Industries · Technology
Software and SaaS
How software companies sell subscriptions (software as a service, SaaS), why recurring revenue, retention, and gross margin matter so much, how to calculate ARR, net revenue retention, churn, CAC payback, and the rule of 40, how cloud hosting and AI costs affect margins, and how to crack software cases.
Key takeaways
- A SaaS company spends a lot upfront to build a product and win each customer, then earns a subscription every month or year.
- SaaS growth is a bridge: start ARR, plus new customers, plus expansion, minus churn and downgrades.
- In software, the customer who stays is the profit. Most software cases come down to winning customers efficiently, keeping them, and charging for the value they get.
- Explain how SaaS companies sell, price, and deliver software
- Build an ARR bridge and calculate net revenue retention and churn
- Calculate CAC payback and the rule of 40
- Explain gross margin, cloud hosting costs, and the new cost of AI features
- Crack typical software cases in growth, pricing, and due diligence
Lessons
How software and SaaS companies work
Customers, pricing models, the value chain from building to renewing, the cost structure, and the key metrics.
SaaS unit economics: ARR bridge, NRR, CAC payback, and rule of 40
Build an ARR bridge, calculate retention and payback, and see how cloud and AI costs change gross margin.
Software and SaaS: players, trends, regulation, and how to crack the cases
Examples of software and cloud companies by region, what changed from 2024 to 2026, regulation basics, and typical case prompts.
Worked cases in this module
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Key terms