What we learned selling subscriptions before they became trendy

Our decision to change from a perpetual licence model to subscriptions was one of the great naive moments in Yellowfin’s history. It was about eight years ago and we had great sales growth but it was getting harder to start from scratch every year and sell more perpetual licenses. At the same time, our maintenance business was growing so we decided to flip our model and sell subscriptions. It seemed like a good idea at the time as none of our competitors were selling subscriptions.

The biggest mistake we made was that we didn’t financially model what the subscription business would look like. So one day we were selling a perpetual licence, then the next we were selling the same thing for a third of the price. So we had to create three times more new business to grow our revenue line at the same rate. As we transitioned from a perpetual to a subscription model, we literally hit the brakes on the business and had virtually no revenue growth for about 18 months. 

We had based our subscription price on the assumption that we would average a three-year relationship with our customers. We also expected that there would be some pushback, but the subscription model was really well received by customers which was part of the problem. While we still sell perpetual licenses today, about 92% of our business is subscription and I believe this has created a great foundation for growth. 

Our subscription model has forced us to think about parts of our business that we may have otherwise neglected. In particular, it’s highlighted the importance of customer experience and retention. Our retention rates are about 92% and in some of our core segments we actually have negative churn of 104%. This means our customers buy more licenses from us. It goes to show just how sticky Yellowfin is as a product when you consider we don’t lock people into contracts for more than a year. Our customers have the flexibility to buy more licenses in a year if they want, so their risks are mitigated. 

Under a subscription model, we’re also more beholden to our customers so we focus a lot of our energy into ensuring we look after them. But it’s important to get the right customers in the door first, so we take the time to qualify them well. If you sell to the wrong customer, you not only lose your renewal but the whole cost of sale as well. 

Once we have the right customers, we also make sure that every customer has a phenomenal onboarding experience. We want them to get value out of Yellowfin ideally within 30 days - 90 days tops. So we help our customers to use our product so that it’s valuable to them as quickly as possible. This also makes them want to stay with us.

Finally, once they’re on board we then focus on building deep, ongoing relationships with our customers. Rather than having a single point of contact, we have multiple people within the organization so we can build better relationships with our customers. This is important for any organization that sells to enterprise. You have to build really deep relationships in your customer base for your product to be successful. 

While the first year of transition was a very tough one for growth, I believe moving to a subscription model has helped us build a better business. That’s because we really focus on your customers to make sure that we continue to deliver value to them throughout the cycle. Adding subscription dollars not only drives the engine, it now helps us to grow.