By Abby Sorensen, Chief Editor
Tomasz Tunguz recently released benchmarks for Series A SaaS companies, which revealed a median growth rate of 250 percent. Startup founders who raise a Series A can typically prove to investors that their companies are poised for rapid growth – that’s no surprise. But Tunguz was surprised by the 4x increase in the median MRR of a Series A SaaS company over the past four years. Of course, there are several factors contributing to this growth of early stage SaaS companies. One of those factors is that starting a software company isn’t as much of a mystery as it used to be. There are playbooks for getting a software product off the ground – playbooks that weren’t as readily available four years ago.
Another one of those playbooks, however, was published way back in 2009 and it was the topic of a recent podcast discussion hosted by Jim Roddy, Reseller & ISV Business Advisor at PaymentsEdge Advisory Services with Worldpay.
Getting to Plan B: Breaking Through to a Better Business Model by John Mullins and Randy Komisar is a must-read for software executives who come from a tech background instead of a business background. And even if your business is humming along, it’s a great refresher to as you start 2019. The book uses case studies from both successful and failed companies to explain why a traditional “business plan” isn’t the best way to build a company. The authors give in-depth examples and explanations of the five key components of a business model (revenue, gross margin, operating model, working capital, and investment).
Here are some of the best quotes and takeaways for software companies:
- The authors say, “Your pricing need not – and should not – be driven simply by cost.” Sure, great margins are one of the most appealing aspects of being in the software game, but make sure you are not underpricing your solution.
- “It doesn’t matter how clever your products, if you haven’t got cash on hand to keep your business moving, you’ll be out of business.” We regularly write about the importance of profitability instead of just focusing on growth. This quote gets to the heart of why cash is king. Software exists to help you automate and analyze your billing practices, so there is no excuse for missing out on the cash your customers owe you.
- “By using other people’s experiences to shape your decision making, you have the benefit of their mistakes, their blood, sweat, and tears. They have already waded into the water to test for jellyfish while you’ve been watching from the shore with a gin and tonic in hand.” Even though I prefer margaritas over gin, this quote speaks to core of our editorial mission at SoftwareBusinessGrowth.com and Software Executive magazine. The content we write and the guest columns we published are designed to test the waters for you – to show you what other solutions providers are doing and what lessons they’ve learned. Our hope is you can apply aspects of our content to your own business.
- My favorite case study in the book was about Go Airlines, which was created as a low-cost airline within British Airlines. Instead of looking to competitor airlines, the leaders of Go followed examples from the banking industry and based early decisions on that comparison. Finding examples from outside your industry means competitors within your industry are less likely to have thought of that idea. Don’t just compare your business to what other software companies are doing – think outside the box for comparisons.
Jim and I – along with POS industry veterans Sean Buckley of Vend and Jeremy Julian of CBS NorthStar – regularly discuss how business books like Getting To Plan B apply to POS resellers and software companies. You can listen to the episode below. The “On The Edge” podcast is designed for POS executives with a goal to educate them on leadership, management, hiring, sales, and other SMB best practices. You can listen to past episodes on iTunes or Stitcher, including discussions about:
- Built To Last by Jim Collins and Jerry Porras
- Raving Fans: A Revolutionary Approach To Customer Success by Kenneth Blanchard and Sheldon Bowles
- The Challenger Sale: Taking Control of the Customer Conversation by Matthew Dixon and Brent Adamson
To make sure you never miss an episode, subscribe to the Vantiv Advantage Podcast via iTunes, Stitcher, or wherever you get your podcasts.