As you may have heard several times, SaaS business model is very different from the traditional on-premise model. But many a times ISVs tend to overlook these differences. One of the common mistakes that ISVs tend to do is approach the budgeting from a traditional model (one time licensing) perspective.
Let’s look at a typical budget split-up for an ISV in SaaS model.
|Sales & Marketing||30%||Customer Acquisition Cost (CAC) including cost for marketing, branding and sales compensation.|
|Customer Service||30%||Includes all the cost for delivering the service to customer, which typically includes hardware, license cost, tools cost, tech support and account management.|
|R&D||15%||Includes the cost of engineering team to further enhance the product and add more capabilities that can increase the value of your product.|
|Administration||15%||Includes the expenses related to general administration like HR, Facilities, Infrastructure and Finance.|
That leaves a 10% profit margin. While ISVs will be keen to optimize the spend in the above areas, the reality is they tend to overspend due to lack of proper planning. SaaS business model has inherent challenges, which has to be accounted in your planning.
Let’s look at some of the typical areas that have to be taken care in your budget.
|Sales & Marketing||
Many of the items listed above may appear to be simple or trivial, but as your number of customers grows these are the items that will become a bottleneck and can seriously hinder your business growth.
Please visit the following webinar on Building a Scalable and Profitable Business Model , which talks about the challenges and solutions in running a SaaS business.
Cello offers a complete SaaS Life Cycle Management Solution that can significantly reduce the expenses in all the above areas. Cello has more than 30+ modules that address the common needs of designing, developing and managing a SaaS product/business.
Following are some of the advantages that Cello can bring to your SaaS business,
- 40% increase in trial conversions through customer analytics
- 50% reduction in implementation time and cost
- 60-80% reduction in tech support workload
- SaaS Engineering Framework with complete support for Security, Scalability and Configurability; saving upto 50% on your engineering efforts
- End to end automation of invoicing and payment collection
- Overall 10X times reduction in operating expenses