🎙️ Hey there, SaaSpreneurs!🎙️

It's Ben Murray here, host of the SaaS Metrics School podcast 🎙️, and I'm thrilled to bring you the latest insights straight to your inbox 📩. In our newest episode, we delve into a topic that's pivotal for any SaaS business: platform fees and platform risk 💼.

Whether you're a seasoned SaaS pro or just starting your journey, our discussion is packed with valuable insights to help you navigate and manage platform fees effectively 🚀. So grab a cup of coffee ☕, get comfortable, and let's dive into these essential nuances together. Your SaaS metrics will thank you! 🙌

You can also listen to this episode here.

📓Key Concepts to Learn💡

1. Platform Fees

Explanation: Platform fees refer to costs that arise when a SaaS company uses third-party platforms or integrations to deliver their product's functionalities. Examples include building applications on platforms like ServiceNow or Salesforce.

Importance: Understanding and categorizing these fees correctly is crucial as they are required to deliver the product and thus directly impact the cost of goods sold (COGS) 💼. And your GP %!

2. COGS (Cost of Goods Sold)

Explanation: Platform fees are typically coded to COGS because they are essential expenses for delivering the product and generating revenue 📊.

Importance: Properly categorizing these fees within COGS affects the calculation of gross margins—an important financial metric for SaaS companies 📈.

3. Gross Margin

Explanation: Gross margin is a financial metric that shows the amount of revenue that exceeds the COGS. We convert that profit into a %. Best-in-class gross margins for SaaS companies are around 80% 🌟.

Importance: High platform fees can significantly reduce gross margins, making it difficult to reach the best-in-class benchmarks 📉. What’s your GP% with and without platform feeds?

4. Platform Risk

Explanation: Utilizing third-party platforms carries inherent risks, such as changes in pricing, terms, or the strategic direction of the platform, which are often beyond the SaaS company's control ⚠️.

Importance: Being at the mercy of a third-party platform can risk your company's operational stability and financial health 🏦.

5. Strategic Trade-Offs

Explanation: There's a trade-off between quick, accelerated development from using established platforms and the ongoing costs and risks associated with platform dependence ⚖️.

Importance: Decision makers must weigh the advantages of faster product development against the downsides of lower gross margins and potential platform risks 🔄.

6. DevOps Categorization

Explanation: Within COGS, it's recommended to code platform or integration fees to DevOps to accurately capture where the expenditure belongs 🛠️.

Importance: Correctly categorizing these expenditures ensures precise financial reporting and more insightful financial analysis 📊.

Ready to supercharge your SaaS business? Join Ben’s SaaS community with over 7,000 members for exclusive content. Don't miss out — maximize your SaaS knowledge today!

If you found this episode helpful, make sure to tune in to future episodes of SaaS Metric School to broaden your knowledge of essential SaaS metrics and finance topics.

Got any burning questions or specific metrics you'd like us to cover?

Drop us a line, and we'll do our best to address them in upcoming episodes.

Until next time, keep hustling and measuring those metrics!

Best regards,

Ben Murray
Host of SaaS Metric School

P.S. Don't forget to subscribe to our podcast and share it with your SaaS business buddies. Together, let's conquer the world of SaaS metrics!

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