Earlier this week I was talking to an entrepreneur and we were debating why some SaaS startups are more successful than others. He then commented that business models that are more in the path of revenue do better, in general, all else being equal. Basically, the idea is that products that clearly help companies make more money, as opposed to saving money or making things more efficient, are easier to sell and build a business around.
Here are a few thoughts about products that are in the path of revenue:
- Products that can unequivocally show they make money are the strongest in the path of revenue (e.g. Pardot with marketing automation or Shopify with ecommerce)
- Products that are related to the revenue cycle, but not directly in the path of revenue, can be valuable but have to spend more time convincing buyers of their value
- Many tech companies have ROI calculators on their website in an attempt to connect their product to revenue, but it’s often a sign that it’s less directly in the path
There’s no requirement that successful products be in the path of revenue, and most aren’t. But, for the ones that are, it’s amazing to see how fast they grow and the size of the opportunity.
What else? What are some more thoughts on this idea of evaluating where products are in the path of revenue?