How SaaS Companies Can Align Product Development With Revenue Targets

The SaaS market is projected to grow to $1131.5 billion by 2032, making it one of the most competitive verticals out there. If you run a SaaS business, you must additionally consider the ongoing pressure of delivering and improving a stellar product, and hitting revenue targets at the same time.

SaaS revenue targets are a bit tricky to understand, considering they rely on recurring revenue as opposed to one-time product costs associated with traditional business models. With that in mind, let us first understand how revenue targets in the SaaS industry work before delving deeper into how they tie in with product development.

What Are Revenue Targets in SaaS?

When it comes to building a successful SaaS company, you must balance revenue and profitability. Analyzing metrics such as Annual Recurring Revenue (ARR), Monthly Recurring Revenue (MRR), and Customer Lifetime Value (CLV) will help assess and measure your performance in terms of revenue targets. 

The most common key revenue targets for SaaS businesses include:

• Increasing ARR/MRR annually and consistently
• Expanding average deal size through upsells or cross-sells
• Lowering customer churn rates

The popular “Rule of 40” says that SaaS companies should aim for a balance between growth and profitability by ensuring that the sum of growth rate and profit margin is 40%. By measuring the aforementioned metrics, SaaS companies can set realistic and aspirational revenue targets that help them make efficient product decisions. To make things simpler, leverage an MS Word or Google Sheets invoice template to organize your revenue fields uniformly.

How to Align Revenue Targets With SaaS Product Development?

Building a strong SaaS product strategically involves tracking granular data points such as feature usage, churn rates, and user behavior, as well as gathering customer feedback, considering that analytics make up the backbone of your product development process. 

Build a data-driven product development process by implementing strong governance frameworks, surveying users after product demos, and running regular A/B tests. That said, once you do have a strong SaaS product development process in place, here are a few questions you must ask to ensure that it is aligned with your revenue targets:

#1 Have You Established Cross-Functional Collaboration?

You may have a great team, but if all the departments are working in silos, it is counterproductive to sustain the organic growth of your organization. Instead, break down these silos so that product development, sales, marketing, and customer success teams work in tandem. As a result, you can deliver customer-centric solutions and boost your revenue.

For example, Slack, a popular communication and collaboration tool for businesses, arranges regular alignment meetings between the product and customer success teams to discuss and address user feedback and suggestions.

In a SaaS environment, boosting cross-functional collaboration can ensure that your team members regularly share useful insights and utilize resources to level up and enhance product development.

#2 Do You Prioritize Features that Drive Revenue?

What makes a SaaS product truly value-driven and efficient is its ability to provide regular updates to add new features, improve the existing ones, and ensure that all your app data is secure. However, understanding which features to prioritize over those that are not very urgent is an important task in the process. 

Making your feature prioritization data-driven ensures that you focus your resources on driving growth and user satisfaction more than anything else. Use scoring metrics to rank features based on potential impact on revenue, development effort, or user satisfaction. Moreover, you must balance the short-term wins by investing in long-term differentiators.

For example, Dropbox leveraged collaborative feedback loops and implemented data analysis to prioritize their “file sharing” and “team folders” features, providing a significant boost to their paid conversions.

#3 Do You Utilize Agile Methodologies for Revenue Focus?

For SaaS companies, very few methodologies and strategies work as effectively as agile methodology. With the help of agile development processes, SaaS businesses can adapt to user feedback as quickly as possible amidst shifting market conditions and promote continuous alignment with business goals. Taking an agile approach towards your product development also helps ensure that the product is continuously aligned with your business goals.

To accomplish this, you can link your sprint goals directly with revenue KPIs and review outcomes regularly. This helps your teams stay focused on business impact and not just the code output. For example, Atlassian uses agile sprints to rapidly launch feature updates that align with the growth objectives and user requests.

#4 Have You Leveraged Technology for Growth & Scalability?

By leveraging a robust, cloud-native technology stack, your SaaS business can scale efficiently and consistently. That said, doing so will also help SaaS companies cater to increased user and data demands without disrupting any of your existing revenue streams.

Moreover, you must consider investing in scalable architectures, whether you go for a serverless structure or managed databases. Automate your infrastructure management processes using tools such as Kubernetes and utilize cloud platforms that provide auto-scaling. For example, Netflix’s migration to microservices helped it scale globally and support millions of users with minimal downtime.

#5 Do You Regularly Measure Success and Iterate Quickly?

To ensure that your processes and strategies perform as expected, you must define and monitor KPIs at every stage. Right from product usage, customer engagement, and churn to enhancing the lifetime value of your customers, measure the right KPIs and tweak your strategy accordingly to generate the best results. Faster iteration by responding to real data will help you generate the best results out of your SaaS team.

Build product dashboards that will help track the most crucial KPIs such as adoption, NPS and usage depth. You can also schedule regular reviews based on your revenue targets and iterate based on what’s working. 

Concluding Remarks

When you want to ensure that your SaaS product development is done right, you must align it with your business strategy right from the get-go. Moreover, you must encourage cross-functional collaborations among your teams and measure outcomes regularly so that no process exists in a silo. With the help of the strategies that have been mentioned in this article, a SaaS development company or in-house team can maximize product roadmaps and turn them into gateways to sustainable growth of revenue. Accelerate your growth by establishing collaborations, adopting the right metrics, and building your product iteratively.