4 signs that your SaaS business is dying

Original author: Josh Pigford
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There are a number of indicators that at an early stage make it clear that your SaaS business is doomed. Let's look at each of them and find out how to fix the situation.

1. ARPU is less than $ 20

ARPU (Average Revenue Per User) - the average monthly income per user. It is calculated by dividing the amount of monthly revenue by the number of users.

Low ARPU is low margin . Even if we ignore the technological costs for each client (for example, the cost of server resources), the margin will still be close to zero. Why? It's all about customer support.

The need for support with low ARPUs is a real disaster in terms of business growth. Imagine a company with a small staff - a startup with a low ARPU and a lot of customers who bought the cheapest subscription, but at the same time require first-class service. What is more profitable: to provide support to 1000 customers who paid $ 3 per month, or 30 customers who paid $ 100 per month?

Bear in mind that these three-dollar customers are the most demanding and least loyal . Then you will immediately understand why a low ARPU can quickly ruin your business.

How to solve this problem? To increase the cost of services.

If you work in the field of B2B, and the initial tariff plan costs less than $ 20 per month, you underestimate the services provided. When you even improve or facilitate the functioning of someone else’s business by a gram, the minimum subscription cost should be above $ 20 . The end of the story.

Are customers not willing to pay so much? This means that you provide an insufficiently valuable service, do not completely solve the problem, or position yourself incorrectly.

In B2C, little can be done in this sense. Most B2C products are knowingly doomed to a long and arduous journey to the breakeven point. The story is that when a B2C product was able to survive without reliance on a millionth venture capital funding, units.

2. Revenue ceiling less than $ 100 / month

Revenue ceiling - the maximum cost of a monthly subscription for one account. This is a great measure of the true value of the dish that you present to your customers. Both the income and the outflow of customers depend on the cost.

High cost = high income and low outflow.

Low cost = low income and high outflow.

If you are not able to request and receive more than $ 100 / month, you need to work on the value of the product. When your service will better satisfy customer needs, you can set a higher tariff and accelerate business development.

By the way, for this reason unlimited plans are disastrous for the company . They instantly limit the revenue ceiling.

3. Monthly outflow of customers more than 25%

Outflow - the percentage of customers (respectively, and income) who refuse your product every month. If it is above 25%, you lose a quarter of the business every month. Naturally, this fact does not add stability.

It is dangerous when high outflows are masked by high growth rates . As long as the number of new users exceeds the number of those who abandoned the product, revenue is growing. The problem is that endless growth is impossible, and after a while you will find that the connection schedule for new customers has gone down, and the business has become unprofitable.

To reduce churn, provide higher value and increase the number of contacts with the user. This can be weekly or monthly newsletters, cases, webinars, video instructions, etc. Also add the ability to use your product together with the team - it is more difficult for the client to refuse the service when all employees are used to it .

4. MRR less than $ 2000 after a year in business

If your business is more than a year old, and MRR (Monthly Recurring Revenue, regular monthly income) stubbornly does not want to exceed a couple of thousand dollars, you most likely do not solve the urgent problems of your customers.

If your product does not solve real, significant problems, do not try to revive a stillborn. Find another “pain” in many companies that you can make money from.

How is faith in success?

It is sad if, when evaluating your business, you find one of these signs. When you invest all your energy, spend a huge amount of time and money, it is difficult to come to terms with unpleasant reality.

However, face to face is the fastest way to achieve what you want. Life is too short to do things that don't affect anything.

There are many examples where people do not stop and continue to spend energy on developing a non-viable idea. Others, on the contrary, have the courage to say “stop” and change direction. Their efforts are not in vain: not the second, so the third product “shoots”, and the victory fully pays for all previous failures.

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