It’s an unprecedented time to be in SaaS. Long term, the sector’s prospects are strong. The SaaS market could grow almost 10% every year to 2027 — and I think that’s a conservative estimate. In a recent Stripe survey, 63% of B2B recurring revenue businesses said they were confident of their growth in 2023. But the road ahead is bumpy. Many founders are dealing with the first cyclical economic slowdown their businesses have faced. As budgets tighten, SaaS businesses are reexamining the tools they use every day to achieve what they once took for granted: accelerating their growth without making big capital expenditures. The good news? New technologies offer more ways than ever to grow revenue. And to many founders’ surprise, one of the easiest ways to do this is one of the least glamorous: the financial stack. With the right tools, there’s every opportunity for SaaS businesses to continue growing — even in today’s economy. Doing more with less often means making big changes. That’s why recessions define startups: They force generational changes that are only possible when the stakes are high. Nearly 82% of businesses Stripe surveyed said they were concerned about the current state of the economy, and 45% of them are worried about their cash flow position. But at the same time, nearly 60% of businesses agree a recession is a ripe time to innovate. One of the best, most cost-effective ways for SaaS businesses to do that is using technology to reduce the complexity of financial processes and optimize sales.
The real rate limiter for SaaS businesses’ growth isn’t shipping software — it’s selling it
As a business model, SaaS is inherently global. The internet means a Swedish company can instantly reach customers from Singapore to Mexico. But actually selling things online is still surprisingly hard. That company would need to charge its customers in Singaporean dollars, work out how to bill them automatically, withhold the right sales tax and reconcile global currencies into Swedish kroner, among other financial gymnastics. Because there hasn’t been an easy way to do this — even for digitally native SaaS businesses — the revenue stack is a big source of inefficiency. It means losing money for preventable reasons like customers unnecessarily churning when their payment details expire or transactions being falsely blocked as fraudulent. It means wasting time and money working out how to support new currencies, keeping up with changing regulations on identity verification or adopting new payment methods. And it means slower innovation, as patchwork software makes it hard to create and test new product tiers, pricing structures or business models. As a founder, I spent hours creating customer contracts, manually following up on payments or reconciling different invoices generated by patchwork systems. Those are pain points founders can’t afford in a strong economy, let alone a weak one. Crucially, fully integrated payments technologies mean these problems are now entirely preventable — with no additional headcount and at practically no extra cost. There are three main things SaaS founders can do to improve their profitability today.