If you’re managing capital one of the first things you realize is that it’s more expensive to acquire new customers than it is to sell to existing customers. If you wanted to get technical you can look at customer life time values and costs of acquisition.
The below data comes from Sammy Abdullah at Blossom Ventures, who curates some awesome analysis. His data shows how public SaaS companies leverage customer acquisition costs to sell more to existing customers under a metric called net retention. Formulaically net retention is calculated as beginning of period revenue + upgrades — downgrades — churn all divided by beginning of period revenue. If that formula yields a number greater than 100%, then growth from your existing customer base more than offset any losses from that customer base.
Do you know what the margins are for these different services in the stack? I know payroll profit margins max out around 17 – 19% but usually hovers around 12%. Do you have any analytics around what percentage of a POS stack their clients use?
Great question and as we’ve looked at our own numbers there’s higher correlation between size of merchants and spend on stack. This is why Square is trying to go upmarket: farmer’s market cat sweater lady isn’t going to buy analytics, payroll, or marketing services.
You also need to clarify net margin or gross margin, and to whom. Reseller? Third party ISV? POS ISV? We did a post on Lavu that walked through some of the math you may be looking for (https://reformingretail.com/index.php/2018/11/06/lavu-falling-into-the-same-pos-product-trap-as-micros-and-aloha/)