How to Build a Resilient SaaS Business in 2023

Your SaaS business needs to be able to shift its focus from growth to resilience during challenging times – or risk failure. How? By deploying systems and strategies to overcome crises and ensure long-term survival. 

And while we’ve learned to live with Covid, if you’ve been listening to the news lately, you know that analysts and economists expect a recession to hit very soon. If not this year, then in 2024. You might be worried about the impact of a worldwide recession on your business, especially since we’ve already seen thousands of layoffs in recent months. 

How do you prepare for these, sometimes inevitable, economic downturns? This article covers six strategies and systems that will help your SaaS thrive when times get tough. 

1. Collect and Implement Customer Data

Your SaaS company’s ability to pull through tough times depends on making high-stakes decisions based on data. According to Enterprise Strategy Group’s latest report, Economic Impact of Data Innovation 2023, organizations that effectively leverage data are more profitable, resilient, and innovative. 

While it might be tempting to bypass complicated facts and figures, you can’t rely on your gut to make business decisions in a crisis (or any other time). Your intuition might tell you one thing, but your (potential) customers think the opposite. There’s nothing more persuasive than hard data to back up your choices and ensure a successful outcome – even in failure, data indicates where you went wrong. And many companies fail to realize that their customers and product are their most fertile data source. 

Data helps you deliver the best possible experience to your customers and build the best possible product. By harnessing your customer data, you can find new customers, increase customer retention, predict future trends, improve customer support, and uncover new opportunities for growth (amongst many other things). Overall, it helps you bolster your company’s resilience against outside challenges. 

But how do you collect this data? Until recently, third-party tracking was the backbone of digital marketing. However, with Google phasing out third-party cookies in Chrome by 2024 and global privacy laws (like the GDPR) tightening up, companies have to find new ways to identify customers, track their behavior, and digitally advertise. 

As a result, first-party data is more important than ever. Data ownership equals data resilience. Instead of relying on agencies or other third parties to generate your data, bring your data capabilities in-house. First-party data will help you provide value to your customers by recognizing their wants, needs, and preferences.

For example, Sky, the telecommunications conglomerate, achieved a 38 percent uplift in email open rate, a 64 percent boost in click rate, and a 3 percent increase in conversions using customer data insights.

How? Sky used its customer viewing data (1.6 billion rows of it) to target customers nearing the end of their contract and likely to cancel their subscriptions. Sky sent them a personalized email summarizing the content they’d enjoyed over the past year. The email version that didn’t include personalized viewing data paled in comparison.

Why is this important to business resilience? During a recession, customers often consider canceling non-essential services (like streaming services). By showing your customers how much value they’ve gotten from your SaaS, you can convince them to keep their subscriptions.  

Also, as your SaaS company matures, customer service, sales, and product teams will need accurate data to gain a more holistic view of your customers. This unified customer knowledge will help to personalize interactions, proactively reduce churn, and enable upselling opportunities, which makes your company more resilient. 

Don’t know where to start? Here are the four types of customer data you should be collecting, interpreting, and acting on within your SaaS business:

Identity Data

This is data you’re probably already collecting, such as name, phone number, email address, gender, and so on. With enough identity data, you can start to piece together the demographics of your customers.

Engagement Data

Engagement data, also called interaction data, shows how your customers interact with your brand. For example, the time visitors spend reading your blog, how many likes you get on a Twitter post, or the items people add to their wishlist on your website. 

Behavioral Data

Behavioral data focuses on how a customer interacts with your product or service. This includes information like purchase history and abandoned shopping carts. This type of data helps you understand what type of customers are making purchases, who’s churning, what features are being used the most, and so on.

Attitudinal Data

While identity, engagement, and behavioral data are objective, customers provide attitudinal data as a first-hand opinion, sharing what they think about your brand, product, and service. This data is often collected through surveys, customer service interactions, or online reviews and helps you understand what customers think of your SaaS. 

Observing customer interactions at different touchpoints helps predict customer behaviors and provide good customer experiences in times of hardship. As a result, it helps you stay relevant, even as their needs evolve, and able to deliver requested (and expected) improvements to your SaaS offering.  

2. Drive Customer Advocacy

According to Harvard Business School, a 12 percent increase in customer advocacy can bring 200 percent growth in revenue. 

Customer advocacy ensures you continue to grow when marketing budgets are tight. When customers market your product for you, you’re less dependent on paid advertising, content marketing, or social media to grow your SaaS business. Word-of-mouth customer advocacy drives over $6 trillion in sales annually for businesses. 

But how do you turn customers into advocates? By delivering the best service and experience possible. For a SaaS business, this can take the form of a user-friendly interface, a helpful website, personalized marketing communications, customer education, and more. 

If your customer walks away from each interaction with your company feeling supported and valued, they’re more likely to remain loyal and recommend your products and services to others.

When Covid hit, businesses had to overcome one of the worst economic downturns in history. With marketing budgets getting cut, it quickly became clear that retaining current customers was more feasible (and important) than using scarce resources to acquire new customers. This led to a surge in the customer advocacy movement that continues to stay strong in a post-pandemic world. 

How Do You Build a Customer Advocacy Program? 

Building a customer advocacy program for your SaaS company is a multi-step process. Here’s how to get started.

1. Identify Your Best Customers

Start by identifying your most satisfied and engaged customers, the natural advocates of your brand.

2. Develop a Communication Plan

Create a communication plan for how you will engage with your advocates throughout the program, including regular updates and opportunities for feedback. 

3. Create a Reward Structure

Create an incentive program that rewards your advocates for their participation and engagement. Find ways to keep them engaged and motivated to continue promoting your brand, such as exclusive events or early access to new features.

4. Provide Resources and Support

Provide your advocates with the resources and support they need to effectively promote your brand, such as marketing materials, case studies, and training (depending on the type of SaaS product you sell).

5. Measure and Evaluate

Regularly measure and evaluate the impact of your customer advocacy program and make adjustments as needed to improve its effectiveness.

Example of a SaaS Advocacy Program

MuleSoft, an API management platform, launched a customer advocacy program called “MuleSoft Champions” to help developers learn new skills. This program increased MuleSoft’s advocate engagement rate by 1,300 percent, and the program’s members created more than 3,000 pieces of content. 

3. Create a Product That Sticks 

Put simply, a sticky product is one that customers return to often because it’s valuable to them. Make your SaaS product so useful to customers that they can’t imagine switching over to a competitor, which makes your business more resilient to outside influences. Product stickiness drives growth for your business by improving customer retention and increasing customer lifetime value. 

How Do You Calculate Product Stickiness?

Product stickiness is the ratio of daily active users (DAUs) to monthly active users (MAUs). More specifically, for any given day (for DAU) or month (for MUA) count how many users logged into your SaaS platform. Then divide that by the number of users who logged in during the previous 30 days. Expressed as a percentage, this is your product stickiness ratio. 

For example, if you have 1,250 daily active users and 5,000 monthly active users, your stickiness rate is 25 percent. For context, the average stickiness rate for the SaaS industry is 13 percent, which translates to a little less than 4 days of activity per user per month.

Strategies to Create a Sticky SaaS Product

After calculating your product stickiness ratio, did you notice it was below the industry average? If so, below are strategies to create a stickier SaaS product.

  • Research your customers’ pain points. Let this data inform your product development to ensure that you’re solving a real problem for your customers (see above for more info about customer data). 
  • Make your product intuitive and easy to use by mirroring common models that people are familiar with. Customers should be able to predict the outcomes of their interactions. This will help to increase adoption and reduce customer churn.
  • Continuously educate your customers to ensure they’re making the most out of your SaaS product. 
  • Make your product customizable so customers can tailor it to their needs and preferences. This will increase the perceived value of your product.
  • Encourage your customers to integrate your software with the rest of their tech stack. This tightens the relationship with your company, giving your customer one more reason to stick around.
  • Create a sense of community by encouraging customers to share their experiences, give feedback, and collaborate. This will increase the perceived value of the product (see above for more info about customer advocacy).
  • Keep refining your product by regularly gathering customer feedback, analyzing customer data, and turning those insights into product enhancements and new features. This will ensure your product remains valuable and essential to your customers’ workflow over time.

Features alone don’t make your product stickier. While it’s normal to be excited about new features, a data-driven approach to product development tells you what’s worth building. Identify opportunities for product innovation that will have a direct impact on customer engagement – and revenue – which often comes down to making your core functionality even stronger. 

Customers won’t renew or expand their subscriptions because you’ve shipped a fancy new feature, but they will remain on board if you continuously improve their favorite features.

A good example of a sticky product is anything in the cloud storage space. Solutions like iCloud and Dropbox offer customers a concrete solution to the problem of insufficient device storage. Once a customer uploads their files, pictures, and videos to an iCloud or Dropbox space, it becomes one of the tools they count on in their daily life. Because it’s a pain to transfer every single file to a competitor or even a hard drive, the customer is essentially locked into the tool and will be paying the monthly fee for the foreseeable future.

4. Automate Internal Business Processes 

A SaaS company often focuses on automating workflows for its customers, but it’s equally important to streamline processes within your company too. To ensure you’re building a resilient business with sustainable growth, automate key processes such as lead generation, customer support, payroll, invoicing, and so on. This will help to reduce errors, improve efficiency, and lower costs. Pro tip: If you want to sell your SaaS company, automation also makes a business more attractive to buyers and can increase its valuation.

According to McKinsey, 45 percent of work activities can be automated using existing technology. In many cases, automation technology can match, or even exceed, the median level of human performance required. What’s even more impressive is that Gartner predicts 69 percent of all routine work currently done by managers will be fully automated by 2024.

Note that automation doesn’t mean replacing your human workforce, but empowering them to focus on more valuable and strategic tasks, thus increasing overall efficiency and productivity. 

Not every business process is a good fit for automation, however. Workflows that are time and resource intensive – and subject to human error – should be the first process to be automated. Below are some internal processes you can start automating.

  • Data management: Automating data management tasks such as data entry, data analysis, and data reporting can help to improve the accuracy and timeliness of information.
  • Communication and collaboration: Automating communication and collaboration tools such as email, chat, and project management can help to improve the flow of information and increase productivity.
  • Customer engagement: Automating marketing, such as email marketing, social media campaigns, and targeted ads, will make the process of converting marketing-qualified leads to sales-qualified leads that much easier.
  • Reporting: Automating your reporting provides your team with real-time insights that help them make better decisions.
  • Security: Automated security protocols can help to prevent data breaches and protect sensitive customer information. 

Automating these types of internal business processes can free up time and resources (precious assets during an economic downturn) that you can then invest in more strategic activities, such as product development, customer acquisition, and customer growth. It will also improve the scalability of your SaaS, allowing your company to handle more customers and transactions with fewer resources. 

5. Build Employee Resilience

So far, you’ve read a lot about operational resilience, but another crucial component is your employees. Employees keep your business running, so you need to keep your staff engaged and productive even when times get tough.

Resilient employees are better at problem-solving, have more positive team relationships, and achieve better results. Research shows that resilience at work increases employees’ enthusiasm by 45 percent, energy by 39 percent, and concentration by 27 percent. And the bottom line is that happier employees support customers better.

Building a resilient workforce helps reduce the impact of change. In other words, resilience in a work setting means an individual’s ability to continue in the face of adversity and thrive in a high-stress environment.

Offer training, mentoring, social support, and counseling services to fortify their confidence and manage stress from the day they start at your company. A study found that workers with clinical depression and anxiety who regularly completed resilience training activities saw a 25 percent boost in resilience

Also, keep a pulse on what your employees are experiencing at work and beyond, so you can attend to their evolving needs. Building business resilience isn’t a one-and-done deal. Encourage C-level management to commit to mental health in the workplace so they can lead by example. 

Is Your SaaS Business Resilient?

If a difficult past has exposed cracks in your company’s armor, take 2023 as the year to focus on building a resilient SaaS business. In return for your efforts, you’ll be able to adapt to changing market conditions, continue to operate effectively, and ensure continuity of service for your customers – all in the face of adversity.

By investing in customer advocacy, employee happiness, product development, and automation, you can position your company for success in an ever-evolving market. Additionally, be willing to adapt and pivot when necessary. With these steps in place, you can build a SaaS business that is not only resilient but also well-positioned for sustainable growth and long-term success.

What Are the Top 3 Most Important Aspects of SaaS?

While there are many nice-to-have features, here are the key characteristics that every SaaS tool should have:

  1. User Experience: The ease of use and overall satisfaction of the software for the end user is crucial in driving adoption and retention.
  2. Scalability: The ability to handle many users and expand data storage requirements is essential for SaaS success.
  3. Reliability: The software must be available and function properly at all times to ensure users can access it whenever and wherever they need it.

How Do You Sell SaaS During a Recession?

Selling SaaS during a recession can be challenging as people and companies have smaller budgets. However, there are several strategies you can use to increase the chances of success during tough times:

  1. Focus on cost savings: Highlight how your SaaS can help an individual or company save money in the long term.
  2. Show the return on investment: Use data and case studies to demonstrate the return on investment an individual or company can expect from using your SaaS product.
  3. Address specific pain points: Identify the specific challenges that individuals or businesses in the current economic climate may be facing and show how your SaaS can help address those issues.
  4. Be flexible with pricing: Offer flexible pricing options, such as pay-as-you-go or subscription-based models, to make your SaaS more affordable for cash-strapped businesses.
  5. Build trust: Build trust with potential customers by highlighting the reliability of your SaaS, as well as the social proof your current customers have shared.
  6. Be patient: Be prepared for longer sales cycles and don’t be discouraged if converting customers takes longer. 

What Is Resilience in Software Applications?

Resilience in software applications refers to the ability of the platform to continue functioning properly in the face of unexpected events. This can include hardware failures, network outages, or other types of disruptions. Resilient systems are designed to minimize downtime and maintain availability, even during failures.

The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.

Get content like this, and more, sent directly to your inbox twice a month.