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May 12, 2020

Rethinking the up-front annual SaaS contract in a cash flow conscious world

Amidst the economic downturn, a new need has emerged for SaaS companies to offer more flexible payment terms to even the largest of enterprise clients. As renewals approach, concerns around retention and financial planning arise as annual pre-paid customers request more flexible payment options.

When we founded Pipe, we had a clear idea of who our early adopters would be: SaaS companies with proven product-market fit, servicing customers in the SMB to mid-market range. So we set about building and launching our product, and lucky for us the reception has been phenomenal. This is what every startup dreams of — product-market fit out of the gate!

What we quickly discovered after publicly launching in February was that our product is in demand with a subset of the SaaS market we hadn’t expected to be serving in our first few months of operating.

We’re fortunate to be in a position to provide much-needed cash flow to SaaS companies. This is the promise we built the company on — regardless of the economic climate. One of our guiding principles is to always listen to our customers and make sure we’re meeting their needs as they evolve. So when they asked, we listened.

Even in a stable economy, our initial target SaaS customers’ clients — SMBs and mid-market companies who watch their budgets closely — prefer to pay monthly or quarterly. Since our public launch, we’ve been working nonstop to onboard SaaS companies and advance up to a full year of cash flow based on their predictable revenue.

In the last month, we’ve heard from many larger SaaS companies that they would find utility in the same product, but fulfilling a different need.

Whereas our initial target SaaS customers want to turn their booked monthly or quarterly subscriptions into a full year’s worth of cash, larger SaaS vendors who have annual prepaid contracts with large enterprise customers are coming up on renewals and find themselves needing to offer more flexible payment terms too. These enterprise customers — some of the largest buyers in the world — are now just as cash flow-conscious as SMBs. While they remain committed to their SaaS vendors for the long term, they need more flexible payment options as the invoices for their annual renewal contracts are due.

We’re pleased to now be serving larger SaaS companies and their enterprise clients, offering the flexible payment terms they need at this time.

Part of being a nimble startup is adapting to the world around us, and most importantly our customers’ needs. When the pandemic hit, we committed to helping as many SaaS companies offering critical services get the cash they needed to keep their businesses running. That same commitment remains today, even as the needs of the SaaS community are evolving in a way we didn’t initially predict for our first few months being in business. We’re in a strong position to help SaaS companies of all shapes and sizes adapt to the new reality, one in which customers large and small require more flexible payment terms.

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Disclaimer: Pipe and its affiliates don't provide financial, tax, legal, or accounting advice. What you're reading has been prepared for knowledge-sharing and informational purposes only. Please consult your financial and legal advisors to determine what transactions and decisions are right for you and your business.

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