the 10 essential saas growth strategies
TRANSCRIPT
3 Introduction
6 Create Tailored Product Editions
9 Expand through an Upsell Path
14 Expand with a Cross-Sell Strategy
18 Expand with Usage Pricing
22 Optimize Pricing and Packaging
26 Enable Self Service
30 Enable Assisted Sales
35 Expand into the Enterprise
39 International Expansion
42 Strategic Acquisitions
46 Conclusion
Table of Contents
3
Introduction
For every successful SaaS company that has grown over 50% year over year — including
such well-known companies as Zendesk, Box, Hubspot, and New Relic — there are
thousands of startups that have failed.
In fact, according to a recent McKinsey study Grow Fast or Die Slow,
"If a software company grows less than 20% annually, there is a 92% chance of failure.”
4
When you’re a startup, it’s fairly easy to double revenues in a month (for example,
going from $10K to $20K). As you start to grow, you can expect to double revenue in
a quarter, then in a year. But as you get larger, it’s very, very difficult to double your
revenues in these same time frames — after all, how many companies grow from
$50M to $100M in one month?
So how can SaaS companies grow, grow fast, grow efficiently, and keep growing?
In working with hundreds of SaaS companies, we’ve learned that the solution to
sustaining a high growth rate is to diversify your approach to growth and embrace
multiple growth strategies.
We’ve boiled it down to the top 10 essential growth strategies:
Here we highlight Zuora customers who provide great examples of
SaaS companies who are nailing each of the 10 growth strategies, and
offer lessons for your own (super)growth.
TAILORED PRODUCT EDITIONS
#1
SELF SERVICE SALES
UPSELL PATH
ASSISTED-SALES MODEL
CROSS-SELL STRATEGY
EXPAND INTO THE ENTERPRISE
USAGE PRICING
INTERNATIONAL EXPANSION
PRICING & PACKAGING OPTIMIZATION
STRATEGIC ACQUISITONS
#2
#7
#3
#8
#4
#9
#5
#10
#6
1. Create Tailored Product Editions
Sure, many SaaS companies might start off selling a single product. But as new features
are added, cramming everything into a single product doesn’t really work.
We know that in order to scale and avoid being priced out by competitors, SaaS
companies need to offer more than one product edition. The question is: how can you
best design your editions to move your growth forward?
The best SaaS companies smartly package their product capabilities so that:
- Each edition appeals to a different segment of the customer base, and
- Each add-on targets a different customer need
Editions and add-ons are just means for monetizing different parts of the
customer base.
7 lessons about crafting meaningful editions
and communicating their value.
Fast forward to the present time at which
Zendesk is used by 200,000+ organizations
worldwide, with a reported $208.8M in
revenue for 2015.
Their editions may change — and likely will,
as that’s part of the growth process — but
they currently offer monthly and annual
plans for four editions:
Essential: Their low-priced starter plan for
$5 is a clear example of going downmarket
to capture the long tail — and an easy way to
onboard new customers.
Team: Directly marketed to small teams
(even in name) and offering everything SMB
need.
STAR EXAMPLE
Zendesk is a great example of a company
that continually experiments with tailored
product editions, to design editions that
are engineered to increase deals and ACV
per deal — and that align with their growth
strategy.
Back in 2010, Zendesk made some pricing
changes that resulted in reported price
increase of up to 300% for some customers.
After tamping down the PR firestorm that
resulted, Zendesk learned some valuable
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Professional: Offering more feature
functionality for established teams —
clearly the option they’re pushing.
Enterprise: More features and flexibility
to scale with larger companies.
Of course this isn’t the locked-down
final incarnation of Zendesk’s product
editions, nor is it the end of their pricing
and packaging journey. Zendesk, like all
growing SaaS companies, knows that
pricing and packaging are dynamic. It’s
an ongoing process of mapping product
editions to strategy.
Since editions and add-on products
change over time, SaaS companies need
the ability to:
Change pricing in a central location
so that it updates across all systems
and sales channels (online, in the
quoting tool, etc.)
Add new products, editions, and
free trials over time without SKU
explosion
Enable quick testing and iteration
of pricing and packaging
Key Takeaways
2. Expand through an Upsell PathAs Paul Farris noted in Marketing Metrics: The Definitive Guide to Measuring
Marketing Performance:
“The probability of selling to a new prospect is 5-20%. The probability of selling to an existing customer is 60-70%.”
Given the nature of SaaS’ recurring revenue business model, it’s no surprise that the
fastest growing companies are the ones that are most successful at growing revenues
from existing customers.
This is well demonstrated in the recent Pacific Crest 2016 SaaS Benchmarking Survey
in which we see that the CAC (customer acquisition cost) to acquire $1 in upsell
revenue is just 24% of the cost to acquire a new customer.
The same study also shows that median respondents are able to successfully
capture 15% of new ACV from upsells. As revenue rises, it’s clear that larger
companies have an even higher percentage of ACV coming from upsells,
largely to sustain CAC and growth efficiency.
Pacific Crest 2016 SaaS Benchmarking Survey
0
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
New ACV from New Customer
Upsell to Existing Customer
Renewals
$1.18
$0.28
25th percentile
Median
75th percentile$0.68
$0.11
$0.55
$0.33
$0.07
$0.13
CAC vs. Selling Path
Respondents: New ACV from New Customer: 142, Upsell ot Existing Customer: 102, Renewals: 97
Upselling is not only critical to increasing revenue, but also for customer
retention and stickiness, because the more value your customers get from your
products/services, the more satisfied they are.
Pacific Crest 2016 SaaS Benchmarking SurveyNew ACV vs. GAAP Revenue
0%
5%
10%
15%
20%
25%
30%
2015 GAAP Revenue
% N
ew
AC
V f
rom
Up
sells
& E
xpan
sio
ns
Median ≈15%
9%
14%
16% 16%
20%
23%
<$2.5MM $2.5MM-$5MM
$5MM-$7.5MM
$7.5MM-$10MM
$10MM-$15MM
$15MM-$25MM
$25MM-$40MM
$40MM-$75MM
$75MM
25% 25%
28%
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The trick, of course, is that you need to understand your customers, and have deep
insight into their usage in order to identify upsell opportunities and build strategic upsell
paths.
Dropbox strategically established this
storage threshold as a willingness-to-
pay boundary. In other words, they know
that 2GB is just enough to get customers
hooked — and then they’ll need to
upgrade to the Pro plan.
With their B2B offering, Dropbox is pulling
on a different lever, that of capability-
driven growth. Their Business plan offers
an expanded set of capabilities that
companies will require as their business
grows and number of users expands.
There’s a real race going on in the cloud
storage space. To maintain their current
valuation of $10B and prepare for their
rumored IPO, Dropbox will need to
continue to innovate on their offerings
and play with their consumption and
capability levers to push their Business
solution and drive users upstream.
STAR EXAMPLE
Dropbox provides a good example of a
SaaS company that has a smart approach
to upselling for increasing revenue and
customer success.
On the B2C side, Dropbox uses a
consumption-driven growth model. They
offer a free Basic plan to individuals, with
2GB of cloud-based storage space. If users
run out of space (which happens quickly
once you start backing up photos and other
media), they can upgrade to a Pro plan.
To create and execute on a clear upsell path, SaaS businesses need the ability to:
Use data to influence packaging decisions and design meaningful tipping
points for upsell paths
Design an upsell path to either be capability-driven or consumption-
driven — or both
Arm sales with the customer information they need to successfully target
potential upsells
Key Takeaways
3. Expand with a Cross-Sell StrategyWhile upselling and cross-selling are sometimes conflated, they are really two distinct
separate growth strategies. While upselling is a strategy designed to sell a more
feature rich (and expensive) product edition to an existing customer, cross-selling is a
strategy designed to sell additional products to an existing customer (to provide a more
comprehensive solution).
UPSELL
CROSS-SELL
SALES & MARKETING EXERCISE
PRODUCT DEVELOPMENT
EXERCISE
According to a recent SaaSRadar report by McKinsey & Company and Gainsight, of
later stage SaaS companies (with revenue in the $25-75M range), companies that
had the lowest churn were those that cross-sold multiple products to about one-
third of their customers. The takeaway is pretty clear: The ability to solve for a broad
range of customer problems, with a broad range of solutions, increases retention.
Cross-selling provides an impetus for innovation. SaaS companies that want the
ability to cross sell need to be continuously innovating, adding new products,
features, functionality, and offerings to entice customers to add on to their plans.
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16 developers. They build on this fan base
and drive retention through bottom-up
adoption of their products. In other words,
rather than marketing solely to leadership,
they connect directly with developers,
providing a wide range of easy-to-deploy
products and additional features that solve
very real pain points.
New Relic has wisely recognized that to
optimize growth, they need to go outside of
just being an APM (application performance
management) offering. As New Relic
founder and CEO Lew Cirne has said "We'd
love New Relic to be for the IT management
market what Salesforce is to sales and
CRM."
Towards this end, they’ve been successful:
According to their FQ4/15 earnings report,
20% of new recurring revenue came from
STAR EXAMPLE
New Relic, a leading digital intelligence
company, is a great example of a SaaS
company that has grown very quickly, in
large part due to its cross-sell strategy.
In 2016, New Relic was ranked as one of
the Fastest Growing Companies in North
America on Deloitte's 2016 Technology
Fast 500 with 847% revenue growth
between fiscal year 2012 and fiscal year
2015.
New Relic is known for their awesome
products, with a huge base of devoted
non-core products, approximately 15%
of their customers were paying for more
than just one product, and multi-product
customers (that is, customers who pay for
more than just one product) increased by
more than 400%.
They did this by offering every product as
a monthly. Any developer can pay a small
fee to try out an add-on product without
a big commitment. This significantly drives
cross-sells.
By diversifying their product line and
focusing on cross-selling to their devoted
base, New Relic is not only increasing
earnings per customer and thus overall
revenue, but is also poised to grab a larger
share of the global IT operations and service
management software (ITOSM) market —
which grew to nearly $21 billion in 2014,
according to Gartner.
To effectively cross-sell, SaaS
businesses need the ability to:
Track customer behavioral (what
they do in the product) and
financial (what they’re paying)
information to understand
customer needs and uncover
new add-on opportunities
Guide the sales team to target
specific customers for specific
add-on offerings
Offer creative pricing strategies
(e.g. in New Relic’s case, a
shorter billing frequency) to
incentivize cross-sells
Key Takeaways
4. Expand with Usage PricingAt its heart, SaaS pricing is a way of quantifying value. The goal: let customers pay
for the value they need. The best pricing strategy will let you put a number on the
metric that customers value most, based on how they actually use your service.
This is commonly called a “value metric.”
Simply put, a value metric should do 3 things:
1. Align to customer needs
2. Grow with customers
3. Be predictable — for customers and for the organization
This is fully supported by a recent McKinsey survey of Enterprise SaaS customers
that showed that more than 75% of customers want pricing metrics that are
aligned with perceived value, easy to understand, and easy to track (and thus
predict costs). And yet, only about 27% of SaaS businesses use some sort of usage-
based pricing today.
The nice thing about a usage-based model is that you can use it to create multiple
dimensions — which are, essentially, the levers you pull to drive price points higher
and higher, drive engagement, and drive revenue. Depending on your business, your
levers could be number of emails, API calls, number of units, or any features that can
be packaged in different ways.
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DATA AND INSIGHTSIncrease Engagement and Retention
In the Subscription Economy, the subscriber is at the center of the business. Everything that your business does (no matter how far removed it might seem from the customer) and every decision you make must be done with a subscriber-centric approach. Your customers want to be recognized as unique individuals rather than a nameless count in a broad market segment.
Gone are the days of product or plan recommendations based on basic profiling. Today’s
realized that they were essentially shifting
to a subscription commerce model. But
with their current billing infrastructure,
they calculated they'd spend more time on
billing than actually delivering their service.
In fact, CollabNet was spending about 25%
of their road map on a billing platform. As
Guy Marion, VP & GM, Cloud Services for
CollabNet notes put it, "That is pretty much
shooting yourself in the foot as a start-up
SaaS company."
CollabNet iterates fast. They pride
themselves on working in two-week sprint
cycles to release products to customers
that they really want, when they need
it. Fortunately they found Zuora to help
them keep up with pricing and package
innovation and iteration (and billing) as well.
And Zuora gave them the ability to easily set
value pricing for multiple markets based
STAR EXAMPLE
When CollabNet, a leading provider
of Enterprise Cloud Development and
Agile ALM products, launched a new
professional service, one of their key
concerns was how to price it. They
quickly realized that a pricing structure
based on usage would make more sense
to subscribers than rigid feature-based
pricing. So they decided to transition from
a utility pricing model to a subscription
pricing model based on usage (i.e. number
of transactions per month that customers
performed on the CollabNet platform).
As they got further into the rollout, they
on usage.
Usage pricing is about more than
pricing; it defines how CollabNet delivers
products and services to their customers.
Having an always available, always
flexible way to update pricing means that
CollabNet can update pricing as their
customers’ needs change. As Marion
notes, this means that “Customers feel
like they’re getting what they’re paying
for, as opposed to being forced into
buying something they don’t really want.”
This is the true meaning of value pricing.
With the Zuora platform, CollabNet is
able to leverage the flexibility and the
speed to provision a range of pricing
plans — and focus on what they're best
at: providing collaborative software
development features and functionality
that help developers build great
software.
To develop a meaningful, value-based
pricing strategy around usage, SaaS
businesses need the ability to:
Accurately track usage
Enable usage-based pricing,
including overage plans, tiered
usage pricing, volume pricing,
rollover windows,
and more
Rate usage to accurately bill
customers
Rate usage in real time to
provide customers with real-
time billing information
Key Takeaways
5. Optimize Pricing and PackagingOver the course of the entire lifetime of a SaaS business, do you know how much time
the average company devotes to planning their pricing? Six hours (that’s according to
research by Jeanne Hopkins, Executive Vice President & CMO at Ipswitch, presented at
a recent SaaSFest). That’s it.
This seems crazy, especially considering the huge impact that pricing has on your
bottom line — bigger even than acquisition or retention, according to research by
Price Intelligently.
Since pricing strategy is key to successful monetization, SaaS businesses need to
constantly be optimizing revenue through pricing. In our experience, we see this
philosophy reflected by our customers who, generally, update pricing annually
(which means that they’re thinking about pricing throughout the year).
Impact of Improving Each Growth Lever
0%
5%
10%
15%
Acquisition Monetization Retention
3.32%
12.70%
6.71%
Impact of improving each lever by 1%
Price Intelligently @PriceIntel
% im
pac
t o
n t
he
bo
tto
m li
ne
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along with recurring monthly charges.
Because of the nature of their business,
Invoca’s pricing manages multiple usage
dimensions including minutes, calls, phone
numbers, voice prompts, and more. This
combined with recurring monthly charges
creates exponential complexity in terms of
pricing.
So, to optimize pricing, Invoca needed
pricing and packaging flexibility to easily
and quickly match customer requirements
and demonstrate value. And they needed a
system that could support their negotiated
sales process and provide clear insight into
the pricing dimensions throughout the
quote-to-subscription cycle.
According to Christensen, Zuora “really frees
[Invoca] up to be creative and intelligent as
STAR EXAMPLE
Invoca, a call performance marketing
solution, demonstrates an evolved
approach to pricing.
According to Kyle Christensen, VP of
Marketing at Invoca, “If you can't price and
package the services and the software and
the products that you're delivering — or if
you do it inefficiently — you're not going
to be successful with growth.”
Invoca wanted a pricing solution that
could handle multiple usage dimensions
they go through pricing exercises. It really adds value to our customers and to
the business.” With increased visibility into key subscription metrics such as TCV,
ARR, and MRR, they can make more data-driven pricing decisions.
To increase monetization through pricing optimization, SaaS businesses need
the ability to:
Change pricing in a central location so that it updates across all systems
and sales channels (online, partner resellers, in the quoting tool, etc.)
Point-and-click to change pricing, not re-write code
Easily manage the impact of pricing changes for the entire organization
so that finance, sales, and operation teams can keep up with pricing
changes
Key Takeaways
6. Enable Self ServiceWhile there’s a lot of emphasis on SaaS startups moving upmarket from self-service
sales to a sales-assisted model, that isn’t the only path. Successful, mature SaaS
companies generally use some sort of hybrid sales model in which they embrace self-
service, transactional, and enterprise sales.
Self-service sales, with their lower price points and shorter sales cycles, are a growth
strategy unto themselves. What you lose in deal size, you make up for with sheer
volume (not to mention upsell opportunities).
To deploy a self-service sales strategy, you need to simplify. Your customer needs to
be able to easily find, understand, try, buy, use, and pay for your product.
Towards this end, the key to successful self-service sales is to have fully automated
systems to manage customer acquisition, onboarding, billing, payment, and account
management. These automated systems eliminate the need for sales support which
translates into a lower CAC (customer acquisition cost), relative to the ASP (average
selling price) for a new customer.
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of the five included documents a month
sent by an individual user is branded with
DocuSign (“Powered by DocuSign"). This
naturally lends itself to viral growth. With
more than 85 million users worldwide in
188 countries, this is a guerilla marketing/
sales team unto itself!
Companies like DocuSign that sell to both
consumers and businesses often track
individuals that sign up with the same
domain name (e.g. [email protected] and jill@
abc.com). Once they see traction for a
certain domain, they can then target those
customers for an upsell to a business plan.
Thus the self-service channel funnels into
an upsell path.
Self-service extends to account
management as well. Through self-service
STAR EXAMPLE
DocuSign, a trusted esignature solution,
employs self-service sales to bring on
new customers and capture the lower
end of the market, with more than
130,000 new users joining the DocuSign
Global Network every day.
For most of their plans — Personal,
Standard, and Business Pro — customers
can sign up right from their website.
Only their Advanced Solutions requires
sales support. Their Personal version
serves as a lead gen tool. Every one
amendments, DocuSign customers can make changes to their plans. This ability
for customers to easily self-service their own accounts is also a great driver for
conversions and upgrades.
To deploy a self-service sales model for customer acquisition and lead gen,
SaaS businesses need the ability to:
Track usage to target free-to-paid conversions
Empower customers to self-manage their own accounts beyond sign-up
(e.g. view balance, change subscription, update billing information, and
pay for invoices)
Support a wide variety of electronic payment methods targeted for
different geographic locations
Keep all customers in a single system so that the customer experience,
over self-service or assisted-sales, is consistent
Key Takeaways
7. Enable Assisted SalesAssisted sales teams are built on the foundation that a business needs to provide
some sales guidance (for new and existing customers). Generally, an assisted sales
model indicates that your product is feature-full enough to bring in higher ACV
customers that will need guidance in the sales process.
Pacific Crest saw this exact trend in their 2016 SaaS report — the greater the
ACV, the more dependent a business was on an assisted sales model.
Pacific Crest 2016 SaaS Benchmarking SurveyPercentage of Sales by Contract Size
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Median Contract Size (ACV)
<$1K
Inside SalesField Sales
25%17%
28%23%
52%
68%72%
85%38%
7%
5%
2%
40%
40% 49%
22%
13% 7%
38% 37% 28% 29% 24% 19% 21% 15%
Mixed/OtherInternet Sales
$1K-$5K $5K-$15K $15K-$25k $25K-$50k $50k-$100K $100K-$250K >250K
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As a SaaS business grows, they need to figure out a way not only to offer assisted
sales, but to overcome operational challenges to scale their sales team over time.
Companies looking to double down on their sales team need to:
- Enable sales with the tools and real-time consumer information to upsell, cross-
sell, and renew customers
- Scale with built-in discounting and approval workflows
- Provide the capabilities to take payments and automate prorations
to go “from zero to a thousand paying
customers in the first month of going
live,” according to BetterCloud CFO Bart
Hacking.
But soon they realized they needed to
go beyond the self-service model with a
direct sales team — and needed to figure
out how they would scale the sales team.
This required them to integrate their CRM
from a quote, order fulfillment, and order
processing standpoint.
BetterCloud was able to standardize across
new sales, renewals, expansions, and upsells
with Zuora's quoting solution. And this
automation ensured that when they needed
to grow their sales team, there was no
systemic limitation to doing so.
STAR EXAMPLE
When BetterCloud, the leading provider
of automated management and intelligent
data security for cloud office systems,
decided to move to a paid model, they
knew they needed help. With thousands
of free users, and projections for a 10%
conversion rate, they needed a robust
solution to manage their subscription
management, billing, and payment
systems as they looked to scale.
They started with a self-service model,
supported by Zuora, that enabled them
BetterCloud is now used by 50,000 organizations worldwide, supporting tens of
millions of employees. As CFO Bart Hacking says, “Our business has grown over a
hundred percent year over year, and that's going to continue.”
To successfully grow a sales team, SaaS businesses need:
Guided selling interfaces to help sales determine which products and add-
ons to sell
Real-time information on customer subscriptions, billing, payments,
and refunds
Built-in discounting and approval workflows
Automatically calculated proration when customers upgrade to a different
edition, suspend a subscription, add more seats, or make other changes
Integration between sales and finance systems so that the downstream
impacts of sales are easily managed (e.g. invoicing impact, revenue
recognition, etc.)
Key Takeaways
8. Expand into the EnterpriseWhile most SaaS businesses initially start with self-service or transactional sales
into smaller accounts, to avoid stalling growth they will eventually need to sell into
the enterprise. As TechCrunch recently reported, “At around $30 to $50M ARR, and
sometimes earlier, the law of large numbers takes hold, and adding enough new
‘small deals’ to maintain a high growth rate becomes increasingly challenging.” The
“law of large numbers” essentially dictates that without landing large deals, it’s going
to be pretty hard to reach $100M ARR, and beyond.
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Moving upmarket into the enterprise means bigger ACV (annual contract value) and
increased overall market share. But moving into the enterprise isn’t as easy as the
glib “land and expand” mantra would make it appear.
Going upmarket isn’t just about selling bigger deals. It’s an internal cultural shift that
requires thoughtful preparation.
There needs to be demand for an enterprise version, the product needs to
be enterprise-ready, and systems need to be in place to support these larger
customers. On the sales side, a business needs to have proven their ability to sell —
to multiple stakeholders across organizations — and needs to be prepared for the
much longer sales cycles that come with enterprise sales.
STAR EXAMPLE
Box provides a great example of a
company that successfully moved
upmarket. When they first started, as a
cloud storage and filesharing company,
their revenues through a sales team were
just 0-1%. In other words, they were pretty
much a pure freemium product with
almost all self-service signs-ups. Now,
even though so many of Box’s customers
are just individual users, almost all of their
revenue comes from businesses — with
99% of their revenue being produced
through their sales team.
Box CEO Aaron Levie succinctly explained
how this came about: “You make your
product as easy as possible to adopt but you
make it so a large enterprise can fully adopt
it across their entire company.”
According to Levie, “There’s probably not a
single enterprise that we ever sold to that
didn’t start with users in that organization
having adopted Box.” When enough
individual users within an organization have
adopted a product, organizational adoption
is the next logical step.
When Box started to make the shift from a
consumer product to an enterprise business
application, they discovered that they
needed the right infrastructure to scale.
They needed:
- The ability to support multi-year
contracts or ramp deals for larger deals
- The ability to track product usage to
promote upsells and negotiate renewals
- The ability to guide sales teams to
the right products and add-ons in their
quoting tool
Box used Zuora to make the charge
into the enterprise market. And today,
more than 41 million users and 59,000
businesses — including 59% of the
Fortune 500 — trust Box to manage
their content in the cloud.
To successfully expand into the
enterprise, SaaS businesses need:
Internal infrastructure that is
“enterprise-ready” such as data
access controls and multi-entity
management
Quoting flexibility to sell into
larger enterprises, with the ability
to price for multi-year contracts
or ramp deals
Systems integration so that
global sales, finance, and
customer success teams can all
work off the same data
Key Takeaways
9. International ExpansionWith a cloud product, there’s no geographical limits to where you can sell your
product. But while going global is a clear growth opportunity for SaaS, it poses
myriad operational challenges.
To go international, SaaS companies need to consider and be prepared for legal and
regulatory requirements, potential taxes, local payment methods and currencies,
different payment gateway partnerships, and data residency requirements. And
individual offerings need to be tailored for each new geography in terms of payment
options, pricing, etc.
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But up to this point, they have mostly
focused on direct sales in the U.S., with the
majority of their total revenue coming from
inside the U.S.
In 2017, international expansion is a
strategic priority, with plans to launch in
multiple countries. With the enterprise
multi-entity version of Zuora, they are
prepared to expand. In the near term, they
are also expanding their currencies to
include the Euro, UK pound, and Australian
dollar in addition to U.S. dollars.
STAR EXAMPLE
Cloud-based video communications
company Zoom has won over more than
just the U.S. with its reliable, affordable,
and easy-to-use product line.
Zoom is already supported in a wide
variety of countries — in fact, they excel
in remote regions due to the product’s
ability to handle low bandwidth really well.
And in addition to their U.S.-based data
centers, they already have data centers
in various locations around the world
including India and China.
To become a truly global company, SaaS businesses need:
Ability to accept multiple payment methods in different local currencies
Automatic tax calculation to avoid tax issues
Different payment gateways to maximize local payment offerings
Accurate reporting on foreign exchange gains and losses
Ability to run multiple financial entities separately
Key Takeaways
10. Strategic AcquisitionsStrategic acquisitions are a next-level growth strategy. For those companies that
have enough cash to fund an acquisition, it can be a smart move to reinvest that
cash into future growth.
Access to capital is only one of many requirements for SaaS businesses
contemplating strategic acquisition. In addition to cash, an acquiring company also
needs a strategic plan that fits in with their business model and
day-to-day operations.
They also need the infrastructure in place to support all product lines in one system
so that upsells and cross-sells across product lines are workable and the customer
experience across product lines is seamless.
Successful acquisitions can help a growing SaaS business increase their market
visibility and market share while enhancing their offerings to build out a more
comprehensive solution.
43
44 Their first acquisition in 2010 was
Precision Polling which was, according
to TechCrunch, “like SurveyMonkey for
phones.” Just a few months after this
comparison was published, SurveyMonkey
took the hint, acquiring Precision Polling to
expand their surveys from online to phone.
In 2011, they acquired WuFoo for $35M,
expanding their product line with this
easy-to-use solution for building online
forms. And they acquired rival MarketTools,
through a partnership with a private equity
firm. This acquisition yielded them three
new products, 1.7M survey users, 2.4M panel
respondents, and some big name enterprise
customers.
SurveyMonkey continued their push into
the enterprise market in 2014 with the
acquisition of Fluidware, a competitor from
STAR EXAMPLE
SurveyMonkey has skillfully used
strategic acquisitions to make them the
world’s leading online survey platform:
between 2010 and 2015, they acquired
six companies — all of which helped
them increase market visibility and market
share while enhancing their offerings and
building out their solution (while folding in
the competition).
Today, SurveyMonkey cross-sells a
number of products that came from
these acquisitions.
Canada, with deep-dive features that appeal to businesses.
And in 2015, SurveyMonkey expanded into app insights with the acquisition of
Renzu, and took additional steps to expand their solution with the acquisition of
TechValidate, an automated content-generation platform, intended to "help every
customer now get more from their survey results," according to SurveyMonkey’s
CEO, Bill Veghte.
As SurveyMonkey continues to grow, we look forward to seeing their next smart
acquisition. It’s only a question of when.
To make strategic acquisitions, SaaS businesses need:
The ability to migrate customers from acquired companies onto one main
platform for improved accuracy and efficiency of back-office systems
Consistent invoicing and billing for seamless customer experience
Key Takeaways
CONCLUSIONGrow Fast — but Stay EfficientWhile each of these growth strategies is important and has its place in the overall
growth strategy of a SaaS business, you can’t just jump in headfirst to take on all 10
strategies simultaneously.
Growth rate is undoubtedly important, but the ability to grow efficiently is of equal
importance. If we had to pick one metric to represent efficiency, it would be CAC
(customer acquisition cost) - the cost to attain $1 of new ARR (Annual Recurring
Revenue). The industry average is $1.13. If CAC is too high, then growth becomes
meaningless.
The fastest growing SaaS companies are able to stay efficient as they grow: efficient in
terms of infrastructure, headcount, systems, processes, and organizational alignment.