In a B2B SaaS product I would not segment dev resources beyond your organizational boundaries for business model purposes. I would evaluate the custom request independently and continue modeling the product as a whole. If you decide to do the custom feature you have a great item to discuss with your finance team. The good thing about this rough financial model is you have a basis to form your recommendation for product decisions by collaborating with experts in your organization.
How do you attribute revenue from product enhancements, if at all?
Let’s say my product generates £1m/year. It’s a SaaS product with a monthly license, so simple MRR/ARR. The cost of running the product itself is maintenance of dev team, which I assume you take as a sunk cost (aka you pay for them regardless of what they do).
Now let’s say a customer asks us to build a feature for which, once implemented, they would pay us an extra 1m/year.
This extra 1m/year sounds nice but it distracts our dev team from maintenance. Choices are to be made.
Do you allocate the extra revenue and match it against cost differently because it’s a “custom feature”? Do you allocate a certain amount of dev resources per year on ‘custom’ work and therefore it’s not really a factor?
In a B2B SaaS product I would not segment dev resources beyond your organizational boundaries for business model purposes. I would evaluate the custom request independently and continue modeling the product as a whole. If you decide to do the custom feature you have a great item to discuss with your finance team. The good thing about this rough financial model is you have a basis to form your recommendation for product decisions by collaborating with experts in your organization.
How do you attribute revenue from product enhancements, if at all?
Let’s say my product generates £1m/year. It’s a SaaS product with a monthly license, so simple MRR/ARR. The cost of running the product itself is maintenance of dev team, which I assume you take as a sunk cost (aka you pay for them regardless of what they do).
Now let’s say a customer asks us to build a feature for which, once implemented, they would pay us an extra 1m/year.
This extra 1m/year sounds nice but it distracts our dev team from maintenance. Choices are to be made.
Do you allocate the extra revenue and match it against cost differently because it’s a “custom feature”? Do you allocate a certain amount of dev resources per year on ‘custom’ work and therefore it’s not really a factor?
Any insights would be good to hear!
Thanks for including a link to my recent newsletter on how to work with sales teams that are driving the product roadmap!
Thanks Ben! It was an excellent article on deciding about customer feature requests.