There’s no such thing as operating a risk-free business. There are always going to be forces outside of your control whether that’s a potential recession, a pandemic, or other events that impact your way of operating.

No matter the type or industry, statistics routinely show the same thing: increasing the lifetime value of a customer is more efficient and more effective for growth than just focusing solely on acquisition. Sustainable growth for SaaS organizations means increasing your company's net revenue retention (NRR) and average customer lifetime value (LTV) in comparison to the cost of acquiring those customers (CAC).

Knowing a statistic and actually operating your business accordingly are worlds apart. Most 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. Sometimes, the problem stems from a disagreement between teams about when exactly to create the renewal opportunity in Salesforce. 

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. 

These teams processes often include tediously cobbling together renewal opportunities from existing information within their CRM. The people who should be talking to customers and forecasting and securing contract renewals aren’t. Instead, they’re spending time and energy keying-in data manually, doing what we used to call “paperwork”.

This situation results in constant back-and-forths between these teams, costing the business time and money. There is then revenue leakage because of improperly constructed deals/opps, and a lack of understanding where the whitespace is in their existing customer base because the data simply can’t be looked at in an easy, consistent manner.

Growing a SaaS business in a profitable way means being able to come up with a data-driven game plan for increasing LTV. SaaS organizations need a way to easily synthesize all the right data into the next renewal term/opportunity without forcing teams to do an overwhelming amount of mind-numbing manual work. 

This ideal process looks like:

  • All data centralized or at least integrated seamlessly
  • Reduce number of places teams need to go to (like CRM)
  • Easy to use renewal process (one click to complete and it auto fills)
  • Able to draw up reports easily for various functions
  • Forecast upcoming or potential renewal scenarios
  • Consistent, live, connected data

Today’s SaaS Renewal Problems

Renewals are often the furthest thing from the mind of revenue teams in early startups and smaller organizations. For early stage businesses or those with a small pool of customers looking to grow, there are different priorities. Instead, they might be focusing on brand awareness, solidifying their feature set, or, in some cases, just getting those first few customers.

Place Co-Founder and CEO, Brandon Metcalf is no stranger to these motions as startups go grow in those early days.

“Early stage startups realize quickly that understanding what is up for renewal isn’t easy.” he observed, “It can become overwhelming which has a massive impact on not just the renewal itself but whether there are opportunities for cross-sell or upselling them on additional products.

Obviously, there are things you can and can’t control in business. Product releases, preparing for your next series of funding, or your content strategy are all things that are dictated by the internal machinations at your organization. They’re completely driven by you and your team members. 

At the same time, there are plenty more that you can’t see until you’re already in the thick of it—think things like a pandemic, wars, recessions, or stagflation. While there are sometimes outside forces you can somewhat control (e.g. The United States goes through a recession about once every six years), for others, all you can do is plan as best you can and shore up your 

organization against potential downturns.

What this looks like for SaaS organizations who need to be mindful of a tightening budget in a down market is ensuring that Net Revenue Retention (NRR) is trending in the positive direction. 

In practice, this means focusing on reducing churn and retaining customers while also expanding contracts where possible. 

“In the current economic climate, renewals and an accurate renewals forecast is as critical as new sales pipeline if not more so,” said Brandon. “And therein lies a problem.”

Data, Systems, and Process Issues in Growing NRR

Over time, as companies add more customers to their rosters and older customers’ contracts are set to expire, problems may come up. At those early stages, these issues can be addressed as they come up. Opportunities can be modified manually, contracts can be addressed individually. 

But as a business scales, these problems can grow exponentially.

“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,” one revenue leader commented, “The cherry on top is that the sales team doesn’t understand co-terming and add-ons, proration, and how to calculate ARR.”

The result is your revenue teams spending less and less time securing those renewals or ensuring retention.

Garbage in Equals Garbage Out 

We’re going to go out on a limb here and say that perfect data is a pipe dream. Every SaaS organization has those dark corners of data that they don’t understand exactly what’s going on. Bad or missing data about subscriptions make including information about customer license counts, prices, start and end dates, and other contract details a tedious, manual process. 

One Customer Success leader with experience across multiple SaaS organizations remarked that they have seen this process tackled in just as many different ways. While one organization built an internal tool to collect licensing information, others used third-party tools which frustrated teams who couldn’t get the data to line up across the board. “In the end,” she noted, “Your license counts, ARR, billing dates and whatnot are only as good as the data that’s feeding into your CRM.”

Without accurate information, it can make the handoff from the revenue team to the finance side of the business inefficient and cause multiple back-and-forths between the two functions in order to figure out where. 

Too Many Systems of Record

Oftentimes, data is all over the place. Some pieces of information might be stored in Salesforce while other pieces are in spreadsheets or inside the product itself—And that’s just on the Revenue side of the fence. Eventually that data needs to be passed over to the billing, accounting, and finance teams and that adds another layer of complexity. 

None of this information is able to be updated in real time either. As one finance leader told Place”

"Once Accounting has gotten me our three statements for the month/quarter, I have to be ready for changes to occur.” They noted, “The sales team might closes a complex deal between the time I put my data into the Board deck slides and the day of the Board meeting, my team has to scramble and work around the clock to update the outputs."

Inaccurate Predictions of the Customer’s Probability to Renew 

Renewals are a lot more than just a binary choice between yes or no. As everyone knows, things seemingly change by the minute at start ups. New features are added or no longer available at the contract level that the client is at. 

As a company grows, it can become increasingly hard to predict how a customer will react at time of renewal without the data to back up decisions. Truth is, it’s not a problem just young organizations face—Many have incomplete or insufficient information on the account to accurately predict whether a customer will renew or not. It takes time and accurate data collection and analysis to understand which customers are likely to renew but it also takes the ability to pull the right data from the right systems in order to understand it.

Reduce Revenue Leakage and Increase Upsells 

Poor renewal processes run the risk of revenue leakage and not charging a customer properly. As an example, let’s say your customers are allowed a single complimentary sandbox instance with more available for an upcharge. If the previous renewal opportunity was created without these additional charges, it’s very likely to go unnoticed on this cycle if the customer’s Salesforce Account isn’t scrutinized enough. Over time this could lead to a significant amount of lost revenue. 

Similarly, having accurate subscription information means it’s that much easier to conduct a white space analysis. This means having an accurate contract that clearly spells-out products purchased at specific prices, for a specific time, paid on a specified schedule. 

Improving renewal processes means you can identify which customers have which products so that, come renewal time, you can cross-sell and upsell appropriately.

Better Internal Operations

Optimizing customer-facing business processes such as tightening up your renewal process feeds other activities downstream for your finance and accounting teams. For instance, when a renewal deal is closed-won, it makes the work the finance team does, such as generating a billing schedule for proper revenue recognition, that much faster. 

Over time, data cleanliness will increase and make other revenue functions easier too, such as forecasting, reporting to the executive team, and importantly, billing customers accurately and on-time.

There are seemingly as many ways to construct a renewal opportunity as there are SaaS companies. Questions arise such as: 

  • When should the opportunity be created? 
  • Should each product have its own opportunity? 
  • Will the customer be buying additional licenses, or will they be paying for new features or products that the company cross-sells now, or will the customer be reducing their commitment to buy? 
  • What happens if we lose the renewal and the customer churns? 
  • How does that get recorded in the appropriate system?

When you add in additional complexities like selling a multi-year deal with different pricing each year, simply ensuring the correct information makes it into the renewal the opportunity can be nearly as time consuming as securing the renewal in the first place.

Reenvisioning Your Renewals Process

Consistent growth means one of two things: either making it cheaper to acquire customers or having each individual customer become worth more. 

In recent years, customer acquisition costs have climbed drastically. According to a report by Wordstream, Cost-Per-Lead (CPL) has jumped in 91% of industries while conversion rates are declining 14% YoY. Paid ad spend has made it cost prohibitive for many organizations and changes in privacy laws have made it significantly more difficult to identify anonymous traffic or track various metrics. 

Understanding the profitability of your business requires balancing these customer acquisition costs with how much each customer is worth in the time they are under contract with you. This ratio, known as LTV:CAC is an essential metric you should be measuring. A good rule of thumb for comparing the two would be about be at about 3:1 or better. Therefore, consistent growth means one of two things: either making it cheaper to acquire customers or having each individual customer become worth more. 

With that in mind, increasing the LTV side of the LTV:CAC ratio is a motion that is far more under your control. Increasing the value of each customer means you’re getting incremental revenue and increased profitability even if your customer acquisition costs remain flat.

It’s time for revenue teams to stop digging through multiple opportunities and stitching together a Frankenstein’s monster of a renewal opportunity.

Here’s how:

  1. Understand your process today

Before you look toward improving the way your teams handle renewals, you have to form a clear idea of the people, processes, and systems currently involved in the process. From there, you might consider sketching a process map to capture each step from beginning to end so your team can come to agreement on what happens when.

There's an ongoing debate within SaaS companies about literally when to create the Renewal Opportunity in the CRM. Some revenue and finance leaders believe it should be created automatically as soon as the Initial Opp is Closed-Won. Others believe their teams should wait until some predefined window of time or trigger point prior to the renewal date to create the Renewal Opp. Importantly, you should work to put controls in place that make it simple to follow renewal timing rules that company stakeholders agree upon.

Questions you should be able to answer:

  • When should a Renewal Opportunity be created?
  • Which teams are involved in what parts of the process?
  • What are the milestones in the renewal process?
  • Which stakeholders need to be involved?
  • What does the handoff process look like now?
  1. Identify and Clarify Bottlenecks

Once you have the answers to the questions above, take a look at what the overall process looks like and start to outline what your goal renewal process looks like and get buy-in from all involved stakeholders.

Questions to answer:

  • What would the ideal process look like?
  • Who should be notified and when?
  • How do we identify which customers are eligible for up-sells, cross-sells, or add-ons to their subscriptions? 
  • How do we capture up-sells, cross-sells, and add-ons at the time of renewal?
  • Which part or parts of the process need the most attention?
  • How do we understand customer account health?
  1. Acquire the tools and technology you need

Once you have a clear understanding of the problem, it’s time to start finding a way to solve it. Building a process to identify upcoming renewals and expansion opportunities should be done in tandem with any of the software products you use to help with these efforts. There are countless solutions on the market for managing customer subscriptions, so it’s important to start your evaluation from an informed perspective.
Many subscription management solutions are built to be as broadly-inclusive of any subscription business model. This means there may be some tools that are built to handle extremely high-volume consumer-based businesses, which are a big departure from B2B SaaS. In order to ensure you explore software that is built for B2B SaaS companies with license-based or usage-based revenue models, there are some important capabilities you should consider. 

Those capabilities include:

  • All data centralized, or if not that, integrated seamlessly
  • Streamlined subscription management 
  • Ensure you’re capturing all renewal information consistently
  • Capable of conducting whitespace analysis for cross-sell/up-sell opportunities
  • Reduce number of places teams need to go to (like CRM)
  • Easy to use renewal process (one click to complete and it auto fills)
  • Able to draw up reports easily for various functions
  • Live data so your team is on top of the latest updates

Transform RevOps with the Right Solution

Companies often struggle with building and managing subscription Renewal Opportunities that include all the required contract details, including products, pricing, and payment terms. 

With Place, teams handling renewals no longer have to spend hours analyzing old Opportunities or entering data into new ones manually. 

Our solution unlocks features for those teams like:

  • Fast, Simple Renewal-Creation UI - Automatically surface all the relevant information about products involved in a contract renewal, and easily see and swap products that are no longer active in the price book. 
  • Automatic Renewal Opportunity Creation - Be sure every renewal is created at the exact right time, with the right products, pricing, and billing terms. Be confident the renewals team is prepared for when it’s time to contact the customer about their renewal. 
  • Quote Generation Support for Subscription-Based Models - Ensure the renewals team never has to go searching for old quotes, clone them, or re-enter data manually when it already exists. Auto-create quotes from custom fields and assign them to any opportunity.
  • Board-Ready SaaS-Related Revenue Metrics & Reports - NRR, LTV:CAC? No issue. Our built-in calculated fields, reports, and dashboard components help renewals and RevOps teams track and share analytics to better guide company efforts to improve these metrics and others. 

About Place

Place is a venture-backed software company building innovative applications that improve business operations and outcomes in B2B SaaS companies. Place’s flagship product suite is a customer subscription and revenue management platform that integrates with leading accounting systems to centralize customer subscriptions, renewals, revenue metrics, and business forecasting inside the Salesforce Platform.

Using Place, SaaS leaders gain vision and control over their growth story, revenue teams achieve more insight into sales and customer relationships, and finance & accounting teams become cash collecting, revenue recognizing superheroes.

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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.