Current market conditions present a worrying picture for B2B SaaS businesses. Experts predict that the US economy will likely slow in 2022 and 2023, possibly even resulting in a recession. This means companies will have less money for B2B SaaS products and will have to think very carefully about the services they choose. As a result, the competition will be fierce.
However, now’s not the time to give up. SaaS companies are in a strong position to capitalize on market changes if they employ the right strategies.
What are the actions SaaS companies should take during an economic turndown? Will layoffs or turning off Marketing budgets help companies to stay profitable during these turbulent times? – The answer is: NO! Simply since it won’t help them grow ARR and hit their revenue goals!
With this in mind, let’s look at how you can grow your SaaS business through economic downturn.
How To Scale Your SaaS Startup During Economic Downturn?
Markets are slowing down, but that doesn’t mean you should too. Naturally, you want to scale your B2B SaaS business. And the good news is that there’s always opportunity amid uncertainty. It’s just about knowing where to strike. For example, some of today’s biggest companies, including WhatsApp, Uber, Asana, Venmo, and Slack, all launched around 2008 – when we had the last big economic crash.
At the same time, SaaS companies might be in a better position to weather this storm than others. For example, research firm Gartner predicts an acceleration in business software spending in 2023, up to 11.8% growth, up from a predicted 9.8% growth in 2022. Or in other words, SaaS spending could grow even faster than we expected in the coming years.
However, while promising, this doesn’t mean B2B SaaS companies are safe. SaaS is still in its relative infancy, and we’ve never seen the effects of a market downturn on SaaS companies at this scale. For example, worldwide end-user spending on SaaS stood at $31.4 billion in 2015, but by 2021, this figure stood at $152.18 billion. SaaS was barely on the map in 2008.
So, what does this mean for B2B SaaS companies? How do you scale your business through an economic crisis? We can look to the past and the present to find the answer to these pressing questions. It might require some tweaking of your strategy. Moreover, we will likely see changes in SaaS startups due to the economic downturn, but it’s entirely possible to come out strong.
10 Things B2B SaaS Founders and CEOs Should Do To Maintain Steady Growth
- Do more with less: Ad costs are increasing, putting even more stress on B2B SaaS companies. This means you need to use your resources wisely by picking a partner you trust and one that can deliver maximum ROI. Opting for an account-based marketing solution over traditional segment-based marketing could help grow your ARR predictably.
- Focus on the highest value accounts: It’s tempting to split your budget and focus equally among potential customer accounts, but this is often a lousy strategy during an economic downturn. Instead, hyper-focus on the accounts that can bring in the most value.
- Invest in good data: Knowing exactly how effective your marketing efforts are is crucial. This means having a tight grip over your data and the tools to extract meaning from it.
- Focus on existing customers: Selling to existing customers is cheaper than acquiring a new customer. You can boost your annual recurring revenue (ARR) by offering exciting new products or packages to customers who are already behind your brand.
- Find your price point: This is one of the trickiest parts of running a SaaS business. If you get your price point wrong, your business will stall or even decline. In an economic crisis, it often makes more sense to choose a pricing strategy proven within your niche rather than disrupting the status quo.
- Cut through the noise: Companies are bombarded with ads and new SaaS solutions daily. As a result, you should be extremely accurate in your use cases. You need to bridge the value gap between a good and a great SaaS product for their specific business needs.
- Keep up with the pace of change (trends): While economies slow, industries often see massive disruption during economic hardship. We saw this happen with COVID-19 and the vast acceleration of digital transformation. So keep up with the latest trends through content marketing and research and be ready to capitalize on them.
- Consistent brand messaging: Your brand needs to be stronger than ever during uncertain times. You want your customers and potential customers to know precisely what you do and that you can be counted on. Vague or inconsistent brand messaging could make you appear weak or risky. Adopting an Account Based Marketing strategy (ABM) can help you deliver consistent messages to the right people at the right time based on where they’re at in their journey.
- Go international: Going international might seem risky during an economic downturn, but it can actually save your business if done right. For example, most financial publications predict the US will have a recession or at least come very close. However, the Euro Area expects they will avoid a recession, despite the uncertainty caused by the invasion of Ukraine. Switching your focus to customers with more stability (and more cash to spare) could be a lucrative strategy.
- Build morale and motivation in your team: Morale often takes a hit during economic slumps. People become stressed and usually have less money to spend on the things they enjoy. You can build morale by clearly communicating with your team about what’s happening and trying to involve them in critical decision-making activities.
Pro tip: With the rapid pace of how the buyer journey and purchase habits are changing in the B2B SaaS space we see many companies shifting to TikTok with the aim to find new audiences at a lower price.
Why should you care? Because TikTok is (for the moment) still considered as a relatively cheap platform to invest your Marketing dollars and gain traction for your business, it is in current state like Facebook and LinkedIn were several years ago, and companies should be taking advantage of this opportunity to capture demand at lower costs.
Revamping Your Startup Business Model and Shifting Your Mindset Through Turbulent Times – What Should Be the Focus for SaaS Founders and CEOs?
During an economic downturn, investors scrutinize your metrics more than ever. This means you need to have a laser focus on the KPIs investors care about most. Burn rate (the pace at which cash is decreasing), the “Rule of 40” (your growth rate and profit margin), and the ratio of Lifetime Value (LTV) to Customer Acquisition Cost (CAC) should be your top concerns. For example, lifetime value must exceed CAG for a viable business, but a ratio of 4:1 is preferred.
Adding to this, during an economic downturn, it often makes more sense to focus on boosting your ARR than putting the majority of your focus into finding new customers.
When economic uncertainty hits, budgets shrink – that goes for you and your clients and potential clients. This means you need to invest in tools that give you the most bang for your buck. Account-based marketing (ABM) has proven hugely successful for B2B SaaS businesses, and many more will undoubtedly make the switch as we move into 2023 and beyond. Inconsistent marketing will cost you, and you don’t have the funds to waste during a recession.
If you want to scale your SaaS business through an economic downturn, an ABM solution could be the answer. Book a demo today to see what Acquisent can do for you.