Why you should add team features to a SaaS product for individuals

Edited excerpt from Why Tilting Just a Smidge from Self-Service Can Grow Your Revenue 30x by Jason Lemkin:

If your product is 100% individual-focused, and you add just enough features to sell to a Team, to tilt just slightly upmarket — you can grow your revenue, at least a segment of your revenue, by 20-30x.

Why? The key is a combination of (x) churn and (y) value. Virtually every self-service, individual seat web service churns at a relatively high rate — from maybe 2.5% a month at best, to 3.5% or 4.0% a month or more in many cases. So that means maybe your customer lasts 8-10 months, maybe a bit longer but not too much.

Now, come up with a slight extension of that same product, wherein some group, team or segment of an entire enterprise can use it together. Let’s call it just 5 seats to start, instead of 1. Maybe you add management-level analytics. Some sort of collaboration. I’m not sure what it will be for you. But let’s call it the most basic features necessary so a team or a group will buy, instead of an individual user.

And what you’ll find is epic on the churn side. Your churn as the deal gets just a smidge bigger will fall dramatically, toward 1-1.5%. And as you add more seats, the churn will trend toward 0% and eventually become negative. Because your customers will add more seats over time than they cancel.

All of a sudden, in say a $30/month product … you’ve gone from a $240 Customer Lifetime Value for the single seat purchase to $5400 CLTV over 3 years from the same customer, from the same basic core product, just with whatever additional functionality you need for your Team or “Enterprise” edition.

One thought on “Why you should add team features to a SaaS product for individuals

  1. Pingback: How to extend a SaaS business from small to large sales without using outbound calling | A Founder's Notebook

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