How to Burn Cash

(and make more)

Jeff Perlman, CEO OneSaas
Do you need
money to
survive or to
thrive?
Steady Burn to next cash injection
• $450K initial
cash/investment
• $61K MRR by month 18
from $86K monthly costs
(Close to break-even if
can’t close next round)
• $25K Cash on hand by
month 18 (* Must be
closing next round
before now)
Diminishing Burn to Break-even
• $300K initial
cash/investment
• $42K MRR by month 18
from $42K monthly
costs
• $11K Cash on hand by
month 18 (mitigate risk
by adjusting breakeven
plot and costs monthly
– know your levers!)
Self-feeding Burn from deferred revenue
• $160K initial
cash/investment
• $33K MRR by month 18
from $33K monthly costs
• $15K Cash on hand by
month 18 (* $71K
Deferred Revenue in
Liability)
What is Deferred Revenue?
• Payments in advance of products or services to be delivered
• Unearned revenue is a liability
• Spending before you earn it = risk
• Delivery moves it to recognised revenue = income
• You mitigate the risk by delivering

For customers to buy into deferred revenue,

• your pricing has to be right,

• they have to trust you, and
• believe you will still be around in a year
Deferred revenue opportunities
• Pre-payments for specific deliverables, e.g. a software build or
consulting engagement
• Always take a deposit – everyone should have skin in the game
• Installation / Initiation fees
• A fee before initial deployment/provision (short-term deferred)
• Subscription pricing annual/multi-year contracts versus monthly plans
• SMB/Consumer customers get a discount for annual pre-payment or pay a
penalty for monthly payment instead of annual
• Enterprise customers get a discount for pre-payment, e.g. to consume $
within the budget year
Get a discount for paying annually

• ~15% of customers initially opted for

annual plan
• Marketing campaigns to target best
customers on monthly = ~20%
upgraded to annual
• 30% higher churn rate at renewal time
= refund risk

~$1 of deferred revenue for every $5 of

recognised revenue
Get penalised for paying monthly

• ~40% of customers initially opt

for annual plan
• No upgrade marketing campaign
yet (timing)
• Churn is on parity (better
advance communication of
renewal)

~$5 of deferred revenue for every

$1 of recognised revenue
Beyond financial levers

Offer features
only available on
annual plans
Pricing is IMPORTANT to get right
• Don’t leave money on the table
• Match the value proposition
• Pick the right value metric(s)
• Fit user persona’s ecosystem
• Know your SaaS metrics
• Work on a theoretical model
monitor, test and adjust
• Model to target operating margin
• Bind your revenue model,
budgets and levers to your burn rate
Pricing psychology
https://www.nickkolenda.com/psychological-pricing-strategies/

Nothing in this world has concrete meaning.

At the end of the day, price is merely a
perception. Nothing more. Nothing less.
Pricing – A/B test, constant optimisation
• V1 pricing: 1 plan: $30
• No time to figure out – take a stab
• V2 pricing: 4 plans: $25, $35, $50, $75
• Lower entry point, 40% higher overall ARPU
• V3 pricing: 3 plans: $29, $49, $99
• Simpler, no perceived price difference, 13% higher overall ARPU
• Critical mass allowed much deeper analysis of usage and value metrics for v4
• V4 pricing: 5 plans: $19, $29, $49, $99, $299
• Lower entry point, higher range
• V4.1: only show 3 most relevant
• V4.2-5: experiment with freemium and $9 limited plan
• Thesis: 6% increased ARPU, 60% increased conversion rate
Tuesday night take-aways
• Take control of your business and burn rate
• Find ways to earn and burn your own money
• Combine multiple options to optimize your
growth
• Create self-sufficiency so you are not driven by
need

• Invest deeply (time) in your pricing strategy

• Implement to enable flexibility
• Analyse, analyse, analyse
Thank you
Questions?