Why profit is so important for your SaaS

One of the most important metrics for your SaaS company is profit. But it's not often talked about. Why? And why should you focus more on your profit?

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Startup Costs Team 16/07/2019

check your profit in your Startup Costs dashboard

Many SaaS owners track a ton of metrics: MRR, churn and retention to name just a few. Using great tools like Baremetrics, Profitwell or similar. These are all super relevant metrics to track for any SaaS businesses, but there’s one important metric for decision making not often mentioned and that is: profit.

Most venture-backed startups don’t care about profit, as their sheer existence is mostly to grow as big and as quickly as possible (in attempt to be bought or to IPO). Profit is not even the slightest on their radar. Startup Costs though serves SaaS companies that want to be a (small and profitable) business, ie. need to have revenue. That’s what we’re about too and that’s who we serve too.

What is profit

Profit is what’s left after you subtracted your expenses from your revenue. This might seem simple and obvious to some, but what most people don’t realise is that the expenses also include your salary, including your own. It’s not what’s left after you paid your (low) expenses to run your SaaS company (these low monthly expenses is what makes running a SaaS so intrinsically interesting!). But it’s not the complete picture. Think of it this way: if you’d hire someone to do your job, what would be left is your profit.

So: profit = what’s left after all expenses are paid (including salaries).

Why should you care?

Why would you care about profit? You make a more than decent living off of your SaaS business and you can even afford a small team! Having a profit though, gives you room to wiggle. Having a slower month, sudden increase in churn or economic issues? All fairly common problems that I’ve seen at many SaaS companies. In all these cases you can fallback to your profit. Got no profit? Buckle up as a bumpy ride will be upon you. 🎢

Another reason why you want to focus on profit is it puts you in control. Maybe you want to, temporarily, take a step back? Hire for a (another) part-time customer support role? Want to focus on your family more? Or maybe kickstart a big new feature within your SaaS for which you need to hire a small team? The profits you gained can help you do this.

When to choose profit?

So when should you focus on profit and when should you invest your profit into your company and grow it? That’s one tough question to answer as no company within any industry is alike. How likely is it your company will be around in X years? And what makes you happy running your business? Do you thrive on running an ever growing business or is it good enough as it’s now? Do you have a team that you are responsible for? Do you care for employee-happiness and maybe want to do profit-share? How big is your market—is there still room to grow? Are there any growth opportunities you haven’t explored yet? Just a handful of questions to consider when to go for profit or for growth. Based on the answers you give, along with the numbers available to you in your Startup Costs dashboard, you can make a well-educated decision.

Profit in your Startup Costs dashboard

Startup Costs allows you to add all your running expenses (including automatic import of your Stripe fees) and it also lets you add all your revenue (again automatic import of your Stripe data is possible!). Once all your data is within your Startup Costs dashboard, Startup Costs gives you a month-by-month and a year-over-year total for your profit. This magical number is your key to more freedom to run your business how you want and lets you make decisions others have to trust their gut-feeling for. 🔑

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