Acquisition vs Renewals - How RevOps should be thinking about this
The path toward growth for SaaS organizations is never calm and even. Increasing inflation, tightening labor markets, and unreliable supply chain, what Gartner refers to as The Triple Squeeze, are making new logo acquisition more of an uphill battle than ever. Instead of simply redoubling efforts in the face of the squeeze, high-performing SaaS organizations are instead turning focus toward their existing customer base instead.
“During economic uncertainty, we advise our clients to double down on showing their existing customers love.” writes Lisa McLeod, founder of McLeod & More, “When you provide extra value during a time when others are likely pulling back, you’ll establish your company as a team who cares.”
Still, it’s not like renewals are a guaranteed win — Renewal processes have their own foibles to deal with. In this article, we’re going to discuss why renewals are more vital in uncertain economic times, where most processes fail today, and a new path forward.
The value of focusing on LTV
Obviously, the primary way businesses grow is by acquiring new clients. But when customer acquisition costs have risen by as much as 60% in the last five years according to industry estimates, it becomes a lot more than just “spend money to make money.”
Obviously (again), it’s not the only path to increasing revenue. Retention of existing clients has become priority number one in 2023. No matter the sector, industry, or product, organizations are holding true to one idea: increasing the lifetime value of a customer is more efficient and more effective for growth than just focusing solely on acquisition.
According to research done by Bain & Company, increasing customer retention rates by even just 5% can increase profits by anywhere from 25% to 95%. Still: finding the perfect balance between acquisition and retention can be a difficult task that requires careful planning and execution. It’s critical for SaaS organizations to understand the value in both new client acquisition and existing client retention in order to maximize their revenues and build lasting business relationships.
The reality of renewals
Knowing a statistic and actually operating your business accordingly are worlds apart. Place Founder and CEO, Brandon Metcalf is no stranger to the reality of the situation for startups growing in those early days.
“Early-stage startups realize quickly that understanding what is up for renewal isn’t easy.” He explains, “It can become overwhelming which has a massive impact on not just the renewal itself but whether there are opportunities for cross-selling or upselling them on additional products.”
Many Revenue and Customer Success leaders grapple with data issues such as struggling to pull the correct data together or missing or incorrect information—especially if the data is stored across multiple systems or spreadsheets. Complicating matters further, Salesforce workflows and disconnected processes between Revenue teams and Accounting teams can turn the backend customer subscription process into a headache. This is where a lot of today’s organizations get hung up.
It’s time for a new path forward
Over time, as companies add more customers to their rosters and older customers’ contracts are set to expire, problems may come up. When startups are still small, issues within opportunities can be modified manually and contracts can be addressed one by one. But as a business scales, these problems can grow exponentially.
As one revenue leader told Place “Nobody knows when the actual effective dates are. Nobody knows who’s supposed to get compensated on the renewal, whether it's the sales team or the customer success team.” Making matters worse, they continued, “the cherry on top is that the sales team doesn’t understand co-terming and add-ons, proration, and how to calculate ARR.”
If your revenue operations teams are spending too much time tediously cobbling together renewal opportunities from existing information within their CRM, it might be time to reimagine what that process could look like.
The RevOps Guide to Winning More Valuable Renewals
Many organizations are struggling with building and managing subscription Renewal Opportunities. They’re having to stitch together the required contract details, including products, pricing, and payment terms making closing the books a difficult process and projecting future state even worse.
In our new ebook, The RevOps Guide to Winning More Valuable Renewals, you’ll get a clear picture of what your team should be prioritizing, how they should go about building a process that works and synthesize all the right data into the next renewal term/opportunity without forcing teams to how to get rid of an overwhelming amount of mind-numbing manual work.
Download our eBook here!
Equip your go-to-market and finance teams with the connection they need.
Built on the Salesforce Platform, Place unifies SaaS go-to-market and finance teams, systems, and processes to drive stronger cash flow and increase customer retention.