So what is this so-called “white space” you ask?
During our times at hyper-growth, public SaaS companies, we used white space analysis to help grow annual revenues from $100M to over $500M in 7 years.
That’s nearly a 26% CAGR!
Not only did white space analysis help our companies grow revenue, but by using whitespace in our own analyses, we were able to get promoted faster.
Who doesn’t like that?
The best part is it’s super simple to learn and is applicable to virtually all SaaS companies.
Let’s dive in.
What you need
To start you’ll need your most up-to-date customer data. Specific items you’ll need for each customer are:
- The products and services they buy
- The ARR (Annual Recurring Revenue) or MRR (Monthly Recurring Revenue) they pay
- The date they renew (aka renewal date)
Ideally, the above info would be organized in tables or a data warehouse every month (we call these data snapshots). This will help you track whitespace and product counts by customer over time.
If that process doesn’t exist, this is another BIG opportunity for you to get promoted faster by implementing an important process for reporting. 😉
Step 1: Determine What Products Exist and How They are Bundled
White space is the gap between the products and/or services your customers purchase and the total (aka max) amount of products/services your company offers.
Let’s say your company sells 8 services.
These services are offered in 3 different bundles.
Each bundle progressively offers more of the services at a slightly higher price point.
The first two plan bundles (Basic Plan and Advanced Plan) have white space (aka the services Not Included).
Take your list of customers and the bundle that they currently purchase and put them in two columns in a spreadsheet.
Then create columns across for each service your company offers. In this example, there would be 8 columns for the 8 services
Finally, fill those columns in with a 1 if the customer buys the service or a ZERO if the customer does not buy the service.
Added bonus, you now have the ability to calculate product counts too!
This is a KPI (key performance indicator) that when measured over time shows how your service upsell strategy is working.
Step 2: Determine the MRR or ARR each Customer Pays for Their Bundle
Here’s the formula if you don’t have MRR or ARR already calculated.
ARR = (Recurring Revenue / Contract Length in Days) X 365 Days in a Year
MRR = ARR / 12
Here’s an article on ARR if you want more in-depth info on this very important SaaS metric.
For this example, let’s use MRR (Monthly Recurring Revenue).
Step 3: Present white space opportunity in an actionable way
Creating a one-pager listing in which customers have the biggest white space (aka upsell) opportunity makes your sales team’s job MUCH easier.
And using simple conditional formatting adds a little bit of extra clarity on where to focus selling efforts.
The above white space opportunity is $230.
This means if sales upsold all customers to the Premium Plan, your company could expect $230 of incremental MRR.
Not too shabby. 😉
More ways Whitespace can fast-track your career
In case you missed it, look at the last column in the visual above called “Average Service Count”.
This is an EXTREMELY useful metric when tracked every month. If upsell is a priority at your company, then you would want to see this average service count increase.
You can also get fancy with this metric and analyze by region or sales team which can help you find where upselling is most successful (reward and repeat) and least successful (double down on training to increase).
Conclusion: You’re a Whitespace Master and made yourself more promotable
You can now calculate white space.
Not every company does this.
You are going to help SO MANY departments drive higher revenue and engage with customers more effectively.
Now you know what data to go after, how to massage that data to make it more useful, and the structure needed to use the info.
There are so many things you can do with this info to business partner, grow your business, and look GOOD (aka get promoted) by doing it.
How about you? How do you feel about Whitespace now?
Let us know and we’ll share your thoughts in our next posts.
Have fun making an impact on your business and your career!
Cheers,
Drew & Yarty
PS: This post is 100% human-made
