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扩展 SaaS 业务的方法

原文链接:Ways to Expand Your SaaS Business

If you’re a high growth company, it’s imperative to find ways to expand. The market rewards growth, and the power law dynamics of startup outcomes (i.e. most value accrues to the winners) mean that growing fast and winning your market carries outsized rewards.

Many teams approach the question of how to expand their business as a free-form brainstorming exercise. But in my opinion, this is the wrong approach. B2B software is conceptually simple:

  • You build it
  • You sell + market it (note that the order of bullets 1 and 2 can be flipped…)
  • You support it
  • You count the money

There are only so many ways to expand a SaaS business, although execution is complex and nuanced. As a result, SaaS growth is a multiple choice question rather than a free-response essay. And since it’s multiple choice, techniques like process of elimination, pattern-matching, and even guess-and-check can all work when figuring out how best to grow.

This knowledge of how to grow your business exists in many SaaS executives’ heads, but I rarely see it formalized. Tweet at us or reach out via email if you have other ideas.

Go Up-Market

The most common way to expand a business is to go up-market. Sell more expensive products to a larger, more enterprise-y buyer who can pay more.

Thousands of SaaS companies follow this path to growth – Dropbox, Jira, ServiceNow, and more. Enterprise customers pay more, churn less, and are often willing and able to increase their spend in ways that smaller customers can’t.

This strategy usually entails building out a broad but straightforward range of enterprise features. And since it’s harder to sell to the enterprise, you often need multiple layers of sales and marketing, legal, security, and other mature capabilities to have a shot. These significant GTM functions often come to dominate your company’s culture at scale (see: Salesforce, Oracle, Adobe).

Consider going up-market if:

  • Your product solves a big need that you can charge a lot of money for: adding revenue, saving significant costs, or allowing businesses to become more compliant with regulations.
  • You have the will and skill to build a mature go-to-market motion with a small army of salespeople and a robust marketing function.

Go Down-Market

The opposite strategy, which is much more rare, is to go down-market towards smaller customers. The advantage – you can often run a more efficient go-to-market motion by selling to smaller companies – combine some marketing with a smooth onboarding flow and the money makes itself. As a result, many dominant companies like Canva, Figma, and Dropbox have a strong base of smaller customers.

Example: Atlassian purchased several down-market products to offer cheaper solutions – examples include Trello and Statuspage.io. Figma has successfully built a suite of free and SMB-ready features to solidify their grip on the lower end of the market.

Consider going down-market if:

  • Your product can deliver value almost immediately. SMBs typically don’t like to wait to see value.
  • You have very strong design and product skills on your team – efficient onboarding is critical to winning in the SMB market.

Expand Product Lines (Same Buyer, Same Industry)

Sell your existing buyer a feature that is slightly related to your original product line. This strategy often increases both value per customer and differentiation: I get more $, and I also sell you a more comprehensive suite of functionality.

This is one of the hardest strategies because it requires gaining product/market fit with a new product line – as a result, many enterprise companies with slower R&D choose to acquire a proven product rather than roll the dice on building a new one. But the differentiation benefits mean that this is one of the highest payoff strategies, and almost all large SaaS businesses start new product lines over time (notable exceptions such as Zoom and Snowflake often have a very strong ability to expand into both higher and lower market segments).

Adding new product lines for an existing buyer is generally easier but has a lower payoff. Adding product lines that unlock an entirely new buyer has a higher payoff but is much riskier – for example, trying to expand from a sales productivity tool to a marketing productivity platform.

Example: Salesforce (and many, many others) built Machine Learning or AI-branded products that could be upsold to existing customers. For that matter, Salesforce has acquired all manner of products to expand into different areas of SaaS, such as support, social marketing, and ads. Adobe acquired EchoSign and moved to a Legal / Administrative buyer, which was quite different from their traditional creative buyer for the Creative Cloud. AWS and Azure have taken the opposite strategy and used their superlative product development skills to build a wide array of new product lines.

Consider expanding product lines if:

  • You are very strong at product development and can build new products (e.g., AWS).
  • Your market is one in which adjacent markets are predictable and product line expansion carries less risk (e.g., AWS again).
  • You have a lot of money to acquire strong assets.
  • Your GTM team can be retrained on a more complex suite of products.

Expand to New Industries

Many horizontal products that can be used for a variety of general use-cases are extensible across a range of industries. For example, your product might be an amazing database technology for media streaming companies at first, and with a bit of retooling you can configure it to be an amazing technology for financial services firms.

Some of the most common industries to expand to are highly regulated industries such as the public sector, finance, and healthcare. Highly regulated industries often have known product requirements that raise the barriers to entry – if you can build these requirements, you gain access to a new market to sell into.

Example: Azure launched a public cloud offering that allows them to sell cloud products to the government (new industry), although they’re selling to roughly the same buyer (technology / IT). Qualtrics has expanded their surveying functionality to industries as varied as employee engagement via internal surveys and scientific research.

Consider expanding to new industries if:

  • Your product’s value proposition is fairly generic or horizontal – for example, it can be used by a wide range of industries. Zoom is a great example of a horizontal SaaS product (anyone who has a distributed team can use it). At the opposite end of the spectrum is a product like Procore which is specifically built for the construction industry.
  • Your product works particularly well for a few industries right now, but isn’t selling in other industry verticals at all (this means that there’s opportunity).

Adding Services

A lot of enterprise companies choose to add services consisting of individual human consulting over time. There are two huge upsides to services: the first is that it can dramatically increase the value of products with a high sales price but poor UX. Instead of churning off of a $5M contract because the product is a nightmare, services will help you install and use a powerful but unwieldy piece of technology. The second is that services are incredibly easy to sell – you just tell customers that your powerful product will be more useful if you help install it, and the rich ones pay you for it.

There are major downsides to adding services to your business. First, it hurts your margins. Consultants or integration engineers are expensive, and often come with gross margins in the 0-40% range rather than the 70%+ margins seen in software businesses. This can have an even worse disadvantage of making you appear to be a consulting business with a much lower valuation than a pure-play SaaS company (for example, consulting firm Accenture is valued at only ~3x its $60B in revenue run-rate as of this writing). Another smaller disadvantage is that services take up a lot of headcount which complicates your overall company. And finally, services can be a major crutch that prevents you from scaling your product. If it’s easy to throw integration consulting at big clients, your team might not be incentivized to actually make your product usable, which would pay more dividends in the long run.

Of course, the gross margin and complexity disadvantages of adding services really kick in when you over-indulge. Services are kind of like drinking alcohol. Almost everyone does it a bit, and it feels good to have as an option. But if you go crazy it can ruin your business, especially if it prevents you from improving in the long run.

Consider adding services if:

  • Your product delivers very significant value when properly operated
  • Your product is hard to integrate or operate (there’ll be steady revenue here and you can improve Net Dollar Retention)
  • You really need money (services are relatively easy to add)
  • You aren’t worried about your business’ gross margins, or being perceived as a services firm rather than a “pure-play” software business. One reason for this might be that your margins are already incredible; another reason might be that you’re desperate for the money. We’re not judging.

Expand Geographically

One of the best ways to grow your business is to shift into new geographies. For many products, if you’re huge in Milwaukee, there’s no reason that you can’t be huge in Korea. You just need to get a marketing and sales team out there to sell!

Example: Almost all SaaS businesses eventually start to sell across the globe at scale. For one clear example, SAP is a German company that is used for ERP at Fortune 500 companies across the globe.

Pro-tip: it’s really, really hard to sell in China, and we don’t recommend trying this due to various regulatory, cultural, financial, and security related challenges. Many technology companies have tried and failed horribly to sell in Chinese markets. If someone comes in saying that China will be your next market, be extremely wary.

Consider expanding geographically if:

  • Your product’s value proposition is not geography-specific.
  • You have a lot of money, because geographic expansion requires heavy upfront costs (are you an expert in German employment law? Would you like to be?).
  • Your team is strong operationally – particularly in recruiting, people operations, and legal.

英文原文

If you’re a high growth company, it’s imperative to find ways to expand. The market rewards growth, and the power law dynamics of startup outcomes (i.e. most value accrues to the winners) mean that growing fast and winning your market carries outsized rewards.

Many teams approach the question of how to expand their business as a free-form brainstorming exercise. But in my opinion, this is the wrong approach. B2B software is conceptually simple:

  • You build it
  • You sell + market it (note that the order of bullets 1 and 2 can be flipped…)
  • You support it
  • You count the money

There are only so many ways to expand a SaaS business, although execution is complex and nuanced. As a result, SaaS growth is a multiple choice question rather than a free-response essay. And since it’s multiple choice, techniques like process of elimination, pattern-matching, and even guess-and-check can all work when figuring out how best to grow.

This knowledge of how to grow your business exists in many SaaS executives’ heads, but I rarely see it formalized. Tweet at us or reach out via email if you have other ideas.

Go Up-Market

The most common way to expand a business is to go up-market. Sell more expensive products to a larger, more enterprise-y buyer who can pay more.

Thousands of SaaS companies follow this path to growth – Dropbox, Jira, ServiceNow, and more. Enterprise customers pay more, churn less, and are often willing and able to increase their spend in ways that smaller customers can’t.

This strategy usually entails building out a broad but straightforward range of enterprise features. And since it’s harder to sell to the enterprise, you often need multiple layers of sales and marketing, legal, security, and other mature capabilities to have a shot. These significant GTM functions often come to dominate your company’s culture at scale (see: Salesforce, Oracle, Adobe).

Consider going up-market if:

  • Your product solves a big need that you can charge a lot of money for: adding revenue, saving significant costs, or allowing businesses to become more compliant with regulations.
  • You have the will and skill to build a mature go-to-market motion with a small army of salespeople and a robust marketing function.

Go Down-Market

The opposite strategy, which is much more rare, is to go down-market towards smaller customers. The advantage – you can often run a more efficient go-to-market motion by selling to smaller companies – combine some marketing with a smooth onboarding flow and the money makes itself. As a result, many dominant companies like Canva, Figma, and Dropbox have a strong base of smaller customers.

Example: Atlassian purchased several down-market products to offer cheaper solutions – examples include Trello and Statuspage.io. Figma has successfully built a suite of free and SMB-ready features to solidify their grip on the lower end of the market.

Consider going down-market if:

  • Your product can deliver value almost immediately. SMBs typically don’t like to wait to see value.
  • You have very strong design and product skills on your team – efficient onboarding is critical to winning in the SMB market.

Expand Product Lines (Same Buyer, Same Industry)

Sell your existing buyer a feature that is slightly related to your original product line. This strategy often increases both value per customer and differentiation: I get more $, and I also sell you a more comprehensive suite of functionality.

This is one of the hardest strategies because it requires gaining product/market fit with a new product line – as a result, many enterprise companies with slower R&D choose to acquire a proven product rather than roll the dice on building a new one. But the differentiation benefits mean that this is one of the highest payoff strategies, and almost all large SaaS businesses start new product lines over time (notable exceptions such as Zoom and Snowflake often have a very strong ability to expand into both higher and lower market segments).

Adding new product lines for an existing buyer is generally easier but has a lower payoff. Adding product lines that unlock an entirely new buyer has a higher payoff but is much riskier – for example, trying to expand from a sales productivity tool to a marketing productivity platform.

Example: Salesforce (and many, many others) built Machine Learning or AI-branded products that could be upsold to existing customers. For that matter, Salesforce has acquired all manner of products to expand into different areas of SaaS, such as support, social marketing, and ads. Adobe acquired EchoSign and moved to a Legal / Administrative buyer, which was quite different from their traditional creative buyer for the Creative Cloud. AWS and Azure have taken the opposite strategy and used their superlative product development skills to build a wide array of new product lines.

Consider expanding product lines if:

  • You are very strong at product development and can build new products (e.g., AWS).
  • Your market is one in which adjacent markets are predictable and product line expansion carries less risk (e.g., AWS again).
  • You have a lot of money to acquire strong assets.
  • Your GTM team can be retrained on a more complex suite of products.

Expand to New Industries

Many horizontal products that can be used for a variety of general use-cases are extensible across a range of industries. For example, your product might be an amazing database technology for media streaming companies at first, and with a bit of retooling you can configure it to be an amazing technology for financial services firms.

Some of the most common industries to expand to are highly regulated industries such as the public sector, finance, and healthcare. Highly regulated industries often have known product requirements that raise the barriers to entry – if you can build these requirements, you gain access to a new market to sell into.

Example: Azure launched a public cloud offering that allows them to sell cloud products to the government (new industry), although they’re selling to roughly the same buyer (technology / IT). Qualtrics has expanded their surveying functionality to industries as varied as employee engagement via internal surveys and scientific research.

Consider expanding to new industries if:

  • Your product’s value proposition is fairly generic or horizontal – for example, it can be used by a wide range of industries. Zoom is a great example of a horizontal SaaS product (anyone who has a distributed team can use it). At the opposite end of the spectrum is a product like Procore which is specifically built for the construction industry.
  • Your product works particularly well for a few industries right now, but isn’t selling in other industry verticals at all (this means that there’s opportunity).

Adding Services

A lot of enterprise companies choose to add services consisting of individual human consulting over time. There are two huge upsides to services: the first is that it can dramatically increase the value of products with a high sales price but poor UX. Instead of churning off of a $5M contract because the product is a nightmare, services will help you install and use a powerful but unwieldy piece of technology. The second is that services are incredibly easy to sell – you just tell customers that your powerful product will be more useful if you help install it, and the rich ones pay you for it.

There are major downsides to adding services to your business. First, it hurts your margins. Consultants or integration engineers are expensive, and often come with gross margins in the 0-40% range rather than the 70%+ margins seen in software businesses. This can have an even worse disadvantage of making you appear to be a consulting business with a much lower valuation than a pure-play SaaS company (for example, consulting firm Accenture is valued at only ~3x its $60B in revenue run-rate as of this writing). Another smaller disadvantage is that services take up a lot of headcount which complicates your overall company. And finally, services can be a major crutch that prevents you from scaling your product. If it’s easy to throw integration consulting at big clients, your team might not be incentivized to actually make your product usable, which would pay more dividends in the long run.

Of course, the gross margin and complexity disadvantages of adding services really kick in when you over-indulge. Services are kind of like drinking alcohol. Almost everyone does it a bit, and it feels good to have as an option. But if you go crazy it can ruin your business, especially if it prevents you from improving in the long run.

Consider adding services if:

  • Your product delivers very significant value when properly operated
  • Your product is hard to integrate or operate (there’ll be steady revenue here and you can improve Net Dollar Retention)
  • You really need money (services are relatively easy to add)
  • You aren’t worried about your business’ gross margins, or being perceived as a services firm rather than a “pure-play” software business. One reason for this might be that your margins are already incredible; another reason might be that you’re desperate for the money. We’re not judging.

Expand Geographically

One of the best ways to grow your business is to shift into new geographies. For many products, if you’re huge in Milwaukee, there’s no reason that you can’t be huge in Korea. You just need to get a marketing and sales team out there to sell!

Example: Almost all SaaS businesses eventually start to sell across the globe at scale. For one clear example, SAP is a German company that is used for ERP at Fortune 500 companies across the globe.

Pro-tip: it’s really, really hard to sell in China, and we don’t recommend trying this due to various regulatory, cultural, financial, and security related challenges. Many technology companies have tried and failed horribly to sell in Chinese markets. If someone comes in saying that China will be your next market, be extremely wary.

Consider expanding geographically if:

  • Your product’s value proposition is not geography-specific.
  • You have a lot of money, because geographic expansion requires heavy upfront costs (are you an expert in German employment law? Would you like to be?).
  • Your team is strong operationally – particularly in recruiting, people operations, and legal.