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Don’t read this article. Save your time and go read Jason Lemkin’s SaaStr blog. It’s the “Joel on Software” of blogs for SaaS businesses. Why? Because this art

Don’t read this article. Save your time and go read Jason Lemkin’s SaaStr blog. It’s the “Joel on Software” of blogs for SaaS businesses. Why? Because this article is grossly simplistic when it comes to SaaS pricing: 1- Despite its title, it Doesnt actually talk at all about how pricing models effect valuation. 2- it presents a laundry list of different models with “pros” and “cons” from the company's perspective, as if that is the most important viewpoint for choosing a pricing model. 3- nothing about aligning pricing to customer value. If you sell a product that improves, say, the conversion rate on a shopping cart checkout funnel, per-user pricing would be a terrible idea since that’s doesn’t align with value. 4- it completely neglects sales concepts. High CAC is fine if LTV is > 3x. Nothing about churn, let alone net-dollar churn, Nothing about incentivizing pricing or contracts to reduce the payback period, which can be without a doubt the largest throttle on SaaS growth, and thus valuation

jldugger 6y ago
Is there like a starter list for that SaaStr blog? I'm on like page five of articles and only back to february.
- billyhoffman 6y ago
  The “best of” is a great place to start and is grouped by topic https://www.saastr.com/best-of-saastr/ https://www.saastr.com/best-of-saastr/ Don’t get overwhelmed. I suggest starting with the stuff about building an MVP, getting traction, and getting to $1MM in ARR. Even if you have read the “technical” side of those stages of a business (building prototypes fast, shipping and iterating, picking an unsexy tech stack, etc) these articles are great because they explain the business side: pricing, average deal size, cost to acquire a customer, inbound and outbound, churn rates, sales channels, lifetime customer value. Basically all the metrics you use to judge the health of a SaaS business and thus how they are valued. I know it’s a lot, but he does a great job ramping engineers to understand business and I have really come to enjoy the Science aspect of business (modeling, forecasting, etc).

jldugger 6y ago

Is there like a starter list for that SaaStr blog? I'm on like page five of articles and only back to february.

billyhoffman 6y ago
The “best of” is a great place to start and is grouped by topic https://www.saastr.com/best-of-saastr/ https://www.saastr.com/best-of-saastr/ Don’t get overwhelmed. I suggest starting with the stuff about building an MVP, getting traction, and getting to $1MM in ARR. Even if you have read the “technical” side of those stages of a business (building prototypes fast, shipping and iterating, picking an unsexy tech stack, etc) these articles are great because they explain the business side: pricing, average deal size, cost to acquire a customer, inbound and outbound, churn rates, sales channels, lifetime customer value. Basically all the metrics you use to judge the health of a SaaS business and thus how they are valued. I know it’s a lot, but he does a great job ramping engineers to understand business and I have really come to enjoy the Science aspect of business (modeling, forecasting, etc).