Improve Your Pricing Schedule And Turn More Profit

Quote Info

We want you to look at pricing the same way you look at other business functions, because at the end of the day pricing is the greatest leverage that you have on your bottom line.  Empower your organization to be in tune with your customers and always be optimizing for profits. If you remember nothing else from this post – remember these few points.

• Pricing is a constant process that is fueled by tons of customer data

• A pricing committee is the strong grip of a hand that cranks your pricing lever

• You should be evaluating every quarter and making sure that your personas are quantified

• You should be making minor changes every three months, and major changes every six

• Improve your product so that you can improve your pricing. 1% increases in price yield 11% increases in profit.

More SaaS + Software Stats

Less than 20% of new revenue came from existing customers in the form of up-sell and expansion sales

Companies with longer contracts (2+ years) reported the lowest annual unit churn

SaaS companies in the $7.5MM-$15MM range are among the fastest growers

Growth rate accelerates in the expansion stage ($2.5M – $10M ARR)

Very few software companies grow beyond $1 billion in revenues

80% of venture capital investments take place in the enterprise

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts. Source: ForEntrepreneurs

The top 50% of the fastest growing SaaS businesses generate much higher upsells than their competitors. The larger the business, the greater the impact of upselling

It’s 9x cheaper to retain existing customers than acquire new customers: costing $0.13 to acquire any additional dollar of revenue

The median average contract length is 1.3 years and the average billing term is seven months in advance in 2016. Comparable to 2015, with average contract length shortening from 1.5 to 1.3 years and average billing period increasing by one month from 2015 to 7 months

More Growth Strategy Stats

Revenue Renewal Rate= (MRR up for the renewal at beginning of month- MRR not renewed at the end of month)/ MRR up for renewal at beginning of month)

High-growth companies offer a return to shareholders 5 times greater than medium-growth companies

Growth trumps all

The median Customer Acquisition Cost (CAC) for upsells is just $0.28 per $1, less than a quarter of the $1.18 spent to acquire $1 of revenue from a new customer

How to Reduce Churn

It’s common for startups to grow rapidly, doubling or tripling in size year over year, until they hit $5M in ARR

SaaS businesses face significant losses in the early years (and often an associated cash flow problem)

SAAS companies with >$250K median ACV book nearly 25% of their contracts at 3 years or longer

Analyzed by contract value, field sales are primarily evident for companies with median deals over $25K. Inside sales strategies are most popular for companies with $1K-$25K median deal sizes

The median average contract length is 1.3 years and the average billing term is seven months in advance in 2016. Comparable to 2015, with average contract length shortening from 1.5 to 1.3 years and average billing period increasing by one month from 2015 to 7 months