How to take your subscription business to the next level
2021 was a strong year for the public markets in the SaaS world. There seemed to be capital everywhere, leading to increasing valuations and companies pursuing growth over earnings.
Halfway into 2022, we're living in a different world. While 2021 was a seminal year for fundraising, investor sentiment has changed. Amidst rising inflation and interest rates, the era of growth at all costs is changing.
The market downturn is expected to impact consumer behaviour, labour markets, supply chains, and more. As SaaS companies focus more on maximising cash flow, retaining existing customers, and preparing themselves for a more extended recovery period, here are some things you should keep in mind as you re-evaluate your investments.
Unique opportunities to improve business performance and long-term endurance
The macro slowdown does not mean slower productivity. With the right objectives and shifting focus, companies can switch gears to becoming more productive in other business areas. During the hyper-growth period, it's easy to get entranced in the daily grind and challenging to get away from day-to-day activities to focus on the big picture and long-term strategy. But challenging times allow us to take a deeper look within our business and often produce a long-lasting impact.
So, where can you find these opportunities? Start by asking some simple questions:
- Is it time to revisit an idea you previously pushed off the priority list?
- How about addressing operational efficiencies, such as integrating and automating those manual workflows, which take time to see results?
- What about implementing best practices in our internal processes that could pay off big time in the long run?
- Is it less expensive to advertise? If so, take advantage to increase your brand name. Help your customers find you.
- It's cheaper to buy certain assets and technology. Is it time to stock up?
Many Olympic athletes take an "active rest day", in which the athlete's body moves with workouts different from their routine to encourage their muscles to recover, especially after an injury. During a slowdown, businesses also utilise the muscles they did not use as often to produce results. Like the Olympic athletes, we do not slow down; we just work on a different muscle.
With looming headlines about rising inflation and reduced demand, the challenge for businesses is to increase their cash runway and retain customers. Chargebee, with its suite of revenue management products, aims to help subscription businesses across the globe battle the current turbulence in the market by helping them retain customers, improve cash flows and payment collections, monetise their products effectively, and streamline revenue operations.
To increase a customer's lifetime value, it's essential to get timely insights into retention and tailor experiences so that if they try to cancel – you give them a better offer to make them stay. At a time when it's challenging to acquire new customers, retaining customers can help you go a long way.
Leverage automation to manage revenue cycles more effectively
In a subscription business, every function impacts the customer life cycle. As the team underpinning all the fundamental processes within a company, finance has the unique perspective of overseeing the entire value chain – from the sales process to back office operations – and assessing the present and future needs of the company.
Investing in infrastructure and essential automation helps build a base for disciplined growth. Finance leaders need to recognise that a robust tech stack plays a strategic role in their company's growth. You need a revenue management infrastructure that helps automate many effort-intensive and repetitive tasks. Automation also goes a long way in eliminating inconsistencies and plugging revenue leaks. But most importantly, automation saves you precious time, so you can focus more on driving strategic initiatives such as increasing revenue, experimenting with pricing, and improving profitability.
When it comes to your tech stack, you need to ensure it can scale with growth and enables the business to unlock new growth opportunities. A robust recurring billing and revenue management system can help you manage account receivables and cash flow, reconcile payments, automate revenue recognition, and generate data reports in real-time, even as your business expands across products and geographies.
Focus on a multi-year horizon
While near-term financial sustainability is a concern for many, keeping an eye on the big picture is also critical. You're worried about successfully surviving the storm. How equipped are you to thrive in the market once you do?
When you're investing in tumultuous times, it helps to ask yourself:
- What does success look like in the next two years?
- Do I have the operational readiness to thrive in this market?
Since you want to align capital with growth opportunities with the highest ROI in the long term, you need a single source of truth for data and critical insights to see what drives incremental results for the company and can be scaled up. You must ensure complete revenue visibility with robust integrations of essential systems. This way, your customer and employee lifecycle is integrated across the business, enabling you to be agile in your go-to-market strategy.
Most businesses do not escape a global downturn unscathed. But the way you navigate the crisis can still set you apart. Your ability to adapt to changing business scenarios and make suitable long-term investments for growth will ensure you will emerge stronger and be better positioned to thrive as the economy recovers.
Global uncertainty abounds on all fronts, but according to Gartner, SaaS remains the most prominent public cloud services market segment, forecasted to reach US$176.6bn in end-user spending in 2022.
So businesses that make prudent strategic investments in automation and scalable technology will eventually sail through these mercurial waters to find the shore beyond.
About the author: Lydia Stone has over 20 years of experience building and leading accounting organisations. She managed IPO, primary and secondary financing transactions, M&A, and full range public company accounting operations, including accounting, financial reporting, tax, treasury, financial systems and audit functions. Lydia currently serves as Chief Accounting Officer at Chargebee, Inc. Prior to Chargebee, Lydia served as Chief Accounting Officer for Blackboard and Evolent Health, and various leadership roles in BAE systems and Ernst & Young LLP.
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