The “Any Money Is Good Money” Mindset in Software Businesses
Many businesses operate under the principle of “any money is good money,” regardless of the industry. However, this mindset is particularly prevalent in the software/SaaS space.
When it comes to tangible products, selling an item for less than it costs to produce results in a loss due to labor, materials, handling, and shipping costs. But in the software space, the cost of producing additional units, such as a software license, can be close to zero. For instance, an eBook can be replicated with minimal cost after the initial creation.
This mindset is commonly seen in poorly managed, low-profit businesses, or in situations where the software business unit is subsidized by other activities.
It is often found in small to medium-sized software businesses with 25 to 75 employees, where positive cash flow supports the lifestyle of key leaders. As long as cash is flowing, bills are being paid, everything is perceived as good.
There’s Real Danger in ‘Any Money is Good Money’
However, this mindset can be dangerous for business owners. Continually reinvesting and growing at a rate comparable to the competition is crucial. If not, the risk is that eventually the gravy train runs out.
In some cases, the leadership may not fully understand the business they are in and are just happy that their products are selling. In these situations, finding an industry-appropriate revenue operations person can make a significant difference.
A Revenue Operations (RevOps) professional can help bring order and efficiency to an out-of-control business. Here are some areas where they can help:
- Alignment: Get internal departments/teams to understand and work towards common goals.
- Process Improvement: Analyze and optimize sales processes, from lead generation to closing deals, to resolve bottlenecks and inefficiencies slowing revenue velocity.
- Data Analytics: Structure, collect, and analyze data to provide key insights. Understand what is being sold, to whom, where, and at what price? Identify which product features are being used or not.
- KPIs: Drive performance through key performance indicators, measuring performance against revenue goals.
Whether it is a $450M business, $50M, or smaller, it is not uncommon to find businesses that do not know where their money comes from or why their customers buy (beyond the obvious). Without answers to key questions, businesses cannot determine where they need to go, what they need to do to survive. Then, any money received is merely good money. By accident.
Image Credit(s):
Burning Banner – Jp Valery
Supreme – Erik Mclean