Why is SaaS pricing so important?

Updated: May 22, 2019


SaaS (Software as a Service) has singlehandedly emerged as the single largest business model disruption in the last decade. SaaS companies suddenly made available enterprise quality technology to people (and businesses) across the world. SaaS public companies made ~$70Bn (at a ~70% gross profit) while adding ~$700Bn in MCap on the Nasdaq.


But there is one thing that sets SaaS apart. A 70% gross profit means that the every $1 of revenue can add $0.70 to your profits & $9.5 to your enterprise value. Which makes for – Pricing, the single largest needle spinner (after the product and service, of course) in a SaaS companies life. Looking for that one small thing that makes a big change?


First of all, is re-evaluating pricing today really a good idea for us?


Every business has certain levers that are some of the most important areas that the business needs to consider. For a manufacturing company, it could be scale-up costs, raw material costs and marginal cost. In a SaaS business, it becomes a lot more complex as the marginal cost could be as low as 0 with the initial outlay in the millions of dollars. Lets challenge some fundamental assumptions that SaaS companies don’t follow.


Let’s play a game of Myth/Truth.


Which of these statements are a Myth and which are the Truth?


Answers:


Credits: OpenView Partners: 2018 Expansion SaaS Benchmarks Survey | Price Intelligently: The Anatomy of SaaS pricing

Ok, that makes sense.


I’m open to the idea.


Should I re-evaluate my pricing then?


It's really important you do.

Why?



Want to get your hands on our latest whitepaper on how to price your SaaS?


[ Download SaaS Pricing Whitepaper ]

Now how important is this if you are not planning on selling your business/ taking it public in the next year, you ask?




Important isn't it?


We are glad you agree.

Want to see what your other entrepreneurs are doing to price? The results may be as surprising as this article.


How are other tech companies pricing their SaaS?

Read here: [ How companies are calculating their SaaS pricing today ]

Want to get your hands on our latest whitepaper on how to price your SaaS?


[ Download SaaS Pricing Whitepaper ]

I hope that you find this information as a conversation starter with your CXOs. If you would like to have a conversation on how you can achieve this for your organization or need assistance in sourcing good partners, we can be reached on connect[at]prequate.in.

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