By Abby Sorensen, Chief Editor
The Business Solutions Network looks drastically different since the last time we hosted an event for software companies. When we were in Santa Ana back in February 2017, the then-named ISV IQ Live! conference was a subset of then-named Business Solutions magazine. Why the change? Well, the name “ISV IQ Live!” was a mouthful of an acronym (I’m slightly kidding, of course).
The real reason behind our revamped and rebranded products was the fact that we want to better serve our ISV readers. Business Solutions was a channel-focused publication geared towards VARs and MSPs. We weren’t doing our ISV audience justice by occasionally writing an article about software companies. Hosting these conferences was a good start, but we wanted to put more resources towards helping software executives run successful, profitable software businesses.
Software Executive magazine and its sister website, www.ISVinsights.com, were launched in the summer of 2017 thanks in part to the success of our previous software conferences. Our ISV Insights event in Philadelphia on October 12 will be our next new-and-improved product.
I’ll be on stage at ISV Insights moderating panels about pricing strategies and raising capital. Since I know most of our audience won’t be able to make the trip to Philadelphia to see these sessions, I wanted to share a preview. I asked pricing strategies panelist John Alarcon, CFO of LoanLogics, and raising capital panelist You Mon Tsang, co-founder and CEO of ChurnZero, to share their insights on one of the questions we’ll ask them on stage.
I first met Alarcon at a Corum Group Merge Briefing meeting earlier this summer (Ivan Ruzic, VP at Corum Group, will also be at our Philadelphia event presenting on M&A strategies for software companies). Alarcon isn’t just the CFO of a 100+ employee software company, he’s also finishing up his PhD at Temple University, where he is extensively researching SaaS financial metrics. Here’s his opinion on who within the organization should control pricing:
Pricing is determined by balancing what the client is willing to pay for your product and the company’s goals. The client’s willingness to pay is influenced by multiple factors such as your brand, the quality of the product, the availability of alternatives, and the competition. It is also influenced by the company’s business strategy, which will dictate price positioning (e.g., low cost vs. differentiation).
Controlling pricing is a collaborative effort:
- The CEO leads the strategy and sets the tone from the top for its execution.
- Marketing and sales plays an integral role in the communication of the value proposition, positioning of the product, and the actual sale.
- Finance manages tight internal controls around pricing and discounting to protect the company’s margins and ensure quality revenue while growing.
- Legal ensures proper pricing and terms are reflected in the contract using a straightforward language that the client can understand and that adequately protects the firm.
Effectively controlling pricing requires a disciplined process, including a standard pricing model, rules regarding discounts, and an exception process with formal approval by the P&L owner. Finance is generally the function to lead this process, using automation to expedite the sales cycle.
You Mon Tsang is the co-founder and CEO of ChurnZero, which helps subscription businesses fight churn with a real-time customer success platform. Before ChurnZero, he was the CMO of Vocus (now Cision) and CEO of the marketing automation business unit, OutMarket. He is a serial entrepreneur, having founded four software companies, including ChurnZero, Biz360 and Engine140. ChurnZero announced a $2.5 million round of funding in September 2017, led by Grotech Ventures with additional funding by Middleland Capital. Tsang offered advice to attendees who have never raised capital before:
Ask yourself: Do you really want to raise money? Raising money puts you on the track of OWING money. The payback comes in different forms: debt payments, dividends, or climbing equity. But there is payback. You have a boss; you have someone who can demand answers; you have set expectations. Now this is not a bad thing if you think your company has a big enough market, a good enough product and a strong enough team to (1) raise money and (2) give back a nice return.
But I find too many entrepreneurs look to raise money too quickly. Think about other options first. Can you do a nights-and-weekends bootstrap while maintaining a paying job? Can you sell adjacent services while building your product? Can you find grants or win business plan competitions?
I’ve bootstrapped, and I’ve raised money. They both have their place. Think hard about which one is best for your business.
If you’d like to hear more from Tsang and Alarcon, and the 20 other experts who will be on stage in Philadelphia on October 12, head over to www.isvinsightsevents.com/register-industry to register today. Other agenda topics include building a reseller program, exit strategies, churn benchmarking, and hiring engineering talent in a challenging tech labor market. Registration is complimentary for active ISV/software developer executives. Questions about our ISV Insights conference can be directed to Ben Huggler at firstname.lastname@example.org.