If you thought egg prices were out of control, SaaS inflation is outpacing the rest of the economy.
In the US, SaaS spending is growing 3.5x faster than market inflation. In Australia and the UK, that rises to 5x, according to Eldar Tuvey, founder and CEO of Vertice.
“If reducing SaaS costs is a top priority for your business in 2023, improving your software negotiation strategy is the place to start,” he writes.
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Finding meaningful ways to save can extend your runway and even prevent layoffs: This article provides tactics and strategies for working with suppliers to shorten contract length and secure more favorable terms.
“Negotiating each of the contracts that make up your SaaS stack yields long-term savings by mitigating the effect of rising prices,” says Tuvey.
Thank you for reading,
Walter Thompson
Editorial Manager, businessupdates.org+
@your protagonist
Table of Contents
When to build a freemium plan and how to do it right
Image Credits: Jonathan Knowles (Opens in a new window) /Getty Images
SaaS pricing comes in three flavors: the classic sales-driven model, free trials that ultimately force users to make a decision, or freemium plans that hopefully deliver enough value to keep them coming back.
“Given the obvious differences between these models, choosing one should be fairly easy,” writes Konstantin Valiotti, product director of growth at PandaDoc. “However, current market conditions do not support having just one model.”
In this TC+ article, he explains how to determine the right time to roll out a freemium plan, and equally important, when not to. It also includes a tactical framework for developing freemium products with limited and unlimited use cases.
“Each strategy is unique and depends on the company’s idea of how it wants to move forward,” writes Valiotti. “So think of freemium as an extension of your strategy and see if it’s right for you.”
What do recent state tax changes mean for US SaaS startups?
Image Credits: Daniela Simona Temneanu / EyeEm (Opens in a new window) /Getty Images
For SaaS startups, tax time can be puzzling.
Some states classify software-as-a-service products as, er, services, while others classify them as, er, products.
“There is also the issue of just bundling,” said tax accountant Ardy Esmaeili. “SaaS may not be taxed, but it is when coupled with hardware.”
To help founders better understand their liability, Esmaeili shares tips on identifying a company’s physical nexus and lists multiple SaaS categories that states are likely to tax.
“Engage an expert as early as possible,” he writes. “Don’t think you don’t have to worry about it yet, because waiting can have major consequences in the long run.”
Where should sales be in product-driven companies?
Image Credits: Nigel Sussman (Opens in a new window)
Early-stage startups pursuing a product-driven growth strategy may not need sales teams to build their customer base.
Before his company was acquired by Salesforce, Slack CEO Stewart Butterfield said, “I think we can get away with a traditional way without having a sales team, probably forever.”
Today, Slack has an “extension product team” that integrates product, data science, and sales operations.
According to Elena Verna, interim head of growth at Amplitude, “Start getting your product and sales working very closely together as a unit, like brother and sister.”
