the SaaS Paradox
In the ever-challenging world of SaaS, it’s critical to identify the cost of acquiring customers, the stickiness and the return on investment. What I am suggesting is very obvious, and yes, I am not reinventing the wheel. What I am underlining is to identify the sweet spot between scalability and profitability.
Most of the new-age startups are driven by metrics like “App Downloads”, “Registered Users”, “Daily Active Users”, “Average Usage Time” etc. They perceive these dimensions as indicators towards a larger objective, “Monetization”. However, reality might be a different animal altogether.
What helps in deciding which matrics to drive has more to do with the depth of understanding of the founders; their expertise in the relevant industry. Any business with its core fundamental of profitability will use these metrics as early indicators of adaption and will be quick to do a POC of its monetization model and expedite the journey from user to a subscriber.
On another side of the spectrum are people who focus on driving these superficial metrics without testing the CVP of their product. They portray “App Downloads” and “Registered Users” as the captive user base in building an assumptive monetization model, limited to fundraising.
The choice is between building a business model like Zoho, which strives on its paid subscribers and strong CVP, or playing the valuation game; surviving funding to funding.