The real test for SaaS companies comes in maintaining an accelerated growth rate as they hit scale while also balancing growth and profitability. That’s where the Profit Plan comes in.
Customer Lifetime Value: The combination of continued ARPU with low churn
Cost to Service: Now that you are doing everything at scale, you need to get your cost under control – sales, marketing, support, operations, and retention.
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.
Your marketing leadership needs will be constantly changing in this growth stage. You now need to go after the “late majority” of the market, which includes specialization in specific market segments or industries. Here are some examples:
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.