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Acqui-hires have little to do with business fundamentals, and are outside of the scope of this calculation. They're simply measured as "Enough to attract the ta
by drone 13y ago
Acqui-hires have little to do with business fundamentals, and are outside of the scope of this calculation. They're simply measured as "Enough to attract the talent away from their existing venture." Typically in these deals, the core business is shut down and the variable/fixed costs aren't given any relevance.
I'm not sure about there being a hard and fast rule of cost-of-sale in SaaS - I would expect that's largely based on the target customer, enterprise targets are usually going to have a higher customer acquisition cost than consumer targets. Or, by cost of sale, do you mean variable cost? If variable costs approached those of manufacturing in software companies, you'd have to take a hard look at the management and consider replacing them quickly. =)
- mbesto 13y agoWell cost of sale in SaaS can be fixed (salary) and variable (compensation + marketing). I'm referring more to companies that have an "Enterprise" tier, or rather at least require Account Executives that are a must to drive sales with higher profile clients. Any company that does make serious money (that would be worth valuing) would IMHO warrant this type of structure (Basecamp and a few others being the rare exceptions to this rule). > If variable costs approached those of manufacturing in software companies, you'd have to take a hard look at the management and consider replacing them quickly. =) Having looked at various large SaaS companies (SF, Workday, etc) the variable costs appear to be quite high.
- drone 13y ago> Having looked at various large SaaS companies (SF, Workday, etc) the variable costs appear to be quite high. Yeah, I've seen some of that too, but I still think that outside of certain specialized markets and products, that the variable costs shouldn't approach 60%+ on the LTV of a sale. I would also tend to calculate commissions and one-time marketing expenses not only against the first month or payment period, but on the total LTV of the sale.