Everybody knows the concept of Software-as-a-Service (SaaS) business model by now.
But what not many might realize is that SaaS business lives or dies by its Monthly Recurring Revenue.
TheSaaSmarket is predicted to growat a compound annual rate of 17 percent by 2023.
Furthermore, the industry as a whole isestimated to grow over $60 millionby next year.
Challenges that companies attempting to adopt the model ought to be aware of to ride the profit train.
So lets start off with the basics.
It measures the expected and recurrent incomes generated by your SaaS subscription-based business.
Imagine you haveCustomer A playing $200 per month, and Customer B paying $100.
Your recurring revenue would be $300.
Say you have five paying customers, and the average amount is $100 per month.
Using ARPA, your MRR would be $500 (MRR =5 x $100).
That much should go without saying.
Constant and effective communication is also vital for this strategy.
Avoid just pitching tech jargon and power words in an effort to impress.
Which unnecessarily hurts your business.
As long as you offer a value-based service, you neednt worry about losing customers after raising prices.
Especially if it was undervalued in the first place.
For that, you need a good expansion tactic.
However, youd be surprised by the number of SaaS companies that neglect this part of their strategy.
Constantly generating the number of qualified leads eventually leads to increased customer acquisition numbers permanently.
An excellent approach to get new customers is by identifying your target group and focusing your marketing pushes accordingly.
Tailoring your efforts to appeal to their wants and needs specifically.
Your business MRR will grow exponentially once you put an effective customer acquisition strategy in play.
Thats why you should establish a core service; a baseline product stripped from all additional features.
Then, offer those extras as different packages, or as add-on services.
Itll be worth it in the end.
Dont, and youll struggle along.
Optimizing your current customer support strategy is a fantastic way for SaaS companies to increase their overall revenue.
double-check your customers are being taken care of and receiving individualized attention.
Avoid free trials
Offering free plans is a common default practice among software companies.
However, removing your free plans might be a great way to increase your MRR.
Free plans give customers an opportunity to test your service without commitment, and that in itself holds value.
The fact is that when you offer too much for free, upgrade rates decrease.
Take MailChimp as a good example of this strategy.
Avoid unlimited plans
Many software companies make the mistake of providing unlimited plans.
Remember, if you are providing high-quality value, underpricing is a terrible and costly mistake.
Providing add-on services or including them in premium plans is an excellent way to increase revenue and customer acquisition.
It will lead to valuable insights into your company development and the effectiveness of your pricing and marketing strategies.
They are a sure way to be able to offer better products and services to their customers.
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