Software Vendors Find Another Advantage to SaaS
Daniel Druker posted an interesting article in his blog SaaS 2.0 entitled Sage Advice. In it he explores an interesting twist to the value of SaaS to the Channel Partner. SaaS is not only the wave of the future, but it also fits quite nicely into one’s retirement planning.
Druker points out that the Value Added Reseller (“VAR”) has a business model that emphasizes upfront revenue. They sell the software and can also look to implementation as another source of revenue, but by and large there is no steady stream of cash that hits the P&L. The value of the Channel Partner’s business is dependent on finding new customers and selling year after year.
The missing element to the cash flow problem is what the SaaS business model can provide, Contracted Monthly Recurring Revenue (“CMRR”). See my post in this blog March 2nd entitled Best Practices for the SaaS CEO – Top Ten Rules. Byron Deeter’s first rule is that “Cash is King”.
In Daniel Druker’s article he recounts a discussion he had with an established Channel Partner thinking about retirement and the selling of his business. Adopting the SaaS model seems to provide the answers this VAR owner needs. As Druker points out:
• the valuation of any business is driven by future cash flows
• shifting to SaaS will mean a much higher valuation and selling price
Albeit not entirely altruistic, yet another reason to adopt the SaaS approach.
