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How SaaS Startups Can Survive An Economic Winter

SaaS startups have challenging days ahead. The macroeconomic environment is beginning to blow up the sails of companies in the SaaS industry.


Even as macroeconomic headwinds pummel the worldwide economy, there’s no better time than now to be a SaaS marketer. But there is a better way to be one. A SaaS marketer must be part marketer, product manager, and engineer and understand the markets one hundred percent. CEOs also need to discern who is most capable of holding that position.

It’s well known that tech companies, including SaaS firms and SMB (small and mid-sized business) SaaS firms, tend to wash out when economic tidal waves crash down on them. Only those that have figured out their unique customer offerings will survive. Helping clients and customers drive efficiencies and cost savings in corporate processes means knowing how to pivot quickly to monetize opportunities.

 

Identify a unique offering and solve compelling problems

With high-profit margins, it is easy to focus on product features and benefits as the company’s market differentiators. However, when times get tight, it becomes crucial for the CEO and the leadership team to discipline themselves to understand the one key thing that is important to their customers: the problem that the customer wants to be solved.

If companies zero in on fixing that problem or related issues, it will attract the most customers to their solution. And it will be far easier for the customer to understand the product offered, the company’s value proposition, and ultimately how a particular product solves their problem.

Good, thoughtful SMB SaaS marketers will first figure out what customer problem the company needs to fix? Then, who is the right audience? And, finally, who is the best customer to target with this solution?

 

Simplify processes to save on labor costs and drive efficiencies

One of the most complex and necessary challenges for any company is driving efficiencies in the corporate environment, including human resources. While painful to many, hiring freezes and even hiring slowdowns can be the difference between a successful transition through a recessionary climate and an unsuccessful one.

When cutting staff or reducing the number of new employees, CEOs of SMB SaaS companies must consider how to accomplish more with less, especially during tough economic times. For example, can the CEO automate more of the internal employee and sales processes? Can this automation be converted to a completely online process?

A change to a company’s approach to compensation may also be in order, especially as the ubiquitous stock options plans are now, with the recent equity drawdown, not as lucrative as they once were. This affects the acquisition and retention of the best talent.

Also, hiring part-time employees or consultants per project can efficiently leverage more profound knowledge and experience without the overhead of salaries and benefits. To be sure, there are no easy answers here.

 

Poorly capitalized SMB SaaS companies will struggle with cash flow during a recession

This is a financial problem, not an inflationary one. The coming belt-tightening will contribute to the drying up of capital markets for SMB SaaS companies, and the days of easy funding will end. Where will the capital come from? The CEO will need to monetize the company’s solutions faster to drive positive cash flow.

One of the best ways to do this is to increase the number of customers that will find the company relevant and helpful. Customer acquisition can be an expensive reality. However, customer loyalty makes those formerly expensive ones into the most lucrative cash flow opportunities once obtained.

A second way to monetize quickly is to increase a product offering with more features or products within a solution set, thereby increasing overall dollars per customer for each interaction.

 

SaaS leaders focus on lead generation to drive growth opportunities

Another opportunity to implement efficiencies is with an unexpected idea: instead of increasing highly paid salespersons for customer acquisition, a CEO must consider how automation – yes, automation of marketing and sales processes – will drive an increased monetization of the sales cycle as well as reduce headcount.

 

Prepare for the economic winter with good, well-considered decisions

Simplifying the sales process, including automating as many steps in the customer interaction process as possible, will not only save costs but reduce friction for the customer in their interaction with the company. A small SaaS firm must also undergo the discipline of zeroing in on the company’s unique offering. It must be articulated well and solve compelling customer problems.

By simplifying sales processes, including automating sales and customer acquisition, an SMB SaaS company, for whom doing more with less is always important, can save on labor costs and drive efficiencies. In addition, the expectation of hiring only full-time employees with expensive compensation and benefits packages will become a pivotal opportunity to leverage contract or part-time workers. And lastly, with economic storms on the horizon, it will become imperative for SMB SaaS firms to monetize new customers and products quickly.

SaaS marketers and the CEO and leadership team have challenging days ahead. The macroeconomic environment is beginning to blow up the sails of companies in the SaaS industry. Before the worst of it hits, a Saas company needs to determine its unique offering for its best customers, simplify its processes to save labor and drive efficiencies, and monetize its solutions quickly to drive cash flow and growth through improved lead generation. That’s how SMB SaaS companies will survive.

 

Saj Sahay is a CMO with Chief Outsiders, the nation’s largest and fastest-growing firm offering fractional Chief Marketing Officer services with Fortune 500 experience.

 

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Photo: Robsonphoto, YFS Magazine, Adobe Stock
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