how-does-hubspot-make-money

How Does HubSpot Make Money? The HubSpot Business Model In A Nutshell

HubSpot is a CRM (customer relationship management) solution, providing various levels of its B2B and Enterprise subscription plans. Beyond subscriptions, the company monetizes via professional services. However, these carry a negative marginality as the company uses professional services (in the form of onboarding and implementation) to increase its tools, which help companies leverage digital marketing channels to generate leads.

Origin Story

HubSpot is an American software developer and marketer with a focus on sales, customer service, and inbound marketing.

It was founded in 2006 at MIT by Brian Halligan and Dharmesh Shah. Just four years later, the company reached $15.6 million in revenue and acquired Twitter app store Oneforty. It also progressed from serving small companies to serving larger businesses with as many as 1,000 employees. It soon acquired competitor GroupSharp and debuted on the NYSE in 2014.

In 2017, the company strengthened its product offering by acquiring Kemvi – a service for sales teams incorporating machine learning and artificial intelligence.

HubSpot recently eclipsed 100,000 paying customers with over $1 billion in annual recurring revenue.

Understanding the CRM solution

As HubSpot highlighted in its financials:

At the core of our CRM Platform is our CRM that our customers use which creates a single view of all interactions a prospective or existing customer has with their marketing, sales and customer service teams. The CRM shares data across every application in the CRM Platform, automatically informing more personalized emails, website content, ads, and conversations, and enables more accurate timing cues for our customer’s internal teams. In addition, the CRM Platform was built to easily and seamlessly integrate third party applications to further customize to an individual company’s industry or needs. We designed and built our CRM Platform to serve a broad range of customers globally. Our CRM Platform starts completely free and grows with our customers to meet their needs at different stages in their life-cycles. It supports multiple languages and currencies and offers an array of sophisticated features, including content partitioning at the enterprise level for companies operating in or serving multiple countries.

By 2020, HubSpot counted almost 104k customers, that counted an average $9,582 subscription revenue.

HubSpot revenue generation

HubSpot shows two primary revenue streams: subscriptions (with various B2B to Enterprise) plans and professional services. Subscriptions make up most of the company’s revenues (over $853 million in 2020), while professional services represent a more marginal part of its revenues ($30 million by 2020).

While the revenues grew over the years, the HubSpot business model never turned into profitability. The balance between offered a high-priced B2B subscription, even though coupled (as we’ll see) with onboarding professional services, it hasn’t yet struck a balance for the company’s profitability. The company does spend a good chunk of its revenues on sales and marketing. However, it leverages a lot on stock-based compensations.

It’s important to notice that professional services carry a negative marginality. In short, HubSpot loses money on them. So why does it offer these?

It does so that to further prompt the sales of its subscription services, as professional services help various level of customers to better understand HubSpot’s solutions.

In fact, HubSpot highlights that professional services and other revenue are derived primarily from customer on-boarding and training services. Those on-boarding services usually involve an implementation specialist working directly with the customers to make them understand how to attract leads and convert them into customers through search engine optimization, social media, blogging, and other content.

Indeed, the primary means of revenue generation for HubSpot is the selling of software via paid subscriptions.

Let’s take a look at these subscriptions in more detail.

Marketing Hub

Marketing Hub contains everything a business needs to turn leads into customers. There are three options:

  1. Starter – $50/month or $45/month if paid annually. Features include landing pages, ad management, conversational bots, list segmentation, email marketing, and ad targeting.
  2. Professional – $890/month or $800/month if paid annually for businesses that need to market to at least 2,000 contacts. Extra features include A/B testing, multi-language content, and Salesforce integration.
  3. Enterprise – $3,200/month for enterprises with at least 10,000 marketing contacts. Features unique to this plan include partitioning, user roles, adaptive testing, and predictive lead scoring.

Sales Hub

Sales Hub encompasses HubSpot CRM software, helping teams organize data and close deals.

There are also three options here:

  1. Starter – $50/month or $45/month if paid annually. This option provides simple automation, quotes, calling, live chat, and a reporting dashboard.
  2. Professional – $500/month or $450/month if paid annually. Extra features include sales analytics, custom reporting and forecasting, 1:1 video creation, calculated properties, and eSignatures.
  3. Enterprise – $1,200/month for at least 10 paid users. Hierarchical teams, advanced permissions, playbooks, and call transcription are all Enterprise-level features.

Service Hub

Service Hub is a customer service solution, helping businesses turn their customers into fans.

There are three different plans under this hub:

  1. Starter – $50/month or $45/month paid annually and including features such as conversational bots, team email, canned snippets, and rep productivity reports.
  2. Professional – $400/month or $360/month paid annually. Teams selecting this plan can utilize ticket status and routing, video hosting, and surveys focused on NPS, customer experience, and customer support.
  3. Enterprise – $1,200/month for at least 10 paid users. Enterprise features include customer objects, calculated properties, field-level permissions, and webhooks.

CMS Hub

For those wishing to build or scale an optimized website, HubSpot also makes money via two plans:

  1. Professional – $300/month or $270/month if paid annually. These plans are feature-rich and include a drag-and-drop editor, SEO optimization, and a contact attribution report builder. Uptime of 99.99% and 24/7 security monitoring is also provided
  2. Enterprise – $900/month for extra features including serverless functions, memberships, custom CDN integration, code alerts, and an additional brand domain.

Onboarding and professional services

To help businesses hit the ground running, HubSpot also offers a range of support services. These include:

  • Onboarding – providing technical advice for each of the Hub plans mentioned above. There are also specific onboarding services for partners and start-ups. Prices are based on the plan chosen from a specific Hub.
  • Professional services – encompassing inbound consulting, technical consulting, migration services, and classroom training. Prices are based on the length and nature of the training provided.

Key takeaways

  • HubSpot is a software marketer and developer platform. It was founded in 2006 at MIT by Brian Halligan and Dharmesh Shah.
  • HubSpot makes money by offering a diverse range of subscription plans. Each plan is categorized according to the size of an organization, with options in sales, marketing, customer service, and CMS.
  • HubSpot also charges for various onboarding and professional services to help businesses with product implementation and training.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"