by Paul Lynch
At the end of 2018, Mailgun, now the email service provider for brands like GitHub, Shopify, Slack and Lyft, was poised for growth – but kept getting bogged down by manual, time-consuming billing and reporting practices. They’d grown fast, from a small startup to over 100 employees, but their accounting solutions had not meaningfully evolved since their early days. And that was becoming a problem.
Multiple billing systems and complicated contract customers that required itemized invoices were being managed manually, within an excessive number of spreadsheets. Monthly revenue accounting lasted two weeks or more. And these billing limitations left little room for experimentation or customization. All of these factors were becoming significant barriers to Mailgun’s ability to serve its clients and continue to grow.
This is a story we see again and again. B2B SaaS businesses growing fast, fueled by innovation and energy, skidding to a halt because of billing.
Why does this happen?
Because B2B SaaS is unlike any other industry, and perhaps most unlike B2C SaaS, with which it’s often and incorrectly compared.
B2B SaaS sits at an unusual Nexus of needs
To understand the unique needs of B2B SaaS, you first have to see it within the context of its next-of-kin: B2C SaaS and Enterprise software.
The B2C SaaS business model is about high volume sales with simple pricing structures. For example, an Adobe license for individual customers offers just a handful of standard tiers and there isn’t a lot of change once it’s purchased, except for the occasional trading up or down in plan.
Enterprise software is at the other end of the spectrum: Fewer customers, but far more personalization of service and price. Enterprise customers who buy this software are also very different – they’re established and slower moving, which means that once they find a software solution that works for them, they don’t require a lot of quick changes to their plans. Most enterprise deals are also highly customized to meet specific needs.
Then there are the B2B SaaS companies serving the startup to mid-market community.
These businesses move fast, change quickly and grow quickly, which means they require:
- High levels of customization
- Ability to meet their quickly changing needs
- Agility in pricing
- Ability to meet their needs at high – and ever-growing – scale
And this is where the very simple revenue management tasks for other businesses suddenly become major headaches that can actually block your ability, as a B2B SaaS company, to grow.
B2B SaaS Requires Agility at a Whole New Level
When your customers all need personalized offers, at different – and changing – price points, at different – and changing – scales, with endless combinations of recurring and usage-based pricing, revenue management can become a significant hurdle.
Limiting your offers to just a few simple pricing combinations is one solution, but not a good one for B2B SaaS – it prevents you from personalizing an offer that is the best fit for your customers’ needs. The subscription world is all about relationships and personalization, and B2B SaaS customers have come to expect that high level of service.
Subscription-based adds another layer of complexity
Calculating accurate revenue, understanding sales commissions, and creating CX and operational efficiencies all become extremely complicated when combined with the subscription model because subscriptions require you to ask questions other businesses don’t have to think about, like…
- When do I actually recognize my revenue?
- How do I compensate my seller for a subscription deal if the revenue hasn’t yet been recognized (since it will roll out over a period of time)?
And then, you also have to account for discounts, promotions, usage and value-based pricing.
Making personalized offers at scale is the best way to serve your customers because you can price for the value you actually provide. This would be impossible to do manually. You need a system that’s built to support high complexity, high volume and high velocity of change.
We’ve seen it again and again – B2B SaaS companies that:
- Aren’t sure what their actual revenue is at any given time.
- Require a month to close their books, every month.
- Manually track revenue with spreadsheets and multiple billing systems.
- Fail to accurately calculate sales commissions.
- Delay product releases due to inflexible billing systems.
- Avoid experimenting with pricing, because it’s a pain.
Billing shouldn’t stand between you and growth. We are obsessed with removing this SaaS business blocker.
Chargify Gives B2B SaaS the Ability to Personalize Offers at Scale, Quickly
What if you could launch complex offers quickly, without even having to write code? What if you could automate quote-to-cash, know your true revenue, and instantly and accurately calculate commissions? We created Chargify to empower B2B SaaS businesses to price and bill in the way they need to serve their customers best – and still close their books easily every month.
Even if – especially if – your current accounting practices are dispersed over hundreds of spreadsheets and multiple billing systems, we can consolidate everything you do in one place that facilitates endless pricing plan options – without the headache.
So, how does Mailgun’s story end?
Before Chargify, Mailgun’s internal accounting team took days to calculate usage, merge accounts and generate invoices for their contract customers, delaying their invoicing well into the second week of the new month. And then, it took an additional two weeks to complete monthly revenue reporting from two different billing systems. Now, it’s all done in a single day.
While we can’t take credit for Mailgun’s explosive growth, we can say that since moving to Chargify in early 2019, Mailgun has dramatically streamlined their billing operations and liberated many of their internal resources, enabling them to focus on growing faster and serving their clients even better. You can read the full use case here.
We use our own software as our billing engine, and that allows us to customize our price for every single user – because each of our customers has a unique use case and unique requirements, and it’s our goal to price fairly based on those factors. Using our own software, we can appropriately track, log and report on these different prices for each customer, ensuring that they’re only paying for the value they receive – and that they receive the most possible value we can give them.
Don’t let billing be a roadblock to your growth when it can, instead, be a growth lever that sets you up for success.
Want to learn more? One of our billing experts would be happy to help.