Learn about how the strategic move towards a SaaS model is a golden ticket to maximizing the overall value of your business.

In this solocast, Jim Barnish delves into four reasons why transforming your IP into a SaaS model is such a game changer. 

Some of what Jim gets into: 

• Scalability is About Growing Smarter: In a SaaS model, it's not just about getting bigger; it's about getting smarter. Ideally, you should aim for the cost of serving an additional customer being close to zero. 
• SaaS = Steady Revenue Streams: With a traditional product or service-based business, you’re often chasing the next deal to keep the lights on. Turn your business into a SaaS subscription model, you’ll make your revenue streams more consistent—as long as you continue providing value to your customers. 

Scalability and predictable revenue are just two reasons to transform your IP into a SaaS model. To hear Jim’s take on increasing customer value and lowering operating costs, listen to the show. 

About The Dirt Podcast 

The Dirt is about getting real with businesses about the true state of their companies and going clear down to the dirt in solving their core needs as a business. Dive deep with your host Jim Barnish as we uncover The Dirt with some of the world's leading brands.

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About Our Company

Orchid Black is a new kind of growth services firm. We partner with tech-forward companies to build smarter, better, game-changing businesses. 

Website: https://www.orchid.black 

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Jim Barnish 0:02

Hey everyone, Jim Barnett here and welcome back to another episode of the dirt. For all of our new listeners out there, this show is all about providing actionable strategies to help you grow and maximize the value of your business. And today we're going to delve into an area that's incredibly valuable for really all business owners and business leaders with important intellectual property and or methodology. For both tech forward and more traditional businesses. I talk about this a lot with some real focused energy on what I like to call turning your IP into a SaaS product goldmine. Before we dig in, if you know someone who is sitting on a valuable piece of IP or methodology, but has not yet turned it into something special, and is unsure of whether they should or how to do it, pause this episode, copy the link and send it their way. Trust me, they will thank you later. Alright, so why is turning your IP into a SaaS model such a game changer, there's really four elements of why it's so important. Those four elements are one scalability of the business to really seeing some Predictable Revenue, and three, increasing customer value. And then the final one is lowering operating costs. So once again, scalability, the business, predictable revenue, customer value, operating costs. Alright, so let's talk about scalability first. So the the emphasis on this isn't just about growing bigger, it's about growing smarter, it's about creating a business model that allows you to serve exponentially more customers without a linear increase in costs. And this is where the concept of marginal cost zero comes into play. In a perfect SAS model, the cost of serving an additional customer should be almost zero. This is the holy grail of business growth. And it's especially crucial in the tech sector where the pace of change is rapid, and the competition is fierce. That being said, it's it's incredibly important for anything that's non related to tech as well to move forward towards that level. Okay. And now let's talk a little bit of shop a couple years ago, we consulted for a company, let's call them tech mate in the name of trying to keep them you know, their, their name out of this, and they had a killer IP in cybersecurity, but we're stuck in the traditional products and services model. And the issue was scalability. They were limited by the number of hours in a day and the size of their team. And this is important. So why does scalability matters because it's what everyone drools over. They want businesses that can scale without proportionally increasing costs. They look at metrics such as customer lifetime value CLV, or customer acquisition cost CAC, you might have heard those commonly known CLV, and CAC, as well as annual recurring revenue or arr. Now checkmates CLV, the CAC ratio went from a measly two to one to a whopping six to one, tech may turn their IP into a SaaS model and guess what their customer base exploded with over 75% growth the next year, with only a marginal increase in operational costs. And more importantly, they nearly quadrupled the value of their business over the next couple of years. So what does and why does all this matter? If you're sitting on IP, that could be productized. Don't wait. Start exploring how you can implement a SaaS model in your business. Keeping in mind scalability and marginal cost zero, leverage your unit economics like CLV, and CAC, and monthly recurring revenue or annual recurring revenue to give you some validation that you're on the right track. I want a quick little side note, if you're not sure if your IP is something you can productize in scale, give me a call. I'd love to answer any questions you got. But just like DJ Khaled, we are going to talk about another one. All right, so next up Predictable Revenue. The beauty of SAS is that it turns your revenue streams into predictable recurring income. This isn't just about making your revenue streams more consistent. It's also about transforming the very nature of that income. In a more traditional service or product based business, you're often chasing the next deal to keep the lights on. But with SAS you're building an ARR annual basically an annuity revenue stream, which is a complete game changer. A transition to an annuity revenue stream means that the revenue keeps coming in month after month, year over year as long as you keep providing value to your customers consistently. It's the difference between a business owning a rental property and flipping houses. One gives you ongoing income while the other is a one time transaction. It allows you to plan better allocate resources more efficiently and it's a massive attraction point for everyone. Investors buyers, just anyone. Business owners alike. so hear me out. Let's look at the example of healthify they are a healthcare analytics company that switched to a SaaS model and saw their revenue predictability go through the roof. How did they do it? healthified developed a SaaS platform that hospitals could subscribe to for analytics. This pivot allows allowed them to take revenue that was project based and turn their business into a more highly sought after SAS model. This stability allowed them to secure better financing and double down on R and D. So why is this important? Predictable Revenue is like catnip. It reduces business risk and makes you more attractive to everyone. But maybe not cats. metrics to keep an eye on here are Ave average revenue per user ARPU, and net revenue retention or nr healthify is ARPU shot up by 40%. So what does all this mean? If you're dealing with fluctuating income, start by analyzing your existing revenue streams, identify the services that can be turned into a subscription based offering, then pilot such a model with a small customer segment and measure its impact on your ARPU and NRR. If you're able to switch your product to a SaaS model, or at least implement a SaaS model alongside of it, you will find yourself in a business that has reduced risk and increased ability to predict your revenue. Next up customer value. Let's dive into this. So it's a big one in the SAS world, keeping your customers hooked is just as important as acquiring new ones. Not to mention that comes with higher customer retention and increased wallet share due to the ongoing value they provide as long as you're providing value. So let's talk about why I want to introduce you to a company called EduTech. Pro. They were in the business of creating educational games selling one time software licenses. But here's the catch. Once a customer made a purchase, that was it, no ongoing relationship, no additional value, they were leaving money on the table. Sound familiar? So what did Edgetech pro do? They switched gears and adopted a subscription model rolling out regular updates and new games to their customers. And guess what happened? Their customer dollar retention rate skyrocketed to a whopping 96%. And not just that their NPS score, which was a key metric for measuring customer satisfaction, leapt from 30 to 70 net promoter score from 30 to 70. So why does this matter to you? high retention rates mean customers are sticking around increasing their lifetime value and ultimately boosting your company's valuation. If you're struggling with customer retention, it's time to sit up and consider the benefits of such a model. Keep a close eye on metrics like customer retention rate and net promoter score to gauge your progress progress. Now moving on to our fourth and final point today lower operating costs, and this is where the SAS model really shines reducing overhead and infrastructure costs. Let's take a look at fin Corp, a fin tech company that was grappling with high operational costs due to labor intensive auditing processes for financial compliance. They took the plunge and developed a SAS tool that automated the majority of their auditing task internal, the result a significant 30% Drop in operational costs and their profit margins doubled to nearly 30%. This shift allowed fincorp to direct their resources towards growth and innovation, setting them on a path to greater success. And once it was proven, they then repacked, repackaged and commercialized, adding a wildly successful SAS revenue stream as well. And this is crucial folks. So lower operational costs translate to higher profit margins, making your business even more appealing to anyone, especially outside buyers. That's important. The key metrics to monitor here are operational efficiency ratio and profit margins. Then if it works for yourself, who else can you sell it to? So what should you do audit your operational costs and figure out if your operational costs are gnawing away at your profits? If they are, it's time to explore how transitioning to a SaaS model can streamline your operations and boost your bottom line. And that's it. So what did we learn? We learned that turning your IP or method into a SaaS model, subscription model is not just a trend, it's a strategic move that can significantly amplify the value of your business. from achieving unparalleled scalability and enjoying Predictable Revenue to enhancing customer value and slashing operational costs. The benefits are abundantly clear. And we've journeyed through real world examples like checkmate and healthify and Edgetech pro and fincorp. Even if we changed the names a little bit was witnessing transformative growth and value creation. If you're sitting on valuable IP, now's the time to explore, adapt and innovate, evaluate your scalability, analyze your revenue streams, scrutinize your customer retention and customer value strategies, and audit your operational costs. The SAS model could be very well be the golden ticket to maximizing the value of your business. And remember, if you have any questions or any guidance on this journey, I'm just a call away. This is Jim varnish, signing off for another episode of the dirt. Until next time, keep growing smarter JV out.

Jim Barnish 9:50

I hope you all enjoyed this episode of the dirt. I want to invite you to listen to our other episodes where every week I am interviewing business leaders who are crushing it in their field and finding out exactly what makes them successful we will see you next time on the dirt