Annual Contract Plans for SaaS

Some good advice here re annual plans for SaaS contracts. Reduce churn and attract higher-value customers. Makes total sense. 

Some additional observations:

Annual plans are not just good for the vendor, they are also good for the customer, as they provide explicit budget control without any mid-year invoice surprises. So expect customers to ask for them.

Find a mechanic to deal with uncertain demand projections. Either work with user bands (contract size increases as they cross a threshold) or annual all-you-can-eat plans that get reindexed upon annual renewal. 

Don’t fret too much about cancellation mechanics required by customer legal. If they want out they will get out. So e.g. 90-day total contract cancellation clause would be OK.

For those cases where the customer wants a choice between annual and monthly make sure that there is a significant uplift on the monthly pricing and/or position that as an “on request” offer that will be handled as an exception and/or construct a mandatory bundling with professional services such as training or a rent-an-admin service package. This will differentiate the monthly plan quite a bit and also ensure that you have the resources required to make the customer instantly successful. 

And once you have a fixed-price annual contract then most customers will want to pay in advance, as opposed to quarterly or monthly invoicing. So if you offer several invoicing options, don’t discount the annual prepay by too much, 2-4% are a good place to start.

Two New Books

Tsundoku? Guilty as charged. But every now and then I actually open up some of the books that keep arriving at my doorstep. 
 
Such as:
 
Get Backed by Evan Baehr and Evan Loomis. “Craft your story, build the perfect pitch deck, launch the venture of your dreams.” This does not disappoint. While there may be many other ways to structure and order your pitch deck, this book will give you a very solid framework within which to start and from which to depart at your own risk. Probably most helpful are the dozen or so real-live examples that they include and comment on. And the exhaustive list of potential backup slides that you may want to have in your deck or, at least, be able to produce on short notice. Mandatory reading.
 
The Art of Explanation by Lee LeFever. “Making your ideads, products, and services easier to understand.” This is a bit of a mixed bag for me. Could be much more concise, but then that is a dilemma with all business books, where many authors need to pad the page count to reach book-length. Somebody should find a better way. Some good takeaways in this book re story-telling and not overestimating your audience’s previous knowledge or ability to absorb information. So what feels like dumbing down to the expert may often be exactly what is required to come across to an audience. 
 
 
 
 

Bad Habit: Downloading Samples on the Kindle

Love my Kindle. Actually I have a handful. Pry them from my cold dead hands. But I only recently discovered that you can download free samples for many books. Try before you buy. 
 
And now I find myself reading the sample chapter and moving on to the next book. Much like I often watch the pilot for a fantastic TV show and then move on to the next pilot. 
 
For TV that’s OK. For books not so much. Almost wish I hadn’t seen this feature.

The Curse of Free Software

Been a lifelong paying user of Instapaper. It’s just the best. When they asked people to pay (1 buck a month) I gladly did. Now Pinterest has taken over and it’s all free. Which sounds great, but then makes you wonder if and when they might have second thoughts and turn it off. Which would be genuinely painful if you have hundreds of archived links and it’s an integral part of your content consumption workflow. Better to start backing up and finding a second source, I guess. 

Per-User Based Pricing Still Makes Sense

Interesting article here on per-user pricing for SaaS products and what the alternatives are, specifically indexing into the number of employees in your customer’s organization or somehow tie into financial metrics, such as transaction volume.

A good question to ask and definitely worth a look, although in most cases you’ll end up staying with per-user based pricing.

Per employee only makes sense if your solution is designed to touch every single one of them (n which case it becomes almost identical to per-user).  

Transaction-based is only achievable if your solution somehow directly touches the financials of the transaction itself, e.g. some kind of payment processor, and directly contributes to a measurable margin increase for that transaction.

So in most cases, especially for departmental/LoB solutions you’ll end up sticking with per-user. But don’t forget to model:

  • Do we price diverse user personae differently? Might be needed if value derived is very diverse.
  • Do we need to package users into bands so that annual contracts can be budgeted with no need for incremental top-ups?
  • Do we account for users outside the customer’s organization (customers, partners, suppliers) that either get indirect value or that have to be pulled in in order to realize the primary value proposition?

WhatsApp in Search of a Business Model

So today we apparently heard that WhatsApp is going to discontinue all consumer-centric monetisation, such as charging for the app or charging any subscription fees. Instead content owners and business that want to interact with me have to pay for connecting with the 900m user base.

Not obvious what that means for the WhatsApp user experience and how attractive this channel will be for advertisers. Seems like early days.

But what is obvious is that this is another indicator for how difficult it is to monetize consumer products, where advertising (especially on mobile and also in the context of communication services) really doesn’t work very well and where it’s incredibly hard to get people to pay beyond an initial app download fee.

And even that is hard enough.

Q3/15 Reading List

Lionel Davidson: Kolymsky Heights. Strong.
Mike Hawthorne: Hell of a Journey. DNF
Ivan Vladislavic: Double Negative. Solid.
Jens Mühling. Mein russisches Abenteuer. Naja.
Tim Moore: French Revolutions. Never boring.
Julia Pierpont: Among the Ten Thousand Things. Solid stuff.
Julian Barnes: Keeping an Eye Open. Not for me. DNF.
Joseph O’Neill: The Dog. Loved it.
William Boyd: Sweet Caress. Just great.
Daniel Friebe: Eddy Merckx. Solidly written but the mystery remains.
Martin Suter: Montecristo. Schwach. DNF.
Jonathan Franzen: Purity. Very satisfying.
Jonas Jonasson: Der Hundertjährige, der aus dem Fenster stieg. Sehr unterhaltsam.
John Banville: The Blue Guitar. Exquisite.
Karl-Ove Knausgård: Träumen. Stark.
Klaus Modick. Klack. Gut genug.
Salman Rushdie: Two Years Eight Months and Twenty-Eight Nights. What a wonderful fairytale.

Q2/15 Reading List

Kazuo Ishiguro: The Buried Giant. Very disappointing.
 
Michael Barry: Shadows on the Road. Interesting enough.
 
Lacey Noonan: A Gronking to Remember. Beyond belief.
 
Kazuo Ishiguro: Nocturnes. Excellent. 
 
Modiano: Gräser der Nacht.  Schwierig schwierig.
 
Bryson: Small Island.Perfect, never gets old.
 
Zia Haider Rahman: In the Light of What We Know. Outstanding. 
 
Ned Boulting: 101 Damnations. Good not great
 
Ed Catmull: Creativity Inc. Pretty good.
 
Klaus Modick: Konzert ohne Dichter. Sehr solide. 
 
Gaimon: Pro Cycling on $10 a Day. Fun read, good writer.

The Changing Nature of Tech Companies

Much talk about Google restructuring into holding company Alphabet and its various subsidiaries. Which is of course a brilliant move when it comes to solving their succession problem. So well done.

Many commentators have compared the new structure to Berkshire Hathaway, but that really doesn’t seem right. Berkshire buys mature companies, whereas I would assume that Alphabet will very much want to grow new businesses inside.

It might make more sense to compare Alphabet to the organizational model of a major film studio or entertainment company.

The parallels are obvious: A talent-driven business, with huge upsides and high downsides, a limited ability to predict success for any given project (so you better have a portfolio of them), and a reasonably short half-life for products with only a small handful of franchises enjoying mid- or long-term success. 

Q1/15 Reading List

NoViolet Bulawayo: We Need New Names. A bit uneven but worth it.
 
Felix Lowe: Climbs and Punishment. Kinda funny. 
 
Maja Haderlap: Engel des Vergessens. Eindrucksvoll.
 
Olga Grjasnowa: Der Russe ist einer, der Birken liebt. Sehr stark.
 
Andreas Maier: Das Haus. Schon überzeugend. Aber elf Bände?
 
Edward St Aubyn: Lost for Words. Good not great. 
 
Gabriel Weinberg and Justin Mares: Traction. Good stuff. 
 
Ben Lerner: Leaving the Atocha Station. Impressive Bildungsroman.
 
Alan Rusbridger: Play It Again. What a wonderful surprise. 
 
Ben Lerner: 10:04. Again, impressive.
 
McHutchinson & Blundell: Mid-life Cyclists. A pleasant surprise. 
 
Thomas Hettche: Woraus wir gemacht sind. Au weh. Wo ist der Lektor?
 
Gerhard Polt: und auch sonst. Nicht wirklich inspiriert.
 
Patrick Modiano: Abendgesellschaft. Faszinierend.
 
George Saunders: tenth of december. Strong stuff. 
 
Robert Seethaler: Der Trafikant. Sehr stark.
 
Colum McCann: Dancer. Outstanding. 
 
Roger Ebert: Life Itself. Mixed bag, bit long.
 
Alexandra Fuller: Don’t Let’s Go To The Dogs. Very strong.
 
Robert Seethaler: Die weiteren Aussichten. Nicht ganz so stark.
 
John Hooper: The Italians. Good not great.
 
Ron Rash: Serena. Strong stuff.
 
Arno Geiger: Selbstporträt mit Flusspferd. Eher schwach.