The Secret Sauce of Top SaaS Businesses: Customer Success

Pieter Kemps: Arda, what are the main characteristics and benefits of the SaaS business model?

Arda Koterin: SaaS has completely transformed the way technology is delivered to the market. This model removes barriers for both vendors and customers, allowing for greater scalability, which is an important factor when it comes to growing a SaaS business.

It is also an extremely fast paced business model, with lower barriers to entry, easier adoption, and quicker sales cycles that allow businesses to understand and reiterate their products more quickly.

The nature of the SaaS business model also allows you to efficiently expand your client base to different industries.

Pieter: Great points. Just to add on to that, SaaS has a very high quality of revenue because it is predictable, recurring, and has higher gross margins.

Having said that, subscription businesses are not without risk. There are no long-term lock-ins through water-tight contracts. As the Amazon CTO used to say when speaking about AWS: "We have to earn the trust of our customers every single hour." Why? Because customers can leave at any given hour. Even though the revenue may be recurring, it stops the moment the customer leaves.

So, what does that mean for how you run a SaaS business?

Arda: As you mentioned, the idea of recurring revenue is often like a dream. But like dreams, it can easily turn into a nightmare if you start getting a “leaky bucket” and subsequently losing customers. The big enemy of a SaaS business? Churn! Therefore, the focus should be on “negative churn”, which means expanding revenue from your existing customer base.

This will require you to have a strong focus on customers. If you fail to do so, you’ll not only lose your existing customers, but also lose prospective customers if you prove unable to meet your customer’s expectations. Customers talk! All of this requires more than just your usual reactive "customer support". It has to be proactive.