Scaling your software as a service (SaaS) business successfully demands foresight and careful planning. It’s not enough to be able to grow your customer base rapidly; you also need strong infrastructure to support that growth. This will enable you to continue servicing the needs of each customer, whether they’re in the first week of their customer lifecycle, or their tenth year.
In addition to investing in the proper infrastructure, it’s also important to examine new technological options and cultivate partnerships to help your business automate, integrate, and streamline its processes.
For more than 50 years, the organization has matched mentors with over 11-million entrepreneurs to help them through different business processes. How far-reaching is their help? In one year—2018—SCORE volunteers helped an estimated two thirds of their clients increase their revenue.
I recently contacted SCORE to discuss its recommendations for business scaling in more detail, and was connected with one of its mentors in the Princeton, NJ area, Dr. Bala Subramanian. In addition to being the chairman, president and CEO of Synergism, Inc., he’s also an adjunct faculty member at Kean University.
For over five years, he’s been helping empower businesses to thrive and has shared his perspectives on what needs to be done to prepare for the scaling process.
Manufacturing growth versus SaaS scale
Business growth can take many different forms, Dr. Subramanian explained. For a traditional manufacturing facility, for example, growth means manufacturing costs increase as more raw materials are consumed to satisfy the demand for more products.
A SaaS business, on the other hand, is unique because its product is already created. Therefore, growth takes form through different channels, such as partnering with technology that will help them grow their infrastructure and support more customers.
“These days, in the post-industrial area, most of the products offered are services,” Dr. Subramanian said. “And in a service economy, your efficiencies go up, but your costs should not increase significantly.”
For scaling SaaS businesses, this is good news. Because they don’t have to make large capital investments in raw products like a manufacturing business, they can direct their focus on other components of the business, such as developing infrastructure that will support a growing customer base.
When is the best time for SaaS scale?
How can a SaaS business recognize the best time to scale? Dr. Subramanian recommends a lot of data crunching to see if your business is ready for that leap.
Businesses that have received funding from investors understand the importance of having clearly defined goals their investors will use to hold them accountable. These goals also act as a yardstick for CEOs and other managers to judge the health of their business.
Certain SaaS metrics can help analyze data in a number of different ways, helping to provide critical insights into your business, from sales figures to customer behavior. For example, metrics can help track growth month over month and year over year, and identify customer patterns to avoid churn.
Then, there are stretch goals, which challenge a business to go even further than what’s necessary to keep the business profitable. If you’re routinely hitting those stretch goals, it may be time to consider scaling.
But as mentioned, to truly scale a business, you can’t just focus on growing your customer base. Businesses must first ensure their processes and infrastructure are ready to support bringing in new customers.
Automation technology helps scale businesses of all sizes
It’s important to ask this question, says Dr. Subramanian: “If you’re billing 500 customers and you double that, do you need more resources? Now, billing and other systems can be easily scaled using fintech modernization strategies.”
These modernization strategies have helped level the playing field, he explained. “Businesses are no longer handicapped by their size. They don’t have to spend a lot more money to compete with larger businesses. All businesses can be agile and more customized.”
For example, accountants and finance teams for many businesses still manually send out invoices and reconcile their accounts at the end of each month. With fintech and machine learning technologies, this process can be automated and streamlined.
Another benefit of modernizing your infrastructure is putting the power in the hands of your customers, says Dr. Subramanian. Many SaaS billing businesses provide customers with a self-service portal, allowing them to make changes to their own accounts—including updating contact information and payment methods—without having to reach out for support.
For instance, he illustrated the many changes on Wall Street. The history of stock trading dates back since well before the Dutch East India Company issued paper shares in 1602. Now, SaaS businesses such as E*TRADE permit customers to trade their own stocks, independent of a broker.
In fact, an estimated 67% of customers have indicated they prefer to use self-service portals, versus speaking with a live person. Not only do customers appreciate being able to make changes at their convenience, but it also allows staff to focus on other issues to help grow the company.
The importance of integrating business technologies
Integrating the various technologies a business uses is important because it helps further streamline and automate processes—a critical step for any scaling business.
MicroStrategy, Inc., for example, is a SaaS business that helps integrate tools and apps that businesses already use to provide additional insights into the data that’s generated. When someone is considering a purchase online, they can hover over a product and learn additional information. Although used in the retail sector, the business underscores the power of streamlining processes to quickly gather important information to make quick, real-time decisions.
Another example of integrating technologies is implementing an agile billing system that can integrate with other business platforms, such as customer relationship management (CRM) platforms like Salesforce, and accounting tools such as NetSuite and QuickBooks.
The seamless flow between these platforms enables information to update in one and travel to the others. This ensures continuous data accuracy and the elimination of data silos and duplicated efforts.
Creating channel partners to enhance business practices
Businesses looking to scale can also use technology to create channel partners, essentially entering into a cooperative agreement to share resources.
“These days, people are not delegating responsibilities, they are using more channel partners to create a two-way benefit,” Dr. Subramanian explained. By sharing marketing costs, for example, “it reduces the costs in both directions.”
For example, in the IoT industry, a GPS business may connect with a data sensor manufacturer to generate a mutually beneficial partnership, creating a stronger overall product to sell to customers. This not only reduces costs, but also benefits customers because they don’t have to buy two separate products out of the box and then try to pair those products themselves.
Scaling a business helps increase market share
Businesses that achieve successful SaaS scale should find their market share increases at the same time. As Dr. Subramanian mentioned earlier, with SaaS businesses, the cost to distribute their services has not increased significantly.
Therefore, as market share increases, businesses can pass their savings on to their customers. This might mean developing features to create added value or by offering incentives.
“Because of that increased market share, for example,” he said, “a business can say, ‘Normally, this is our cost. But we can let you use it for 30 days for free.’”
Incentivizing customers with a free trial period is two-fold. Not only does it tout the success of that business, but it also boosts customer acquisition and adds to the customer base. And, if your business has planned out its scaling strategy well, it will be able to take on and support those new customers for a long time.
There are a lot of moving parts and considerations to be made, such as determining what technologies and evolution in infrastructure may support your rapid growth the best. But tapping into professionals with the business acumen to mentor and support a growing business, the journey does not have to be a solo venture.