There’s a lot being said and written about the impact of the current COVID-19 induced economic crisis on SaaS businesses, and how founders and management should react. Many teams have already made the first adjustments.
One thing that deserves more attention is that this downturn is very different from prior ones. Its impact varies very significantly along many dimensions and is unique to each business.
Most general advice and sentiment tend to gravitate towards the mean. But when the variance is so high, the mean may not be applicable to many.Granularity is paramount.
The range of impact of the current situation is stark. While there are some sizeable companies looking at prospects of near-zero business for months, there are also those that are seeing acceleration and are scurrying to keep pace with a surge in customer demand. And then there is everything in between.
This downturn is different from prior ones. It is coupled with a massive dislocation. Like prior recessions, many business customers are looking for ways to optimize software costs. However, they are also looking for tools that help adapt to the new reality, ways to continue serving customers in a very different set-up and be more efficient.
As an example, consider the impact of this crisis by industry sector below. These could be industries that you or your customers operate in. Companies in ‘Green’ zone have a very different set of challenges than the ones in the ‘Red’ zone. So any response needs to be very specific to where the business and its customers are along this curve.
Illustrative COVID-19 impact by industry
There are several other dimensions that we are seeing the COVID impact on businesses vary significantly along. Here are a few others:
- Whether you can offer a proposition that can help customers get back to business or stay in business. Business customers are currently hyper-focused on ensuring business continuity, safety and productivity of employees, and cost optimization. Longer-term modernization projects may be put on hold as focus shifts to near-term RoI. We are seeing many entrepreneurs quickly adapt their proposition to serve these changing needs
- Deal sizes. Larger deals are coming under significantly increased scrutiny and businesses are requiring higher levels of approval for large deals. If your natural deal sizes are large, can you find ways to start small, prove value, and grow accounts over time?
- Sales models. Field sales are obviously on pause for a while, as are events and trade shows as sources of leads. Those that already have a well-oiled inside sales machine or self-serve models — or can build those quickly — are better positioned
- Buyer persona. Some departments such as IT or HR may be tied down with a focus on immediate business continuity needs, while others such as Sales and Marketing are dealing with a sudden change in momentum and changes to their team. Products that tie into their current, changing needs are doing better than those that don’t
- Channels and lead sources. Events and trade shows as major lead sources are off for a while. But prospects may be more available for phone conversations and video chats. Online ad rates are falling. Those that have adapted their lead-gen playbook quickly are better positioned
- Capital efficiency. Those that are — or can be — cash-flow positive based on revenues will experience this downturn very differently than those with high burn rates
- Scale/stage. While larger companies have the advantage of more management bandwidth, resources, and execution capacity overall, earlier stage startups have the advantage of being nimble and being able to change direction very quickly. Industry focus, sales motion, lead sources, and burn rates get harder to change with scale.
The good news is that many of the above can be adapted. And the best entrepreneurs are already hard at work doing so.
So carefully determine where you are on the COVID impact curve, and adapt, adapt, adapt.