Beyond the Subscription: Proven Strategies to Maximise SaaS Profitability
16 December 2025
Beyond the Subscription: Proven Strategies to Maximise SaaS Profitability
You’ve decided to set up a company that sells a software subscription to users, but you are naturally worried about where the substantial profits will come from. Establishing a Software as a Service (SaaS) business model presents a unique set of challenges, especially since recurring costs can feel relentless. However, SaaS models can absolutely be profitable, provided you stop focusing solely on customer acquisition.
In fact, many successful managers understand that true profitability comes from internal optimisation and getting the most value from your existing customer base. This means you must take a rigorous inward look at your entire operation. Consequently, you will uncover all the little areas where you could strategically make more money, transforming a simply viable product into a highly lucrative enterprise. This transformation involves carefully examining core areas, such as pricing, payments, and retention tactics.
Upgrade Your Payment Solution
We’ll start with a concept that flies very low under the radar, but upgrading your payment solution will help you make more money. Furthermore, it achieves this by cutting down the fees you pay on every single transaction. It is fair to say that most newer SaaS companies still use platforms like Stripe Connect. Unfortunately, this often charges a percentage as high as 2.9% plus an additional flat fee per successful payment. Consequently, this sizable chunk is paid whenever someone purchases or renews a software subscription. This percentage eats directly into your bottom line. Therefore, it can seriously disrupt your planned pricing strategy, particularly at scale.
In fact, you can easily switch to some Stripe Connect alternatives for SaaS to cut down those fees, or you can even negotiate a better rate once your transaction volume increases. Furthermore, reducing fees is only half the battle. You must also tackle involuntary churn, which is caused by payment failure, not customer dissatisfaction. Data shows that card failures, such as expired details or bank changes, can silently cost a business significant revenue every month. Managers should, therefore, invest in “dunning” management tools. These tools automatically update old card details and intelligently retry failed payments. While seemingly a small administrative step, this move has big and overwhelmingly positive consequences for monthly recurring revenue.
Offer Feature Upgrades
This is a really common and highly effective tactic in the SaaS world to maximise profits, especially after users have downloaded your software and found initial value. Customers will typically pay for a foundational set of features in the beginning. However, you can then introduce loads of possible upgrades to enhance their experience, for a fee, of course. For instance, they might make one-off payments for certain premium reports, or they may increase their subscription to unlock some more advanced and impressive capabilities.
Let’s say you have developed a powerful new feature using the latest AI technology to save the user several hours of work per week. Naturally, you can charge people extra to use this, though you must always make sure you demonstrate the added value they are getting from it. Moreover, the goal here is not merely to charge more, but to offer tiered packages that align perfectly with the customer’s growth. This is arguably one of the smartest ways to increase profits, because you are getting more money from existing, happy subscribers rather than spending heavily on new customer acquisition. Consequently, the Customer Lifetime Value (CLV) increases substantially, boosting the entire financial health of the business.
Ensure There’s Always An Annual Subscription Option
Annual subscriptions are a strategic necessity because they lock people into using your software for a full 12 months. Therefore, there is a much higher probability that someone will renew their commitment after using the service consistently for that long. Conversely, monthly subscriptions are much easier for people to cancel or back out of; you could have users who only download and pay for your software for a month or two before abruptly leaving. Even more annoyingly, they might return after a few months just to use it for a month again, creating unstable revenue forecasts.
Annual subscriptions stop this unpredictable pattern from happening. Here is precisely how you make them more appealing to the customer. You must set the annual price so users technically pay less per month when they take out the subscription in one single payment. For example, a rolling monthly offer costs £25, but the annual offer works out at just £20 a month. They see this calculation as a great deal and a personal saving. Really, however, you are locking them in to ensure you get the full £240 for the year upfront. Therefore, instead of someone paying £25 or £50 for just one or two sporadic months, you have encouraged them to spend £240 immediately. This is a very clever way of solving a business plateau if too many subscribers habitually cancel after a short trial period.
Master the Art of Value-Based Pricing
Moving beyond the payment frequency, managers must address the foundational question of how their price is determined. Many startups fall into the trap of using cost-plus pricing. In this model, they simply add a margin to their operating costs. However, this method severely limits long-term profit. Conversely, the most successful SaaS businesses use value-based pricing. This involves setting the price based on the quantifiable financial benefit the customer receives, not what it costs you to deliver the service.
For instance, if your software saves a client £1,000 a month in labour, charging them £100 a month is easily justified. As a result, they feel they are getting excellent value, but you have still secured a high-margin recurring revenue stream. Establishing this system requires managers to identify their core “value metric.” This metric is the specific unit of usage that directly correlates with the customer’s success. It could be the number of team members, the volume of data processed, or the number of API calls. Ultimately, tying the price to the customer’s growth ensures that as your customer earns more value, your company also earns more money in a completely scalable and fair way. Furthermore, this clarity makes upselling much simpler, since any price increase is directly linked to an increase in delivered performance.
Slash Profit Leaks by Tackling Involuntary Churn
While we have touched on payment solutions, the issue of churn deserves its own focus, especially as it relates to hidden profit leaks. Churn, which is the rate at which customers leave, is categorized into two main types: voluntary churn (when a customer actively cancels) and involuntary churn (when the service stops due to a payment issue).
For managers seeking to stabilise revenue, addressing involuntary churn is the fastest route to recovering lost profit. Industry data often suggests that involuntary churn accounts for a significant portion of lost monthly revenue. Conversely, it is often the easiest problem to fix because the customer actually wants to keep using your service. A comprehensive churn management strategy must incorporate three key elements. Firstly, use payment card updaters that automatically fetch new details from card networks. Secondly, employ intelligent retry logic to re-attempt payments at optimal times and frequencies. Finally, ensure timely and empathetic communication with the customer about the payment failure. Consequently, tackling this area turns what would have been a cancellation into a sustained, profitable subscription.
Increase Stickiness with Ecosystem Development
Finally, profitability is not just about what is inside your software. It is also about how well your software integrates with the tools your customers already use. Managers should strategically view integrations and partnerships as both an acquisition channel and a retention mechanism. When your SaaS product connects seamlessly with other key platforms—like a major CRM or accounting package—it becomes deeply embedded in the client’s operations. This deep integration dramatically increases the cost of switching to a competitor.
Therefore, the customer becomes “sticky,” meaning their Customer Lifetime Value extends far further into the future. Furthermore, strategic partnerships can open up new revenue streams through co-marketing agreements or joint sales efforts. For example, offering a specific feature bundle exclusively to users of a partner’s platform can drive traffic to your service. Ultimately, by building a comprehensive and necessary ecosystem around your product, you are not just selling software; you are selling an indispensable hub of operational efficiency. This solidifies your position in the market and provides a protective moat around your profits.
These clever tactics are just the beginning; once you go down this rabbit hole, you realise there are many other highly sophisticated ways to increase profits for your SaaS business. Success in the subscription economy is achieved through the constant, granular optimisation of pricing, payments, and persistence.
References
Stripe. Software pricing: Models and strategies for SaaS businesses. https://stripe.com/au/resources/more/software-pricing-models-and-strategies-for-saas-businesses
Recurly. Customer churn benchmarks: How does your churn rate compare?. https://recurly.com/research/churn-rate-benchmarks/
ProfitWell. SaaS Pricing. https://www.startuppeople.com/articles/marketing-growth/saas-pricing
Cobloom. SaaS Churn Rates: How High is Too High? A Meta-Analysis of 6 Studies. https://www.cobloom.com/blog/churn-rate-how-high-is-too-high
Photo by ThisisEngineering on Unsplash
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