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SaaS Pricing Models and Strategies

August 4, 2022 by scott.p

With the influx of the Software as a Service (SaaS) business model over the past several years, many new pricing strategies and models have been implemented. There are a wide variety of viable options to choose from depending on your target market and price points. In this post, we will explore a few of the most common SaaS pricing models and SaaS pricing strategies.

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SaaS Pricing Strategies

Before deciding which specific model to choose, a successful SaaS company will carefully plan their long-term pricing strategy. Without a legitimate strategy to inform pricing options, the whole plan and company can easily go awry. These are a few of the most common pricing strategies that SaaS companies should implement.

Penetration

With this approach, the whole goal is to gain as much of the market as possible right off the bat. To do that, a company must price their products lower than their competitors to encourage customers entering the field, as well as those who are already established with competitors.

While offering SaaS products at a price with minimal profit may seem like leaving money on the table, this approach allows a company to quickly enter the market. Once they have proved their worth to their customers, they can begin gradually raising their prices.

Skimming

This method serves as the exact opposite of the penetration approach. Instead of starting low and gradually raising the price, this method involves starting high and gradually dropping it.

This is a smart way for companies with a unique SaaS product to enter, as the early adopters will be willing to pay more. As the product loses its grandeur and competitors try to penetrate the field, dropping the price allows you to maintain your customers and reach new markets.

Cost Plus

In this strategy, the whole goal is to ensure profits from the very beginning. The price is based on the cost per unit combined with a designated amount of money that the company hopes to make per unit.

This method is simplistic in that the price is always based on the cost. While this does ensure that you make a profit, startups using this approach will probably have difficulty penetrating the market.

Value-based

Instead of focusing on your own costs in providing the solution, this strategy focuses on the value from the customer’s perspective. Of course, this value is subjective and can vary depending on the user. This means that you need to understand exactly how your users will use your product and what benefits it will provide them.

Successfully using this approach requires significant understanding of your customers and how they feel about your product and price points. When done correctly, you can gain significantly more profit per customer than with many of these other strategies.

This discussion of strategies is especially important in the determination of SaaS pricing strategies. Many startups begin without any clear competition or a completely new SaaS solution, which makes it very difficult to know what the prices should be. As Lincoln Murphy so aptly puts it, “no one knows what the best price for your SaaS offering should be.”

By working through some strategies, however, you will be able to generate a better idea of what your pricing approach should be. Once you determine your strategy, you can make better, more informed decisions about your actual model.

Pricing Models

Done are the days of simple flat rate pricings. For SaaS startups and companies, a flat-rate pricing system severely limits their income potential, as their high usage customers will receive significantly more value. Usage-based models have been used by a few companies, but the inconsistency in income for you and the prices for customers causes most people to avoid this model.

This has led to a lot of creativity in developing models that make sense for the customers and provide legitimate income for the companies. Here are a few of the most common models.

Tiered Pricing

One of the most common pricing models is tiered pricing, which offers different plans for different personas. Oftentimes, this will range from free users, who have very limited functionality, all the way to large enterprises and businesses. Most companies who use this pricing model have pricing pages with three or four different options.

Price tiering allows you to effectively market your product to multiple personas, greatly expanding your pool of potential customers. By not overcharging or undercharging any of your customers, you maximize each customer’s value and provide them with the tools they deserve. This model goes extremely well with the value-based and cost plus strategies.

Price Per User

This is another common model for SaaS companies. In this setup, the company designates a price per user, and that price stays the same regardless of how many individuals are on a given plan. This arrangement is extremely simple, allowing the customer to easily calculate the consistent costs and the provider to earn the same consistent income.

While the simplicity is appealing, this model is not ideal for large enterprises. Ryan Law of Cobloom says it this way: “by charging per user, you provide a reason to avoid adding new users to the tool. This also provides an incentive to cheat, and wherever possible, share a single login between multiple team members.”

Per Active User

A variation of the price per user model, this approach allows the customer to pay based on how many people actually use their product. In some ways, this is similar to the usage based approach, except that the variation occurs with the number of people not the quantity or types of use.

This model encourages enterprises to sign up as many of their members as possible, knowing that they will only be required to pay for those who end up using it. Paying based on the number of users maximizes value for the customer and ensures that you don’t overcharge or undercharge.

It is important to point out that these are not the only models. Other common models include per feature pricing and premium pricing. Another important thing to mention is that these approaches are not mutually exclusive. Additionally, elements such as free trials can be tacked onto any of these pricing models, particularly if you are working within the penetration strategy.

How Does RevTek Help SaaS Companies?

Regardless of which of these SaaS pricing strategies or models you have or choose, your company will need an injection of external capital at some point. With their reliance on relatively small monthly payments and a lack of upfront payments, SaaS companies in particular need outside investments. That’s where we come in.

We specialize in providing capital to SaaS companies just like yours. Our process is simple. We provide you with the growth capital that you need to expand your operations and increase the value of your SaaS business in exchange for manageable monthly payments based on your monthly, recurring revenue.

Unlike others, we do not take any equity, a seat on your board, and our terms are simple. To be eligible, you do not have to be profitable, but you should have a predictable recurring revenue of at least $50,000 a month. If you are a SaaS company, learn more about how we can partner with you.

Filed Under: Articles, Blog Posts, Business Investment, Capital Raising

Your Guide to SaaS EBITDA Margins

August 27, 2021 by scott.p

As a SaaS business owner, the value and profitability of your company are always on your mind, especially in the early stages. There could be situations where you ignore overall profit declines or are unaware of your specific metrics, both of which run your company without reliable metrics.

In any case, several formulas can help you assess the profit margin of your company that will tell you how much value your software company holds. Calculating EBITDA is one such metric that business owners use to measure growth and profitability.

What is EBITDA?

EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization”. It seems like a complex term, but broken down it is a calculation for profitability. It is sometimes an alternative to net income or operating cash flow.

EBITDA is the figure that takes the total revenue, subtracting company costs from it, and adds back in interest, taxes, and depreciation values. Knowing this figure helps companies to evaluate themselves against similar businesses and industry averages. EBITDA is also often discussed when considering the sale of a company because it gives buyers a good idea of its ability to generate cash flow.

How to Calculate EBITDA

To calculate EBITDA, you should already have all the data sets you need on the company’s income statement and balance sheet. There are two ways to calculate EBITDA.

These two formulas may yield different results because Net Income may include various factors than Operating Income, such as one-time expenses and non-operating costs.

Starting with Net Income, the formula is:

EBITDA= Net Income + Interest + Taxes + Depreciation + Amortization 

Because you can calculate Net Income without interest and taxes, you must first add them back to the amount. 

Starting with operating income, the formula is:

EBITDA= Operating Income + Depreciation Expense + Amortization Expense 

Because you can calculate Operating Income before you subtract interests and taxes, there are not more steps to the process.

The Rule of 40

Knowing the EBITDA of your company is necessary for finding another necessary calculation: The Rule of 40. This number is a well-known figure in the SaaS Industry that assesses the health of your SaaS Business.

The formula says that if you add together your revenue growth rate and EBITDA profit margin, and if their sum equals more than 40%, your company is healthy and doing well.

The Rule 40 still applies to companies with low or negative profits because they may have high enough growth rates to counterbalance them—for example, start-ups seeking to maximize customer acquisition costs. The opposite is also true for slow-growing companies that have significant profits.

The median EBITDA margin for publicly traded SaaS Companies typically sits around 37%, meaning just under half of the companies meet the Rule of 40.

The Trouble with EBITDA

Many business owners may not choose to rely on the EBITDA measurement because there are a few drawbacks. EBITDA is not a Generally Accepted Accounting Principal (GAAP). Therefore, many companies may calculate it differently. Buyers can also be wary of committing to companies that highly advertise EBITDA because this number can downplay and distract from rising costs in financial statements.

We Boost Your SaaS Company with an EBITDA Margin

Our team at RevTek Capital understands how crucial EBITDA margins are to the health and revenue increase of your SaaS company. By taking a capital investment to increase sales and marketing dollars or diversify your customer service options to drive up profits, RevTek can help you boost your company’s growth.

We make it our aim to accelerate your business growth and would love to show you how by helping you calculate your EBITDA. No successful SaaS business CEO has ever run their company without taking financial metrics and statistics into consideration. Call today at 480.332.0399 so we can evaluate your company earnings and help you determine your company’s next growth steps.

Filed Under: Business Investment

Cost of Sales for SaaS Company

July 29, 2021 by scott.p

Many different metrics are essential to understand when running a Software as a Service (SAAS) Business, such as Monthly Recurring Revenue, Churn, Net Retention, and others. COGS, or the cost of what it takes to deliver a product or service, is also among those crucial metrics.

Unfortunately, it can be one of the most challenging numbers to calculate because no Generally Accepted Accounting Principle (GAAP) outlines what information must be included in COGS. Therefore, many businesses vary in their approaches to product and service costs.

Learning about COGS and knowing how to calculate the figures accurately will allow you to determine the total cost of producing and delivering your service. Additionally, you will be able to calculate your gross profit and gross profit margin accurately.

We have outlined a few of these concepts below to help you get a basic knowledge of COGS.

What is COGS?

The Costs of Goods Sold (COGS) is the amount of money required to deliver a product or service. A traditional product involves materials, production, and delivery costs while separating overhead operation expenses like rent, commissions, and salaries.

How is COGS different for SaaS Companies?

Because SaaS products are subscription-based services delivered online, it can be challenging to calculate COGS because the enumerated costs are not precise. There are many associated costs for SaaS that do not apply to a traditional product, such as embedded third-party software, hosting and data expenses, and website development.

A general rule to follow for COGS in a SaaS company is that if you could deliver the service without the expense, do not include it in the total cost.

With a traditional or physical product, personnel-related services such as salary, commission, and customer support are not included in COGS. However, for the SaaS industry, these professional service costs are included in COGS on a case-by-case or situational basis, which is often a crucial part of delivery.

How to Calculate COGS and Gross Margin

You subtract the production cost of unsold inventory since accurate COGS only include the production costs of goods sold. However, subscription software companies do not typically have inventory carried over from year to year, so the equation is straightforward once you have determined the elements you will include. Simply add up the costs accrued during the defined period.

Having an accurate COGS is crucial because it determines your gross margin. The accepted suggestion is that your SaaS Companies’ gross margin should be 80-90%. The calculation is as follows:

Total Revenue – COGS = Gross Margin (%)

Achieving a higher margin is essential because this is overhead costs and salaries come out of this margin. Higher margins mean more investment and growth opportunities.

COGS and Capital

The COGS for your SaaS business directly affects your options for capital because lower costs of goods create higher margins and, therefore, more profitability. Having accurate calculations and high profitability increases the likelihood of willing potential investors.

At RevTek Capital, we invest growth capital and expert knowledge to help you achieve lower costs of sales for your SaaS company and increase the accuracy of your COGS calculations.

Are you ready to partner with us to help your SaaS Business thrive? We are excited to talk to you about your business and growth strategies and connect you to our network of investors. Give us a call at (480) 332-0399 to begin a conversation.

Filed Under: Business Investment

How To Grow a SaaS Company

June 28, 2021 by scott.p

Building a business takes hard work, focus, and most importantly, time. When starting a Software as a Service business, it is tempting to focus on becoming the next overnight success. But in all honesty, very few companies luck into that title.

For every overnight millionaire, there are several hard working business owners steadily reaching sustainable success. Be encouraged that with long term focus and steady planning, you can be next.

Determining how quickly a saas company should grow is not a one-size fits all equation. There are many metrics and statistics that we could throw at you but knowing those numbers does not increase your growth rates. It is learning and putting into practice the tried and true strategies that successful businesses use that will increase the growth of your SaaS Company.

Of course, every area of your business should be streamlined and perfected in order to produce the best quality service. But there are only two basic ways to grow your business: increase your customer base and increase your revenue growth.

Putting it that simply makes it sound easy but the factors that affect both customer and revenue growth are vast. At RevTek Capital, our experience and research working with SaaS businesses have found that there are three main areas where a SaaS company should focus their attention. In order to increase your customer base and thus revenue growth, your company should focus on: offering a quality evolving SaaS product, dynamic marketing strategies, and excellent customer service.

Evolving Products or Services

Without a quality product, a SaaS company has no hope. And with SaaS, the basis of that product or service is software that solves a problem for your target audience. Unfortunately when it comes to the online world, having a good idea and a one-time finished product is not enough. The digital world is constantly evolving and improving, and thus your service must as well if you intend to succeed long term. This is where the use of open-source software comes in.

So how can open-sourcing help a SaaS company grow? There are many ways. First of all, open-source business software will make your success easier from the get-go. If you are able to find open source projects or coding that fits your needs, you will save time and money in software development and can focus on the customization of that software to your brand and business.

Secondly, having the use of an open source community will ensure that your software can constantly evolve and keep up with new developments without wasting your precious time and efforts. This includes fixing bugs and adjusting issues while you and your team can focus on your user experience and new product growth and roll outs.

The key of focus here is to continually provide an updated product without using too much of your own creative energy and time.

Marketing Strategies

Once you are satisfied with the status of the product or service you have to offer, your main focus can shift to building an ever-growing customer base. The best way to do this is by developing a solid marketing strategy. Even as a new business with a small marketing budget, focusing on hiring an experienced content marketer or on learning how to market your company through inexpensive measures such as social media can increase your client base through word of mouth, advertisements, and community connections.

In addition to social media efforts and search engine advertisements, collecting email addresses in order to market directly to an interested audience is a best practice when it comes to online marketing. Using your current client base by sharing testimonials, reviews and instituting a referral program are also great ways to increase your client base without investing too many marketing dollars.

There are many different approaches you can take when it comes to content marketing for SaaS companies, but the key is setting a goal and proven strategies and sticking to them.

Customer Service

The final piece to growing your SaaS company is by focusing on retaining customers in order to decrease your churn and unsubscribe rate. This is mainly done through your customer service efforts. When clients have positive experiences with the personnel of a company and are assured that they will receive an answer or solution to any issues that arise, they are much less likely to leave the company.

Ensuring that your SaaS business has excellent customer service through the use of personable employees, extensive FAQ and troubleshoot directories, an easy to use online interface, and attention to customer satisfaction will help you to build a brand that is known for its quality products and reputation.

The key for your customer service goals is to remember that it is less expensive for you to keep existing customers than to acquire new ones. There is no better place to focus your growth attention and dollars than on maintaining your client relationships.

Capital for Your Growing SaaS Company

At RevTek Capital, it is our main business to partner with you by supplying the capital to help take you to the next level of business. This capital may be used to perfect your product, develop a new marketing strategy, or bolster your customer service efforts.

If you now have a good understanding of how to grow a SaaS company and are ready to take the next step in growing your business, contact our team at (480) 332-0399 to begin today.

Filed Under: Business Investment

Your Guide to Monthly SaaS Recurring Revenue

May 17, 2021 by scott.p

Recurring Revenue is to SaaS subscription businesses what flowers are to a fruiting plant— it’s the whole point, keeps the business going, and if it’s missing or has an issue, growth stalls. With subscriptions, customers pay a set amount each month and the company can then calculate the cash flow that is expected to come in each month to determine its health.

Though it is not a Generally Accepted Accounting Principle (GAAP), MRR is one of the most important SaaS metrics benchmarks that a business can track in order to know how well the company is doing currently and how well it will do long term.

What is MRR?

Monthly Recurring Revenue (MRR) is the predictable revenue that is expected to be received on a monthly basis. It is what makes SaaS companies attractive in business because rather than receiving revenue one time for one purchase, the service is paid for regularly each month. Because of this, MRR growth is predictable and consistent and allows for accurate projections to be made.

How to Calculate MRR

The simplest way to calculate MRR is to multiply the Average Revenue per account by the total number of users in a given month.

For example: If you have 100 customers paying $10 per month, your MRR = $1,000

This number is the most simple to calculate but can then also be broken down into other important metrics that help to give an accurate picture of where your growth or loss is coming from.

Types of MRR

  • New- Revenue gained from acquiring new customers
  • Expansion- Revenue gained from existing customers in the form of upgrades
  • Contraction- Revenue lost from downgrades
  • Customer Churn- Revenue lost from cancellations

Why MRR is Important

Tracking all types of MRR helps to understand how your company is growing, how to better invest advertising dollars, and where changes should be made. It is commonly known that it costs less to keep and upsell current customers than to find new customers, therefore tracking the MRR churned on a monthly basis helps to know where your service is going wrong or how you are thriving with your net retention rate.

Knowing these exact metrics also helps to predict your annual recurring revenue to make plans for the future of the company.

Common Mistakes

Unfortunately, many small business SaaS companies make a few mistakes when beginning to calculate MRR and this is important to avoid. If not careful, you could be reporting incorrect numbers to your board or investors and also working with incorrect data for predictions and future calculations.

A few common mistakes in calculating MRR are:

Including Trial Members

You should not include anyone into MRR until they are a full paying customer. Including predicted revenue into your monthly revenue will give you an inflated sense new customers and also will contribute to high churn rates because it is not realistic that 100% of those on a trial will convert.

Not Accounting for Discounts

It is important to keep close tabs on the members who are using your product at a discounted rate. Calculating these members in a separate category helps to ensure that you are not accounting for money you don’t currently receive. Your MRR will be seriously skewed if you count members who receive a 50% discount as paying full price.

Calculating Annual Subscriptions Incorrectly

If you have customers that subscribe to annual memberships, it is important to divide their payment by the intended number of months that they are subscribing. Calculating a large payment all at once, in one month will affect all of your projections and will not give you an accurate picture of how your recurring revenue is growing each month.

Securing Capital for Your SaaS Growth

Having accurate calculations for your Monthly Recurring Revenue is absolutely essential because it gives you a clear picture of how quickly your company is growing and allows for you to prepare to take your business to the next level.

At RevTek Capital, we provide revenue-based financing. Meaning, payments are based on your MRR. We understand that monthly revenue can fluctuate, therefore knowing how much MRR you bring in each month helps you to secure an accurate amount of growth capital funding and ensures that you only repay us amounts that are affordable for your business each month.

Our team is not only experienced in capital funding but also in understanding SaaS Recurring Revenue. We can connect you with partnerships to help you track metrics and growth and also help you to secure the funding you need. Contact us today if you have more questions or are ready to begin a partnership with RevTek Capital.

Filed Under: Business Investment

Net Retention Rate in SaaS

May 3, 2021 by scott.p

When you are running a business, you always want to keep a close eye on whether your company is thriving and profitable. For most companies, the number one metric to track is Monthly Recurring Revenue (MRR) but because subscription revenue is the key marker of a Software as a Service (SaaS) business, a different metric is needed to grasp the true health of your company. This is why Net Revenue Retention is one of the most important indicators for SaaS companies.

What is NRR?

Net Revenue Retention (NRR), also referred to as net dollar retention, is one of the most valuable Key Performance Indicators in SaaS Metrics. This metric calculates the health of a company based on the existing customer retention rate. Not only does it measure how successful a company is at renewing or sustaining customer contracts but also how well it is doing at generating additional revenue from this existing customer base.

By keeping close tabs on what is happening with your customer’s journeys through measuring the NRR, you are able to better gauge customer success in your company as a whole. You will have a good picture of how long customers use your product, what kinds of products they choose to upgrade, and how often they unsubscribe. Knowing this information helps to make long term plans for how to increase the value of your business in the future.

Four Factors Used to Calculate NRR

Monthly Recurring Revenue

This is the amount of revenue that a company can expect to receive in a given month.

Expansion Revenue

This is the amount of revenue that is added in a time period due to upgrades and cross sells.

Revenue Reduction

This is the amount of revenue that is subtracted due to downgrades to lower payment plans.

Revenue Churn

This is the amount of revenue lost due to customer cancellations.

Calculating NRR

To calculate your company’s Net Retention Rate, you begin by adding the MRR and Expansion Revenue together. This is the total revenue for the month. You then subtract the month’s revenue lost due to downgrades and cancellations. Then divide by the original MRR number. This result should be a percentage over 100% if your business is operating with healthy growth.

For example, let’s say last month’s MRR is $75,000 and your expansion for the month was $10,000. Reduction and Churn were low at $2,000 each. That equation would be:

(75,000 + 10,000 – 2,000 – 2,000) / 75,000 = 108%

This shows that despite reduction and churn for the month, the company is still growing without any added customers.

Difference Between NRR and GRR

Net revenue retention rates and gross revenue retention are very similar metrics. The difference is that gross revenue retention does not factor upsells and upgrades into account. This gives a different perspective and more precise view at calculating the customer churn rate. This method of measuring churn helps to see exactly how your company is being affected by customers leaving your business. Both of these metrics are important for measuring the health of your company.

RevTek Capital’s Role in SaaS

RevTek Capital’s Role in the Software as a Service world is by providing low cost capital through revenue based financing to help you reach your next growth level. Above simply earning business, we desire to develop partnerships with thriving companies and we desire to help you get there.

Our team can not only help by providing growth capital but we can also connect you with experts in SaaS metrics.

Contact us at  (480) 332-0399 if you are ready to grow and need more assistance with calculating Net Retention Rate in SaaS.

Filed Under: Business Investment

Content Marketing for SaaS Companies

April 19, 2021 by scott.p

Software as a Service (SaaS) content marketing is the number one tool that your business should be implementing in order to generate leads, educate on your area of expertise, and convert potential customers into loyal users.

Content Marketing is the process of using media online to drive traffic towards your SaaS products and develop brand awareness by sharing information without explicit or singular promotion. Put simply, it is a clever way to drum up business online without overtly advertising.

If your content marketing efforts are falling flat, could use a refresh, or have not been kicked off yet, keep reading to learn more about developing a marketing strategy, how to determine your target audience, and how and where to focus your content.

Develop a Strategy

Many SaaS marketers find themselves in a tough spot when it comes to content marketing for two reasons: they don’t develop a strategy and/or they don’t let the strategy run for long enough. It is a key part of online marketing to regularly post content in order to build momentum and gain traction in today’s online market. Most companies do not see results from content marketing right up front but staying dedicated and determined pays off in the long run. 

Here are a few beginning steps for developing a winning content marketing strategy:

Determine Goals

It goes without saying that if you do not decide upfront what your marketing goals are, it will be incredibly hard to determine whether or not they worked. Setting marketing goals practically looks like answering a lot of questions: Who are you trying to reach? What are you trying to accomplish? Who will be producing the content? What does success look like?

Creating cycles where you will assess your success, determine new goals, revisit previous goals, and make adjustments will help you to keep your plans on target and attainable.

Plan Content

Content creation is a whole beast in itself but with the right plan and strategy, it is the key to helping you develop brand awareness, educate your target audience, and convert customers. It can seem overwhelming when deciding what content you should post about but that’s where having a plan comes to the rescue! Rather than deciding on a whim, you should develop a schedule of what type of content will be posted, where those posts will go, and how your content topics will be cycled.

The easiest way to keep track of your planned content is through implementing a shared calendar tool where you can get ahead on writing, plan for the future, and know that you are covered for weeks or even months at a time.

Measure Performance

The most important aspect of developing your strategy is determining your key performance indicators (KPIs). Your business overall should have a set of KPI’s used for tracking metrics benchmarks, but your content marketing should have it’s own set of benchmarks to track and measure the performance of your marketing content.

There are a plethora of metrics you may choose to track such as clicks, subscribers, conversions, views, etc. Your area of business will determine what type of metrics are most important to you but the key is having a set of indicators that help you to track your progress.

Sales Funnel

A content marketing sales funnel is exactly what it sounds like. It is the figure for tracking your audience and funneling them through a pathway to becoming a converted customer. There are three main locations on the sales funnel– aptly named Top, Middle, and Bottom.

Top

At the top of the funnel is where your content should be marketed towards awareness and education. This is an audience who is not yet familiar with your brand or product. Your goal is to help your audience understand your product, assess their needs, and realize that your product or service can solve a problem for them. The success of this content can be tracked with click-based goals and traffic numbers. This is not the stage where you expect to see conversions or revenue, though that is the direction where you are trying to move.

Middle

The middle of the funnel is where your content is geared towards sign-up traffic and lead generation. This is an audience who is already familiar with your service but may not yet be ready to buy in. Your goal is to shift this target from a casual reader into a member of your audience by getting their information. Marketing your product in a free trial or by offering newsletters and e-books is a great way to keep your product top of mind and in front of this audience who may be ready to try out your service but are not yet ready to convert. Engagement is a great way to gauge the success of this content by getting contact information, downloads and interactions.

Bottom

The bottom of the funnel is where your content is focused on customer conversion and retention. This is the audience who is ready to buy in and pay for your product. They may have already tried your product in a trial or are ready to jump in. Your goal with this content is to officially convert and to maintain that relationship through content offers, upgrades, and satisfaction. Goals for this level of content are easiest to track because this is where you count sales and revenue.

A noteworthy point to mention is that not all customers will come to you at the top of the funnel and work their way down. Many prospective buyers will have already done their research, will already be familiar with their needs or your product, and thus are ready to purchase. That is the ideal prospective customer! Therefore it is important to make sure that your content is equally shared for every level of customer in the sales funnel. When a customer is ready to sign up, you don’t want them to have to search far and wide for a sign-up button, you want that to be the easiest part of the process!

Marketing Mediums

Now that you have established your marketing strategy, set goals, and determined the type of audience you are reaching, it is time to reach them and post that content. Knowing where and how to post content is the most important piece of the puzzle in content marketing.

Organic Search

Case studies show that your audience will primarily discover you through an organic search. This means that you want to post content in such a way that your target audience will reach you through the use of a search engine. Most SaaS companies take advantage of blog posts and optimized website landing pages to do this. This means posting regular content with researched keywords so that your page becomes a top search result.

Social Media

Content shared on social media is a great way to build relationships with your audience and help them to share their experience with your brand. Creating a steady presence on social media helps to keep your brand in mind and close at hand. Social media content is different from search engines because it has the potential to build an audience of readers who may not have thought to search for your related topics or brand. This content can help you market sign-ups and educating information.

Email Marketing

Using email marketing is a sure fire way to know that customers who are interested in your content will see your content. Unlike search engines and social media, email is not based on algorithms and analytics, therefore if your targeted customer has subscribed to your email you know it will come across their screen. This is a great way to share content geared towards conversions and retention.

Optimizing Content

Every piece of content that your company shares should be optimized towards a goal. This ensures that all of your marketing is measurable and useful towards gaining conversions. Some quick tips for making sure that your content is optimized for success include:

  • Search Engine Optimization (SEO) and keyword research
  • Previous content refreshes
  • Calls to action
  • Continual follow ups
  • Use of internal links

How We Can Help

At RevTek Capital, our main goal may not be content marketing but our main goal is ensuring that our partnerships succeed in business. We understand that content marketing for your SaaS business plays a key role in that success. Therefore we have access to marketing materials and special offers from marketing partners to help you develop successful growth strategies.

If you are ready to take your SaaS business to the next level with revenue based financing and content marketing assistance contact us at (480) 332-0399.

Filed Under: Business Investment

Paid Advertising: PPC for SaaS Companies

April 5, 2021 by scott.p

In the digital marketing world, PPC or pay per click content marketing is king. PPC ads are absolutely essential to running a successful online business yet if they are not done correctly, that is money down the drain. With a properly targeted PPC campaign you can optimize your Software as a Service (SaaS) marketing ads to ensure that you spend less on leads that don’t go anywhere.

What is PPC?

Put simply, pay per click is a model of advertising where you only pay for ads as they are clicked. Meaning, you are only paying for the ads that are bringing you traffic. It seems like a simple winning scenario but there is actually a science and art behind it all.

Keep reading to find tips on how to optimize your SaaS business marketing campaign.

Determine Your Purpose

Before beginning an ad campaign, it is important to determine exactly what it is that you will be marketing and what exactly you want your customers to do. Many start-up companies don’t fully benefit from their PPC ads because they advertise way too broadly.

Taking the time to determine exactly what you desire the outcome to be will help you to better target your ads. For example, your ad will look differently if you are wanting a customer to sign up for a free trial than if you are simply trying to raise brand awareness.

Target Your Customer

This aspect of marketing may take some trial and error before finding qualified leads. That is okay. Reaching your target audience first requires determining who your potential customers are and finding what speaks to them.

The ad platforms you choose will help to focus in on what customer you are trying to reach. Using a search engine such as Google will result in an audience that was searching for exact terms or related keywords. Using social media, such as with Facebook ads,you can target a market they may not have been looking for your brand or area of business but who may benefit because of another connection.

Focus on Funnel Stage

Focusing on the stage of the sales funnel will better help you target specific ad groups accordingly. A customer at the top of the funnel has just now heard of your brand or begun searching for your area of business.

It is commonly known in sales cycles that your brand or product must be in front of a target between 6-10 times before they will be willing to buy in. Therefore at the top, ads can focus more on what makes your brand unique or stand out. This stage is for building familiarity and rapport.

At the bottom of the funnel is where conversion rates are the highest. These targets are closest to making a purchase and are where you want to spend the most cost per click. These ads will push for bigger actions such as signing up for a free trial and will give you the biggest return on your investment.

Remarketing is a very important aspect of PPC advertising because it ensures that customers who have already shown interest in your product continue to see your brand. If nothing else, your company should begin with a remarketing strategy when jumping into paid advertising.

Optimize Ad Copy

The number one way to ensure that you develop a winning strategy all comes down to the actual words in your advertisements: the ad copy. You can employ all the right science and strategy, but if your ads aren’t engaging, you won’t get clicks or conversion.

Analytics have tools for helping you to optimize your ad campaigns in a way that will place your advertisements at the top of the page or in front of the right audience. They do this by employing a Quality Score, or a rating on how well your ad will do. It is your goal to make sure that your quality scores are high.

This includes markers like: using targeted keywords in texts, titles, and URLs, personalizing and using specific language and terms, creating engaging and fast landing pages, and implementing mobile accessibility.

Your Summary

When testing the waters of targeted paid advertising, it is all about experimenting. You should try many different approaches and angles to discover:

  • Whether you are conversion or awareness focused
  • Who you are targeting
  • What your keywords and ad group segments are
  • How you should draw in conversions

In the trial stages, your Click Through Rate (CTR) will likely be around 3%, with that percentage increasing as your strategy focuses and improves.

PCC for Your SaaS Company

At RevTek Capital, it is our goal to see our SaaS partnerships thrive. Our team is concerned about so much more than just your funding. We truly want to see you succeed.

We have a team of experts ready to help you create growth strategies that include developing and implementing pay per click advertising to help you reach the next level.

To partner with us today, schedule an appointment by calling our team at (480) 332-0399.

Filed Under: Business Investment

Top 10 SaaS Trends: 2021 Edition

March 29, 2021 by scott.p

The Software as a Service industry has taken the tech world by storm in recent years and is creating a digital transformation that permanently changes the world of technology and software development.

The SaaS market is quickly growing and will continue to grow with no signs of slowing down. In fact, all predictions point to several billion-dollar increases in the coming years. It is no surprise then that the future of tech and the future of SaaS are closely linked. Therefore, investors and owners of small and large businesses alike want to keep an eye on the direction that SaaS is headed.

The year 2020 was a breakthrough year for SaaS companies due to the ongoing pandemic and necessity of an increase in work from home solutions. SaaS applications such as Zoom, Slack, and many others saw a significant increase in sales and success while helping businesses stay open and connected.

With the high level of success, increase in demand, cost-effectiveness and constant development of the world of SaaS, we have outlined below the Top 10 SaaS Trends that stand out in 2021.

1. Machine Learning

Artificial Intelligence is now at the forefront of many industries, and SaaS products are no exception. AI integrations and applications are being added to most SaaS businesses to streamline and increase productivity. This is utilized in the functions of automating repetitive tasks within software, introducing AI-powered chatbots to assist in user relationships and help desks, and much more. As time continues, if AI can be paired with a function to increase success, it will be.

2. Vertical SaaS

Vertical is the term for SaaS that is created to target niche or narrow markets. It mainly targets specific industries that need tailored functions, such as in the healthcare industry. Most SaaS giants are created broadly (or horizontally) to be used by any business in any industry, but this leaves personalization gaps. Therefore, Vertical SaaS solutions can be used to upsell clients of established companies that need more specific functions or can be a market entry point for new startups.

3. Micro SaaS

The SaaS market has limitless room for growth, change, new ideas, and entries. Still, it is comically oversaturated in specific functions or products (think e-mail). In the case where a market giant has a stronghold, companies are finding a way to capitalize by creating add ons, plug-ins, and extensions to already functioning SaaS. These are called Micro SaaS. An example being: Boomerang for Gmail, a way to schedule and track emails. This is a way for small businesses or smaller ideas to join in on an established market and increase productivity and success.

4. Mobile Optimization

More than ever, people embrace the opportunity to be in constant connection and communication through smartphone use. SaaS companies who take advantage of this opportunity and create Apps that function well with desktop compatibility or stand-alone functions will continue to thrive. Offering freedom to clients by optimizing mobile functions allows clients to work and communicate from anywhere at any time. 

5. White Labeling

A new SaaS business model that is on the rise is White Labeling. This is where software companies will create a fully developed SaaS product to sell it to another company that then markets and operates it under their brand name. This is a way for new startups to enter the market with less financial backing or software expertise. This model has been seen in SaaS payment functions and can work in other markets as well.

6. Integrations

The ability for SaaS functions to integrate across platforms is a telling marker of whether a SaaS company will succeed or not. The market is growing and expanding. If your company cannot offer a particular easy-to-use function, the odds are high that a new company will come along and meet that need. This explains why many SaaS companies are increasingly adding the ability to link apps. There are even SaaS companies such as Zapier, whose entire function is about integrating and automating functions across applications.

7. Unbundling

This is a feature that many SaaS companies are moving towards to increase customer retention. Often, small business customers leave a company because they pay for packages and functions that they simply do not need. If your company only offers package deals at higher price points than customers can afford or are willing to pay, customer churn will increase. Offering the ability to unbundle a package and pay for specific functions and actions allows customers to remain clients while maximizing their budget and efficiency.

8. PaaS

Platform as a Service is a type of SaaS that allows companies to create and develop their own apps or software. For the most part, PaaS has involved heavy coding knowledge and been used by developers to create these apps. However, with the rise of integrations and the emergence of options, many companies offer users the ability to personalize, develop, and offer their own platforms to users.

9. Low Code

As touched on above, non-tech savvy business owners’ ability to break into the SaaS world is steadily increasing. With the increase of white labeling and move toward PaaS offerings, low coding abilities and integrations are moving into the SaaS world. We expect to see this trend continue and move into various other aspects of SaaS as well. 

10. Security

Security is not often a concern in the world of SaaS. Measures tend to be very secure. But as SaaS availability, users, applications, and links between apps grow, security measures need to grow along with it. Each company will need to ensure that security keeps up with growth. This also leaves room for more SaaS Security companies to enter the market.

SaaS Growth

These Top 10 SaaS Trends in 2021 all involve growth, increasing efficiency, and streamlining programs. At RevTek Capital, it is our desire to see SaaS companies grow and make changes to keep up with market demands to succeed.

We are available to invest in your growing company and give advice on how to best set financial goals that aid in growth. To schedule an appointment with our team, call (480) 332-0399 today!

Filed Under: Business Investment

The Basics of the SaaS Business Model

March 16, 2021 by scott.p

Software as a Service is a booming market in the business industry. SaaS Businesses are known for overnight expansion, high dollar buy-outs, and attainable growth for young up and comers.

Essentially, to start a successful SaaS company, one needs three things: a marketable idea, a team of professionals, and funding. Seems easy enough, right?

Though the premise of that statement is true, some key focuses of the SaaS model make the business different from traditional software companies.

Perhaps you are new to the industry, or you are looking to throw your hat into the ring of SaaS. If so, we have outlined below a few of the basics to help you set your best foot forward.

Understanding SaaS

Software as a Service is a model of business where software is stored and operated through a cloud-based system. Users do not possess a physical product but access the service through a login or membership. These memberships are not a one-time payment upfront but are paid by monthly subscription or through contract period memberships.

The SaaS product is software, but the business’s primary focus is the second “S” in the name: Service. The focus on offering a specific service is what sets this business model apart. There is a service element involved in how customers access the product, interact with the product, and pay for the product.

Aside from being cloud-based, there are a few key elements that are unique to the SaaS Business Model.

Three Key Focuses:

Recurring Revenue

The method of revenue growth in SaaS is one of the most appealing aspects of the business. Software of the past consisted of a customer making a one-time purchase of a disk and then installing software on a desktop. SaaS entails customers continually purchasing access to a service to access the desired software.

This means that with SaaS, revenue is recurring and is therefore growing. Because of this, revenue recognition is calculated using Monthly Recurring Revenue or Annually Recurring Revenue depending on the pricing model that is offered.

SaaS Business owners can count on revenue recurring over time. They can therefore make long-term plans for how much money the business will bring in each year. They can also use this knowledge to make educated decisions for where to invest cash flow in order to expand.

Because the company does not have to focus on convincing customers to purchase again, most of the business focus is spent on keeping current customers satisfied and acquiring new lifetime customers.

Customer Attention

Customer satisfaction is always a concern of any business in any industry. Undoubtedly though, the most unique aspect of SaaS is the attention that is focused on building customer relationships and interactions. Because revenue is earned on a recurring basis, retaining customers is the number one way to ensure that your SaaS business remains profitable.

It is commonly known in the industry that it costs more to acquire new customers than to keep existing customers. Therefore, a successful SaaS company spends the most time and focus on providing a quality user interface, customer experience, and help desks or assistance programs.

Customer Churn is inescapable to some degree. Therefore, SaaS Sales and marketing dollars that focus on new customer acquisition are tailored to the degree of contact the potential customer may receive from a representative.

For instance, low-touch contact such as free or low-cost advertising for a “freemium” plan requires fewer dollars spent per individual. Whereas high touch contact such as dedicated salesmen or representatives that manage enterprise relationships may cost more but acquires a more significant number of sales.

Metrics & Adaptability

SaaS companies spending time and money developing direct relationships with their clients allow for a unique opportunity in business. This is to assess the needs and satisfaction of the clients and make necessary changes in real-time.

The SaaS business model can track many metrics that other businesses cannot track on a monthly scale, such as MRR, efficiency, and churn, among others. This opportunity allows SaaS owners to constantly develop new versions and updates, offer new programs, and work out bugs in systems to provide seamless service.

This adaptability is not only an opportunity but a necessity for SaaS companies because of the competitive nature of the business. In most cases, there are always new competitors looking to poach clients. The key to customer retention is integrating your service into your customers’ lives so that you become essential to their life and business. This involves constantly keeping a listening ear to their concerns and needs while consistently offering top-quality products and services.

Bonus: Endgame

It seems counterintuitive for a startup business or a thriving company to start with the end in mind. Still, in the SaaS industry, it is essential. The exit strategy of your SaaS business should always be a key focus. This will help you to determine where your growth strategies need to be focused throughout the process of building your company.

Because the market of SaaS business is overly saturated, for most, the trend seems to be: never stop adapting or be overtaken. Because of this, there are typically two end goal options that allow for businesses to stay on top: go public or get bought out. Many companies get acquired by large software corporations, while some seek the riskier option of going public.

Though because the world of SaaS is still fairly new, there are no written rules for how things must go. The industry itself is constantly adapting, and companies are inventing new ways to stay on top every day.

It is wise for a new SaaS business owner to have an idea of the direction they are headed in order to form a steady plan for how to get there.

Funding Your SaaS Business Model

There is a key stage for every SaaS business where funding is needed to reach the next growth level or goal. Whether a new startup seeking hypergrowth or an established SaaS business seeking to expand sales or refine a product, RevTek Capital is available for your cash flow needs.

At RevTek Capital, we have an experienced team of professionals familiar with the SaaS Business Model’s key focuses. We desire to partner with you to help your SaaS Business reach your next growth metric.

Schedule an appointment with us today at (480) 332-0399 to begin a conversation about how RevTek Capital can help you.

Filed Under: Business Investment

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