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On a dedicated website, postIPOnonprofits.com, Zoho highlights how no SaaS company is profitable yet (although Salesforce.com has just become profitable) and states that all SaaS companies claim to be gaining market share and yet don’t expect to be profitable for the foreseeable future. Zoho also compares data (which SaaS companies manage) with money in a reference to the importance of financially strong banks.
While Zoho is of course praising its own business model and obscuring the fact that several of these companies operate with positive cash flows, the financial stability of SaaS must be kept in mind to ensure the long-term success of the industry. And, a reminder for early stage SaaS companies: providing a free product does not prove sustainability, so show pricing plans as soon as possible.
SaaStr’s Jason Lemkin gave his thoughts on the lack of profits in the SaaS industry: poor sales efficiency, and pricing is often too cheap (read his Quora post on the topic).