This data is useful as an early warning system – the problem doesn’t necessarily exist yet, but it will.
For now, your focus should be on two things:
- Customer lifetime value (CLV)
Business survival, right now, is about cost savings and reducing your burn rate. Here’s three things you can do:
- Audit your expenses – we’re all paying for things we shouldn’t.
- Make sure you're default alive with at least a 10% buffer if you’re bootstrapped or an 18-24 month runway if venture-backed.
- Re-evaluate all non-core projects. You need to make long-term bets, but scrutinize everything.
Customer lifetime value (CLV)
Subscription growth is pretty basic:
Acquire a customer that's optimally monetized and sticks around for a long time.
Most SaaS businesses focus on the “acquire” part of that sentence, but the rest is crucial as well.
On monetization you should:
- Sell to your existing customers. Happy customers consistently buy more in recessions. Focus on cross-sells, upsells, and add-ons to bring in additional revenue.
- Raise prices. If your net promoter score (NPS) is more than 20, raise prices starting in September (after the balance sheet audits are done).
- Evaluate segments ASAP. Focus your sales team on the most lucrative prospects, rather than those hit hardest by the recession.
- Localize your offering. Localize your product and sales processes in the strongest economies. Beyond currencies and languages, make sure your pricing is region specific too.
- Re-evaluate your discounting strategy. Most discounts are far too high – cut them by half.
On retention, you should:
- Shore up credit card failures. It’s likely that your recovery rate is half what it should be. Reducing friction in your renewal process, or retrying payments at the right time will improve your payment acceptance rate.
- Implement cancellation flows. Entice people to stay with salvage offers and maintenance plans.
- Push longer-term plans. Do a promotion that encourages monthly customers on to quarterly or annual plans.
- Set up reactivation campaigns. Follow up 60, 120, and 180 days after a customer cancels – use small offers to encourage them to come back.