One SaaS Application of Record Per Job Function

Software-as-a-Service (SaaS) is entering its third phase of maturity. Phase one focused on enterprise applications that became platform products like Salesforce.com, NetSuite, and others. Phase two was about general point solutions, mostly for the small-to-medium sized business market like Pardot, Mailchimp, and Zendesk. Phase three is new vertical-specific SaaS applications as well as more specialized solutions…

SaaS and Barriers to Entry

Earlier today Zaid Farooqui tweeted that some of his hedge fund friends think Software-as-a-Service (SaaS) companies are over-valued due to low barriers to entry: My hedge fund friend believes all public SaaS companies are grossly overvalued since they have 100s of competitor, little barrier to entry. — Zaid Farooqui (@zaid) September 7, 2014 While I…

Gross Margin and SaaS

One important aspect of Software-as-a-Service (SaaS) that isn’t well understood to first-time entrepreneurs is the role gross margin plays into the business. Gross margin is defined as the percent of revenue left over after the cost of servicing that revenue is taken into account (see SaaS cost of goods sold). For example, with a SaaS…

Economics of Customer Onboarding Programs

After talking about The Importance of a Customer Onboarding Program, it’s now time to talk about some of the economics of customer onboarding. Many Software-as-a-Service (SaaS) entrepreneurs don’t realize that customer onboarding costs have to be amortized over some period of time and that they affect the cost of goods sold (here’s a separate primer on…