Will the economic downturn spark a new and better era of SaaS? Image

Will the economic downturn spark a new and better era of SaaS?

By Nick Mehta

This article was originally published in Built In

Previous tough times have improved SaaS. This time, it shouldn’t be any different.

If you’re my age (or older), you probably remember exactly where you were and how you felt when the last Great Recession hit in 2008. The fear. The uncertainty. The string of bankruptcies. The relentless checking of your investment accounts.

To say the Great Recession was a rollercoaster would be an understatement. I understand what other SaaS leaders are feeling in the current downturn that’s being fueled by one thing after another. A global pandemic. Russia’s invasion of Ukraine. Supply chain snarls. Volatile energy prices. Record-breaking inflation. The Fed’s ever-increasing interest rates.

And while the economic and geopolitical uncertainty doesn’t look like it’s going away anytime soon, I’m making a bold prediction about the future of SaaS: 2022 will not be a repeat of 2008. In fact, I believe a tremendous amount of opportunity can be mined from these chaotic times.

Here’s why SaaS, in particular, is uniquely positioned to help us change the recession narrative. Over the past few years, SaaS’s purpose-built technologies and strategies have helped our industry withstand the ups and downs of the market. These tools were just a twinkle in a founder’s eye during the last downturn.

In this new normal, success is all about the trifecta of efficient, durable growth anchored in customer lifetime value and profitability. That means SaaS companies are more than ready to come out the winner in the economic equivalent of Lost. But only if they are built for durable growth.

Here are three ways SaaS has changed for the better over the years.

1. Digital game-changers

When I wanted to scale my company in 2009, I was faced with the conundrum of choosing between hiring more people to onboard and service our accounts and risking future layoffs versus improving overall business efficiency. It was a hard decision to make because no CEO wants to hire people and then have to let them go due to his/her business decisions.

In today’s market, most companies will likely see a decline in logo acquisition for the foreseeable future, which means your existing customers will become a bigger part of your revenue pie. Thankfully, with today’s sophisticated digital tools like AI and automation, it’s much easier now to scale your customer success and marketing efforts than it was during the last recession. Digital customer success helps businesses deliver a more personalized experience to their entire customer base, which goes a long way toward improving retention and expansion, both of which are key metrics in the current market.

In other words, with digital customer success, we can all easily do more with less.

2. New growth avenues

During the last recession, many CEOs, including me, were forced to decide between investing for the future (marketing) and lowering current costs to show efficiency. In other words, short-term gain at the expense of long-term, durable gain. We don’t have to make such choices anymore.

With product-led growth (PLG), you can lower your cost of acquisition, increase upsells and receive the type of ongoing product feedback that makes your brand stickier than duct tape. B2B companies like Box and Notion and B2C companies like Spotify and Headspace are a few great examples of PLG-led companies.

As every investor reminds us, capital-efficient customer acquisition and retention have never been more critical. The good news is that PLG provides SaaS companies with a new tool in their arsenal. If used correctly, it will lead them to the intelligent, sustainable, and capital-efficient growth that today’s SaaS brands need.

3. B2B communities

As a consumer, Peloton remains one of my favorite brands, even though the company has seen better days. While you might be physically alone on your Peloton, you don’t feel that way at all. The community creates a feeling as if you are riding alongside so many other people. You can join hashtag groups, compete on leaderboards, give each other high fives and do so much more. In fact, I like it so much that I’ve recommended it to all my friends and family to join. That’s the power of people, the power of community.

It’s no different for B2B businesses today. When you buy software, you are effectively buying into its community of users, and that’s a part of its value proposition. This wasn’t even a thing during the Great Recession. You bought your software and used it with a few colleagues and collectively griped about or acclaimed its virtues during coffee breaks. That was it.

Today, online and in-person communities have become hubs where customers can evangelize the outcomes they’re getting from your product. If you need a cherry on top, community-led growth also lowers software price and reduces time to value.

The fact is that word-of-mouth remains the most powerful marketing for any business, SaaS or otherwise. In fact, your customers are often your best salespeople. What’s not to love?

Prosilience for the Win

I’ve invented a new word to reflect my optimism about what’s to come for SaaS companies: Prosilience. Resilience gets you through. Prosilience gets you ahead. It’s about using learnings from downturns past and taking bold, proactive steps to make your company rock solid.

Because remember: tech juggernauts like Venmo, Instagram, Uber and WhatsApp all launched during the Great Recession. So now’s the time to put on your rosiest glasses and look for ways to build durable growth and spin the situation to your advantage. The next era of SaaS awaits. Onward!

 

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