Securing SaaS Renewals with Flexible Payment Terms

The Capchase Team
The Capchase Team
Posted on
January 8, 2024
min read
Securing SaaS Renewals with Flexible Payment Terms

Today’s market environment is impacting SaaS Customer Success teams. Net-new business is slower overall, which means that focus has shifted to retention and upsells. Often, focusing on renewals is the wiser choice from a financial standpoint. 

The challenging reality of the macro environment

Customer Acquisition Cost (CAC) is up nearly 3x since 2020, and net-new sales cycles are nearly 40% longer – meaning it’s more expensive to acquire new clients, and it takes more time to close deals as negotiations are tougher in this environment where vendors and buyers need to fight for (and hold on to) every dollar. This results in many SaaS companies increasingly relying on renewals for cash flow consistency – and on upsells for revenue growth – putting more and more pressure on the Customer Success team. 

Why customers downsell at renewal time

Retention rates overall are trending down, and SaaS vendors are experiencing more downsells as SaaS buyers respond to tighter budgets and start to consolidate their software stacks. More than half of SaaS businesses had lower retention in 2022 when compared to 2021. A challenging macroeconomic environment means subscribers are making cuts to their SaaS spend in sharp contrast to 2021, which saw almost 70% of businesses having a higher retention rate in 2021 when compared to 2020.

SaaS companies are flexible and adaptable, with innovative new solutions appearing every day. But that upside is also a downside: the SaaS market is getting increasingly saturated, with increased competition in every niche and dozens, if not hundreds, of alternative platforms for customers to consider at the time of renewal. 

With a more competitive environment, renewals could more accurately be called re-sells. As of Q3 2023, renewals take an average of 51 days, 15% longer than net-new purchases. Current customers are treating renewals as if they’re new purchases, meaning they’re beginning the process earlier in order to take time to consider competitive alternatives and determine where they can downsize, consolidate, or switch to a cheaper option. 

Why it matters

In today’s market, Customer Success is more important than ever before. Previously, Sales teams worked independently, from first contact with leads through closing. Now, Customer Success teams have a larger role to play as the friendly face and personal touch that follows customers from the early stages of closing through the lifetime of their contract. 

In an increasingly-automated world, personal relationships are becoming more meaningful, and can be the difference between making and breaking a renewal, upsell, or net-new sale. As the first person to interact with the customer post-sale, Customer Success leaders are ambassadors of the brand, guides as the buyer implements your solution for the first time, and a trusted contact if something goes wrong or questions arise. 

Customer Success leaders are also responsible for driving Customer Lifetime Value (CLV) through upsells, customer expansion, and optimization, ensuring that the customer has the best possible experience with the product. Some Customer Success KPIs are tangible – ACV, renewal rates, and upsell rate – while others are harder to quantify, such as word-of-mouth referrals from happy customers to future prospects. 

At the end of the day, a good relationship can only get you so far if your customer simply doesn’t have the cash on hand to pay their ACV. That’s where flexible payment terms come in.

Managing pain points with flexible payment terms

In a more stable market, Customer Success teams could set customers up for long-term loyalty by facilitating a seamless onboarding process, providing regular supportive contact, and offering upsells based on optimized product use. Today, Customer Support leaders have to take a slightly different approach to manage churn.

A financing partner that offers flexible payment options can be an excellent way to address Customer Support challenges while boosting revenue. A platform like Capchase Pay allows vendors to seamlessly offer flexible payment terms, such as monthly or quarterly payment options, while paying you, the seller, full ACV upfront, so you have cash on hand that you need to power operations and growth. 

Flexible payment terms meet your customers where they’re at, on a customer-by-customer basis, which helps manage churn rates and make it easier for customers to choose to renew with you even amid an increasingly-competitive market. Providing payment installment options also helps Customer Success leaders hit revenue targets in a down economy, as they reduce the upfront cost burden. It’s a win-win for both vendors and buyers. 

Capchase Pay increases customer satisfaction by empowering customers to optimize their cash flow at renewal, helping you achieve your retention goals. And best of all, Capchase Pay helps you hit expansion revenue targets by reducing buying friction, making way for more upsell opportunities. 

Are you ready to make your Customer Success team even more successful? Ready to reduce churn, boost renewals and upsells, and land more net-new customers? Flexible payment options are easier to offer than you think. It’s time to explore Capchase Pay. Learn more.