Scaling your SaaS billing system can be complex. Here's the guide to making sure your subscriptions don't suffer for it. Read More >
Launching a new product is expensive and time consuming. One of the most important operational activities that companies have to consider is billing. A billing system is crucial as it is directly tied to revenue collection. SaaS startups need to consider their needs to determine which billing system will be right for them.
Product launch is the pinnacle of a company’s efforts to address the needs of its market. There are many things founders need to consider that are tied to launching a product. For example, you need to understand your business model, how you will market the product, develop customer acquisition strategies, check your competition and so on.
Launching your product following lean principles will go a long way in helping you come up with a solution that customers will be willing to pay for. One of the foundations of lean product development is carrying out fast-cycle low cost experiments. Product experiments help you to understand your customers’ real needs and provide insights to product improvement.
Overcoming the challenges of building a SaaS startup needs patience, making informed decisions and understanding your market. You need to try different business models, launch promotional campaigns with minimal effort, reduce the marketing time in the competitive SaaS space and trump your competition through disruption.
Building a Successful SaaS Startup
SaaS startups can be very complex and time consuming to build. Founders are under pressure and have to make tough decisions when building both the team and product. Usual challenges like high direct costs, limited time, the need for creating high quality products and a strained team are some of the stresses that the typical founder faces.
There is always an option to build your own in-house system. However, this will mean losing many hours you would have spent on R&D or coding your core product to reinvent the wheel. Think about this, with so many email management systems available, why should you build an in-house system?
You can move quickly with product creation, testing and deployment by concentrating on your core function and using other solutions to take care of other secondary functions. For example, you can use Hubspot for marketing automation, KISSmetrics for analytics and reporting, Freshbooks for accounting, FreshDesk for helpdesk and so on.
For a SaaS business, the need for having a recurring billing solution that works is paramount for the operation of the business.
Should You Build of Develop your Own Billing Solution?
When it comes to billing, the question on whether to build or develop your own solution has to be determined beforehand. Building your own solution means will give you the ability to include the features that you want. For example, you might want a solution that integrates with in-house apps and has other functionalities not available in other systems in the market.
However, the downside of building your own system include high cost of development, the tasks of patching and upgrading your software every time to keep it secure, PCI compliance issues among others. For most startups, choosing a 3rd party billing system is a more convenient and reasonable way to go on revenue collection.
Choosing a Recurring Billing System
There are a number of things you need to consider when choosing a recurring billing system. Here are some questions you should ask when searching for a recurring billing system:
- How many subscription plans will you be offering?
- What billing cycle will you be following?
- Will you offer free trials?
- Will you be offering one-time payment?
- What pricing model do you need?
- Will you need additional features?
A good online recurring billing system should support multiple gateways that your customers prefer. You do not want to risk locking out a segment of your market because of not supporting a particular payment gateway. Other features that you may wish for include affiliate management, coupon management, transaction management, invoicing, upgrade/upsell, among others.
Customer Growth and Retention
More than the above, your billing solution should help you in customer growth and retention. Customer growth through upselling and customer acquisition, and retention through reducing churn rate and improving engagement are connected through billing. You can improve user engagement with the help of your user activity and behavior when interacting with your app.
Acquiring a customer is 6-7 times more expensive than retaining one. However, most startups focus on customer acquisition (CAC-Cost of Acquiring Customers) while ignoring retaining customers (MRR-Monthly Recurring Revenue). A diminishing MRR is one of the recipes of startup failures.
Your billing system should help you in customer growth and retention by making it easier for you to accept online payments and at the same time communicate with your customers. Features like dunning management, ability to extend trials, integration with CRM and analytics software, ability to send transactional emails and others should be part and parcel of your billing solution.
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