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Diving into the cloudpart-2

August 08, 2019 / Mickey

In Part 1 of this two-part series we explained the pros and cons of software-as-a-service (SAAS) businesses for both software companies and their customers. In this article, we explain the common financial metrics used to analyse and value SAAS businesses. Once you have developed a new software product, you’ll need a marketing and sales team to find and support customers. This cost is completely unrelated to the software and is called customer acquisition cost, or CAC. CAC will vary from company to company. Xero provides very cheap accounting software thats easy to use. Its CAC is low, as customers can sign up simply online. In contrast, if you sell complex software systems for hundreds of thousands or millions of dollars to major listed businesses, then your CAC will be very high. CAC alone doesnt always tell you much. It needs to be considered within the context of how much the product sells for and the size of the potential pool of customers.Take self-managed super fund softwa...