How do you manage profitability in a subscription business? The answer: Knowing and managing the breakeven point of your customer relationships. In the Subscription Economy, the longer the customer relationship, the more profitable the business model is. In fact, in the Subscription Economy, accelerating time to the breakeven point of a customer relationship is a critical imperative because of the high cost of customer acquisition, the deferral of revenues over time, and the risk of churn. Let’s dig deeper into software-as-a-service (SaaS) for an example. Using benchmark information from Bessemer Venture Partners, Opexengine, River Cities, and others, the breakeven point in a customer relationship is on average 3.1 years in SaaS. Does that seem like a long time? More than [...]
