How Subscription and SaaS Companies Can Thrive during a Tough Economy

How Subscription and SaaS Companies Can Thrive during a Tough Economy

Twitter user Patticus analyzed 23.2k subscription and SaaS companies to get a glance at how the economy’s red flags are impacting their revenue.

In short, he found out that while the new sales are consistent, and in some cases growing, the churn-up rates and downgrades are getting higher.

And he revealed some practical actions to take to get ready for an eventual market contraction.

There are two main actions to take: survival and lifetime value (LTV).

Survival

Let’s start with survival:

  • Audit all your expenses: You might be paying for things you’re not using. Cut that cost.
  • Make sure you’re “default alive” and have at least 10% margin for error if bootstrapped, and 18+ months of burn-rate if VC-funded. “Default alive” means you don’t spend more than you make, so you are breakeven or profitable.
  • Re-evaluate non-core projects.

Lifetime value (LTV)

Now regarding LTV… There are two main areas:

Monetization

For monetization, the actions to take are:

  • Focus on cross-sell: Happy customers consistently buy more during recessions. If you don’t have cross-sells, create an add-on, like priority support.
  • Evaluate customer segments. Segments affected more by a market contraction are less likely to buy so you can pull that ad spend.
  • Reduce discounts.

Retention

For retention:

  • Fix credit card failures to boost your recovery rate.
  • Implement cancellation flows to customers that unsubscribe. You can do it with salvage offers or maintenance plans.
  • Run promotions to get monthly customers on quarterly and yearly subscriptions.
  • Create reactivation campaigns set for 60, 120, and 180 days after a customer cancels the subscription.

Conclusion

Whether you think there will be a recession or not, some of these actions are still useful to boost revenue and cut costs. Hence, something to consider at any time.

Software Blade

SoftwareBlade.com covers today's software and tomorrow's emerging technology.

Leave a Reply

Your email address will not be published.