Software as a Service

The Software as a Service industry is a unique industry unto itself. It features extremely high gross margins, but also a very high cost to acquire a customer. The low barriers to entry allow many companies to beta test a concept in the market before incurring significant capital to expand their customer base. In every sense, SaaS companies must keep their overhead as minimal as possible - that way, capital raised can foster sales growth and development of the product. Inefficient or unnecessary overhead consumes capital that otherwise could be used for much higher ROI projects. As a result, many SaaS companies sustain reduced overhead spend, which generally translates to inexperienced or undertrained resources processing transactions and collating information critical to the understanding and growth of startups. Companies scramble for data to raise capital, but limit the resources used to gather that information. Further, with limited capacity resources, many times networking capital suffers - which requires the consumption of more investment resources that otherwise could be utilized elsewhere.

On one project, Random Wave was hired to improve the effectiveness and quality of information. While providing services, our experts found inefficiencies in processes that led to missed billings, missed recognition of revenue, and incredibly high DOS on receivables to the tune of $500k in capital being tied up annually in receivables.

Our experts mined historical transactions and contracts and were able to find almost $200k in missed revenue recognition. Further, $70k of these contracts were not billed in the first place. We assisted the company in billing and collecting on and missed contracts.

In another project, we assisted a company in reducing DOS on receivables from over 100 days to less than 60 days. This equated to an annualized $500k in networking capital increase, which was used to fund research and development costs.

The median SaaS startup spends about 92% of first-year revenue on customer acquisition. Once acquired, SaaS companies spend 20% of their revenue on COR, 28% on R&D, and 20% on customer retention. This does not leave much for G&A costs. Too often, the tradeoff on cost allocation is between G&A and R&D. At Random Wave, we minimize your G&A so that more capital is spent on Research and Development, maximizing ROI.