Interesting post from Byron Deeter on Sandhill where they studied more than hundred SaaS companies and came up with following laws for building highly successful SaaS businesses.
- Key business metrics for SaaS companies should be CMRR (Contracted Monthly Recurring Revenue) and Cash and not bookings
- It takes at least $300K of CMRR to climb the Sales Learning Curve - Stop at three sales reps until at least two of them are making $100K MRR quotas.
- As soon as you have climbed the Sales Learning Curve, begin ramping your sales force by hiring renewal-oriented account managers.
- Channels are very hard for SaaS companies to build, so do not base your plan on SIs and traditional ISVs. You will need to sell directly for a long time.
- Stay local - Prove your business in your market first.
- Invest early in backup and disaster recovery, but stick to one data center till listing
- Single instance, multi-tenant - Have only one version of the code in production. Say no to on premise deployments
- Savvy online marketing is a core competence (sometimes the only one) of every successful SaaS business.
- Constantly trade off cash vs. growth
- SaaS requires R&D and sales expense up front for a multi-year stream of revenue, so it demands enough investment capital to fund 4+ years of runway
Thoughts worth pondering for companies already having SaaS delivered products or planning for it.
At e-Zest, we have been providing similar kind of recommendations to our customers as part of SaaS delivery consulting services and its quite satisfying to see that research findings are in line with what we have been recommending for quite some time .