Trying to increase MRR can feel selfish or sleezy. But done the right way, it is the most unselfish thing you can do
It usually doesn’t cost anything to create a new user account, so why do SaaS companies charge for it. All software should be free, right?
I mean, Google Maps, Ubuntu and Facebook are all free and these are some of the biggest and greatest pieces of software ever written. They all changed the world in some way.
So why should you even charge for your SaaS product? Should you even charge for it? It’s probably built on top of a whole lot of open source software that was free after all.
But software isn’t free. It has to be built, maintained, marketed, and product-managed (to make sure you build the right features).
Generating revenue from your software allows you to hire people to help make your software better. As your software gets better your users get more value from it.
If you are selling into the USA, then $10 per month is a very low price. Your software can probably save or make a user/business more than $10 per month without too much effort. If you sell to office workers then you probably only need to save them 30 minutes per month of time to provide a positive Return on Investment.
(If you are selling into other countries then you might consider localized pricing to ensure your customers get a Return on Investment on your software)
As you increase your MRR then you can afford to hire more people to further improve your software. Both your existing and new customers benefit from these improvements.
Maybe you were saving your average user three hours per month before, now you might be saving them five hours per month. This applies to all of your users. So if you had 1000 users then you are now saving an extra 2000 hours for all of your users (that’s one person full time for a year). Software is incredibly leveraged like that.
It’s hard to improve or maintain software that doesn't generate revenue. You can’t hire anyone to help you, and you won’t have much time outside of your full-time job (that actually pays the bills).
Marketers and product managers are not free either, they also need money to pay bills. You can definitely do these jobs yourself, but it will take time away from building the product.
Forgetting marketing and product management for a moment. Let’s look at a case where individual developers are front-and-center.
I have a lot of admiration for open-source developers. They have built some pretty impressive pieces of software that power the world today. It’s fair to say that almost all modern software wouldn’t be possible without open-source software.
But even open-source software development is running into problems with developer funding. When a project gets popular people to find more bugs, and they have more use-cases that require more features to be built.
A lot of open-source developers have full-time jobs so that they can do things like pay bills and save up to buy a house. They can’t commit the required time to their projects. Many of them need funding, and it’s becoming an issue as to who should be funding them.
If more open-source developers were able to get funding, then they would be able to better serve the thousands of people that use their software. In turn, this would improve some/all of the software built using these projects.
Increasing your MRR helps you to improve your product. Firstly, you can afford to hire other people to help you. Like:
Yes, even marketers are really important here. Marketers help to spread the word about your product to more people. This means that you can get more signups and then help more people. Remember that your product has a net-positive impact on its users (who are a good fit for the product), so the more users you get the more people you can help.
It’s really hard to help someone with your product if they have not signed up. It’s also really hard to help someone if they have signed up and are not paying anything. Free users can be good if they are a good fit for the product and eventually convert into paid users.
Some free users stay free because they are not really a good fit for the product, and don’t get much value from it. Customers that say “I would really like features X, Y, and Z to be added and then I might consider paying $<less than your price> per month” probably fall into this category. Your paid customers are arguably a better fit for your product, which means that you can help them more.
Users who are always free take up resources that could be used to help your paid customers. If your Customer Support team is always busy talking to free customers, then they won’t have time to help paid customers.
Your SaaS product provides value to your customers, probably more than you think. Your customers get more value as you improve it.
Increasing MRR means that you can hire more people to help you improve your software. This, in turn, provides more value to your customers.
Software is incredibly leveraged. If your improvement saves the average customer 2 hours per month and you have 1000 customers, then this improvement saves a total of 2000 extra hours per month.
Any time saved could be used by your business customers to better serve their customers. Your consumer customers could use it to spend more time doing something enjoyable.