SaaS Interviews with CEOs, Startups, Founders
How to upsell discounted customers to generate 10x more in MRR
27 Apr 2023
Chapter 1: What insights do the speakers share about the SaaS conference?
I'm very excited to share this recording with you guys, which happened at our conference, sasopen.com, with over 100 speakers, all founders of B2B SaaS companies. We have a very high bar for what speakers share on stage, so you're going to enjoy this episode where we dive deep into revenue graphs, real tactics, and real growth metrics.
you are listening to conversations with nathan latka where i sit down and interview the top sas founders like eric juan from zoom if you'd like to subscribe go to getlatka.com we've published thousands of these interviews and if you want to sort through them quickly by revenue or churn cac valuation or other metrics the easiest way to do that is to go to getlatka.com and use our filtering tool it's like a big excel sheet for all these podcast interviews
Check it out right now at getlatka.com.
Hi, everyone. I'm Casey Golden.
Chapter 2: How did LuxLock transition from pilot programs to enterprise sales?
I'm the founder of LuxLock. We're a unified experience platform for luxury brands. So today, I am going to learn how to use this. I'm going to talk about how we 10x our business from pilots to being enterprise ready. We had to essentially have this insane amount of business in retail that is all professional services. They don't do SaaS phase.
Chapter 3: What pricing strategies helped LuxLock upsell discounted customers?
So we had to really find this blended model to be able to sell to our vertical, but keep the pricing consistent. So I'm going to talk a little bit about what we did with our founder program, how we started removing discounts from our pilot accounts, and going into selling full price enterprise. So with our model, we're vertical SaaS. And so it wasn't about the size of account.
It was about the type of account.
Chapter 4: How does LuxLock's blended model work for different account types?
And we needed to find a model that was essentially going to work across. And using this, you might see we're a revenue share plus a SaaS. And in order to be able to do essentially this, we had to come into our founder program because nobody likes to be first. So we positioned at the top. We're probably the most expensive SaaS software fee for chat.
And we needed that model to fit for a $5 million business to a $5 billion business, because most of our customers are at $5 billion.
Chapter 5: What challenges did LuxLock face with customer pricing and relationships?
And we didn't know how to start enterprise with nobody wanting to be first. So just to give you kind of an idea of where we landed. We knew that if we charged by accounts for our SaaS fees, we'd leave a billion dollars on the table because there's not as many accounts as there are locations. And if we charge for user licenses, we'd bottleneck our adoption. But everyone is used to user licenses.
So we built it into our model to leverage free user licenses as a negotiation point instead of touching our SAS fee.
Chapter 6: How did LuxLock achieve significant revenue growth in beta?
So far, it's worked really well. And we take 5% of our lift rather than any type of professional services. So we've essentially gone from zero, from pre-product, to $85,000 in beta to $871,000. And we're on track for our first year out of beta to hit $5 million ARR, just in the SaaS fees. So when I go into...
the agreement essentially if we priced we priced too low we would never build a raise or increase our prices with our customers um if we were inconsistent we would lose all of our relations like our customers relationship and our integrity with them because unlike a lot of businesses or sas companies um
All of our customers are friends, and most of them are workaholics that talk about business about 80% of the time, and they know how much everybody pays for everything. And so we went with a startup program that allowed founders to bring their own price. We went out and saw some of the best emerging luxury brands that we just had killer founders, great products.
We knew that they'd be successful. We knew that they'd get venture backed. And at some point they'd be able to pay us the sooner than later. And then we just broke it down for them in four steps. Say like, we believe in you. We're gonna go ahead and invest our time and
Chapter 7: What unique value does LuxLock provide to luxury brands?
be able to help you increase your revenue faster. And we broke it into four steps for them. And they agreed on a 5x return, which I think is better than Facebook right now. So it was very easy for us to go ahead and get them to commit to paying full price. We weren't getting commitment from them for a discount. We focused on you're paying $4,000 a month for your SAS fee.
I'm invoicing you $4,000 a month. You're going to get used to seeing this size of bill because most brands, the SAS fees are like $25. And it was very eye-opening for them to say like, oh my gosh, I'm getting a $4,000 bill from you. So we needed to make it normal. But we started helping them increase their revenue. So instead of a 5x return, most of our customers have been getting a 30x return.
So now they don't mind paying $4,000 a month because they're making a lot more money than we're charging them. When it really came down to building out our monetization strategy, we compete a lot with enterprise retail tech companies. We play with Microsoft Retails, the SAPs of the world.
Chapter 8: How can revenue share models enhance customer relationships?
Most of it is professional services. They're like one-time software fees and then a lifetime of consultants. So we wanted to make sure that we were blending the best of SaaS with what we could what we knew the appetite was for our industry.
So we really tiered this to be a little bit more of a psychological sales cycle to make sure at the end of the day, we got what we wanted and everybody was paying the same price. We tiered up an additional SaaS fee for $6,000 a month, which we have four customers using right now. That was literally just an additional feature set
And most of our customers start at the $4,000 a month, which is great. That's exactly what we wanted. And all of the user licenses, essentially, we comp. And it gives us a really good idea how many users that they're looking to roll out with, so we can start projecting how much revenue and productivity that's coming out from the users.
But it's one of the biggest problems in our space is that everybody, every company's bought software, nobody uses it. And so we really didn't wanna, we wanted to make sure that there was some type of value for user licenses, but at the same time to make sure we don't bottleneck. And then we have some extra little perks in there, but the revenue share has been probably,
The most unique additive for us is because at the end of the month of our first month, we can actually say we made you $200,000 this month, or we made you $6,000 this month. If you turn our software off, it's gone. And I think that this is one of the things that I find difficult as a SaaS founder is that we pay a lot of SaaS fees.
I think we probably pay more SaaS fees than our customers pay in SaaS fees. And it's really interesting to see how many, I mean, I think we all went through and have gone through and said like, what can we afford not to have?
rather than being able to say like this directly impacts my productivity or my revenue or opportunity for revenue, I don't really see a lot of SaaS fees essentially connected to how the brands make money. And I think that that was something that was really important to us is that if our customer makes more money and grows, our revenue also grows. And so... It's always aligned.
If we see an opportunity to build a new feature or increase conversion rate, we build it. They don't need to ask us to necessarily build it because we're just going to be able to get more of a share. And so it's really helped us to be able to make sure that we're focused on the things that our customer cares about. Like I said, we're just billing them every month.
I can't wait for this whole invoicing system to go away. But our founders in this program, they've gotten used to seeing value for things that are more expensive. I hope it helps the whole ecosystem in general. But this is just really where we focused on about it. 10 minutes, wow. That was fun.
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