Client Value to Acquisition Cost Calculator May 19 Jason Moore

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?

Is Your Idea Key to SaaS Success? Apr 03 Jason Moore

You have probably already guessed that the answer, in my estimation, is no.

You may be able to garner some attention from friends, a few dollars from friends and family, and a decent amount of attention from local media outlets.  But your idea is worth zero without execution.

Below is, in my order of importance, the list of the key ingredients to you achieving success (you define what that is) with a SaaS company.

1. Sales – This is intentionally separated from marketing in this context.  Until you receive money via your product you are still only in possession of an idea.  Selling can be defined in many different ways, though, so it does not have to be a direct sale to a client.

Seth recently wrote about finding 10 people who want/need your product enough to take you up on your offer.  Once you have ten, find ten more.  If you’re lucky, the first ten will be finding ten more at the same time because your product delivers as promised (or more).

Some of you may feel that this is marketing. But that’s one of the main problems with a non-sales culture. People are extremely comfortable when they feel they are “marketing” but icky when it’s called “sales”.  If you have a product that is going to positively impact your potential clients, then you are doing them (and yourself) a grave disservice by not getting it into as many people’s hands who need it.  If you get uncomfortable about telling someone you know about your product, then your sub-conscious may be telling you that you are over-promising.

2. Relationships/Support – the misconstrued dream that many people entering the SaaS world have is that once you build the application and it works well, all your clients will understand it, adopt it easily, hand over their credit card, and never cancel.  Okay, maybe when it’s put like that you deny that you feel that way.  But you’re only lying to yourself.

If anything this group could have been lumped in with sales because as a SaaS model company, your relationships with your current clients is your on-going sales model. This does not have to be a time-intensive process if you implement the proper tools and controls, but it does take effort.

37signals are masters at this.  They have a recent post on exactly how important their customer’s experience is to them.

We had a recent post here about how the relationship goes well beyond your customer service rep.  It is also the responsibility of your billing people, marketing people, collections staff, everyone!

3. Operations, a.k.a. Bootstrapping – if you are going to survive, you better have the purse strings drawn tight on unnecessary expenditures. No matter how good your sales and relationship teams are, the person in charge of your outgoing expenses can cut the jugular at any second.  Once it’s cut; lights out.

NOTE: I am aware that there are a few companies out there like Facebook and Twitter that can bleed money for what appears to be forever. Go buy a lottery ticket instead.

4. Technology/Your Idea – this section does not include all technology involved throughout your company.  It’s impossible to separate any one department from the general term “technology.”  The idea here is that your idea, although the basis of the business being started, is not the most important piece to your future success.  Obviously, you need a viable concept and the development chops to build it (whether on your own or hired), but without the key pieces in place your application is just another piece of unused software… but delivered over the web.

 

Photo Credit: Kyle May

4 Steps to Growing Your SaaS Marketing Mar 30 Jason Moore

As a follow up to our earlier post on 3 Keys to SaaS Success, we have had some great discussions on “What next?” Once you have your application built with the three self-reliant tools built in for your clients, how do you find your clients?  First things, first.  Initially, your clients will not magically find you.  Let me be clear.  Your product is great and you have architected a beautiful design, but without some marketing efforts you and your product are just Dust in the Wind (go ahead and listen while you read the rest).

Whether you are bootstrapping the project on your own or have funding from your company, taking the proper steps will save you time, money, and effort when it comes to today’s marketing environment.

The four steps are as follows:

1. Built-in tools for self-reliance – as mentioned in the previous post, without this relationship between your clients and your application, all other efforts will be more expensive and time-consuming.  So even though these tools are not necessarily “marketing” items, they are critical for your word of mouth to ignite.

2. Build a practical and clean site – your website is critical to your business as a SaaS company, but it is not critical to break the bank on it.  Once you have your basic site built with concise copy (with whatever tone you want to set as your company’s voice), a place where someone can self-signup for trial or paid account, and a feedback loop then you are ready to launch.

Other free tools that are available to increase your presence on-line while keeping costs low are Ning (for community-oriented communication), Wordpress (amazing how customizable it is today), and Google Analytics (see next step).

Your best friend at this point will be your ability to get your voice out to the places it needs to be.  This could be online (Twitter, company blog, discussion boards like on LinkedIn, etc.) or in real life meetups where you (aghast) shake hands with people and develop relationships OFFline.  You (and other employees) are the company.  And people like doing business with people.  Getting involved in your community whether it be local or virtual is the absolute best way to drip your name into conversations.

3. SEO/SEM – Once you have your site up, and you have been able to drive some traffic to the site, start measuring.  Optimizing your site to see what has been effective and how you can climb up the search engines with targeted keywords.  Once you have some income sprinkling in, start dabbling in paid SEM.  Be ruthless on your money going out, though.  If a particular search term or ad is not producing revenue there is ZERO reason for you to continue to put money towards it.  As more accounts come in the door, add more money to what is showing success.

4. Spend money on targeted efforts – For the most part, spending money on advertisements outside of SEM should be done after you are cash flow positive. Money spent in this fashion is better served as brand awareness as opposed to lead generation.  There are many avenues that have little to no cost involved that will generate more leads for you in the beginning.  And without the first three steps covered well, money spent on advertising will more than likely lead to very high abandonment rates when you do garner someone’s attention.

 

You already know about these four steps, and you are possibly participating in some or all of them today. Have you evaluated the strength of your base lately? Did you start buying advertisements and pay-per-click Google ads prior to honing the copy on your site?

One of the dangers that of putting too much effort into step 3 prior to step 2 is translating your data incorrectly.  When you start measuring your sales funnel the abandonment rate could be much higher due to your copy and website flow instead of the effectiveness of the ad.  Changing the ad could be counter-productive.

The order of your efforts is just as important as what the efforts are in many cases.  I would love to hear your thoughts on this subject.  Have you had success with a different order?

Three Keys to SaaS Success Mar 23 Jason Moore

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