Individuals or Teams: Who’s the Better Customer for SaaS Products? - Deepstash
Teams > Individuals in SaaS businesses

SaaS companies make disproportionately more money with Team plans:

  1. Deal Sizes are bigger
  2. Retention is so much better. Once a team is collaborating in a product, no single user can easily make the decision to leave
  3. Seat Expansion. Successful Team products have “net negative churn,” meaning that expansion from retained accounts exceeds revenue lost from churned accounts.

Individual plans are the definition of a Leaky Bucket, with usual yearly churn rates of 50%. The Individual plan makes sense for enabling sharing and collaboration as soon as you can. But Teams are the ultimate destination.

9 STASHED

3 LIKES

B2C SaaS is limited to Individuals plans. The ability to offer Team plans is a major advantage of B2B SaaS. 

  • With only ~50% per year retention, these B2C SaaS businesses are effectively an arbitrage on marketing CAC (customer acquisition cost). There’s no long-term business. 
  • Netflix and Peloton are the exception as they have unique retention strategies.
  • Individual plans are a good business only when retention is unusually high (e.g. churn under 2% per month)

8 STASHED

2 LIKES

Deepstash helps you become inspired, wiser and productive, through bite-sized ideas from the best articles, books and videos out there.

GET THE APP: