This week’s SaaS roundup features articles on customer churn, revenue churn, product differentiation, SaaS revenue financing and more. Let’s get started!
Is revenue churn the definitive metric for calculating churn in your SaaS business? According to ScreenCloud‘s David Hart – the answer is no. Well, at least not always. In this 7-minute read, Hart takes a deeper look into churn calculation and discusses the finer aspects of normal revenue churn, net negative revenue churn, customer churn, LTV and more.
Churn is one of the most important KPIs that SaaS businesses want to improve. But for businesses with net negative revenue churn, although this may seem like a brilliant place to be, there are issues that we all need to be aware of.– David Hart
The rise in revenue financing loans across the SaaS landscape prompted a fantastic new article from David Cummings, which discusses the subject in great detail. What is a revenue financing loan? Revenue financing is a type of loan where payback is dictated by a number of elements including a percentage of revenue, rather than a traditional interest rate. If this concept is new to you, we highly suggest giving this article a quick read!
The good news is that it provides for a more aggressive, non-dilutive (usually) form of financing for Software-as-a-Service (SaaS) companies. The bad news is that it’s much more expensive than a bank loan, but still not nearly as expensive as venture capital.– David Cummings
Blossom Street Ventures‘ Sammy Abdullah brought forth some revealing data collected from 70+ SaaS companies, showing that the average SaaS company spends 23% of revenue on research and development (R&D). Abdullah breaks the data down by company size as well, and digs into the dollar amount companies end up spending on R&D annually.
No matter where your SaaS business is in its lifecycle, as one founder put it to me, “managing a large and growing stack for a cloud application is damn tough” so you’re going to be spending materially on the stack no matter how fast you’re growing or how mature you are.– Sammy Abdullah
Openview‘s Kyle Poyar dives into SaaS product differentiation, the do’s and don’t’s, and more. Poyar talks about how product development can help you compete, where it can go wrong, and shares 4 tips on building a great differentiation strategy for your SaaS business.
No matter which attribute you’ve chosen as your differentiator, delivering a proactive and highly responsive experience that blows your customers’ minds is always a smart strategy. Not only will your effort help cement your product’s place in your customers’ hearts, it will also inspire your customers to become brand ambassadors who recommend your product to others.– Kyle Poyar
On this episode of the ProfitWell Report, Neel Desai analyzes how annual SaaS contracts impact customer churn, and if longer contracts can lower churn in general. As the title of this article reveals, the answer is indeed yes. For those interested in more on this subject, Desai shares benchmarks to back up his findings, and includes a 3-minute video discussing the data in greater detail.
Ultimately, more annuals are likely better, especially given the churn implications, so I’d push for optimizing those relationships by understanding where the best point to ask for an annual upgrade is within your customer’s lifecycle.– Neel Desai
Thanks so much for joining us for this week’s SaaS roundup! We hope you got something helpful from these articles, and invite you back here next Monday for another SaaS roundup!