A successful SaaS business model that leads to product adoption revolves around three basic principles: Value, retention, and advocacy.
Providing customers with value is the initial trigger of product adoption. Customer retention and advocacy generate growth without forcing companies to increase customer acquisition costs (CAC) over time.
A healthy company largely relies on expansion and advocacy as main growth channels. In terms of MRR, these channels should outperform the results of leadgen activities. Especially because classic leadgen processes aren’t scalable.
As a firm, you can’t afford to keep hiring more sales reps or keep increasing your advertising budget to grow your MRR. This would lead to staggering CAC that would delay growth. Such a conversion-based business model is not sustainable in the long run.
Jason Lemkin goes as far as to say that successful SaaS companies are those that, after reaching an ARR of approximately $1m, keep triplicating their MRR without increasing CAC.