Would Your SaaS Product Make It Through When Your Client Is Cutting Down On Expenses?

Is your product going to be cut off the expenses list, if need be?

Let’s time-travel for a second. To 2008 and a bit after.

Economy goes down, a lot of money is wiped including a chunk of your company’s valuation or some of the assets it’s got — we can even go to a scenario as dark as some of your partners go out of business. Both personal partners and company partners.

What happens then?

Whether it’s an executive board or just you, the founder, and two other people, there will be a meeting where expenses need to be cut down. If you’ve ever been at a low financial point in your life, you know what I’m talking about.

You’d look at every single expense that the company has. Now I can’t tell which category will be first to be reduced — whether it’s staff, marketing, supplies etc. — but eventually the company will be looking at the virtual products they’re paying for monthly/yearly.

You’d put down all SaaS products: Basecamp, G Drive or G Suite, Amazon AWS, Dropbox, InVision — whatever is used. Is it crucial to have Zeplin for your developers and designers for $2500/year? Maybe it is, maybe it’s not.

And here’s the deal

You’ll put these products into two categories:

1. Can’t be productive without it
2. Really can’t be productive without it

It will become quickly relevant that list 1 goes away and you stick with list 2. You won’t be paying MailChimp that much per month. And that email client will probably be moved to a leaner solution (if the costs of transfer make sense).

Out of 10 products here, you stick with 0 or maybe 1 that was wrongly placed on list #1. A bit hard but hey, times are hard.

But when you get to list #2, that’s when it gets really hard. Out of 7 products, you need to cut 3.

Why did I paint this picture?

Because I’m not sure whether your product is on list #1 and #2.

I. If it’s on #1

I’d really really ask myself if it makes sense to keep on earning money today while eventually the company might become a sunken ship. We know how hard it is to part ways with things we’re attached to, and it’s even harder in dire times.

What I’m saying is: making a rational decision about your company today is better than becoming emotional in a bad economic environment and saying “We can fix this” for 8 months straight, while burning money — and only then realising it’s been all in vain.

I would say you can:

i. Sell the company while it’s still possible. Probably while making a profit. It’s a tough discussion where you’d need to say “All right, it’s been good for long, nothing is good forever but here it is, a safe and nice exit.” — not many want to have it.

The extreme benefit of this is having capital in a world where liquidity is scarce. I wrote about it here:

How To Live Long And Prosper As A Tech Company. A Story About Sacrifice.

ii. Have an even tougher discussion. The product needs to justify its costs better. Through any business, we aim to create value for someone and then capture a percentage of it. You pay $10, they give you $50 — that’s what a profitable company does.

The very profitable ones, like Apple, probably capture $28 out of those $50. This conversation I’d like to push here is not around how much % are you capturing. Rather, I’d like to talk about whether you produce $50 for a client or $100 (it’s still a metaphor, play with me for a sec here).

If that number is not high enough, it’s very likely you’ll be on list 1.

To put it very directly, I’m telling you that maybe it’s a good idea to offer your users more utilitarian value. That’s right, I’m advocating against creating an experience, which is the central point of most articles here.

I wrote about this as well. In short, it’s about meaning — giving more meaning to your users means giving them more value. Meaning is the basic need humanity is looking to solve at mass scale right now — much like we’ve solved the basic need of food and shelter en masse.

Tech CEOs, Here’s One Way To Look At Uncovering More Value From Your Company’s Product.

Eventually, after we solve that, we’ll probably be looking at transcendence. But I digress.

iii. Ignore it and what I’m saying and we’ll talk in a few years about it

If your product is on list #2, I’d say congratulations but we can’t know for sure whether that’s true until the moment hits. So let’s buckle up, keep on pushing and be honest with ourselves.

The bottom line

When the economic landscape is equal to wildland fire, I’d like you to be on the good side of it. Yes, a wildfire is bad — but in the grand scheme of things it wipes away what should not be there: all the deadwood.

Same thing applies to an economic crash — if you’re meant to survive, you’ll be even stronger.

Let’s make sure we’re caught on the right side of history.

I help tech CEOs reduce user churn, running Chagency_, an experiences design agency and writing daily. Say hi on Twitter or LinkedIn!

Illustration Credits: Aloysius Patrimonio