Are You Really A Software Company?

Stijn Hendrikse
Jan 16, 2019

Are you a software company? Or are you (at risk of) becoming a professional services company?

  • Is your Customer Success team growing faster than your operating profit?
  • Is your revenue to do customer development, paid on-boarding or implementations becoming a significant revenue stream?
  • Are you considering to let customers pay for premier support?

Some of the above can happen as you optimize for churn reduction, and it does not have to be bad. It could mean that your business model will be impacted though, with a major impact on how you approach sales and marketing.

The long term profitability of a pure SaaS company with low churn rates and a reasonable “Cost-to-Service” is very strong. It can support higher CAC (Customer Acquisition Cost) than a traditional Software Company with a perpetual license model. If your revenue becomes too dependent on the delivery of professional services, the typical high leverage SaaS Customer LTV (Life Time Value) principles may no longer hold true.

When the lack of a great customer experience in your product, missing features or complex onboarding is compensated by adding people, consider making the product better. If certain (big) customers drive you to start maintaining multiple custom versions of the product, or codebases that don’t allow you to upgrade everyone together, think again. Do you really want to go down that path?

It pays off to be a pure SaaS Company. Even if you need to leave some short term cash on the table.

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