4 signs that your SaaS business is dying

There are a number of indicators that, at an early stage, make it clear that your SaaS business is doomed. Let's look at each of them and find out how to fix the situation.

1. ARPU is less than $ 20.

ARPU (Average Revenue Per User) - the average monthly income per user. Calculated by dividing the amount of monthly revenue by the number of users.
')
Low ARPU is a low margin . Even if we ignore the technological costs for each client (for example, the cost of server resources), the margin will still be close to zero. Why? It's all about customer support.

The need for support with low ARPU is a real disaster in terms of business growth. Imagine a company with a small staff — a startup with a low ARPU and many customers who bought the cheapest subscription but who require first-class service. What is more profitable: n support for 1000 clients who paid $ 3 a month, or 30 customers who paid $ 100 a month?

Bear in mind that these “three dollar” customers are the most demanding and least loyal . Then you will immediately understand why low ARPU can quickly ruin your business.

How to solve this problem? Increase the cost of services.

If you work in the field of B2B, and the initial tariff plan costs less than $ 20 a month, you underestimate the services provided. When you at least per gram improve or facilitate the functioning of someone else's business, the minimum cost of a subscription should be above $ 20 . The end of the story.

Customers are not willing to pay so much? It means that you provide an insufficiently valuable service, do not solve the problem completely or position yourself incorrectly.

In the field of B2C in this sense, little can be done. Most B2C products are doomed to a long and difficult path to the break-even point. Stories of when a B2C product was able to survive without reliance on a millionth venture financing, units.

2. Income ceiling of less than $ 100 / month

Revenue ceiling - the maximum cost of a monthly subscription for one account. This is an excellent measure of the true value of the dish that you present to your customers. Both income and customer churn depend on the cost.

High cost = high income and low outflow.

Low cost = low income and high outflow.

If you are not able to request and receive more than $ 100 / month, you need to work on the value of the product. When your service will be better able to satisfy customer requests, you will be able to assign a higher rate and speed up business development.

By the way, for this reason, unlimited plans are disastrous for the company . They instantly limit the income ceiling.

3. Monthly customer outflow of more than 25%

Outflow - the percentage of customers (respectively, and income) who refuse your product every month. If it is above 25%, you lose a quarter of the business every month. Naturally, this fact does not add stability.

It is dangerous when a high outflow is masked by high growth rates . As long as the number of new users exceeds the number of abandoned products, revenue increases. The problem is that endless growth is impossible, and after a while you will find that the schedule for connecting new customers has gone down, and the business has become unprofitable.

To reduce churn, provide a higher value and increase the number of contacts with the user. This could be weekly or monthly newsletters, cases, webinars, video instructions, etc. Also add the ability to use your product together with the team - the client is more difficult to abandon the service, when all employees are accustomed to it .

4. MRR less than $ 2000 after a year in business

If your business is over a year old, and MRR (Monthly Recurring Revenue, regular monthly income) stubbornly does not want to exceed a couple thousand dollars, you most likely do not solve the immediate problems of your customers.

If your product does not solve real, significant problems, you should not try to revive the stillborn. Find another "pain" of many companies, to get rid of which you can earn.

How is faith in success?

Sadly, if you evaluate your business, you will find one of these signs. When you invest all the energy, you spend a huge amount of time and money, it is difficult to reconcile with the unpleasant reality.

However, to face the truth - the fastest way to achieve the desired. Life is too short to do things that do not affect anything.

There are many examples where people do not stop and continue to expend energy on the development of an unviable idea. Others, on the contrary, have the courage to say “stop” and change direction. Their efforts are not in vain: not the second, so the third product "shoots", and the victory fully pays for all previous failures.