"In today’s business world, technology, specifically software, is ubiquitous in the business environment. It can help track shipments across continents, manage large numbers of employees and control inventories.
For years, companies have relied on software to run their own computer networks and internal structures. But in recent years, the traditional software license purchase has become old fashioned. Many customers and vendors are migrating to a Saas(Software as a Service business model).
SaaS is a web based software application delivery system. The SaaS model is simple; the enterprise vendor operates and hosts clients over the internet, and the client enjoys access to all business activities online. Customers pay the vendor monthly fees (annuity payments) (and are usually not required to buy extra equipment or software licenses for using the application).
Unlike traditional consumer oriented web host software, SaaS literally encapsulates the enterprises. This is why the demand for software licenses has remained flat, while SaaS has experienced a big boom. This demand is due, in large part, to its low costs. Business enterprises save on the costs incurred by IT related investments. SaaS fosters innovative ways to be efficient with tasks. It also offers a considerable decrease in deployment time.
SaaS is of two types; business application and development tools. Business application SaaS entails the software that helps businesses accomplish their tasks accurately and quickly. Examples include client management, such as CRM systems (customer relationship management) and marketing automation. Business Applications are very competitive and very specific. You can find a SaaS provider to satisfy your most complex or unique demands.
SaaS owners should always seek to understand, test and apply key performance indicators.
- Monthly Recurring Revenue serves as a primary benchmark for progress. It is the steady cash flow from client sources, such as monthly subscriptions (measured by subscription monthly revenues owed by a customer over the duration of the months).
- Cost per acquisition is used to determine the amount of money spent in acquiring the customers and the viability of the process. It is measured by adding the marketing and sales expenses over the average cost per new customer to the business.
- Average revenue per customer is more straightforward. It is used to determine the revenue already received from customers.
- Lifetime value of a customer, in essence, is his or her economic value to your company. This figure is determined in different ways, depending on your business model.
- How many customers does your business lose per month? How many come back for your services? This is defined by churn. Churn measures the percentage of customers that your business loses over a specific duration of time".
By Roy Saar
Roy Saar is an Angel investor & Venture Capitalist with Mangrove Capital Partners
Roy seats on the boards of: WIX, PlanetSoho, WalkMe, RFcell & Polaris Solutions.
