Commerce Glossary

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What is a SaaS Business Model?

saas busi - ness mod - el
Is a business model that involves selling cloud-based software which can be accessed through an internet browser, mobile app, or desktop app, and charging users on a monthly or annual subscription basis. This pricing model allows businesses to receive recurring payments in the form of monthly recurring revenue (MRR) or annual recurring revenue (ARR).

SaaS is an increasingly competitive business environment, so start-ups must think carefully about their differentiators and the value they add to the market. Best practice also dictates that SaaS companies must monitor the business’ performance through all stages by keeping track of the key metrics, including customer acquisition cost (CAC), customer lifetime value (CLTV or CLV), customer retention, and customer churn.

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