Profit

The real test for SaaS companies comes in the final phase, Profit. At this stage, companies strive to maintain an accelerated growth rate as they hit scale while also balancing growth and profitability.

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Profitable ARR

To get to 40% and stay there, you need to start making a profit

CTS

Now that you are doing everything at scale, you need to get your cost under control – sales, marketing, support, operations, and retention.

LTV

Customer Lifetime Value: The combination of continued ARPU with low churn

The rule of 40%

Private equity firms and later state investors have accepted that SaaS companies can compensate profitability with subscriber and ARR growth. The “40% Rule” is a method to make sure these are in a healthy balance.

The rule states that your growth rate plus your profit should add up to 40%. So if you’re growing at 30%, you should be generating a profit of 10%. If you’re growing at 40%, your profits could be as low as 0%. If you’re doing better than 40% total, that’s awesome.

Think of 40% as a magic number to get serious interest from private equity financing firms and might even land you an IPO.

Opening international subsidiaries
Expansion (segments & verticals)
Consideration of inorganic growth (M&A) to speed up market entry or solution completion
Developing a distributed marketing team across countries or segments
Diversifying your channel marketing across resellers, distributors, OEMs, etc.
Developing products for specific industries or verticals
Preparing an IPO (initial public offering)
Developing a plan to monetize your intellectual property
Evolving legal agreements as they support or inhibit marketing
Addressing potential competition with yourself (older products/plans)
Grandfathering early adopters (customer) into new pricing plans

Flexibility

As your company grows, the marketing team will get bigger, and the scope of potential work they can do will grow faster. The challenge is that some CMOs are more experienced in the art of marketing, others in science. To scale you need both.

The same flexibility offered with the SCALE Plan (bringing in CMOs with different types of expertise as the needs of your company change) applies to the PROFIT program. This service is optimized to give you the right SaaS CMO expertise to address all the challenges you’ll encounter.