Payments infrastructure provider Paddle sees first hand what’s happening in the SaaS market through the wealth of growth and retention data in its B2B SaaS Index and monthly reports.
As we approach the end of H1, we spoke to CMO Andrew Davies to get his take on the year so far and find out where he thinks the biggest opportunities lie in the months ahead.
As we approach H2, how do you think the SaaS market is playing out this year? Will 2024 be a better year than 2023?
I would say it’s too early to call the bottom of the market, but all of our data for the first four months is positive. We have seen reactivation monthly recurring revenue (MRR) driving growth, B2C MRR has been trending up, and B2B is returning to pre-pandemic norms.
The main theme is that we’re now seeing month-on-month growth, that isn’t as high as it was in the pandemic and in the zero interest rate phenomenon, but it is back around pre-pandemic levels. So yes, 2024 should be a better year than 2023.
Where do you think the biggest opportunities lie for SaaS companies in 2024?
The biggest opportunity for SaaS companies is to build a new future based on solid fundamentals. We often use the phrase “cuddling with the chaos” and it’s about grappling with the fact that you don’t have eternal capital and you probably shouldn’t expect to have eternal capital.
If you’re venture backed and you’ve suffered a decrease in your valuation then you’ve got to take that on the chin and move forwards. Now, it’s about recognising that there’s a big game to play and that compounding growth over multiple years is going to make you a solid company as long as you can rein in your cash shortfall.
So, in terms of the biggest opportunities: Number one is for stronger businesses to be built on better fundamentals.
Number two is internationalisation for companies that are selling globally using product-led growth (PLG). Our data shows that markets outside of the US and UK are growing faster right now so there’s plenty of opportunity to capture more revenue in parts of Europe and Australia and New Zealand.
You can see more data on the SaaS market in our monthly SaaS Market Report.
The third opportunity is that every product should be providing more value by leveraging the transformative potential of AI.
Which trend or market shift is exciting you most right now?
Bootstrapping is exciting right now. The fact that there are bootstrappers who are foregoing venture funding to build their businesses, and finding a way to grow, whether through consulting revenue or getting early customers, is exciting to see.
Those businesses don’t have the constraints on them that they have to be market winners. They can be very powerful for local economies and for the individual founders and teams.
If you could advise SaaS leaders to double down in one area throughout 2024, what would it be and why?
Focus on the customer. We’re seeing significant new MRR from reactivations, which are customers who have previously cancelled. The lesson here is to let people cancel well, understand why they’re cancelling, be nice to them and re-engage them with future reactivation campaigns.
Make sure you really understand customer needs and you’re delivering value – that drives retention.
And don’t forget about expansion and upsell, which you can do by offering multiple products or add-ons, or ensuring your value metric is one that grows as the value that customers receive grows.
Doing all three of those means your customers can be drivers of revenue growth without you winning any net new customers, which is vital in this modern world.
What’s one piece of advice that’s always stuck with you?
We always overestimate what we get done in a month and underestimate what we can get done a year. Grit, resilience, and consistency always win out.
