Thursday, 3 November 2016

Revenue Streams for SaaS

custom software development companies
SaaS on its own isn’t a profitable business model. It becomes profitable only when united with a strategic revenue model. Right pricing structure is the key in SaaS business space, involving a variety of themes and variations. Profitability is the one factor, the software outsourcing companies need to go after, right from the start.


The biggest misconception today in SaaS business is that monthly subscription is the only source of revenue.

However, starting from subscriptions is not at all a bad idea. Subscriptions are the trendsetting SaaS pricing models. The benefits of subscriptions include:
  • Continuously recurring revenue
  • Better growth rate
  • CLV

When analyzed thoroughly, the subscription model defeats the licensing model.


“Upsell” is the generic term for improving both customer value and expenditure. Successful SaaS sales depends on upsells.

Attracting potential customers is a tougher job than upselling the existing customers for a software outsourcing company. It’s less profitable, too. It’s six to seven times more expensive to gain a potential customer than to retain an existing one. You get an extra layer of profit on the average profit, when you upsell an existing customer.
  • Extra Storage, Speed, or DataOne of the commonly used ways to upsell customers, is by giving additional storage, speed, data, bandwidth, etc., along with pertinent costs. Depending on the product and customers, this could be a great way to provide users with the correct level of service at a suitable cost.

New Versions

Charging for new versions of your SaaS carries plenty of risks, but for some businesses, it is the most relevant way to charge. Here, the hardest part is persuading your customers that it’s the right thing to do.

Affiliate Sales

With a successfully executed affiliate program, the software outsourcing company can reduce marketing costs, effortlessly enter new markets, expand your business, and retain your existing customers. Customers who are successful with affiliate marketing will stick with you for longer duration, resulting in a reduced customer attrition.

But use this affiliate program with little cautiousness. If it isn’t properly checked or monitored, it can result in tacky marketing and uninvited exposure to adjacent markets.


It’s critical to focus as much on revenue streams outside the application as within the core product. One such beyond-the-application revenue stream is the API.
An API is a means of making the SaaS compatible with other software applications. Some developers will pay substantial API fees, eyeing the potential of a SaaS that is integrated and customized for their needs.

If an API is created, do an accurate cost forecasting. From a development perspective, APIs are expensive, and future support burdens may offset the potential cost.

White Label Licensing

If customers want to sell solution to their customers, it’s worth some consideration. Hence, charge should be levied accordingly and license agreement should be setup to avoid any future pitfalls.

Setup Fees

A setup fee is a nice way to validate clients during the onboarding process. A client who is willing and able to pay a setup fee is a client who can afford your service commits to use it.
There are always two sides of a coin. Some clients see it as a major turnoff if they are charged every time they turn around. Charge fees to customers only if the services generate true value to them.


Some SaaS providers have successfully developed a revenue model by which they charge for reporting. Whether the reports are automatically generated or manually prepared, they can add a huge value to clients.

If a reporting model can be developed that gives value to the client, while at the same time proves the ROI of the SaaS, then charging the client is justified.


It’s relatively easy and cost effective to build a SaaS with some space for advertising space and revenue. Ads within the SaaS is a hands-free way to earn enduring and recurring income. Companies like SaaSAds specialize in the integration of advertising within SaaS.

However, there are some risks involved. Some users may find these advertisements as annoying. Advertising work great, only for freemium models.

Customer Service

Customer service is not cheap. Hiring and retaining the right people is tough enough. Support personnel must be trained continually not only in the software itself, but in the best way of guiding customers to solve their issues themselves. If the software is complex and customer doesn’t have enough knowledge about it, it will cost a lot to have a fully staffed support team.

Customers needing additional support can be charged a monthly fee. For e.g. A retainer fee to get support when they need it.

SaaS business can be highly profitable, as long as the planning is for profits to happen. Discovering revenue streams other than monthly subscriptions is the key to maximize the profits for software outsourcing companies.

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