Finance is the lifeblood of any business. Therefore, this blog is mostly relevant to companies that make a minimum of $100K a month. Meaning, you should have survival/actionable money.
If you have reached $100K a month mark, check for these 5 signs in your SaaS and take action before you burn all your money.
1. Consistent Expenses – If you are spending the almost same amount of money that you spent 6 months ago, it means that you are not spending enough money on scaling your team or building processes or building resources. The business it most likely to fall in another 6 months of time. Now you are thinking that I am crazy because any business wants to reduce the expenses. Well, here expenses should be in relation to your growth rate. For example- if your revenue is 100k a month you are just spending 10k to 20k on your expenses. That simply means that you are not investing to scale the business. I mean seriously, recollect 1 business whose expenses are controlled but still growing at a competitive rate.
2. Sales Vs Churn- equilibrium – Old school way, if your demand and supply meet a meet point. If you are churning your customers more than or equal to new sales. It is most likely to fall in another 12 months. Why an additional 6 months in this measure? This is because your expenses are consistent. In another word, at some point your s, ales will be equal to churn. For example, you have 1000 customer and you add 200 but also churn 200. This is the point when it starts falling apart. Take a strong action when you are on 200/100.
3. Integrations – I am not only talking about building integrations. I am also talking about these integrations to work and build a harmonious dependency on each other. Look at any good SaaS product today. Almost 95% of the SaaS companies provide integrations. At this stage, you should release at least 1 integration a week. Most importantly, it should work as intended. If not, it will throw you a year behind your competitor.
If you are thinking to build the functionality in your product rather than outside integration. Don’t do that. Why? I will tell you more in my upcoming blog.
4. The volume of Customer queries – It totally depends on the nature of your business but the threshold is still the same for most SaaS businesses. 100:1 is the ideal ratio. If you are getting 100:10 or more, you have built a complex product. Most of your time and resources will be wasted in fixing customers problems rather than fixing business problems.
5 – SaaS Culture – What is SaaS culture after all? It is nothing but a gut feeling in your team to build fast, sell fast, support fast and for that matter trash fast if something doesn’t work out. In the SaaS business, 3 months is good enough time to measure and control an indicator. If this is not happening, probably you are in the wrong business.
There are many other factors that can tear apart a SaaS business but this is relatively for growing SaaS SMEs.
Now that I have told you about few factors that can impact your business negatively, please comment and let me know if you want me to deep dive into facts and figures on how we took care of these challenges on our journey of growth at CallHippo.