Consistent Cash Flow
Consistent Cash Flow
The Rise of the SaaS Business
Driving the rise of the SaaS businesses is enthusiasm from customers, providers, and investors, for subscription-based (SaaS) B2B business models across sectors, from financial services to manufacturing. Yet as they roll out a myriad of subscription offerings, many organizations find that their internal processes and systems can’t keep up with the customer expectations and operational realities of subscriptions, and as a result hinder growth. One such critical process to examine and reinvent is the SaaS business end-to-end process for quoting, contracting, invoicing, collections, and renewals.
Optimizing your SaaS business cash flow requires a series of concerted design decisions and trade-offs across the end-to-end customer journey. At the highest level, it involves striking the right balance between two key areas standardization of subscription simplicity and customization to offer flexibility. We discuss these areas of standardization should you opt-in to our newsletter.
Optimizing Your Subscription Cash Flow
A SaaS based enterprise software vendor with a business modeling platform was trying to land a major new client that would give their SaaS business a meaningful boost to the latest sales figures. To win the deal, the sales team agreed to a deep discount—despite also committing to provide extra help during implementation and a higher-than-standard level of ongoing support. During on-boarding, it became apparent that the combination of a lower-than-usual fee with a higher-than-usual servicing cost would result in a loss. Adding to the pain, a year later the customer opted not to renew the contract, citing poor service.
Sound familiar? It is not unusual for any business to take standard offerings and customize for individual customers to give them a compelling reason to buy. But diverging from the norm makes it more complex and expensive to deliver what’s promised. And implementing and supporting custom solutions in a way that fits with a company’s existing processes is often impossible.
Of course, other types of businesses have had decades to perfect the systems, costs, and quality issues associated with selling and delivering traditional products. But best practices for selling and delivering SaaS products are still evolving. The path from initial opportunity to final payment is incredibly complex for as-a-service sales group. It requires collaboration from sales with legal, operations, finance, product, IT, customer support, professional services, and other functions. Tension points can bubble up anywhere, from prospecting a lead to negotiating the deal to collecting on an invoice or renewing a contract.
Your SaaS business needs to carefully consider every design decision or it can be costly to sell through to delivery. For example, is the feedback from your SaaS business’ sales group that the process has too many bottlenecks requiring a lot of communication to move a quote to an invoice? Does the sales team have to generate quotes manually? Through to, do you receive feedback that the entitlements system was not ready and or invoicing was performed manually? With no clear direction on enterprise-wide choices, each salesperson is likely left to shepherd their deal through multiple functional teams. Though customers were excited to embrace your SaaS solution, the inability of scaling put your growth plans on hold.
The complexity of a SaaS business, particularly moving from opportunity to cash flow is associated with:
- slower sales motion,
- poor customer experience, and ultimately
- decreased ability to grow.
Higher-growth SaaS companies consistently demonstrate a set of practices that help minimize internal friction through standardization and yet retain the flexibility to meet the critical needs of customers.
At a time when the stakes are rising and the demand for SaaS subscription services is growing, organizations must ensure all areas of the end-to-end sales journey are aligned with a series of carefully design decisions. The right opportunity to cash flow processes can be a powerful growth driver. It is a complex undertaking, but those that adopt best practices to design their process to fire on all cylinders across each attribute achieve a sustainable competitive advantage.
Prioritizing Cash Flow
bEffective helps your SaaS business address four areas for achieving tangible improvements in internal processes and customer service. You can find insights for each of those areas should you sign up to our newsletter. For example, we aim to improve:
- Clarity of product portfolio,
- The ‘how-to’ create and deliver products,
- The systems for delivering those processes and of course
- The skills of the people involved.
The standard tension points we expect to find in your SaaS business upon addressing these improvement areas follows:
- Offers are too complex, or
- delivery doesn’t match the customer’s sector, or
- Margins shrink during delivery or
- Financial or operational performance data is missing during key parts of your sales process.
Usually one or all of these four scenarios occur during lead to opportunity phase, opportunity to order, order to invoice or finally invoice to cash phase.
In the end, some of the typical results when optimizing opportunity to cash include:
- 50 percent reductions in the time that sales representatives spend on back-office tasks,
- 10 percent increases in deal margins, and
- Customer-satisfaction improvement of up to 15 points out of 100.
bEffective’s strength is helping your SaaS business with the difficult task for aligning the link between opportunities to cash flow. McKinsey & Company’s research confirm if your SaaS businesses does optimize these processes you will have greater success in:
- Adding new accounts,
- Growing existing accounts, and
- Reducing customer churn. As a result, you will
- Grow annual recurring revenue (ARR) at four times the rate of others.
You’ve read our promise, for the challenge you may be facing along with the ‘how to’ solve it.
bEffective offers services to help your SaaS business establish its revenue growth methodology in whole or for the module you need help to improve upon.
Should you wish to do it for yourself, then check out our resources menu for ‘how-to’ solve the challenge mentioned above as well as others in this area of our website. Keep in mind the research and science dictates the ‘right’ revenue growth approach needs to be built in sequence, integrated and more for achieving the promise percentage, dollars through to consistent cash flow.
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