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Business Insights for Software Developers and Publishers www.softletter.com |
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Vol 4, No 3 In This Issue's Softletter
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The Softletter CEO 2008 This survey covers Chief Executive Officer (CEO) compensation and asks only four questions . We're looking for some fairly standard information--in particular, a comparison of "base salary" vs. "variable pay" (bonuses, commissions, etc.) for your most recent full year and for the previous year. In addition, we compare salaries based on company development stages, an important factor that's rarely taken into account in other salary surveys. Everyone who supplies data for this survey will receive a complimentary copy of the summary report in the February 15th issue of Softletter! Of course, all responses will be strictly confidential. We won't disclose or identify data about any individuals or about participating companies. The Softletter 2007 Website Security and Up Time Survey is Now Open This survey covers website security and up time. As you are undoubtedly well aware, doing business online can be a dangerous exercise. Recent security breaches involving the states of Massachusetts, Vermont, Connecticut etc., the massive loss of data at TJ Max, and a recent phishing attack at Salesforce.com only highlight the current state of online security affairs. This survey examines the potential impact of DDoS, hacking, and phishing/social engineering attacks on your site and business. All respondents receive a free copy of the complete summary results! Of course, all responses will be strictly confidential. We won't disclose or identify data about any individuals or about participating companies. The 2008 Softletter SaaS Report is now available. Introductory price of $199; price raises to $249 on March 11th. Over 204 invaluable pages on every aspect of SaaS from the technology provider's viewpoint. Complete TOC and preview pages available here
Not All Revenue is Created Equal: A Guide to Understanding How Your Revenue Will be Evaluated When You Sell Your Company, Part II of II Maintenance: Maintenance revenue, typically billed annually as a percentage of software license value, can provide revenue stability and profitability for companies that mainly sell software licenses. Buyers value that predictability. However, when maintenance revenue is a small percentage of total annual revenue, it may reveal that few customers purchase maintenance. Alternatively, if maintenance revenue is a high percentage of annual revenue, it may be because sales have stagnated and there is little growth. Another issue facing companies transitioning to the SaaS model is that traditional maintenance revenues evaporate quickly as your business moves to a recurring revenue model. Subscriptions: The sale of software under a subscription is increasingly common and is the business model for the sale of "software as a service" or SaaS. Valuations of companies like Salesforce.com clearly indicate that investors and acquirers highly value the predictability of this business model. The high valuations also stem from the fact that once SaaS companies reach a base of revenue that covers operating costs, the profit margin on all revenue increases is very high. Part III of this article will examine this issue in greater detail. Long term contracts: Software companies may sell licenses under contracts that extend over several years. Future amounts are contractually assured but will not show up on historical financial statements. This contractual revenue should be highlighted as an element of a company's pipeline analysis. While a revenue multiple may not be applicable, contractual revenue can support a rationale for using the highest comparable market valuation metrics and a premium valuation. So, be prepared for buyers to ask for an analysis of your revenues. Don't expect them to value all your revenue the same way. If your potential buyer is a public company, look to their business model, financial statements, analyst reports and market valuation to understand their perspective on valuation so that you can provide them sound rationale for the valuation that you want. As you describe your company's revenue models, help the buyer gain an accurate view of the risks in your business and recognize where they can drive future profits. Manage Your SoftGram Subscription
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Softletter's Marketing and Selling SaaS Seminar, 2008 Boston, MA San Mateo, CA The Premier Event for Those Who Need to Succeed in SaaS Expanded Agenda Online Here
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