Technology & Innovation

6 ways finance pros can recession-proof SaaS companies

Learn the six best practices finance pros can implement to recession-proof SaaS companies, including cash management, automation, and pricing optimization.

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Whether you’re a CFO, Controller, or RevOps specialist, SaaS finance professionals share a common goal of helping their company find profitability and scale in all economic conditions. The recent market downturn might have you discouraged, but there are time-tested and well-proven ways of achieving financial success in uncertain markets. 

This article will walk you through various strategies and best practices that SaaS finance pros can adopt to recession-proof their organizations. We’ll cover everything from SaaS pricing strategies to team alignment and much more.

If you want to know how to recession-proof a SaaS company, these six best practices are a great place to start.  

6 best practices to recession-proof your SaaS company

When the market turns against you, having some best practices to follow will keep you calm, optimistic, and efficient. If you can swiftly and skillfully respond to changing conditions, you’ll be miles ahead of your SaaS peers scrambling to find their footing. 

Below are six cardinal best practices for SaaS finance leaders. They can help you keep a straight course in the current downturn and be more prepared for future economic turbulence. 

1. Review and adjust financial forecasts

To recession-proof your SaaS company, high-quality revenue forecasting is indispensable. When times are lean, your allowable margin for forecasting variance drastically decreases. Even a minor difference between expected results and reality can spell significant hardships for SaaS companies.

You should make a habit of regularly reviewing your forecast data to be sure that it accurately reflects the situation on the ground. Take a look at your revenue projections and adjust them based on different scenarios. This will help you better understand the potential impact of a recession on your business and allow you to prepare accordingly. 

Often, you have three different forecasts:

  • Likely: 60% chance to make the Plan.  This is how you make your valuation.  
  • Stretch:  30% chance to beat the Plan.  This is the Rally target for the team to find a way to do big things.  
  • Shoot for the Stars:  10% chance to beat the Plan.  This is the Art of the Possible, with really thinking creatively to open up whole new markets, channels, or engagement.  

Even if you’ve wisely chosen to invest in fully automated forecasting, your final readouts will only be reliable and actionable if your starting assumptions are grounded in the facts. 

2. Focus on cash management

Cash is king during a market downturn. It supplies vital peace of mind, and much more importantly, it dramatically expands your options for strategic maneuvering. No matter how skillful you are in other areas of your profession, you’ll struggle to recession-proof your SaaS company if your cash management isn‘t fully optimized.

With this in mind, you’ll want to seize every opportunity to strengthen your cash position. Some of the simplest and most effective ways of extending your cash runway include:

1. Reducing non-essential spending: Go through your firm’s various expenditures and thoroughly inventory what’s essential. Recessions alter cash management priorities, and it’s vital to be realistic about what’s important and what’s not. 

2. Prioritizing revenue-generating activities: Related to the previous point, be sure to put revenue-generating activities first among your financial priorities. Once you’ve eliminated your non-essential expenses, you can devote some or all of that money to revenue generation. 

3. Doubling down on FP&A: If you want to make new hires in the near future, penetrate a new market, or engage in any other expansion activities, do your due diligence first. Automated forecasting can help you have maximum confidence in your decisions by knowing your outcomes in advance. You can’t recession-proof SaaS firms without rock-solid FP&A.  

4.  Ensuring retention and upsell of your customers:  It is so much cheaper to retain a customer than to find a new one.  Take this time to understand where they get value, where they have frustrations, and what they want going forward.  Profitability comes from reducing churn and increase the dollars in Net Dollar Retention.  

Remember to do everything you can to fortify your cash position when the conditions around you look chancy. 

3. Invest in automation

Automation allows SaaS finance leaders and teams to do more with less. In times of economic uncertainty, this will give you a vital competitive edge and ensure that your organization continues to perform at its peak potential. 

Some common and highly beneficial use cases for SaaS automation include: 

  • Financial management software to streamline processes like billing and rev ops to cut the close, reduce forecast variance, and accelerate cash flow
  • Sales and marketing automation tools to help maximize lead gen performance, forecast accuracy, and closing rates 

Investing in automation will help you and your team weather the current economic storm and recession-proof your SaaS company 

4. Optimize your pricing strategy

A market downturn will often impact SaaS customers’ purchasing behavior and levels of sales resistance. This means there’s no better time to take a closer look at your pricing strategy

Are you meeting your customers’ needs with a pricing structure that’s fair to them and profitable for you? Here are some pricing suggestions to help you deal with the downturn more effectively: 

  • Adjust your pricing tiers: Especially during a recession, you must ensure you’ve priced your products optimally. If you’ve seen slow or minimal user adoption, it might be time to run some forecasts on alternative pricing options. 
  • Experiment with your billing model: SaaS hybrid billing options might make your products more attractive to users at a time when people are more cost sensitive. Automated accounting software can help you find the optimal billing method for your organization. 
  • Offer special promotions: A generous discount can help bring in new customers who might otherwise be resistant to onboarding at a time when the economy is less than stellar. 
  • Introduce new products or features: Giving users additional products or features on their existing subscriptions–or even expanding your product line in general–can be very effective during a downturn. Just make sure that any expansions you roll out genuinely align with your customers’ needs. 

Pricing is one of the strongest persuasive tools at your disposal for keeping customers. Make sure you take the time to get it right. 

Ensure finance, sales, and marketing teams are aligned

During a recession, a robust marketing and sales strategy is critical for weathering the storm. CFOs, Controllers, and RevOps professionals should work with sales and marketing teams to create a plan that focuses on three core components:  

1. Retaining existing customers: Since retaining an existing customer is always cheaper than acquiring a new one, retention should be your top priority. Fixing any product bugs customers have complained about and doubling down on customer support are great places to start. 

2. Generating new leads: After retention, lead generation is the next top sales and marketing priority during a recession. Automated accounting software helps finance professionals quickly and easily analyze all their company’s relevant lead generation and adoption data so that they can respond to negative or positive trends in real time.  

3. Optimizing customer acquisition costs: Managing your CAC is vital in a downturn. Especially since your cash runway might already be feeling some strain, anything you can do to minimize your CAC will free up capital for other strategic uses.

Using cloud-based software with a single source of truth (SSOT) will enable all leaders and team members to easily access reliable and accurate data on sales and marketing campaigns.

6. Improve data accuracy and integrity

For SaaS finance leaders, whether you’re a CFO, a Controller, or a Rev Ops director, you can’t afford to compromise on the quality of your data. During a recession, trustworthy data can mean the difference between thriving despite economic challenges or closing shop altogether. 

When the margin for error grows slim, you absolutely must be able to trust your data. To that end, make sure you and your team observe best practices such as: 

  • Dismantling data silos: Siloing data is the practice of widely dispersing your company’s data across various disconnected locations. If your company spreads out its data, you can virtually guarantee that you’re wasting time and money on manual information gathering and the tedious back-and-forth that always goes with it. Adopting an SSOT is a must when combating a recession. Your various departments will be more agile, effective, and confident.  
  • Leveraging role-based dashboards: Automated role-based dashboards enable the decision-makers in your organization to instantly access the exact data they need for their specific roles. Since various employees, department heads, and finance leaders each rely on a unique set of metrics, this is indispensable for saving time and streamlining your firm’s effectiveness. 

With a unified financial management system, you and your colleagues in other departments can use detailed data drill-down when analyzing transactions and metrics. When seeking to recession-proof your SaaS company, almost nothing matters more than guaranteeing the integrity of your data. 

Building an agile future to help your business grow

By following these best practices to proactively tackle financial management challenges, you can help your SaaS company navigate through difficult times and emerge stronger on the other side. Just as importantly, you can recession-proof your SaaS company for the economic storms that haven’t materialized yet. 

To learn more about how you can not only survive but thrive during a downturn, check out our recent webinar with SaaS industry pros.