Excellent post! I've been around a couple of businesses within larger companies that were variants of this theme and what you described resonates.
Is it correct to assume that in order to reach escape velocity and build a good business here requires a scenario where the SaaS portion eventually does deliver a meaningful reduction in labor cost? If so, what are some of the tells either at the start or as you ramp towards $1MM ARR that the SaaS portion of the business will deliver the goods to help you reach $10MM+ ARR?
Yes—the core thesis here has to be "Software will do more of this work, and that fact will translate into (a) better gross margins, (b) better CSAT, or ideally (c) both".
And so the only way to know if that's true is to pay very close attention to those metrics (and particularly to GM), which is kind of a foreign motion for the average B2B SaaS startup. The average startup is run on the assumption that: "hey, it's software, it inherently has great margins".
Great post!
Excellent post! I've been around a couple of businesses within larger companies that were variants of this theme and what you described resonates.
Is it correct to assume that in order to reach escape velocity and build a good business here requires a scenario where the SaaS portion eventually does deliver a meaningful reduction in labor cost? If so, what are some of the tells either at the start or as you ramp towards $1MM ARR that the SaaS portion of the business will deliver the goods to help you reach $10MM+ ARR?
Yes—the core thesis here has to be "Software will do more of this work, and that fact will translate into (a) better gross margins, (b) better CSAT, or ideally (c) both".
And so the only way to know if that's true is to pay very close attention to those metrics (and particularly to GM), which is kind of a foreign motion for the average B2B SaaS startup. The average startup is run on the assumption that: "hey, it's software, it inherently has great margins".
Another concern that comes to mind is when companies start growing they tend to shift from outsourcing their Back Office to having in-house.
How do you manage this risk?
What would be a good GM for this kind of hybrid services, Waseem?
I think you want "Saas gross margins".
You might like this article: https://twosigmaventures.com/blog/article/why-gross-margins-matter/