tech
SaaS (Software as a Service)
Software delivered as a recurring subscription, accessed via the web instead of installed locally.
Definition
SaaS (Software as a Service) is software delivered over the internet on a recurring subscription basis - Salesforce, HubSpot, Slack, Notion are SaaS products. The category transformed the software industry by aligning vendor incentives with customer outcomes (retention matters more than acquisition) and creating predictable recurring revenue. The economics: high gross margins (70-90%), high CAC, multi-year payback, but exceptional LTV when retention is solid. For service businesses, productizing services into SaaS is one of the highest-leverage strategic moves available.
In your business
- →SaaS valuations (revenue multiples) are 3-5x higher than project-based services - the model shift matters
- →Retention is the most important SaaS metric - acquisition into a leaky bucket fails
- →Watch for SaaS sprawl in your own business - audit subscriptions annually