From startups to Fortune 50 enterprises, it seems that adopting a subscription-based business model is now a goal of nearly every business. Considered to be the fast track to organizational growth, SaaS subscription management continues to accelerate at an astonishing rate. As recently reported by MarketsandMarkets, the market size for global subscription and billing management is expected to grow from USD 4.0 billion in 2020 to USD 7.8 billion by 2025. What’s behind this phenomenal growth? If you’re thinking about adopting a SaaS subscription management business model, what should you consider before taking the leap?
Why SaaS Subscription Management Adoption Continues to Rise
The concept is simple – you provide software services to your customers, and they pay you a recurring fee for usage. However, as with any business model there are both advantages and disadvantages. Let’s start by looking at the key advantages from both the customer and software provider’s perspective.
Customer’s flock to companies that offer SaaS because of its many benefits, including:
- Cost predictability: Whether the customer is billed monthly, quarterly, or annually, invoice predictability enables them to manage expenses and budgets more efficiently.
- Pricing options: From flat-rate and tiered to per user/per unit and freemium, there’s a variety of pricing models that will fit virtually any need or budget.
- Scalability: As a customer’s usage increases or decreases, they benefit from the ability to quickly scale without the need to purchase new hardware/software, acquire more storage, etc.
- Cost-effectiveness: The cost of hardware, software, testing, etc. is shared across the customer base, minimizing CAPEX and OPEX.
- Simplicity: Removes the need for onsite hardware and software which require installation, upgrades, and support; adoption and usage is straightforward.
- Work flexibility: As we’ve witnessed with the pandemic, the ability to work remotely is essential. SaaS enables employees to work from anywhere and from virtually any device.
- Enhanced security: The level of security that most SaaS companies implement and maintain would be cost prohibitive for the average company to replicate.
From the SaaS provider’s side, the benefits are also plentiful and include:
- Revenue predictability: While revenue is never 100% predictable, the SaaS subscription management business model provides for more predictability due to its recurring revenue stream.
- Increased customer loyalty: Not a one-off sale, contracts signed by customers afford SaaS businesses the opportunity to build long-term customer relationships.
- Reduced piracy: Since SaaS providers don’t sell software licenses, the risk of software piracy is greatly diminished.
- Easier international expansion: With software accessed via the cloud, offshore resellers aren’t needed when you’re ready to take your offering global.
- Innovation inspiration: With numerous ways to adopt and deploy a SaaS subscription management business model, SaaS businesses have more of an opportunity to be creative than their traditional business counterparts.
The features and benefits of SaaS subscription management speak for themselves, further confirming why this business model continues to gain unprecedented traction.
So, you think you’re ready to make the move to becoming a SaaS organization? Before you change your business model, read on for the three considerations every SaaS subscription management leader needs to know.
Key Considerations for SaaS Subscription Management
On the surface SaaS subscription management is uncomplicated, however as we peel back the layers, there are unique factors that need to be considered. To help put your SaaS business on the road to success, be sure to take the following into consideration.
- Customer churn: Customer churn is challenging regardless of your business model, however for SaaS companies it’s a natural occurrence. Customers will leave for a variety of reasons like if the service no longer provides the expected value or repetitive invoicing errors. To keep customers from going to your competitors, be sure that your invoicing platform ensures billing accuracy and automated invoice processing. In addition, it needs to efficiently handle the frequent changes that are a byproduct of this business model, as well as allow for a variety of payment methods, including auto payment.
- Customer relationship management: As previously mentioned, SaaS companies have the ability to foster long-term customer relationships. With the higher frequency of customer interactions, you need to ensure that your billing platform easily integrates with your customer relationship management (CRM) system. This helps ensure that you’re able to synchronize data for more efficient and effective customer management across the entire customer life cycle.
- Billing flexibility: Recurring revenue can take on various forms and be subject to change. From free trials and discounts to packages and bundles, your billing solution needs the flexibility to accurately handle a variety of billing options across your entire customer base.
As you can see, billing plays a central role in the success of your SaaS company. To help you determine if your billing platform is up to the challenge, we’ve provided some tips on essential components of the right billing system.
What to Look for in a Billing Platform
There are a variety of billing systems on the market, each with its own characteristics. Let’s take a look at what the best billing system for SaaS subscription management looks like. When evaluating billing platforms be sure it allows you to:
- Unify disparate data to configure, price, quote, bill, and manage revenue on a single system.
- Support any combination of pricing models – one-time, subscription, usage, hybrid, and dynamic.
- Efficiently manage contract rates and payment terms.
- Deliver a variety of payment options, as well as handle credits, refunds, and dunning.
- Create innovative usage-based pricing models by capturing raw data from any source.
- Automate collections management to better track aging balances and stop revenue leakage.
- Easily integrate with other systems such as CRM, general ledger, and tax solutions.
- Automate the entire quote-to-cash process for more efficient billing and revenue recognition.
- Automate manual processes with easy-to-use workflows.
- Keep customer data confidential and comply with regulatory standards such as GDPR and CCP.
- Take your offerings global with built-in localization, multi-currency, multiple languages, regional taxation, etc.
- Acquire valuable insights to analyze and optimize billing performance.
- Give customers what they want – the ability to serve themselves.
Essentially, the right billing platform for SaaS subscription management needs to support the entire quote-to-cash process, from configuration through revenue recognition and everything in between.
With BillingPlatform you’re able to automate the entire quote-to-cash process, enabling you to monetize any revenue opportunity and deliver a frictionless customer experience. With us as your partner, you can bring innovative new products and services to market 30% faster and reduce operational costs by as much as 50%, helping you gain a competitive advantage. Ready to get started with a SaaS subscription management solution like BillingPlatform? Contact our experts.