With the strength of the economy over the last 5+ years, many bootstrapped SaaS Founders have never run a business during a recession, let alone a black swan event like the novel coronavirus pandemic we’re currently facing. With recurring revenue, high margins, and an online business model, it’s easy to think you won’t see much of an impact. Here’s why that’s a mistake, and what you can do to take care of your customers and your team right now.
By that evening, we had postponed the event indefinitely over concerns for the wellbeing of our attendees and presenters.
As the week progressed, our employees and contractors were facing school closures, empty store shelves, closing borders, and an expanding sense of anxiety in and for our families and communities.
When you run any business, it’s easy to get caught up in the metrics and numbers — as a business owner it’s your job to manage those — but I’d encourage the Founder community to look beyond those right now to the people behind them: Your customers, and your team.
Taking care of your customers: What we’re seeing and doing across our SaaS portfolio
In the larger economy, coronavirus has created a spike in demand for some goods and services (hello, toilet paper), others are flat, and many are seeing declines, and so it goes in SaaS, too.
The good news for SaaS founders is that the high margins and recurring revenue of SaaS do offer all of us a bit more financial protection than say, a local brick-and-mortar business. But when our customers are impacted, so are we, and it would be a mistake to ignore that. And if our customers are those same local brick-and-mortar businesses, we need to be taking a serious look at how we can support them.
Here’s a look at our own portfolio, by customer segment, and how we’re shifting our focus right now.
Our B2B SaaS companies with a small business customer base
We’re expecting that we could see some declines in revenue for our B2B SaaS products that cater to small businesses, like our retail locator and payment processing apps, if the trend of quarantines and shut downs of “non-essential businesses” like those happening in Europe continue. As of last week in a NFIB survey of small business owners, 74% said they were unaffected, but 43% of those responders were anticipating impacts.
For these properties, we’re temporarily shifting our focus from growth to how we can support and retain our customers during this challenging time. That means looking at pausing any marketing not related to organic search (we still want people who are looking for our services to be able to easily find them), honoring account ‘pause’ requests, and creating and curating content and resources that can help them weather a downturn in their own businesses.
Our B2B SaaS that help customers work and teach online
On the other hand, we expect to see increases in some of the businesses in our portfolio that help companies and schools work and educate remotely. With at least 18 states enacting school closures for 2+ weeks as we write this, educators and administrators are scrambling to put together online classroom resources. On the business side of things, companies are asking employees to work from home, and for many it’s a first.
Both of these moves mean we’ll probably see some increased interest in our ed tech properties, and our SaaS tools that help remote workforces.
But that doesn’t mean we’re going out with a big marketing campaign for these properties either. Our focus is on communicating and curating helpful information for teachers and businesses working online for the first time.
We’re also looking at places we can broaden what’s available as part of free plans, extend free trials to give people some breathing room, and create more onboarding resources and explainers to help them make the transition.
If you’re in the position of seeing a boost in interest right now, be a good leader and put people over profit by looking at ways you can help new customers who might be making major work and life adjustments.
Our other businesses
Finally, we also have businesses we expect will remain pretty stable without big surges or dips. For properties like this, we’re keeping up our normal routine, but we’re still evaluating any outgoing marketing and communications to make sure they’re relevant and appropriate given the current climate.
To put that in simple terms, just think about your own experience. Do you really want that “25% off all furniture!” email in your inbox right now, or do you think the company who sent it should have taken a moment to consider it before pushing the send button?
You can take the same approach with your company. Just take some time to really think about your customers, how they are (or might soon be) impacted by this pandemic, and what you can do to serve them best right now.
Taking care of your team
If you’re not already remote-first, now’s the perfect time to make the change. We promise, you won’t look back.
You should also remember that anyone who works for you is likely to be feeling some anxiety, and many people are finding themselves with kids suddenly home from school, in addition to other personal challenges, so leave room for them to be flexible with schedules, take time off, and take care of themselves and their loved ones. And of course remember that if you are already remote-first like we are, your distributed team might already be being affected quite differently depending on where they are.
How will coronavirus impact SaaS funding and valuations?
You can’t take care of your customers and your team if you go out of business, so let’s look a bit at the financial and business side of things.
Bootstrapped founders have never really worried about outside funding, by definition, but you should still be paying attention to the overall SaaS market. In January, it was as hot as it’s ever been, and valuation multiples were high with investors with very short-term holding terms coming on the scene.
We’re expecting that some of that speculation will slow down, and that valuation multiples will come down a bit. We’ve always had an intended hold term of “forever,” and we tend to work with Founders who care about more than just the sales price (like the future of their product, customers, and team) so this doesn’t change much for us in terms of acquisitions.
While this post is focused on the “business owner” aspect of your life, and I know from personal experience that it can be a big part of your identity as an entrepreneur, I hope that you and your loved ones are safe and healthy, first and foremost.
Let’s keep the conversation going. You can find me on Twitter @Kevin_McArdle. I’d love to hear how things are going with your SaaS, what you’re seeing out there, and what you’re doing for your own customers, teams, and companies.