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| Name | Boost Pricing Control with an Internal Discount Policy | SaaS Metrics School | Sales Discounts |
| Video Uploader | Video From The SaaS CFO |
| Upload Date | This Video Uploaded At 15-07-2024 18:00:23 |
| Video Discription | Welcome to another edition of SaaS Metrics School with Ben Murray, The SaaS CFO. In today's video, we're diving deep into the topic of discounting in the SaaS industry. This episode addresses a critical question from a student in my private Slack community for the SaaS Metrics course. Discounting has always been a part of the software industry, even dating back to the early 2000s during the on-premise perpetual license and maintenance days. However, it's essential to understand how discounting impacts revenue, gross profit, and overall business metrics. Key Points Discussed: 1. The History and Prevalence of Discounting in Software: - Discounting has been synonymous with software sales for decades. - It's crucial to be cautious with discounting as it directly affects revenue. 2. Impact on Gross Profit: - Discounting lowers revenue but does not typically change the Cost of Goods Sold (COGS), resulting in decreased gross profit. - Understanding the flow of these impacts on the Profit and Loss (P&L) statement. 3. Implementing Discounting Policies and Pricing Controls: - The importance of having a framework to avoid chaotic pricing strategies. - Setting approval levels for discounts (e.g., sales managers can approve up to 10%, VP of Sales up to 20%, and anything above that requires CFO or CEO approval). - Customizing these thresholds according to the business needs. 4. Framework for Discounting Approval Levels: - Establishing reasonable thresholds for different discount levels. - Ensuring higher-level discounts are reviewed and approved by senior management. 5. Tracking Discounts: - The need to track discounts accurately, preferably in the CRM system rather than on the P&L. - The pitfalls of recording gross revenue and discounts in separate accounts and how it affects business metrics. 6. Impact on SaaS Metrics: - How discounting impacts gross profit and why it's crucial to monitor these changes. - Special cases where COGS may scale down with pricing discounts due to third-party products embedded in the software. Best Practices: - Establishing Clear Policies: Implementing structured discounting policies to maintain control over pricing. - Tracking Historical Data: Using CRM systems to keep track of discounting history for better analysis and decision-making. - Avoiding Separate Discount Lines on P&L: Ensuring discounts are not posted separately to maintain accurate financial metrics. - Understanding Gross Profit Impact: Recognizing that while revenue decreases with discounts, COGS generally remains unchanged, affecting gross profit. Why This Matters: Discounting can be a powerful tool in driving sales, but without proper controls and understanding, it can lead to significant financial pitfalls. By implementing structured discounting policies and tracking mechanisms, SaaS businesses can maintain healthy margins and make informed strategic decisions. Join the Discussion: Have you faced challenges with discounting in your SaaS business? What frameworks have you found effective? Share your experiences and questions in the comments below. Subscribe and Stay Updated: If you found this video helpful, make sure to subscribe to our channel for more insights on SaaS metrics, financial strategies, and best practices. Hit the notification bell to stay updated with our latest videos. To learn more about Ben check out the links below: Subscribe to Ben’s daily metrics newsletter: https://saasmetricsschool.beehiiv.com/subscribe Subscribe to Ben’s SaaS newsletter: https://mailchi.mp/df1db6bf8bca/the-saas-cfo-sign-up-landing-page SaaS Metrics courses here: https://www.thesaasacademy.com/ Join Ben’s SaaS community here: https://www.thesaasacademy.com/offers/ivNjwYDx/checkout Follow Ben on LinkedIn: https://www.linkedin.com/in/benrmurray #saas #thesaascfo #podcast #saasmetrics #saasmetricsschool #benmurray jlGkwT4_0k0 |
| Category | People & Blogs |
| Tags | SaaS discounting | SaaS metrics | software pricing | SaaS revenue | SaaS P&L | SaaS gross profit | discount policies | pricing controls | SaaS CFO | Ben Murray | financial strategies | pricing framework | approval levels | CRM tracking | business metrics | financial health | sales strategy | discount tracking | pricing calculator | revenue management | financial planning | profitability | cost management | discounting software | industry best practices | financial analysis | pricing policies |
