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

Individuals or Teams: Who’s the Better Customer for SaaS Products?

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Teams > Individuals in SaaS businesses

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.

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B2B> B2C

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)

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CURATED BY

vladimir

Life-long learner. Passionate about leadership, entrepreneurship, philosophy, Buddhism & SF. Founder @deepstash.

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