Suzanne Xie
It’s an unprecedented time to be in SaaS.
Long term, the sector’s prospects are strong. The SaaS market could grow almost 10% every year to 2027 — and I think that’s a conservative estimate. In a recent Stripe survey, 63% of B2B recurring revenue businesses said they were confident of their growth in 2023.
But the road ahead is bumpy. Many founders are dealing with the first cyclical economic slowdown their businesses have faced. As budgets tighten, SaaS businesses are reexamining the tools they use every day to achieve what they once took for granted: accelerating their growth without making big capital expenditures.
The good news? New technologies offer more ways than ever to grow revenue. And to many founders’ surprise, one of the easiest ways to do this is one of the least glamorous: the financial stack.
Doing more with less often means making big changes. That’s why recessions define startups: They force generational changes that are only possible when the stakes are high. Nearly 82% of businesses Stripe surveyed said they were concerned about the current state of the economy, and 45% of them are worried about their cash flow position.
But at the same time, nearly 60% of businesses agree a recession is a ripe time to innovate. One of the best, most cost-effective ways for SaaS businesses to do that is using technology to reduce the complexity of financial processes and optimize sales.
The real rate limiter for SaaS businesses’ growth isn’t shipping software — it’s selling it
As a business model, SaaS is inherently global. The internet means a Swedish company can instantly reach customers from Singapore to Mexico.
But actually selling things online is still surprisingly hard. That company would need to charge its customers in Singaporean dollars, work out how to bill them automatically, withhold the right sales tax and reconcile global currencies into Swedish kroner, among other financial gymnastics.
Because there hasn’t been an easy way to do this — even for digitally native SaaS businesses — the revenue stack is a big source of inefficiency.
It means losing money for preventable reasons like customers unnecessarily churning when their payment details expire or transactions being falsely blocked as fraudulent.
It means wasting time and money working out how to support new currencies, keeping up with changing regulations on identity verification or adopting new payment methods.
And it means slower innovation, as patchwork software makes it hard to create and test new product tiers, pricing structures or business models.
As a founder, I spent hours creating customer contracts, manually following up on payments or reconciling different invoices generated by patchwork systems. Those are pain points founders can’t afford in a strong economy, let alone a weak one.
Crucially, fully integrated payments technologies mean these problems are now entirely preventable — with no additional headcount and at practically no extra cost.
There are three main things SaaS founders can do to improve their profitability today.
1. Eliminate avoidable churn to maximize revenue
Nearly 25% of revenue churn is involuntary due to things like expired cards, insufficient funds or billing errors.
Integrated billing software can help SaaS businesses claw this back. Smart billing software recovers 14% more revenue than sending manual payment retries, for example — and for a lot less effort. That’s because this software is built on a network that knows when retrying a payment is most likely to succeed because it’s learned from hundreds of billions of transactions.
It’s almost as if founders pooled data on when to best bill their customers.
2. Cut back-office costs with high-integrity data
Accounting software providers have promised for years to help businesses reduce back-office costs. But it hasn’t happened because of low-quality data.
To use an analogy: One of the reasons lean manufacturing swept the automotive industry in the 1960s and 1970s was because it allowed parts defects to be caught early. A faulty bolt on its own is an inexpensive problem — but a faulty bolt in a car might mean an expensive recall.
The same goes for data.
If your SaaS business operates a “gateway” model where each payment method has its own reporting system that leads to questionable data accuracy, leading to late nights for your finance team, administrative bloat and a slow financial close.
But use a payments processor that provides clean data capturing all aspects of each transaction and you can free up resources to focus on growth. Case in point, Figma closed the books of a $10 billion business with a finance team of fewer than five people.
3. Use modern no-code tools to your advantage
All SaaS founders want reliable financial infrastructure for their business. But in today’s macroeconomic climate, they face a near-universal scarcity of developer talent, IT budgets and time.
No-code tools have become more powerful in recent years, replacing deeper, more complex financial operations in a business’s stack.
In fact, it’s now possible to build an entirely new business without writing a single line of code. SaaS businesses are using them to create checkouts and pricing tables, invoice customers, even replace their entire billing architecture — all in just a few clicks.
These tools increase conversion and reduce expenditure. Powerful customer portals, for example, let end users manage their subscriptions, update their payment method and view their billing history — and don’t require developer time to deploy. Fifty-seven percent of recurring revenue businesses we surveyed are actively seeking to use more no-code and low-code software solutions.
With the right tools, there’s every opportunity for SaaS businesses to continue growing — even in today’s economy.
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