Christian Owens is CEO and co-founder of Paddle, a payments infrastructure provider for SaaS businesses.
Scaling a SaaS company is tougher today than in the past few years. Whatever stage your company is at, a near 70% drop in the value of public SaaS stocks, increasingly limited access to funding and shrinking company tech stacks all point toward a more challenging road ahead for a sector that got used to rapid growth almost by default.
By nature, ambitious SaaS founders and operators do not want to give up on their growth ambitions even amid an economic downturn. There is no reason why they should do so. The fact is, VC funding isn’t a prerequisite for retaining customers and scaling steadily.
However, there is no doubt that traditional growth levers like digital advertising and bigger sales teams are likely to be proving too costly or unreliable in the current climate. There are still opportunities for growth out there, but founders and operators will need a new strategy if they want to continue growing through the downturn. The key is to focus on scaling sustainably by tapping into more overlooked and underrated sources of revenue.
If your CX isn’t tailored for international customers, you are leaving critical gaps in your offering and will see potential sales fall through the cracks.
As the founder of a payments infrastructure provider for SaaS businesses, I have helped thousands of software companies over the last 10 years, and we see the financial metrics of 30,000 subscription companies. Based on this experience and analysis of our data, I believe there are three growth levers often overlooked by SaaS leaders that every company should be exploring.
Focus on expansion for recession-proof revenue
Encouraging businesses to deprioritize acquiring new customers might seem counterintuitive, but the truth is, keeping existing customers happy — and generating new sales from them — is far easier and much cheaper than acquiring new clients. This is especially true now, as many buyers will be hesitant to spend money trying out new tools.
That’s why SaaS companies should be paying attention to expansion revenue — the additional revenue generated after the customer’s initial purchase. This basically means getting your customers to spend more than they did the month before. Our data shows that the most successful subscription companies worldwide have 20% of their new revenue coming from existing customers, but many businesses have close to zero.
This is a consequence of what we call “sales brain” — a flawed mindset that views the sale as the end goal rather than the start of a long-term process.
Here are a few ideas SaaS leaders can use to supercharge their expansion revenue:
Add upsell tiers to your pricing, pushing valuable features into more premium tiers. Our research shows that the top 1% of growing apps have 16 pricing tiers, so don’t be afraid to charge for the most popular tools in your platform.