MicroConf On Air
MicroConf Tactics: Secret Way To Make An Extra $10k+ in MRR (SaaS Cheat Code)
Wed Jun 21 2023Description
The episode discusses the concept of expansion revenue and its role as a cheat code for SaaS businesses. It explores how expansion revenue allows customers to pay more as they get more value from the product, leading to net negative churn. The episode also provides examples of expansion revenue strategies and highlights the importance of customer behavior and value metrics in determining its feasibility. Additionally, it emphasizes the potential enterprise value that can be achieved through even a small percentage of net negative churn.
Insights
Expansion revenue is a secret way to make an extra $10,000 or more in MRR each month.
Expansion revenue is a powerful strategy that can significantly boost monthly recurring revenue for SaaS businesses.
Recurring revenue is the cheat code for SaaS businesses.
Recurring revenue, facilitated by expansion revenue, is a game-changing advantage for SaaS businesses.
Expansion revenue allows customers to pay more as they get more value from the product.
By implementing pricing tiers that automatically upgrade customers as they derive more value from the product, SaaS businesses can generate expansion revenue.
Expansion revenue can result in net negative churn, where the business grows without adding new customers.
Net negative churn is a desirable outcome enabled by expansion revenue, allowing businesses to achieve growth without relying solely on acquiring new customers.
Examples of expansion revenue include charging per seat, per subscriber, or using domain-specific value metrics.
SaaS businesses can implement various expansion revenue strategies, such as charging based on the number of seats or subscribers, or utilizing value metrics specific to their industry.
Net negative churn can be achieved by adding MRR without adding new customers.
By increasing monthly recurring revenue (MRR) through expansion revenue, businesses can achieve net negative churn even without acquiring new customers.
Not every business can have expansion revenue; it depends on customer behavior and value metrics.
The feasibility of implementing expansion revenue strategies varies depending on factors such as customer behavior and the suitability of value metrics for the business.
For businesses operating at scale, even a small percentage of net negative churn can add significant enterprise value.
Even a modest percentage of net negative churn can have a substantial impact on the enterprise value of businesses operating at scale.
If expansion revenue doesn't work for a business, options include experimenting with pricing or starting a new business where it's built in.
If expansion revenue is not viable for a particular business, alternative options include experimenting with pricing strategies or considering the creation of a new business model where expansion revenue is inherently incorporated.
Chapters
Expansion Revenue and SaaS Cheat Codes
00:08 - 06:32
- Expansion revenue is a secret way to make an extra $10,000 or more in MRR each month.
- Recurring revenue is the cheat code for SaaS businesses.
- Expansion revenue is one of the four SaaS cheat codes.
- Expansion revenue allows customers to pay more as they get more value from the product.
- Having pricing tiers that auto upgrade customers as they get more value leads to expansion revenue.
- Expansion revenue can result in net negative churn, where the business grows without adding new customers.
- Companies like Salesforce, HubSpot, Slack, and Box have expansion revenue that leads to net negative churn.
- Value metrics and feature gating are common ways to price SaaS products.
- Per seat pricing and per subscriber/contact pricing are examples of value metrics.
- Charging per seat is recommended if multiple people in the same account see different things in the product.
Expansion Revenue and Net Negative Churn
06:05 - 11:07
- Expansion revenue is a key strategy for SaaS businesses to achieve net negative churn.
- Expansion revenue means that as customers get more value from the product, they pay more.
- Examples of expansion revenue include charging per seat, per subscriber, or using domain-specific value metrics.
- A hypothetical example of expansion revenue is Textual, a text-to-buy service for e-commerce.
- In this example, as customers add subscribers and move up pricing tiers, the company earns more without acquiring new customers.
- Net negative churn can be achieved by adding MRR without adding new customers.
- For businesses operating at scale, even a small percentage of net negative churn can add significant enterprise value.
- Not every business can have expansion revenue; it depends on customer behavior and value metrics.
- If expansion revenue doesn't work for a business, options include experimenting with pricing or starting a new business where it's built in.