3. Leveraging Pricing and Features for Scaling Revenue
- Krish Subramanian Co-Founder & CEO, Chargebee
We reached the first million in revenue with an ACV of 3k. When we sat down to plan our next major milestone, we could see a path towards predictably growing our leads to get us to $4 – 5m within a year.
But as we hypothesized about the next big goal ($10m), we realized that the lead volume and everything we needed to facilitate that necessary leap, suddenly seemed massive.
We were worried. How will we double our acquisition efforts at scale? The existing search volumes couldn’t possibly grow as fast. There just might not be enough opportunities to tap into. A thousand other things could go wrong.
That’s when we paused to consider the other growth levers that were available to us. We asked more basic questions such as how many units we really needed to sell and at what sorts of price points? Charting all those combinations in an Excel sheet gave us a useful perspective.
I know it was a theoretical exercise. Yet it forced us to confront the reality of the value we were actually creating (and could potentially create in the future) and the value we needed to capture.
That exercise produced a figure. It became clear that we required at least a 10k ACV product (and buyers who’d be willing to pay that much) to reach the 10-million mark within the time period we had to chase.
We didn’t have the features that would form such a package. We had to build them.
Next, we felt that we could use some models to think better about pursuing that outcome. We started deconstructing pricing iterations of several SaaS companies such as Zendesk and HubSpot.
What we discovered in that process was that as you get into the details of scaling pricing, even a $299/m product can potentially fetch $1000/m or 12-15K ACV, if you put together just the right enterprise-ready capabilities.
In this regard, I really recommend checking out EnterpriseReady.io, a handy site where you can find an excellent set of primers on what you will need to start moving up-market. Things such as role based access control, audit logs, and SLAs, that bigger customers value more.
So far so good, right?
The math made sense. So did the research. And we could see how the product roadmap had to evolve for us to get this transition right.
But none of that would have worked if we didn’t have a scalable (not just repeatable) way to land customers in that first ACV range.
When you offer good-better-best pricing tiers to serve different segments, you want that scalability and then you also have to look for clues that convey repeatability in the next target ACV range.
You would want to establish that repeatability ahead of time. If you sold one unit of the 15K ACV product this month, you should be able to sell three units/month next quarter, five units/month in the quarter after next, and so on.
Only then can you project scaling this ACV range the year after. This all, of course, starts from consistently finding and qualifying the right leads.