SaaS Pricing

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October 2023

Hi Paul

Welcome to The Cirrostratus Group October newsletter.

This is a great "how to" article from Openview Partners on designing a home page for a SaaS company. It's focused particularly on startups but applies to all SaaS companies, a great resource for designing your homepage. Also a few more signups for your product make it worth the effort to do a review of your current homepage.

Pricing is always an important topic for SaaS companies and benchmarks on pricing methods and approaches are helpful.

Whether you're looking to sell your SaaS business, looking to buy a SaaS business or just interested in valuation it's good to keep current on software M&A trends.

Paul Ressler

The Cirrostratus Group

SaaS Pricing

Openview Partners and Paddle have just published a joint report on the current state of SaaS Pricing.

Some of the key takeaways from the report are:

38% of SaaS companies change pricing quarterly
94% of SaaS companies change pricing at least annually
1/3 of SaaS companies use value-based pricing but 45% of the largest companies use value based pricing
63% of SaaS companies have free trials or freemium
Knowing and articulating the value of your SaaS offering is probably the most important organizational skill to support pricing

The challenge in implementing the above is that it requires regular attention to pricing and good research to support value base pricing, both of which can be difficult for smaller SaaS companies. Although there is not an easy answer of how to implement value based pricing in a smaller SaaS company, about 20% of companies smaller than $1M use it and 25% of companies under $10M use it. This article gives a good outline of what is needed to implement value based pricing.

Software M & A Trends

M A MERGERS AND ACQUISITIONS Mergers Acquisitions Businessman working at office M A

So far in 2023 it has been a challenging year for SaaS M&A. 2023 deal volume is down from 2022 as are revenue & EDITDA multiples. As a result of this, many founders/CEOs have held off doing a transaction in 2023. The good news is that 67% of CEOs/founders expect a better M & A market in 2024.

If you are a buyer 2024 may have better opportunities because of an expected increase in the number of deals. If you are a seller the consensus opinion of a better market in 2024, including higher valuations is good news.

Now might be good time to dust off the M&A plans. Since there is a valuation premium on high quality, it's also a great time to renew the focus on the basics of growth, retention & profiability to take advantage of an improved market in 2024.

For further information on this topic I'd suggest reading Berkery Noyes report on Q3 2023 Software M & A, a brief 2 page summary. I'd also suggest the Software Equity Group report on the State of SaaS M & A - 2023 as a more indepth review with more survey information in it.

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