Software as a Service (SaaS) market is experiencing incredible growth, with subscription models becoming the norm. According to Statia, in 2023 the SaaS market was estimated at approximately 197 billion U.S. dollars, and it is estimated to reach 232 billion U.S. dollars by the end of 2024.
In order to maintain a step ahead in the competition, SaaS companies must have a clear grasp of their financial and operational performance.
The crucial question is how can this be achieved? Simply, with an Enterprise Performance Management (EPM) solution, a complete game-changer for SaaS businesses.
EPM solutions provide data-driven insight, enabling companies to navigate the complexities of subscription models, optimize customer retention strategies, and propel growth.
There are numerous EPM solutions in the market. How do you choose the right one for your business?
We have gathered for you the top five criteria SaaS companies should prioritize when choosing an EPM solution:
Compatibility with Subscription Revenue Models
For SaaS companies, managing subscription revenue streams is fundamental. The chosen EPM solution must seamlessly handle the complexities of revenue recognition, billing cycles, and subscription renewals. Here's what to look for:
- Prioritize EPM tools that specialize in or are adaptable to the SaaS business model. These solutions will be more compatible as they have a deeper understanding of the nuances of subscription billing and revenue recognition.
- Ensure that the EPM solution can manage deferred revenue, which is critical for SaaS companies. It should comply with relevant accounting standards such as ASC 606 and IFRS 15, which dictate how to recognize revenue from subscription contracts.
Agility and Planning for a Dynamic Market
The SaaS market is known for dynamic and rapid change. An ideal EPM solution empowers agile forecasting, enabling companies to adapt quickly to market changes.
- Ensure that the tool can perform rolling forecasts and what-if analyses. This enables you to explore different scenarios and examine their potential impact on your finances and operations.
- Seek a solution that can update financial and operational forecasts in real-time. This ensures that your decision-making is based on the most recent and relevant data.
Unifying Your Workflows: Seamless System Integration
SaaS companies thrive on a unified and cohesive view of their business. To achieve this, your EPM solution should seamlessly integrate with other crucial systems such as CRM, billing, and customer service platforms. This integrated approach offers a holistic perspective of your operations.
Seek a solution that:
- Connects the Dots: Strong API capabilities or pre-built connectors for popular SaaS tools is essential. These integrations ensure smooth data exchange between your EPM solution and your existing business applications.
Beyond the Basics: Powerful Analytics for SaaS
SaaS companies need to dig deeper than standard financial reports. Using the correct EPM solution empowers you to analyze key metrics that measure customer health and business growth.
Here's what to look for:
- SaaS-Specific Insights: A solution that goes beyond generic reports. Look for customizable dashboards and reporting tools tailored to SaaS metrics such as customer acquisition cost (CAC), customer lifetime value (LTV), churn rate, and expansion revenue. These metrics provide valuable insight into customer acquisition efficiency, customer retention strategies, and upselling opportunities. By analyzing CAC and LTV, you can identify high-value customers who might be receptive to upgrading to a higher tier plan or to purchasing additional features.
- Predicting the Future: Advanced analytics features such as predictive modeling are a game-changer. They allow you to forecast future customer behavior, identify potential churn risks, and optimize marketing campaigns for better ROI.
An EPM to Scale with Your Ambitions
Choosing an EPM solution is a long-term investment. Imagine your SaaS company thriving, expanding over the years to come. The correct EPM solution should be your reliable partner throughout this journey, always adapting as your organization grows. Here's what to prioritize:
- Scalability that Matches Your Growth: Don't become trapped in an EPM that limits your potential. Cloud-based solutions typically offer greater scalability, handle larger volumes of data and user counts as your company grows. This ensures that your EPM remains efficient and effective as your business reaches new heights.
- Empowering everyone, everywhere: Choose an EPM solution that is user-friendly and accessible. Look for a solution that is intuitive and easy to learn, even for non-finance professionals. In addition, ensure that it is accessible from various devices, catering to a potentially global and remote workforce. This guarantees that everyone in your organization can leverage the power of the EPM solution for informed decision-making.
Selecting the right EPM solution is a strategic decision with a potential to significantly impact your SaaS company's success. By incorporating the considerations outlined in this blog post as a guiding framework in your search, we hope to provide you with guidelines to ensure that you select the EPM solution most suitable for you. It will be a tool that empowers data-driven decision-making, optimizes performance, and fuels sustainable growth. Please remember, the ideal EPM solution should adapt to your unique business model and empower your entire organization to navigate the dynamic SaaS landscape with confidence.