The reason is because companies at this stage want to test for upsell opportunities.

Instead of cranking out a completely new hit-product, successful SaaS companies figure out how to strategically tailor their product packages for existing customer segments and drive up Average Revenue Per Account. The CAC (customer acquisition cost) to acquire $1 in upsell revenue is just 24% of the cost to acquire a new customer – hence, companies need a strategy to create an enticing upsell path. To do that, companies use either a capabilities-driven or a consumption-driven upsell strategy.

As Box grew, they started to create more editions of their product, such as a Starter Plan, a Business Plan, a Business Plus Plan, and an Enterprise Plan for their enterprise customers. Each of these are offered at a different price point, has a different packaging of features, and is targeted towards a different type of customer. As customers’ needs grow, they eventually move up and upgrade to the next edition.

To continue driving 30%+ YoY growth, mature companies are making strategic acquisitions, launching new revenue streams for crosssell opportunities, and driving efficiency while scaling. When mature companies make strategic acquisitions, they need to ensure that they can smoothly take in those acquisitions, streamline them, and work through the migration process so there is a single system of record for subscriptions. Only then can the company drive cross-sell and upsell opportunities in the future.

Now in the maturity stage, Box is a hugely successful, public company with (according to recent earnings) 41 million users and 85,000 paying customers, including large enterprise companies like General Electric. Box runs their enterprise-grade subscription business through 20+ gateways and collects across 200+ currencies as a global company. At the time of their IPO, Box was at a 110% YoY growth rate. That’s incredible. However, Box couldn’t have grown from the $3M ARR company we knew 15 years ago to the $500M ARR company that it is today without being able to quickly pivot and execute on new strategic growth initiatives.

Every pivot spins up new quoting processes, new ecommerce pages, new payment gateways, new revenue treatments, new billing operations, new ARR reports, and more. Without a flexible platform, SaaS companies end up stitching together different siloed solutions or building a homegrown system – resulting in thousands of hours for IT and engineering projects year over year. While requirements might change across the different growth stages, one thing is consistent – your existing systems shouldn’t be the bottleneck to your growth.

According to the Subscription Economy Index, 70% of a subscription company’s revenue comes from existing customers. As a SaaS business, your goal is to keep your customers for life and drive Customer Lifetime Value. But how do you do that?

In a subscription-based model, customer events throughout the year are ongoing and unpredictable. On average we see four mid-term changes per year for every subscription. Zoom, actually processes 5 changes to a subscription per month!

To illustrate this point, let’s imagine a complicated – but common – customer scenario: In the beginning of the year, your customer wants to start a new subscription, which means that, on the pricing plan from Bronze Edition to Silver Edition, and use a Monthly Plan for additional users starting that month. For finance and engineering, this means changing the pricing plan, adding a second monthly plan, prorating for the remainder of the month, sending a new invoice, redistributing the recognized revenue, and calculating the impact on revenue numbers. This raises multiple issues and questions:

• Does IT have to customize this? Do you do things manually with spreadsheets?

• Did the customer invoice get updated accurately?

• How was revenue recognition impacted?

• What is the impact on MRR and other business metrics?

This is a simple example of the types of requests that customers make in a subscription-based model. In fact, for some SaaS companies, up to 80% of their orders every day are changes to existing subscriptions. In other words, the majority of what they do is just manage change.

But these requests place undue burden on your finance and engineering teams: Finance needs to reconcile all of the spreadsheets. Engineering needs some kind of a hack. Every one of these actions has an impact on billing and invoices, revenue recognition, and reporting. And they all create downstream manual work for your finance teams. In order to be operationally efficient and have the flexibility to innovate and iterate – with products, marketing, pricing, and promotions – all in one central location, you need one system that can handle unpredictable customer events and take the burden off of finance and engineering.

For example, according to Box CFO and Co-Founder Dylan Smith, prior to putting into a place a subscription management platform, they “had Quickbooks as our ‘ERP system’ and were using spreadsheets to manage all of our billings and subscriptions.” Because of this, they were “running into challenges, with a lot of manual work.” Today, Box’s entire order-to-revenue process is centralized. As a result, their finance team is able to easily support any subscription change.

Every SaaS company out there makes key strategic decisions based on subscription metrics such as MRR, Lifetime Value, or Net Dollar Retention. The leading SaaS companies build a data-driven culture and obsess over data to drive decisions and drive new opportunities. “Duh” you’re probably thinking. But the problem isn’t that companies don’t know to do this. The problem usually lies in dirty data.

To make the best business decisions, you need to ask the right questions and access the right metrics. For example, “What is my MRR growth in North America?”, “What’s my current net retention compared to last year?”, and “How much MRR is coming from add-ons today?” If the only way you can answer these questions is to pull bits and pieces of information from disparate systems – and even spreadsheets – this is not going to cut it. Trying to calculate business KPIs through manual processes is time consuming, and can lead to many inaccuracies. Even something as simple as adding a new product can be really challenging if you don’t have the right systems and processes in place. This means that it can become a challenge to correctly measure even the most fundamental metrics such as Monthly Recurring Revenue (MRR), Average Selling Price (ASP), Average Revenue Per Account (ARPU), and Net Retention. For example, Net Retention can be especially tricky to track if you don’t have the right systems in place.

In traditional ERP solutions, an upgrade for a subscription is modeled by 1) cancelling the existing subscription and 2) purchasing a new subscription of greater value. That might look okay on the surface, but you have effectively documented a churn – and that’s not an accurate depiction of the actual change that occured. The leading SaaS companies build this foundation from the start, using a single system of record to calculate these business KPIs and drive critical business decisions.