Simple. Easy. Adaptable. The sweet nothings we love to hear after a long, complicated year.
While this past year has thrown us a number of challenges, one area where we have seen have a positive impact is the growing demand of the subscription world. Enterprises generating between $10-$500M in revenue yearn for processes to be simplified and seamless. However, when a company is experiencing rapid growth, complexity often rears its less-than-welcomed head. While every business wants their growth to be smooth sailing, complexity is inevitable. With scale comes the need to adapt with new processes, offerings, and customer diversity to grow and remain competitive.
Growth = Operational complexity, but why?
The number of companies that utilize subscription billing has grown exponentially over the past several years, with Gartner predicting that 75% of organizations selling direct to consumers will offer subscription services by 2023. We have already seen major success for software companies offering subscription billing and have learned a lot about the challenges and roadblocks that come when businesses of all sizes experience rapid growth. First, I’ve found that growth tends to usher in operational complexity in the sales process with larger companies requiring custom pricing, plans, discounts, and add-ons.
Each layer of complexity is a thread that the finance team must track and the engineering team must code into any internal billing system. To make matters more complicated, we add in the accounting headaches of month-end reconciliation, contract enforcement, and changes to contract terms and obligations. If even one of these threads comes loose, it will lead directly to lost revenue and/or unhappy customers.
Fast, easy, and secure payments are also difficult to scale. It can be very trying to deal with the nuances of payment methods, currencies, and gateways, all of which can be customized and changed based on customer preferences or geographies. Hard-coding your product on top of any payment gateway will limit your ability to service multiple geographies and leave you vulnerable to revenue loss from gateway-related failures. Knowing when and how to adjust your offerings to new customers at a global scale is a whole new level of complexity that you never had to think about when your customer base was more compact.
The internal and external impact
These aspects of subscription billing that become complex with growth causes internal and external problems for the enterprise. Internally there is a delay in time-to-market, since plan and pricing changes take a long time to implement due to developer dependency or longer sales cycles due to poor/manual quote-to-cash workflows. Enterprises struggling with these issues can also see revenue leakage leading to poor invoicing, revenue recovery, and collection workflows.
Externally, not having streamlined solutions to these issues can lead to poor and fragmented customer experience, one of THE most important considerations for a business in any industry. Salesforce found that since the pandemic, 58% of customers had higher expectations regarding client services. When services fail to meet customer expectations, unhappy customers can quickly jump ship and the impact will be felt on the bottom line.
Prevent and overcome the chaos in three steps
Now that we have discussed all the things that COULD go wrong, let’s focus on how to avoid or fix these challenges. Following are my top three tips to prevent and overcome the complexities and chaos of subscription billing.
1. Avoid accumulating tech debt
Use a break-even calculator to understand what kind of growth is needed to sustain your company. For example, if you need to add hundreds of customers to your portfolio, you will, in turn, need to boost your self-serve processes and invest accordingly. If you are planning to move upmarket, you will need to invest in tools that help your sales and finance teams with protracted negotiations and contract requirements.
The more you grow, the more features or services you may need to add to your portfolio, and subsequently the more changes you have to make to the subscription plans you offer. Investing in subscription management software early eliminates the need to constantly make code changes on an internal system to account for experimentation and growth. These incremental changes are likely to be constant as situations change and the cost of making them can add up quickly.
2. Map out your revenue workflow
Map out your revenue workflow from a prospect’s entry point to their invoicing and figure out where there may be potential leaks. Leaks can come from coupons, credit notes, failed payments, cancellations, etc. Even the tiniest of leaks in your revenue workflow can create a massive ripple effect resulting in significant dollars and customers lost.
For example, I previously worked with a business that had been growing its presence aggressively across the globe. As it was growing, the team was adding layers onto workflows to accommodate for new complexities; things like integrating an in-house subscription billing solution with different payment providers for each region. Everything was working fine until they discovered that the payment processing in one of the regions was broken, and the glitch wasn’t noticed for over three months. The business lost hundreds of thousands of dollars over that time – and this was just from one leak. Mapping out your revenue workflow allows you to pinpoint these leaks, prevent further damage, and rescue your revenue.
3.Do a techstack audit
An ideal techstack is the one that scales with you. And it would be best if you built out a wholly integrated revenue stack. The most basic tool to handle whatever revenue a SaaS company is making is a payment gateway. Companies often build around a single payment gateway leaving themselves open to business risks via overdependence on a single vendor. A subscription management software helps companies build a platform that works across multiple gateways, offers the maximum choice of payments to consumers, and connects to their CRMs and Accounting tools—a seamless orchestration layer for your revenue management workflows.
It is recommended that you check your “revenue plumbing” once every 18 months because growth begets complexity. Everything from how you sell to who you sell to can change drastically depending on the speed of growth. Capture the current state of your tools and processes and map it against your next 18 months’ growth targets. Ask: What are your goals for the next year, and can your techstack take you there?
When enterprises are scaling, operational complexity is inevitable, but it doesn’t have to stall growth. With some preparation and the right tools, complexity can be seen for the positive sign that it is rather than a roadblock. Having these tips in your back pocket will help you keep growing your business effectively and have better insight into your organizational workflow, which benefits everyone from your finance team to your sales team to your customers.
