jasonRmoore

An important aspect of being a true SaaS model is the ability for your customers to become a paying customer without the need to interact with someone directly.  Many SaaS companies also utilize the efficient practice of auto-renewing their clients with an easy option to cancel their subscribed services.  The advantages to this are lower acquisition costs due to the absence of man-power, and — if your cost structure is low enough — an almost “under the radar” effect for the renewal.

We approach this transaction differently, though, for our HelpDesk ticket software for specific reasons.

NOTE: One key aspect that should be considered when making this decision is the size of your average transaction.  If you have a $2.00/month subscription, an auto-renewal system is a must.  This is vastly different than a $2,500+/year subscription relationship.

Our clients predominantly choose an annual contract versus a monthly subscription based on the impact to their business.  Switching costs are high when you are serving as the backbone for an entire department or across multiple departments.

Due to the nature of our clients and how they use our products, we view renewals as a chance to build upon our relationship with them as well as look for opportunities for cross-selling, up-selling, or identifying needs not being met with their current subscriptions.  This is where renewals go from merely keeping the lights on to being a growth stream for your company.

Many of our clients are also education and government organizations.  Many times, having a credit card on file is not something they prefer when buying.

There is more than likely a formula that can be derived based upon some key factors:

• Renewal amount/frequency
• Number of clients
• Compensation of employee responsible for renewals
• Internal opportunities for cross- and up-sells
• Do clients need PO process associated with invoice?

Although auto-renewals are an extremely valuable addition to most SaaS offerings in the consumer marketplace, be aware of some of the opportunities that your company may miss out on when not utilizing the opportunity to build on your personal relationships.

Sign-up forms on your website are a critical component for any successful SaaS company.  Are you paying enough attention, or are you putting the responsibility on your prospects to navigate rough waters?

Taking this thought further, most SaaS applications are an in-depth form with specific functionality wrapped around it.  With that thought in mind, how much time is spent during the development process thinking of the interaction with your SaaS as a conversion opportunity?

This post from the Conversion Room Blog is geared towards your website forms, but the information is extremely valuable when it comes to application design, as well.

Our HelpDesk Ticket software is a very clear example of the “app as a form” concept.

The thought of each interaction with our HelpDesk as a conversion opportunity is brand new to me.  I’m hoping to get feedback on this concept to flesh it out further.

One complication that many SaaS products will encounter is their highly configurable nature.  Taking into consideration your clients’ desire to add more and more fields to your standard form will certainly increase the amount of care needed for pre-launch design.

How will the conversion rate change when too many custom fields are added?

Will the intended “simple” feel of your application be lost once a local administrator has their say?

How can you preempt this common behavior?

Thinking of our application as a conversion calculator for organization’s support structure is interesting (to me).  What would our conversion funnel –for brand new clients– look like from logging in through work order request completion?

Note: I apologize to Seth Godin for a post of similar names on the same day. I felt like I was in the Twilight Zone when I saw his post in my reader this morning.  I kept the “Gatherers’” part even though his “Farmers” is probably more accurate due to the active nature of farming versus the passive nature of gathering.

Hunters and Gatherers are roles that are critically important to every civilization throughout history.  Your organization (expecially your sales team) is no different.

The key to successfully building your sales team is identifying up-front who on your staff fits each role as both are needed.

Gatherers are task-oriented and better suited to cultivating your current client-base for up-sells, cross-sells, and farming for referrals.  They are people who are better suited in roles of consistency.  Gatherers are able to identify potential trouble areas and apply the right amount of care to get them back to a healthy state.  Meticulous, observant, and patient are key attributes for your Gatherers.

With bigWebApps HelpDesk ticket software, it is vitally important to maintain our referral percentage above 90%.  This is the lifeblood of any SaaS model. SaaS Churn is discussed from a mathematical stance by Joel York in a recent post on his must-read Chaotic Flow blog.

The continual revenue stream from renewals affords the company stability for those periods of drought that your company is certain to experience.  Are you making sure your Gatherers are getting the praise that they deserve?  It is easy for them to be over-shadowed by the glitz and glamour that comes along with your Hunters’ new business.

Hunters, on the other hand, are not naturally gifted at the tasks necessary for cultivating your current fields.  Hunters are restless folks who excel at tracking moving targets.  The challenge of finding the right spot, establishing a valuable working relationship, and bringing them in as a client is what motivates them.  Hunters must be challenged in a different way than Gatherers.  Going to the same fields each and every day throughout the year not only doesn’t excite them; it demoralizes them.

Hunters have the ability to boost overall morale at a company.  At bigWebApps, we intentionally communicate “big wins” throughout the company in an attempt to let them know that without their specific services, the Hunter would not be able to perform.

Growing our business with both Hunters and Gatherers for our HelpDesk ticket software is vital for the future of the company.

Renewals are for today.  New business is for tomorrow. (note: this statement is being contended internally. more to come in a future blog post)

bigWebApps is currently looking for Hunters for our Atlanta office.  If you are interested in hunting with us for our HelpDesk ticket software, click here to see the job description.

Photo Credit: The Library of Congress. Click on the image to see their Flickr photostream.

Inspired by Peter Cohen’s blog post about How Much Marketing Spend is Enough, the calculator below will help you determine what your client acquisition cost is compared to their lifetime value.

For business owners, this tiny piece of data is one of the most critical bits of information that you should track on a consistent basis.  If you don’t know this number already, check your performance below.

If you are in early stages of starting a business, this is definitely worth the time.  It is also imperative that you are brutally honest about your numbers.  This is not the time to present the hopes & dreams numbers that you used with your potential investors.

If you have not started your business yet, use the calculator below with honest projections.  This will help you get a feel for where your price needs to be to survive IF you are able to deliver the number of clients that you hope.

Tips for using the calculator:
-Type numbers in the BLUE fields only
-If this is your first year, the first two sets of numbers (New, ALL) will be the same
-If you are not a recurring revenue model, the Avg. lifetime of clients will be 1
-Include salaries, commissions, and marketing spend in the Sales/Mktg Costs
-This is not an end-all to all costs.  You must also have solid budgets for R&D, Operations, and other important aspects of your business worked out.

After using this calculator on bigWebApps’ 2008 numbers, I was very pleased to see a 2.40 score.  Due to a few big deals early in 2009, our number is an unsustainable 6.78 which should correct over the course of the year.

What’s your score?  Have any feedback?

I am very fortunate to be in a community that has a great entrepreneurial spirit. Being in this community, I get to hear a lot of ideas for projects that people want to turn into businesses.

Outside of the standard requirements for any business to succeed such as revenue model, marketing and acquisition costs, and so on; you also have three key areas where the relationship between your potential clients and your application must work together seamlessly.

As has been pointed out countless times on SaaS model success, the real key is scalability.  The following three attributes of your application will have huge impact on whether scalability is something you will be able to achieve.

1. Self Setup – Self Setup is the most important “feature” that your application will need to scale your business. Once you have targeted beta clients, immediately start working with them to design how they will be able to get running on your application without you. The self setup should start immediately after someone clicks the “Free Trial” or “30 Day Demo” button on your website.

One of the major differences between SaaS and traditional software is that setup process begins prior to your sales process does.

2. Self Signup – As you are getting launched, sales/signups are not as critical to be automated as setup is. If you are manually having conversations with people through the sales process in the beginning, you will learn what the roadblocks are to purchasing your product. The knowledge that you gain throughout this process will be invaluable to writing effective copy and to designing your site’s sales flow to best suit your potential customer’s needs.

This is closely related to self setup because your potential customer’s experience during that trial period will be the first impression that he remembers when making the decision whether to type in their credit card number.

Self signup is the actual transition between trial and paid. If you plan on launching with a freemium model, this transition period will be laced into your application when your customers hit feature/size roadblocks. Offering them compelling reasons to upgrade, and more importantly, an easy way to act upon that decision could decide your success. Once again, automation on this is not a requirement to get started if you are looking for the specific reasons why people are not buying.  But implementing this should be early in your timeline.

3. Self Help – Prior to launching your product to beta and then full production, it is critical to have dead-nuts simple avenues for your customers to reach you.   But you do not need to be in self-help mode just yet. This is primarily due to the fact that you won’t know what problems/questions your varied customers are going to have until they have them.

It is absolutely critical to have the record button pushed at all times. When it comes time to start writing the self-help material for your application, you will be able to quickly reference your real world feedback ensuring the help material is focused on problems that real people have instead of on problems that you “think” they might have.

photo credit: purplepigswithfigs