Software as a Service, otherwise known as SaaS, is one of the fastest-growing business models in history.
Therefore, it has attracted new entrepreneurs and wily veterans alike due to its ease of use and seamless integration with other applications.
If you’re just starting out, it can be difficult to know what sales model is best for your business.
In this article, I’ll introduce you to the three main ones and share some tips on how to choose and what challenges to expect.
And let’s start with the most common model there is:
The self-service sales model is about low-priced products with a fully automated customer journey. Most startups that use this approach sell their goods via eCommerce so that they can focus on the quality of the product and design.
If you want to make a big splash on the SaaS market as a newbie, it’s important that your product prices are not too high.
The recommended pricing for self-service models is between $1 and $1000 because that’s what your target audience will be willing to pay.
Focus: Product and Customer Journey
In order for this model to work, both your product and your customer acquisition strategy need to be tailored.
When both the product and strategy for acquiring customers are tailored for single users or small teams, you’re on the right track to make your business successful.
The product should be developed with this in mind, while every touchpoint between potential customers and actual purchases must be lean and optimized so that customers can buy without any hassle whatsoever. To stay competitive in the low-cost market, you need to ensure your customer experience is streamlined and infallible enough to generate leads and conversions on its own.
For instance, if a website visitor has an issue with their account or order, they should be able to contact customer support through any channel easily.
Before investing in lead generation strategies such as targeted ads or SEO optimization, make sure your customers get the best possible experience from start to finish.
The transactional sales model is a perfect choice for those who look to establish themselves in the market.
It’s worth noting that self-service and enterprise differ because of the price point, which typically ranges from $1000 – $3000.
The main difference between the two models is that SaaS companies with a transactional sales model offer expert purchase guidance as well, in addition to an automated eCommerce site. This gives customers the opportunity to have their questions answered before they make a final decision on what product best suits their needs.
Focus: Purchase Guidance and 1-on-1 Conversion
The higher-priced products that are used by SaaS startups with the transactional model mean they have more capital to spend on customer acquisition. This gives them a competitive advantage over other companies that cannot afford to spend as much on marketing.
They typically include a small inside sales team to help catch and convert customers when they make purchases through their eCommerce site, providing real-time assistance during the process.
That way, potential buyers can visit a company’s website and make a decision on the spot, but they must meet with a salesperson in-person to complete the transaction.
With this sales model, companies are able to make a profit of more than one hundred thousand dollars annually on their products.
To make this work though, there are many aspects that need to be considered, including having access to customer-focused tools and being knowledgeable about what it takes to give clients a top-quality experience.
Setting out an enterprise sales strategy is not an easy task, therefore, it requires a great deal of planning. One of the most important steps in ensuring success with these types of sales is to choose your team wisely. Your company’s sales team will need to be skilled enough to handle long-cycle transactions with confidence and experience in order to close deals successfully and ultimately grow your business.
Focus: B2B Enterprise Sales
It is often difficult to sell to businesses because they spend a lot of time deciding on purchases and need majority approval from their board before making a purchase.
This process can be very frustrating for salespeople, who are required to work hard and know a lot about their niche, which takes years of dedication and study.
One of the reasons why SaaS companies that employ the enterprise sales model have to be able to rely on both in-house and field reps is the fact that dealing with high-class clients means that your company’s website content, customer service, and more need to be spot-on.
For startups still in the early stages of development, the enterprise model is considered to be too expensive and risky.
The world has never seen a period of innovation like the one we are living in.
Revenue models across the globe are being upended by technology and networks that unlock new sources of value for companies.
Organizations are using revenue model design to build unique approaches to delivering value that has the potential to radically disrupt industries. With greater experimentation becoming more common, businesses are able to iterate and evolve better than ever with a limitless number of possibilities for revenue models today.
Old ways of doing things are being replaced, but there is no telling where this path will lead us to as innovators create new markets every day.
So, to sum it all up:
- Adopt the self-service model if you don’t have the resources to establish a high-functioning sales team and you need a high number of customers to grow.
- Adopt the transactional method if you have almost enough resources to spare for a sales team and a mix of high-paying and low-paying customers.
- Adopt the enterprise model if all your customers are big fishes that need personalized sales pitches and your customer acquisition costs are off the roof.
However, it’s always good to stay on your toes; simply because your audience and the industry can change drastically in the future and you’ll need to be able to adapt to different circumstances.
Frequently Asked Questions
How much recurring revenue is good for SaaS?
It’s impossible to give an exact number to a healthy MRR due to changes in industry, competition, and products; but if you’re averaging a 15-20% MRR growth monthly, your traction can be considered good.
What is a revenue model in SaaS?
A revenue model refers to the framework your business’ income is based on, and for SaaS revenue models it is established around monthly or annual subscriptions.
How can I forecast SaaS revenue?
In order to forecast SaaS revenue, businesses should conduct a thorough analysis of their past performance, as well as their current sales velocity and the health score of their customer; while keeping in mind the global events that might positively or adversely affect MoM growth.