SaaS businesses traditionally have a difficult time maintaining an influx of cash to keep everything going, regardless of the business model the company uses.
However, there is one business model in particular that supports SaaS businesses in their early days. It helps them track growth and improve cash flow, ensuring that the business will have the time it needs to stabilize.
That model is subscription-based recurring billing. The subscription-based billing model has helped scale several businesses into booming brands, and it can do the same for SaaS startups everywhere. We’ve created a guide to discuss how recurring billing routinely aids SaaS businesses and how you can bring these advantages of recurring billing to your business.
Improved Cash Flow
After using the initial investment funds to create the service and attract new clients, there can be a long waiting period before before the business becomes profitable. Recurring billing, particularly annual billing, is a simple way to keep the company running as you strive to attract new clients and keep current ones happy.
In addition to the cost advantages of subscription billing, this business model is also an ideal method for retaining customers. When a business relies upon one-time payments, it’s up to strategic marketing and word of mouth to get more customers to purchase the service. With recurring billing, businesses don’t have to make the continuous effort to re-win the customer, month over month.
Many customers seem to prefer the option of subscription billing. It’s simple, convenient, and, if discounts are offered for paying in advance, it can save money. As long as the service is working as it should, users are typically unwilling to go through the motions of cancelling a service. This keeps a steady flow of income for the business to help fund day to day operations.
In addition to cost-saving advantages, recurring billing also allows for accurate growth predictions and better analytics. This is due to the fact that subscription management leads to pattern identification and a steady indicator of growth.
With one-time payments, some months may be more profitable than others, but there are often few ways to pinpoint exactly why this has happened and if the trend will continue. An influx of one-time funds may be an indicator of a successful marketing campaign or even an influencer promotion. Whether the numbers will hold, however, is another story.
When it comes to improving both cash flow and growth analytics, the right e-commerce platform can make a world of difference. How do you know if a platform is the right one? It’s simple. Make sure they offer critical key factors like customer acquisition and retention solutions, enhanced subscription management tools, storefront inclusion, and back-office support.
If you’re ready to improve your analytics, cash flow, and enhance your SaaS business, FastSpring is ready to help. Download our informative guide about currency and cross-border shopper behavior to learn more today.