to changing into the market leader, or is operating in a segment with little viable competition. In SaaS, sales and marketing execution are critical to the success of the business. Competition will increase buyer acquisition costs and will increase sales complicatedity.

SaaS companies might be vastly valuable and for good reason: their products are core to their prospects’ companies, offer something which is unique in the market (cheaper, higher), finance their own growth through environment friendly sales models and ideally establish market leadership.