3 growth levers every SaaS founder should know about

Scaling a SaaS company is tougher today than in the past few years. Whatever stage your company is at, a near 70% drop in the value of public SaaS stocks, increasingly limited access to funding and shrinking company tech stacks all point toward a more challenging road ahead for a sector that got used to rapid growth almost by default.

By nature, ambitious SaaS founders and operators do not want to give up on their growth ambitions even amid an economic downturn. There is no reason why they should do so. The fact is, VC funding isn’t a prerequisite for retaining customers and scaling steadily.

However, there is no doubt that traditional growth levers like digital advertising and bigger sales teams are likely to be proving too costly or unreliable in the current climate. There are still opportunities for growth out there, but founders and operators will need a new strategy if they want to continue growing through the downturn. The key is to focus on scaling sustainably by tapping into more overlooked and underrated sources of revenue.

As the founder of a payments infrastructure provider for SaaS businesses, I have helped thousands of software companies over the last 10 years, and we see the financial metrics of 30,000 subscription companies. Based on this experience and analysis of our data, I believe there are three growth levers often overlooked by SaaS leaders that every company should be exploring.

Focus on expansion for recession-proof revenue

Encouraging businesses to deprioritize acquiring new customers might seem counterintuitive, but the truth is, keeping existing customers happy — and generating new sales from them — is far easier and much cheaper than acquiring new clients. This is especially true now, as many buyers will be hesitant to spend money trying out new tools.

That’s why SaaS companies should be paying attention to expansion revenue — the additional revenue generated after the customer’s initial purchase. This basically means getting your customers to spend more than they did the month before. Our data shows that the most successful subscription companies worldwide have 20% of their new revenue coming from existing customers, but many businesses have close to zero.

This is a consequence of what we call “sales brain” — a flawed mindset that views the sale as the end goal rather than the start of a long-term process.

Here are a few ideas SaaS leaders can use to supercharge their expansion revenue:

• Add upsell tiers to your pricing, pushing valuable features into more premium tiers. Our research shows that the top 1% of growing apps have 16 pricing tiers, so don’t be afraid to charge for the most popular tools in your platform.
• Charge for priority support. Our data also shows that 20% of a customer base is willing to pay to have their calls or emails answered first. Premium support options can therefore be an easy way to generate extra revenue.
• Build more products. Firms that work on a second product before reaching $10 million in ARR tend to grow 30%-50% faster than single-product companies. More products means more sales from those who are already convinced of your offering.

Market through your partners

It’s never been easier to build a software product or launch a software business. As a result, some analysts expect the number of SaaS companies to grow up to a million over the next 10 years.

This makes standing out from the crowd more important than ever. An often overlooked way to do this in the world of SaaS is through affiliate marketing, which involves partnering with individuals or companies to promote your brand, products or services for a commission.

An affiliate marketing program gives you an additional source of revenue that is low risk and, most importantly, low cost. By recruiting influencer-ambassadors to share a promo code to their audiences, you can drive new leads to your site. This approach works particularly well in SaaS due to the tight-knit nature of our community.

The benefits of affiliate marketing are, in my opinion, threefold:

• It unlocks new marketing channels. Affiliates can promote your business by reaching out to potential leads on their blogs, forums, social media, communities and groups. You can tailor affiliate marketing to reach a targeted audience for your brand — for example, Hacker News or a SaaS-focused podcast.
• It bolsters ROI and reduces customer acquisition costs. This is crucial during a downturn, as it doesn’t require an upfront investment and you pay commission only on conversions.
• It boosts free trial users. SaaS products that offer free trials are extremely attractive, as website visitors driven by affiliates are more likely to sign up if they can try the product for free.

Localization

SaaS businesses have the potential to be global by default. In theory, at least, customers can find your website and purchase your product anywhere in the world.

But, unfortunately, the reality isn’t that simple. Wherever they are, customers expect — and need — a simple, seamless experience tailored to their region. If your customer experience isn’t tailored for international customers, you are leaving critical gaps in your offering and will see potential sales fall through the cracks.

This seems obvious, but many software companies are effectively leaving money on the table because they are asking international customers to overcome obstacles such as information in a different language or unfamiliar checkout options.

Many founders I’ve spoken to assume that localizing effectively is costly or time-intensive, but that doesn’t have to be the case. Here are some tips that will help you localize the right way:

• Translate sales and marketing copy to help customers understand your product more quickly. Localizing information on your website increases the chances of a consumer making a purchase by 72%, according to our data.
• Offer localized pricing. Offering more currencies to customers as well as pricing models based on what they are willing to pay in their respective markets can make a huge difference. Our data shows that customers in Southeast Asia, for instance, are willing to pay 37% less than those in the U.S. Moreover companies that accept 25+ currencies saw 25% higher growth than those that only accept one currency.
• Localize payments. Offering local payment methods to suit regional preferences is also crucial. In China, for example, 81% of customers use AliPay, so any company that doesn’t have it as an option should expect to see baskets abandoned mid-purchase. Startups that have at least one alternative method available grew 22% faster than those that didn’t.

A challenging market brings new opportunities

The downturn is here, and no one is pretending the next year or two is going to be easy. However, we believe there are still plenty of growth opportunities for those agile enough to exploit them.

The good news is twofold: Firstly, if you’re a SaaS founder, you probably like a challenge, and secondly, you can take heart from the fact that some of the world’s most successful SaaS companies were formed amid a recession.

That’s no coincidence: Businesses that can thrive and grow in a challenging landscape are already stronger and leaner when the economy recovers and so are well placed to dominate in the years that follow.

Whatever this next chapter holds for your business, start by focusing on these three growth levers and give yourself the best chance of growing sustainably in both the short and long term.