By Kapil Makhija, CEO Unicommerce
The Covid-19 has taken the world by storm and we all are learning to adapt to the new normal of wearing masks, practicing social distancing, and adjusting to the new working norms. As we all enter the post-covid-19 world, there is no playbook which a SaaS business can refer to for building or surviving this uncertain business environment and everyone is learning with each other’s experiences and trying to adapt to this new order of things.
The post-coronavirus world will give rise to long term trends paving the way for new business models. The disruption caused by pandemic feels like an opportunity for an economic reset with a clean slate. As companies start evaluating and planning their business strategy for the post-covid-19 world, technology will play a pivotal role in various aspects of the business. This creates a silver lining for companies providing SaaS-based solutions as it is expected that companies will start looking for cloud solutions to keep the business running. The economic uncertainty will lead to budget cuts and enterprises would like to limit their investments in technology hardware, which gives an edge to SaaS companies. With this opportunity for growth, it becomes more important for SaaS companies to create products that will help enterprises in improving business efficiency and productivity. SaaS companies should learn from the problems faced by businesses in the last couple of months and develop innovative products/solutions with strong fundamentals, and build a business that can scale up in spite of the tough economic environment.
With that in mind, enclosing a few of my learnings these last few months have taught us and ways to approach the impacts of COVID-19. This may help other SaaS companies as well:
- Lean operations help you grow faster: One thing that this pandemic has shown us is that most of the workers can work from home with equal and sometimes more efficiency than a regular office life. The economic uncertainty is leading to new concerns and as a SaaS company its important to have a lean team that can act quickly to the consumer feedback. SaaS companies can operate efficiently and with a lean team if there is a streamlined communication process between the sales and product development team. Companies with multiple layers of hierarchy, often find it difficult to operate in such situations. The lean team structure gives the organization a competitive edge to evolve and implement new developments and features at a much faster pace.
- Strong Unit economics: Unit economics is a small yet extremely essential part of a business as it drives the business forward. While every entrepreneur and investor understands the importance of unit economics and it’s a basic financial building block of any business, there often comes a time where an organisation has to make a clear decision between growth and profitability, and it’s important for the company to find the right mix while keeping a close check on the burn rate. This is one of the trickiest parts for SaaS-based companies as they usually operate on a subscription model. The unit economics is generally calculated as Lifetime Value (LTV) of a customer divided by Customer Acquisition Costs (CAC). However, it’s tricky to predict the correct lifetime value of a customer, particularly in this uncertain time. Companies that build strong customer relationships are not just able to retain customers but also leverage them for further business growth. In the SaaS industry, higher customer lifetime value leads to better unit economics. Customers are always ready to pay a premium (either immediately in revenue or in terms of higher stickiness) for a great product coupled with good service.
- Keep the cash flow running: One of the most important learnings with COVID-19 is to have a razor sharp focus on your cash flows. In tough times like these, companies should judiciously allocate their existing resources to achieve priority business outcomes. It becomes important to stay active and agile and evaluate the impact on their cash flows through a thorough review of their credit lines, debtors and creditors. The key thing to remember here is that cash flow is as important as revenue growth and it should not be neglected. In particular, for SaaS companies focused on India, since they operate on a monthly subscription model, while revenue recognition may not be a challenge, it would be equally important to be able to recover the money from the clients. It is also important to understand the client context, empathize with them, as it will ensure a steady cash flow even in the future, once the ecosystem starts recovering. The pandemic has helped companies pivot or adopt new business streams to keep the cash flow running, and thus, SaaS companies should be quick enough to adapt the product to the changing needs of the customers, resulting in better recovery of cash flows
- Enterprise Agility is the key to thrive in a storm: An agile organisation is the one that can quickly respond to the fast-changing business priorities, technology, consumer behaviour and ensure positive outcomes for the organisation. An organisation with strong fundamentals will be able to survive the downturn. A pandemic like this will accelerate digital transformation adoption for enterprises. SaaS companies that will be agile enough to innovate their product to meet the upcoming consumer demand are likely to grow faster. In tough times like these, the first priority for any organization is to draft a realistic business continuity plan with a clear view of in-house vulnerabilities and external factors impacting business operations, and thus the agility has to be demonstrated not just in the product evolution, but also in the sales process, in the way you serve your customers etc.
- Keep learning and innovating: The pandemic has led to a major slowdown in business, which has given the majority of us a whole lot of time to reflect on not just the business you do but how to do it efficiently. It has given businesses a chance to re-evaluate their business models and build solutions that actually provided benefits to your customer. Every enterprise and SMB is evolving to meet the new realities of business and as a SaaS company, it’s important to innovate and offer technology solutions that meet their current business needs. For instance, As retail brands are planning their Direct-to-consumer (d2c) strategy, SaaS companies can innovate to offer an integrated solution which will help them manage all business requirements over one platform; ERP/HRMS solution companies need to adapt and create products which help companies manage their remote workforce efficiently. It’s important to keep experimenting and keep improving the customer experience.
- Invest in your biggest Asset called ‘Team’: As we dread through these challenging times, it’s important to build great equity with the team and keep the spirit high. Transparency and open communication help organizations to quickly react and reshape strategies and ensure minimal impact on the business when faced with a pandemic like this. Therefore, all major decisions impacting a business or any structural change should be communicated pro-actively as it brings a sense of confidence amongst the team. At the same time, it’s important for companies to provide them with relevant tools for remote working purposes and the focus should be on the outcome rather than the process. Recognizing that your employees are human and that they will be more distracted right now, will create a sense of psychological safety. Creating a culture and sense of togetherness amongst team members and showing empathy goes a long way.The pandemic has changed the way we work almost overnight and has made us realize the importance of upskilling and reskilling of employees as we all grapple with a skill gap in the industry. Customer needs and customer servicing is going through radical changes, customer service team must be well prepared to address client queries promptly and offer the technology solution that will help clients in these tough times. Companies can create a talent strategy that develops employees’ critical digital and cognitive capabilities, their social and emotional skills, and their adaptability and resilience. Developing this muscle will also strengthen companies for future disruptions
- Focus on brand building: With the majority of the activities and people at a halt to prevent the spread of COVID, this is probably one of the toughest times for brands to connect with their consumers. Hence, building a connection with new customers, maintaining your pre-existing business and audience base will be crucial for any brand to survive. This is an opportunity for your brand to show that it genuinely cares about its customers. Understanding the demand of your consumer is important, which, in turn, can be used by SaaS companies to develop a robust content creation strategy which adds value to their business. An active digital team, regularly creating interesting infographics, blogs, articles that will help your client, beyond the product you offer will help in strengthening the consumer connection. Another interesting way of brand building is webinars, offering them quality sessions with business leaders will help in generating new business.
- Invest in Product: The pandemic has significantly shaken the business landscape and accelerated the digital transformation adoption across the world. This gives a perfect opportunity to SaaS companies to work towards creating a robust product that helps enterprises survive the pandemic and meet new business needs. Upon customer feedback, customer service teams can share valuable insights with the product development team, which will help enterprises to operate easily and efficiently as they navigate work from home necessity. As a SaaS company, it’s important to invest in upgrading the core product and adapt to new business realities at the same time. The need to keep the product cycle dynamic is a must. Lastly, this also gives an opportunity to evolve into a new category to keep up with the change.
- Lead by example: One thing that stands out at times like these is good leadership as it plays a monumental role during these critical times. A good and responsible leader will act as a pillar of strength and organisation’s voice for the team. It’s easy to be understanding and supportive in good times but in times like these, employees look up to the organisation to be supportive. Business leaders need to be more sensitive and understanding of the problems the teams might face. Teams with good leaders often stick together in bad times as they value and respect the leader who always stands by them.
It’s no mystery that this won’t be the last global public health challenge that the human race will face. Hence, we must ensure that business and economy is well prepared to face any such crisis in the future. While there is no one formula that ‘fits all’ to ensure a smooth journey without any road-blocks, one can always try one’s best to enjoy this journey and emerge as a better and stronger team with a robust and thought-through business plan
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