Sass or Software as a service is the platform that allows users to access cloud-based apps over the internet. These apps are a purchase and pay-as-you-go software solution. Nested on the internet through the services provider, these applications have become a norm in today's technology world. Because of this, businesses are starting to incorporate Sass platforms into their business plans. But what does it cost to run a Sass Platform with a few million annual recurring revenues? This article explains some points to consider before building your own Sass.
There is no magic number.
Each SaaS is different, so there is no magic number in which to set your sights. However, you can shop around and find low price web hosting. Make sure that you check to see if the site offers SaaS support. Additionally, you should check the security measures available through the site. While many sites offer a level of services to SaaS developers, many others require you to use third-party providers, linking back to the hosting platform. Weigh the options of your SaaS needs before deciding on the best-shared hosting provider.
The multiple factors which make up Sass
Even with the top-rated web hosting, there will be several layers to your Sass platform. It is not just a matter of having an application developed and putting it on the internet. Consider that the application must be maintained and that there must be a level of safety and security provided to your customers. The development and operational cost must be accounted for. Cost includes:
- Hosted Application development
- Development tools
- Database management
- Business analytics
- Operating systems
- Servers and Storage
- Networking firewalls/security
- Data Center Physical Plant building.
While Sass has several different services, they can be broken down into three categories. These are the leading Sass platform, PaaS (platform as a service), and IaaS (infrastructure as a service). Depending on the domain and web hosting services you use, the price for hosting these different components will vary.
Know the two factors
To help calculate the cost to run a Sass Platform with a few million annual recurring revenues, you must know the two main factors. These are the customer lifetime value (LVT) and the customer acquisition cost (CAC). When calculating the cost, ensure that your LVT is higher than the CAC. This makes it possible for you to grow. You must set your price point to allow for this to happen. That being stated, consider that you will have a cost associated with the number of users and data accessed on the server. CAC and LVT should factor in the cost to operate and the cost to the client.
Sometimes people refer to say that the two methods are the horizontal and the vertical method. However, if you do not accommodate the CAC and the LVT, the numbers will not matter. You will not gain profits, and the cost will be overwhelming.
Cost-plus strategy
This is the fundamental way in which to calculate your cost. Add up all the costs of the SaaS, PaaS, and IaaS. When you have the total cost, you need to add a percentage of points for your profit. The price point is set for your Sass once you meet the expected cost over the cost to own. Remember that millions in annual revenue do not necessarily mean millions in profit. Depending upon the domain and web hosting service used, the total cost adds up could cut substantially into profits. Adjust the price as needed.
Competitor based pricing
The second method is a bit tricky. Competitor-based pricing involves finding the cost of similar SaaS platforms and making your cost similar. The cost that you acquire will be different unless you use the same platform. Expect to have around 12% of your cost (minimum) allocated to your site's hosting, development, and infrastructure. Only use competitor-based pricing when your profit margins appear to be close to that of the competitor you are mimicking.
Value-Based Pricing and cost estimations
Perhaps the best way to know the cost of your SaaS platform is to use the value-based method. With this technique, the user looks outward for all pricing information. This means that the pricing information is from your potential customers and your chosen hosting provider. Take the overall cost to host, develop, and maintain the SaaS and subtract the cost to the client. This gives you your operational cost.
SaaS cost
SaaS costs vary. There is no way to give a fixed number. However, you can assume that the minimum cost will be about 12% of your revenue. This covers the hosting, maintenance, and any IT needed for the application. Remember that you may also need to pay a cost depending upon the number of users, especially if you host your application on multiple top-rated application download sites.
Friday, October 8, 2021