Very good thoughts and observations here. As a solo founder of a SaaS, I'd add:
* $200K of income from $500K of revenue sounds low. There are places which have SaaS-friendly taxation, I'm lucky to live in one (EU, Poland) and 75% net margin for the entire business is easy to achieve. An 8.5% tax on revenue is a really good proposition :-)
* Support is key. I care a lot about support (I do it myself). It can easily get out of hand and become a chore, but that means something is wrong: if you listen to your customers carefully, you should be changing your SaaS so that less support is needed. I'm thinking about this a lot.
* We're talking B2B SaaS here: I also believe it is better to have more customers at lower price points rather than a few big ones. Big ones are difficult to get, and often have bizarre requirements. If you cater to them, you will alienate your other users. But there is a sweet point somewhere: you do not want to go too low, or you'll get customers that have very little money. These not only churn more often, they also often cause support issues. The sweet spot is somewhere in the middle.
- US based business, Boston. Taxes are higher, rent is higher (when you needed rent). Salaries are higher (if you want good people). As the founder, I wanted my company to have great benefits and healthcare. That cost (and I'm not kidding here) reduced our revenue considerably. This is why I'm a huge fan of a single payer option in the US that takes healthcare off corporations.
- B2B business with SMB's, average customer ARR was about $3K. E-commerce integration product, so it was a bit of a lift on the technical side with many nuances between integrations.
- Support ended up being about 75% of our labor costs.
Yes, benefits and healthcare are important. Did I mention that these tax rates and margins I listed also cover full healthcare costs (state-provided health insurance)?
Anyway. My point was to show that costs can vary wildly across countries, and I was surprised to see how low the net margin can end up in the US.
* $200K of income from $500K of revenue sounds low. There are places which have SaaS-friendly taxation, I'm lucky to live in one (EU, Poland) and 75% net margin for the entire business is easy to achieve. An 8.5% tax on revenue is a really good proposition :-)
* Support is key. I care a lot about support (I do it myself). It can easily get out of hand and become a chore, but that means something is wrong: if you listen to your customers carefully, you should be changing your SaaS so that less support is needed. I'm thinking about this a lot.
* We're talking B2B SaaS here: I also believe it is better to have more customers at lower price points rather than a few big ones. Big ones are difficult to get, and often have bizarre requirements. If you cater to them, you will alienate your other users. But there is a sweet point somewhere: you do not want to go too low, or you'll get customers that have very little money. These not only churn more often, they also often cause support issues. The sweet spot is somewhere in the middle.