Breaking down ProfitWells business model (and why they should buy Pipe).
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Breaking down ProfitWells business model (and why they should buy Pipe).

I’m sure many of you have heard of the four P’s of marketing but for the uninitiated here, a quick marketing 101 sidebar.

The 4 P’s are the four essential factors involved in marketing a product or service. They are: the product (the good or service); the price (what the consumer pays); the place (the location where a product is marketed); and promotion (the advertising).

ProfitWell have built their business becoming experts on price, helping Subscription and SaaS businesses, reduce churn, optimise pricing and, improving visibility with accurate revenue reporting - .

According to their website they’ve already worked with 22,000+ companies - hotjar, webflow, Siemens, Mixmax, eero etc.

So what’s their story?

Well, pricing is hard. It’s one of those things that’s easy to set (often in a non-scientific way) and forget.

In my personal experience, when you find a price that works it’s very tempting not to rock the boat. For most, our natural bias is to think about what we’ll lose, not the potential for gain;

  • customers might respond negatively
  • we might lose revenue
  • it’ll mean difficult conversations with clients
  • our competitors will use it against us
  • etc.

For growth companies in particular, nailing the price and focusing on customer acquisition over optimal revenue is a pretty common pitfall, one that can have a significant impact on valuation and free cash flow. Under optimising by 5% at €10k in monthly recurring revenue has a very different impact at scale.

Patrick Campbell (@patticus on Twitter, and well worth a follow) writes:

“Guessing at your pricing is a little like throwing darts blindfolded. You’ll hit something—but it probably won’t be the dartboard.”

and;

“most companies aren’t willing to put in the effort to optimise their pricing decisions….Instead, companies turn to strategies like guessing, relying on discounts, and not pricing based on value.”

But hey, I’m not here to write about pricing. I’m here to break down ProfitWells’ business model.

First product up, Metrics:

  • Customer Segments: Subscription and SaaS Businesses (Media, B2B, B2C, DTC)
  • Value Proposition: ALL the Subscription metrics.
  • Channels: Online (Awareness to Delivery)
  • Customer Relationship: Self Service
  • Revenue Streams: $0
  • Key Resources: Human Resources, Pricing Data/Knowledge
  • Key Activities: Marketing, Development
  • Key Partnerships: Ad Platforms
  • Cost Structure: Human Resources, Software Subs, Infra & Dev Tools

Next products, Retain and Recognized:

  • Customer Segments: Subscription and SaaS Businesses (B2B, B2C, DTC)
  • Value Proposition:Retain: automatically reduce churn Recognized: simplify complex revenue recognition
  • Channels: Online & Sales Team, (and Price Intelligently (we’ll talk about that next)
  • Customer Relationship: Self Service
  • Revenue Streams: Retain: performance based (they put skin in the game. The more revenue the product recovers, the they charge) Recognized: subscription based
  • Key Resources: Human Resources, Pricing Data/Knowledge
  • Key Activities: Marketing, Development, Sales
  • Key Partnerships: Ad Platforms, Infa Vendors
  • Cost Structure: Human Resources, Software Subs, Infra & Dev Tools

Final product, Price Intelligently:

  • Customer Segments: Subscription and SaaS Businesses (B2B, B2C, DTC)
  • Value Proposition: Optimised Subscription Pricing
  • Channels: Online (acquisition), Sales Team (evaluation to delivery)
  • Customer Relationship: Personal Assistance
  • Revenue: project & recurring (dedicated pricing resource)
  • Key Resources: Pricing Economists (cool title eh?), Pricing Data (from free and paid products for benchmarking)
  • Key Activities: Sales, Consulting
  • Key Partnerships: Ad Platforms
  • Cost Structure: Human Resources, Software Subs

And that’s not all. To throw more fuel on the fire they’ve got a media business, recur, that pumps out nice videos, podcasts and books, talking all about pricing (personally I love it!)

What they’ve done is pretty smart. They’ve found a way to leverage the same Key Resources to deliver different Value Propositions to a niche Customer Segment with diversified revenue streams.

  • a free product that acquires users
  • premium products that deliver recurring revenue
  • service based products that leverage data to increase their value and drive more revenue

And now onto the juicy part, where do they go from here? Well, I think there’s an interesting opportunity with Pipe (acquire, partner or compete).

Pipe could be a whole article on its own, but at a basic level, they allow subscription businesses to get cash today for monthly recurring revenue they’ll receive in the future by selling that future revenue to investors for cash today.

For growing subscription businesses, the value is huge. Rather than taking on debt, diluting or boot strapping, they can finance their own growth with future cash flows. It’s pretty interesting.

If you haven’t made the link yet. Remember ProfitWell have access to pricing data for 22,000 customers, all of which are Subscription and SaaS Businesses. For Pipe to create value, they need to connect to the same pricing data. The only difference is Pipe are chose a different value proposition for the customer segment.

After raising $60M in June of last year an acquisition may be a bit rich for ProfitWell’s blood but as they say, there’s many ways to skin a cat.

Let me know what you'd do.

If you enjoyed this, I break businesses down, one business model at a time. You can find me here - https://businessmodelnerds.substack.com/

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