Dear Reader,
Welcome to the 51st edition of the good reads newsletter by Malpani Ventures. Sharing your weekly dose of articles for this long weekend’s reading!
Pricing, Pricing, Pricing
https://future.com/podcasts/pricing-for-startups/
In this a16z podcast on pricing, Mark Cranney, Martin Casado and Scott Kupor talk about all things pricing. Some key points:
Start high and iterate - It is easier to go down in pricing than to go up. Value-based pricing should consider the changes in the customer's network, which can result in cost reduction, flexibility, new product rollouts, and other things that can be captured through the software.
Different pricing for different audiences - The pricing approach for a large enterprise varies depending on the audience. Pricing is different for a user than for CXOs, mid-level managers across multiple functions, and higher-level initiatives. ROI-type modelling is also crucial.
Think through the entire deal - A lot of early stage companies get stuck dealing with bigger companies because they haven't thought through what the rest of the deal will look like if it expanded throughout the entire environment.
A CEO’s tactical guide to driving profitable growth
https://www.bvp.com/atlas/a-ceo-s-tactical-guide-to-driving-profitable-growth
Bessemer Venture Partners provides tactical steps for CEOs to follow in order to drive more efficiency and profitability:
Gross Margin
Automate implementation to reduce the work required to get customers up and running
Charge more for implementation as most software companies fall into the habit of giving away implementation for free as a sales incentive.
Benchmark your ARR per CSM
Review each customer’s profitability and develop a plan for how to increase your lowest-margin customers
Sales & Marketing
Clearly define and relentlessly focus on core ideal customer profile (ICP) since these are likely to have the highest conversion yield.
Consider reducing marketing spend that is tough to measure, such as PR, brand marketing, and in-person marketing.
Review your sales attainment on a rep-by-rep basis. A good rule of thumb is that a well-functioning GTM organization should target 80%+ quota attainment for ramped reps.
Pricing and Packing
Experiment with raising prices for new and old customers.
Consider adding volumetric or tiered pricing components (grows with volume, usage, revenue, etc. or “good, better, best” packages) to help align your pricing with the value you are creating for customers.
Default to annual upfront prepayments charged immediately after contract signing
Learnings from Founders Building Healthcare SaaS
https://medium.com/@verticalsaas/learnings-from-founders-building-healthcare-saas-243ef4c72ae5
Gabriella Monico from Fractal shares her learnings from founders like Exacare, Prospyr, and Ritten who building in healthcare SaaS:
Importance of differentiation
Switching costs in healthcare are high which makes it difficult to garner significant adoption by offering just marginal improvements
To convince users to switch to a new provider, the product has to be 5x or 10x better than the incumbent
Finding a unique value-add or silver bullet can be a key differentiator in a crowded market
Spending time with clinicians
Spending time at practices and actively listening to clinicians is the most effective way to identify valuable features for an MVP
💡 Did you know?
The founders of Zoconut (practice management software for dietitians and nutritionists) almost lived at their anchor clients’ offices for more than 2 weeks in order to understand workflows and devise an MVP
Leverage early adopters for credibility
Strong relationships with early adopters can lead to improved sales efficiency and credibility with future customers
Investing in the success of early customers can lead to long-term benefits as they become champions of your product
Wishing everyone a happy easter weekend! 🐰