The Implosion of SaaS and How RevOps Can Help
Software-as-a-service (SaaS) industry has been a thriving sector in recent years
- April 20, 2023
The software-as-a-service (SaaS) industry has been a thriving sector in recent years, with numerous companies experiencing rapid growth and capturing significant market share. However, the current macroeconomic environment has witnessed the implosion of several SaaS companies – the average company market cap fell down 57% from its 12-month highs. The fastest-growing companies, which traded at the highest multiples before this sell-off, were hit the hardest.
Figure 1: Cumulative Market Cap of SaaS Companies
ARR growth is undoubtedly an essential metric for SaaS companies. While ARR growth is important, an exclusive focus on this metric can lead to several challenges and negative outcomes including disregard for profitability metrics, increased churn, defocusing from ideal customer profile, and lack of business scalability which can increase cost of operations and impact customer experience.
While most companies were caught off-guard with the flight of capital to investments that were deemed less risky, one potential factor that deserves exploration is how much the prioritization of Revenue Operations (RevOps) within ARR-focused SaaS companies could help them turn around sooner.
RevOps and the SaaS Industry
RevOps brings together key GTM stakeholders in sales operations, marketing operations, and customer success teams to create a cohesive revenue generation strategy by breaking down silos, improving cross-functional collaboration, and leveraging data to drive decision-making.
In the SaaS industry, where customer acquisition has always been critical to success, and now retention and lifetime value are considered equally important, neglecting the RevOps function can have far-reaching consequences:
Revenue Leaks from Sales and Marketing Misalignment
Without a strong RevOps function, SaaS companies may struggle to align their sales and marketing efforts effectively. Misaligned strategies can lead to wasted resources and revenue leakage via allocating budget to inefficient lead sources and campaigns, ultimately resulting in higher cost of customer acquisition (CAC). RevOps helps bridge the gap between these departments, ensuring alignment on objectives and KPIs, and a coordinated approach to demand generation and gap management.
Figure 2: The Marketing-Sales Chasm
Limited Visibility Into Revenue Efficiency Metrics
RevOps emphasizes the importance of leveraging data to make informed business decisions. By neglecting RevOps, SaaS companies may lack the necessary visibility into key metrics, such as customer acquisition costs, net retention rate, pipeline velocity, customer lifetime value and other metrics that measure efficiency of revenue generation. Without this data-driven approach, companies may find it challenging to identify trends, trigger early warning indicators to dropoffs in these core metrics, and remediate accordingly.
Lack of Customer Success Monitoring
Customer success is vital for SaaS businesses for long-term growth and profitability. The lack of a truly cross-functional RevOps function can result in suboptimal customer onboarding, limited proactive support, and inadequate engagement strategies. With the greater focus on customer retention in today’s market environment, RevOps has the onus of developing a more granular understanding of the state of customer success and identifying pain points by correlating data across customer support, product analytics, CSAT and NPS surveys, renewal/expansion pipeline and customer engagement data.
Scaling Challenges
As SaaS companies scale, they face numerous operational complexities. Neglecting RevOps during periods of rapid growth can exacerbate these challenges, and in a period of capital crunch, they have to find ways to do even more with less. RevOps provides the structure and processes needed to scale efficiently, enabling companies to adapt to changing market dynamics while maintaining revenue growth. Through initiatives for improving sales ramp time, rep productivity, campaign efficiency, detection of GTM bottlenecks, a data-driven RevOps organization can set up the SaaS business for scalable performance in both bad times and good.
Summary
While many factors may have contributed to the SaaS implosion amidst the market downturn, empowering a strategic and data-driven RevOps organization can be pivotal to the SaaS organization’s ability to recover from the slump and reset for the future. SaaS companies that prioritize RevOps will be better positioned to align their sales, marketing, and customer success efforts, leverage data-driven insights, and navigate the challenges associated with scaling. By embracing RevOps as a strategic priority, SaaS companies can enhance their chances of sustained growth and thrive in the evolving macroeconomic landscape.
BigLittle Is the RevOps Platform for SaaS Companies
BigLittle was founded to provide GTM leaders with the tools, techniques and insights to help them develop a strategic data-driven revenue operations organization. Our product RevenUp is a Revenue Optimization and Revenue Leak Mitigation platform for GTM teams looking to drive revenue efficiency and predictable and aggressive ARR growth across good and bad macroeconomic conditions. RevenUp operates at a level above siloed GTM tools to produce cross-functional insights like the ones below. Get in touch with us to know more.
Figure 3: Correlation of NPS by ticket resolution time
