Quote Info

The speed of business today, especially in the SaaS space, moves lightning quick with little room for hesitation. SaaS differs from other industries out there in the fact that customers, competitors, and technology can so quickly evolve and change. A customer can easily switch from one solution to another, and competitors can copy that new nifty feature. This environment means that your pricing, the exchange rate on the value you’re creating, needs to constantly be evolving, as well. You must be proactive.

Practically, to be proactive and make sure that your pricing strategy is evolving as quickly as your customer and product, you need two key pieces of infrastructure: 1. a pricing committee, and 2. a pricing cadence.

A Pricing Committee Ensures Everyone Is Onboard And Involved In Pricing Changes

As we mentioned previously, pricing is at the center of your business. This is a beautiful fact because it means that pricing is a single fulcrum you can use to push for profit. This is a horrendous fact though because it means pricing is something everyone will have an opinion on and an opportunity to politic through your organization.

To cut through the potential for politics, as well as to streamline the time and tasks to collect data and make pricing decision you need a pricing committee. A pricing committee is the strong grip of a hand that pulls your pricing lever. The purpose of this committee is to insure that your company is identifying the strengths and weaknesses of your pricing strategy and always optimizing for profit. Practically, this purpose manifests itself in two forms – equal representation from the organization, and managing the pricing process.

Equal representation throughout your organization is absolutely crucial, because each part of even a small company will have a perspective that’s important to the pricing process. Sales will provide valuable insights into the sales tactics that are working in pricing conversations. Marketing will provide necessary customer persona data. Product will know the roadmap.


More Growth Strategy Stats

47% of millennials want to work at diverse companies, according to a recent study.

It’s 4x cheaper to upsell existing customers than acquire new customers: costing just $0.28 to acquire an additional dollar of revenue

After $10M in ARR, the median growth rate slows to just under 50%

Unlike many other industries, if a software company grows at only 20%, it has a 92% chance of ceasing to exist within a few years

The median TTM revenue growth rate + adj. EBITDA margin for publicly traded SaaS companies was ~37%, implying that just under one half met or exceed “The Rule of 40%”

Achieving a SaaS Quick Ratio of 4 is a good benchmark for young, high-growth companies but the equation changes as those companies reach scale

The median average contract length is 1.3 years and the average billing term is seven months in advance in 2016. Comparable to 2015, with average contract length shortening from 1.5 to 1.3 years and average billing period increasing by one month from 2015 to 7 months

It’s common for startups to grow rapidly, doubling or tripling in size year over year, until they hit $5M in ARR

Getting paid in advance is really smart idea if you can do it without impacting bookings, as it can provide the cash flow that you need to cover your cash problem

Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.