When talking about startups and vertical SaaS growth, top line revenue is typically one of the… well, top metrics that people look at. While we can always go deeper and examine things in terms of bottom line growth, the top line revenue is often discussed first because it provides an immediate snapshot of business performance. 

In the realm of vertical SaaS, the top line reflects a company's ability to attract and retain customers or subscribers, so it's essential to improve it continuously. 

This article sheds light on top line revenue, its significance for vertical software providers (VSPs), and how to improve it.

What is top line revenue?

Top line revenue is the total income generated from sales before any expenses are deducted. In other words, it's the gross revenue of a company. 

For example, for a vertical SaaS company specializing in field management software, top line revenue would include all user subscription fees, service charges for things like premium support, and payment processing costs whenever people take payments through the software.

Top line vs. bottom line revenue

Top line revenue is the company's gross income from sales before any expenses. In contrast, bottom line revenue is the profit remaining after all operating expenses, taxes, and other costs have been subtracted from the top line.

Think of it this way: top line revenue indicates overall sales performance. Meanwhile, bottom-line (aka net profit) revenue provides insight into a company's profitability and financial health.

Consider the table below to get an overview of top line revenue vs. bottom line revenue.

Key Components of Top Line Revenue in Vertical SaaS

There are several factors that can constitute a business's top line revenue. In vertical SaaS, here are the main components that contribute to it:

Subscription revenue

This is the recurring income from customers paying for access to the software. For example, a healthcare SaaS platform charges hospitals a monthly fee per user, directly contributing to the top line.

Payment processing and financial services

If a SaaS platform offers payments and financial services, the company's earnings from these offerings also add to the top line. 

Let's say an ecommerce software provider offers payment processing as part of its product suite. In this instance, the business earns a percentage of each sale made through its system. Now, let's say that the same company also offers financial services in the form of business loans; the interest and fees from these loans further add to the top line revenue.

This shows that by providing these additional services, you not only create new income streams but also enhance customer retention and satisfaction. As such, offering payments and financial services can be a strategic move ensures a steady flow of revenue, reinforcing the financial stability and growth potential of your business.

Service revenue

This can include revenue from additional services such as training, consulting, or implementation. An example is a SaaS company providing onboarding services to ensure successful software adoption.

Integration and partnership revenue

This would include earnings from partnerships and integrating third-party services. For example, a SaaS firm partnering with a payment gateway provider may receive a commission for each transaction processed, enhancing the top line.

The importance of measuring top line revenue

Top line revenue may not give you the full picture of how a business is doing financially. However, this metric is incredibly valuable in assessing market demand, sales performance, and more. Consider the following. 

It helps you understand market demand

Measuring top line revenue helps SaaS companies gauge the overall demand for their products or services. High top line revenue may indicate strong market interest and customer acquisition, while low or declining top line growth could mean that demand isn't there. 

Tracking top line revenue can help you estimate how well you're meeting market needs, ultimately enabling you to adjust your strategies and capitalize on growth opportunities.

It's a good measure for tracking business growth

Top line revenue serves as a primary indicator of business growth. Consistent top line revenue increases suggest successful expansion efforts and effective marketing strategies. 

That's why many VSPs monitor this metric closely, using it to set realistic growth targets, allocate resources, and make informed decisions about scaling operations.

Top line revenue can help you evaluate sales performance

Every SaaS company wants a strong sales team, so how can you tell if they're meeting your standards? Well, one way to do this is to look at the top line. 

Top line revenue directly reflects sales performance. By analyzing this metric, you can identify trends and evaluate the effectiveness of your sales team and/or any campaigns that are running.

Improve investor and stakeholder confidence

High and growing top line revenue can enhance investor and stakeholder confidence because it signals that the business is capable of generating income. And as any founder and exec knows, the confidence of the market and financial stakeholders is crucial for securing investment. 

Of course, this confidence isn’t just about presenting impressive numbers; it's about demonstrating consistent and sustainable growth that reassures investors of the company's long-term viability. When stakeholders see a steady increase in top line revenue, they perceive the business as one that is expanding its market reach, attracting new customers, and effectively retaining existing ones. 

And let’s not forget that a robust top line indicates that the company's product or service is in demand, which is a key factor for investors when evaluating potential investments. It's a clear indicator that the company has successfully tapped into its target market and is capable of scaling its operations.

How can vertical SaaS providers boost top line revenue?

Given that it's such an important metric, VSPs should constantly think about improving their top line revenue. This "right" course of action will vary from one business to another, but here are some ideas. 

Enhance customer acquisition

Top line revenue is directly tied to subscriptions, so acquiring new subscribers can lead to top line growth. Consider these tactics.

Tighten up your sales and marketing alignment. When these teams are in sync, marketing can deliver more qualified leads, paving the way for a smoother sales experience and more closed-won deals. 

Run promotions. Like other sectors (think: retail), running promos can improve conversion rates and drive up subscriptions. That being said, SaaS companies need to be smart about offering discounts, as excessive price reductions can devalue the product and hurt long-term revenue. Always run the numbers to determine the optimal discount rate and how often to implement these promos.

Expand your revenue streams

Vertical SaaS companies are all about subscriptions, but that doesn't have to be your only revenue source. Explore ways to provide even more value to subscribers. 

Payment monetization. SaaS companies are increasingly offering payments and other financial services, and for good reason: such services funnel added revenue from users while improving retention. 

Remember, adding payment processing and financial services to your offerings can significantly boost your top line revenue. By facilitating transactions within your platform, you not only enhance user experience but also earn a percentage of each transaction, creating a new revenue stream that grows alongside your users' success.

If payment processing isn't part of your software offerings, it may be time to consider it. When implemented well, fintech monetization enhances the user experience by allowing people to accept payments through your software. 

And, of course, it helps you boost your top line. By processing payments through your platform, you earn a percentage of each transaction, adding a revenue stream that grows as your users' businesses grow.

Added services. Double down on the "service" component of SaaS by rolling premium or optional services to your users. Such services can come in the form of:

• Priority support

• Dedicated account managers

• Onboarding and setup

• Consulting
  
  

Explore partnerships. Explore partnerships with SaaS companies or ISVs that complement your offerings.

Depending on the business model, these partnerships can come in the form of revenue-sharing agreements, where you earn a commission on sales made through partner integrations or co-branded solutions that leverage each company's strengths. 

Joint marketing efforts can also drive mutual customer acquisition, while offering bundled services can provide greater value to your customers, making your platform more attractive and comprehensive. 

Optimize your pricing and subscription tiers. Offer tiered subscription plans that cater to varying customer needs and budgets. By aligning your pricing with customer value perception and offering flexible options, you can increase sales, reduce churn, and boost your top line revenue.

The right pricing strategy can attract a broader customer base while encouraging upgrades to higher tiers. Conduct market research to understand your customers' willingness to pay and analyze competitor pricing. 

Reduce churn. While increasing and growing your top line revenue is always good, maintaining it is just as important. That's why vertical SaaS companies must prioritize customer retention and churn reduction. 

Improve customer satisfaction through excellent support, regular check-ins, and proactive issue resolution. Offer personalized experiences and ensure your product continuously evolves to meet customer needs. Implement feedback loops to gather insights and act on them promptly.

Final words

Growing your SaaS company requires growing your top line revenue. When you successfully acquire new customers and expand your revenue streams, you not only boost financial performance but also improve market position and stakeholder confidence.

One of the best ways to do that is to implement payment monetization—which is where Preczn's fintech operating system comes in. 

With Preczn, you can integrate and migrate between fintech connections with ease and seamlessly onboard merchants onto your payment services. Contact us to learn more about how our operator-first platform can help you bolster your revenue streams.