How to handle the unexpected rapid growth of your SaaS business
The software industry is predicted to grow as much as 11% in 2022, and the cloud is expected to be the key driver of that growth. With this in mind, you could say that your SaaS business will, most likely, see an uptick in consumer interest. And, consequently, it will have to handle the increase in demand.
Now, while rapid expansion sounds like a great thing, real-life experience has shown that it's often a blessing in disguise. That's mainly because many companies make the mistake of not having a business plan that accounts for unexpected growth.
So, how can you make sure that your organization is ready to expand in 2022? This article looks at several tips on how to handle the unexpected and rapid growth of your SaaS business.
The risks of rapid growth
Most entrepreneurs dream of the moment their projects graduate to the big leagues. After all, passing the break-even point is when business owners can start to relax and enjoy the fruits (i.e., profits) of all their hard work, right?
Well, not always.
In reality, growth does not equal survival. In fact, it comes with just as many risks as it does with benefits, an idea supported by statistical data showing that approximately 65% of businesses fail before they reach the age of 10.
Fortunately, handling growth – expected or unexpected – doesn't have to be rocket science. Instead, it just has to rely on understanding the risks of running a business that generates a higher level of consumer interest than is accounted for at the initial planning stage.
In other words, the first step to efficiently handle the rapid growth of any business (including SaaS) is to become familiar with the dangers of striking gold.
Cash flow problems
High demand means high costs, which is why cash flow makes for one of the most challenging side-effects of rapid business growth. This is why, when putting together a business plan, SaaS entrepreneurs need to prepare for the possibility that their expenses will exceed their income.
To effectively prevent debilitating cash flow issues (which might spell doom), leaders must understand which aspects of running their SaaS business pose potential problems.
Generally, growing SaaS organizations need to expedite the hiring process. But, contrary to popular belief, this doesn't mean they only have to generate additional income to cover employee salaries.
They also have to pay for any necessary office-space upgrades, acquire (often expensive) equipment, provide new team members with software subscriptions, and finance the onboarding process that can often be lengthy and financially straining.
Dips in productivity
Another common side-effect of a SaaS business experiencing unexpectedly high demand comes in the form of low employee productivity.
Of course, there are many reasons for low productivity levels – lack of motivation, inefficient workflow processes, and poor communication are just a few of them. But, with growing SaaS brands, the common reason for inadequate output boils down to how the organization handles an unexpected increase in consumer interest.
In SaaS companies that can't afford to expand their workforce, the burden of doing more regularly falls on the shoulders of existing developers and managers. Seeing as their to-do lists become littered with a growing number of duties, their focus is stretched thin between multiple assignments, often at the expense of high-priority tasks or, worse yet, their physical and emotional health.
On the other hand, those brands that do make the decision to hire new employees have to handle the added burden of training a new workforce and of putting up with not-yet-optimized workflows.
Either way, the ramifications can be devastating and might even lead to the downfall of a promising SaaS brand. But, what most entrepreneurs don't understand is how common productivity issues are amongst businesses.
According to Haystack, as many as 83% of developers suffered from burnout in June 2021. And the leading causes of such feelings included:
- High workload (for 47% of respondents)
- Inefficiency (31%)
- Lack of clear goals and targets (29%)
So, as you can see, a dip in productivity is not just a dip.
It's also a risk factor and an indicator of your team being under too much strain, which, if left unchecked, might be the cause of your entire organization falling in on itself.
Poor customer experience
Finally, the greatest risk of unexpected rapid growth is a significant decline in the quality of customer experience.
In 2022, customers want to spend their hard-earned money on solutions that:
- Offer excellent value for money
- Are convenient to buy and use
- Come with first-grade customer care
- Represent solid long-term investments
- Solve several needs at once
But, the truth is, when SaaS brands experience unprecedented growth, they often drop the ball.
For some, this means the deterioration of customer care. Others cannot handle the demands of too many users. And then there are those SaaS brands who get so lost in trying to acquire a large share of the market that they forget to improve their existing products and lose precious subscribers to brands who understand that doing one thing well trumps doing multiple things so-so.
How to handle the unexpected and rapid growth of SaaS
Now that you're aware of the top risks of having your SaaS product soar, it's time to start thinking about effective strategies to prevent it from crashing and burning.
The following are some of the tactics you can employ to keep the growth sustainable. They'll also help ensure that you're not just keeping up with demand but actually benefiting from the increase in interest yourself.
Know your limits
If your goal is to prepare for the unexpected and build a robust SaaS that can handle growth, you might want to go old-school regarding the advice you follow. One such potentially business-saving motto could be: Don't bite off more than you can chew.
Does this mean that you should practice humility and only go after small wins in your business endeavors? Absolutely not.
However, you should set out to learn your limitations, understand that the SaaS market is volatile, and assess the risks and the rewards of going after a new win. Start with micro SaaS ideas aligned with your expertise to test the waters and adapt gradually, minimizing risks and increasing your chances of success.
Are you looking for an example of a SaaS business that failed because it didn't understand that there were limitations as to how far it could grow? Just look at what's happening with Peloton right now.
When the COVID-19 pandemic broke out in early 2020, Peloton saw a huge uptick in consumer interest for its subscription programs and exercise equipment. However, two years later, the at-home exercise fad is long over. Peloton and similar companies like Mirror and iFIT are seeing steady declines in consumer interest (and are facing some serious financial strains).
On the other hand, some SaaS teams understood that the pandemic would have to end at some point and that there were only so many people in the world prepared to shell out thousands of dollars to purchase fitness equipment.
So, they focused on developing easy-to-access solutions that would provide value at reasonable prices and remain relevant even after the pandemic. Their products continue to grow. Just look at the steady interest consumers have shown in Apple Fitness+ over the past year.
So, what does knowing your SaaS company's limits mean in practice?
Well, if your business operates in a niche that might see a boom over the next couple of years, you could prepare by limiting the amount of risk you expose your business to.
For example, encouraging potential customers to choose annual instead of monthly subscriptions – as Aura does – could help your SaaS business prevent cash flow problems and reduce churn rates. Plus, it might give you access to the valuable capital you need to prepare your business for future expansion.
Or, if you know that there's a finite number of customers your team (or servers) can handle right now, you might go in a direction similar to Swwwift, a business that invites new leads to join a waitlist.
As you can see, keeping the growth of your SaaS business under control isn't impossible. Nor does it have to mean turning potential subscribers away.
It just requires:
- an objective evaluation of how much your team can handle
- knowing when you need to hire staff
- a clear idea of what resources your business needs to graduate to the next level on its growth scale
When looking to set your SaaS business up for success, the one thing you should do early on is to learn how to properly manage your time. (And teach your team how to do it as well).
After all, inefficiency never leads to gains. And unfortunately, most businesses deal with some degree of it, whether due to poor time-management skills or simply the lack of the right tools.
According to a 2019 survey, British office workers waste 5 hours per week on email. And Development Academy's time management research reveals that the average worker spends 12.5% of their workday on tasks and meetings irrelevant to their role.
Considering this data, SaaS leaders should definitely look for ways to avoid the consequences time-wasters have on their business' capacity to handle growth.
Fortunately, doing this doesn't have to be too big of a challenge these days.
To set up a workflow that will nurture the success of your SaaS brand, the best thing you can do is employ readily available automation, sales, and collaboration tools. These will free up precious time and allow everyone on your team to direct their attention towards high-value tasks (while still getting those small but essential things done).
For example, the right CRM software solution won't just lower customer acquisition costs and boost your revenue. It will also automate a good portion of the work assigned to your sales team, allowing them to spend more time nurturing leads into customers and keeping existing users happy and loyal to your SaaS brand.
Continue listening to consumer pain points
When looking to foster the growth of your SaaS business, you have to remember that long-term success necessitates a preparedness to change. And, in today's world, the pace at which that change happens is faster than ever.
Just take a look at the way people spend their money.
Data from McKinsey, for example, revealed that over 80% of Millennial and Gen Z buyers adopted new shopping behaviors, and almost 50% switched brands between July and October 2021.
And that's not all. Consumer pain points are evolving faster than ever as well. Just consider that, five years ago, no one would have thought that online meetings and remote work would become the norm. Yet here we are.
To ensure that your business has what it takes to survive in a volatile market, the best thing you can do is zoom in on developing SaaS products that continue giving value to your target audience.
One way to do this is to look at the existing solutions in your niche and recognize their shortcomings.
This is what Amie did when developing its product. Understanding that very few SaaS products allow users to merge to-do lists and calendars, Amie developed a productivity tool that would attract an audience experiencing this specific pain point.
And Quetext took the idea of listening to audience pain points even further.
Having developed an AI-driven plagiarism detection tool, this brand decided to give its target consumers access for free. Partly, it employed this tactic to help widen its reach. But more importantly, offering free access enables Quetext to gain valuable insights into the way people interact with plagiarism checkers. The brand can utilize all these insights to continue evolving its product to be the best in the market.
And, of course, while on the subject of continually listening to audience needs (and doing your best to solve them), don't forget about the importance of SaaS product updates.
A future-proof business must understand that there's no such thing as a perfect piece of software. So, to drive growth and keep users from churning, always do your best to find ways to improve.
Organizational structure & company culture
As you work to prepare your SaaS business for the (hopefully bright) future, don't forget that real success doesn't just rely on the quality of your products and service.
Handling unexpected growth is just as heavily dependent on the inner workings of your organization – from its structure to its culture.
For example, a recent report by Reveal found that the top challenges software developers faced last year had a lot to do with organizational structure and company culture. According to the data, project management and deadlines posed problems for one-third of professionals, followed closely by their inability to keep pace with innovation.
This suggests that those entrepreneurs looking to prevent growth from negatively affecting their SaaS business must work out effective methods for keeping their organizations well-oiled and healthy.
On the one hand, this means investing in employee training, acquiring necessary software and hardware solutions, and practicing good communication hygiene so that everyone knows what they're supposed to be doing and what they should aim to achieve.
It also means keeping your expectations as a leader realistic and understanding that no human is capable of delivering 100% all the time.
Accounting for natural productivity dips when setting deadlines is a super-effective way to keep things running smoothly and remain in control even when your SaaS team's workload increases due to heightened demand.
But, most importantly, preparing for the unexpected also means focusing on building (and maintaining) a healthy company culture.
In the age of the Great Resignation, keeping employees happy, engaged, and motivated is more crucial than ever. After all, teams that work well together are more capable of handling challenges than those that fall out even at the slightest sign of trouble.
Fortunately, investing culture doesn't have to be rocket science (or expensive).
Healthy teams are built by protecting employee wellbeing, encouraging collaboration, embracing transparency, and nurturing supportive relationships. So, look for ways to cover these bases. You might do so by exploring affordable ways to organize a team retreat, investing in training programs, encouraging team members to pursue side projects, or simply finding ways to recognize employee successes and reward great work.
Final thoughts: ensure your business is ready to grow
One of the great things about working in SaaS at the moment is the knowledge that the industry is experiencing a boom. And for those with a long-term vision, this unlocks a host of opportunities.
However, as you prepare your business and your team for that growth, remember that expansion, if uncontrolled, doesn't lead to triumph. Just think of it as a fire – the bigger it gets, the more fuel it needs.
So, as you look towards the future of your venture, make sure you're actively scaling your operations instead of letting them get out of hand.
Yes, this does mean that you will have to run a tight ship with your finances, time, team organization, and company culture. But it will also allow you to remain in control and stop your SaaS brand from becoming just one of many that shot for the moon and ended up burning as soon as they reached the atmosphere.