The pandemic years (2020 – 2021) can aptly be described as the golden era of SaaS.
It was fairly easy to get funding for both early-stage companies and those looking to go public. There was high demand for digital services. Profits soared.
I personally experienced this exuberance when fundraising for Tingono. Compared to my first startup, it took 5x less time to raise 5x more capital. This was likely, in part, because we are experienced founders with an exit. But it’s hard to deny we were incredibly fortunate with our timing.
Times they are a-changin’
Alas, this all came to a halt in 2022 when late-stage markets swooned and VC funding slowed. We haven’t seen the impact on profitability yet, but the upcoming earning season will surely be an interesting one to watch.
If you read the news, it seems we’re on the cusp of another great recession. Apparently, things are going to get real gloomy, real fast.
But I have an alternative take based on conversations with several SaaS executives and venture investors: when it comes to enterprise SaaS, the current signs indicate a reversion to the mean rather than a precipitous drop off.
The feeling that the economy is hurtling towards the worst-case scenario fast is really just a return to normal from the insane highs we experienced during the pandemic.
What we’re seeing is buyers and investors more reluctantly parting with their money. Welcome back due diligence! They're using not only available data but also perceived value to assess their options more rigorously. While they are still spending and investing, they are doing so more cautiously.
Could things get worse? Of course. The economy is facing enormous headwinds from high inflation and the resulting interest rate increases. However...
Reverting to the mean
If we presume we are reverting to the mean and the recession will be a relatively mild one, then what changes should we expect?
Well, given the higher risk-free rate, access to capital will continue to tighten. This means:
- Companies simply cannot spend their way to growth. It’s time to acknowledge that growth through acquisition-at-all-costs is no longer feasible.
- Longer sales cycles. Expect companies to be cautious and methodical when evaluating which options to pursue, leading to extra-long sales cycles.
- The quality of customers you attract—and more importantly the ones you retain and expand—will impact your profit margins.
- Your best customers should get your undivided attention. This will act as a safeguard as your competitors attempt to steal your best customers away.
Learning to thrive in challenging times
So, what can you do to not only survive but also thrive in this “new” old world? Three things:
- Provide a stellar customer experience. If your product does not offer outstanding customer value, it could be first on the chopping block. I’m not referring to the raw number of features or bells and whistles you offer. Rather, you’ll need to consider things like usability, discoverability, and ease of use. Basically, your focus should be on everything that helps a customer consistently and rapidly realize the value they are paying for.
- Identify your leading indicators. Tracking lagging indicators (e.g. ARR, pipeline velocity, churn rate, etc.) though necessary, won’t be sufficient. You’ll also need to identify and track leading indicators (e.g. product usage, support tickets, marketing engagement, etc.). Otherwise, by the time you learn that a key customer won’t be renewing, it might be too late to act.
- Engage customers throughout the entire customer journey. Winners will provide a well-orchestrated customer journey. Losers will likely find that customer experiences were fragmented. And the culprit will be siloed activities by marketing, sales, customer success, and support functions.
Executing on all this manually might seem like a tall order. Especially for a company with a substantial customer base...
Tingono was built so you can thrive in these times
However, Tingono is here to help! Tingono brings together your disparate data sources (e.g. CRM, product telemetry, support system etc.), analyzes the signals from this data, and automates the next best actions for you.
Tingono enables companies to retain and expand their customer accounts. In a nutshell, we do the following three things really well:
- Identify leading indicators of churn and recommend the best next actions to prevent it.
- Identify leading indicators of expansion and suggest the best next actions to secure it.
- Automate and orchestrate the recommended best next actions.
As it turns out, these three things will enable you to provide a stellar customer experience, identify your leading indicators, and engage customers throughout the entire customer journey. All the things you need to thrive in this old “new normal"!
