How to Scale Annual Subscription Sales Using the Right Customer Financing Strategy For B2B SaaS

The tech industry is currently facing an economic downturn, presenting new challenges for SaaS companies, especially in the b2b sector.

One effective way to combat these challenges could be through the implementation of strategic customer financing.

So, in this blog post, you`ll explore how a well-crafted software financing solution can boost your ARR and strengthen your B2B SaaS business even during unpredictable market conditions.

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What is Customer Financing?

In the context of the SaaS business, customer financing refers to the process of offering flexible payment options to software buyers, in the form of multiple installment payments.

The main goal of providing software financing is to make the cost of SaaS more affordable and accessible to a wider range of customers, enabling your users to utilize the services they need to run their businesses effectively, without burning their runway.

Why do Businesses Need B2B Financing “Now More than Ever”?

According to Investopedia, new businesses are facing significant challenges due to the current economic conditions, marked by record levels of inflation, rising interest rates, and low consumer confidence.

Although there are several forms of b2b lending, the most effective solution could be the “buy now, pay later” (BNPL) payment model.

Here`s how it works:

You allow your customer to pay only a part of the price for your software product or service today, and the rest is paid in installments later, usually without any interest fees.

It boosts your ARR (annual recurring revenue), as a software provider, since your b2b customers can subscribe to annual plans, but pay monthly, giving you the much-needed upfront cash, while allowing your user to preserve their runway.

Is BNPL For B2B SaaS A Proven Financing Strategy?

According to Klarna, a B2C-facing BNPL provider, companies that use BNPL as business lending saw an average order value increase of an impressive 45%, and Adobe claim that the use of BNPL, grew 215% year over year in the US during the first 2 months of 2021. 

Based on our internal analysis of client data over the past three months, we believe that the B2B space will likely follow the e-commerce trend with a predicted increase in Lifetime Value (LTV) by 15-20%. This significant growth has the potential to make a substantial impact on the expansion of SaaS startups.

What Are The Benefits Of B2B BNPL?

1. Increased Annual Contract Sales 📈

B2B SaaS vendors can leverage the flexibility of BNPL to boost their annual contract sales, by offering customers the option to pay for their subscription in installments rather than one lump sum, while still enjoying the discount that comes with the yearly plan.

Here`s an example:

Say you are a Project Management SaaS provider, targeting SMEs.

Your monthly subscription costs $500, but you offer a 20% discount on your annual plan, that`s $4800/year.

So technically, your customers could save $100/month if they chose the 12-month plan. But the problem with most small businesses is that they might not have $4800 extra cash in hand to be able to afford your services.

This is where the BNPL payment option comes in to allow your customer to sign up for yearly, but spread the $4800 into a 12-month installment plan.

Your customer is still paying monthly with the discounted rate of $400/month, while you get paid upfront by the BNPL payment gateway provider. A win-win for both.

2. Competitive Advantage🏆

By providing a financing program, you are attracting customers you otherwise would not have gotten. Moreover, it increases your sales velocity and sets you apart from the competition. 

Potential customers will be more likely to buy from you than from a competitor that doesn’t offer payment flexibility.

3. Maxizimed Cash Flow For Both The Buyer & The Seller⏩

Working with a third-party customer financing provider guarantees you an upfront payment for the full price of your product.

This is a huge benefit for your SaaS business, as it boosts your cash flow immediately.

It’s a win-win: your customers get payment terms that are valuable and save their runway and optimize cash flow, while you are increasing your company’s revenue and investing in your growth.

How To Offer B2B Sofware Financing?

Here are 4 actionable steps to incorporate the right customer financing program into your b2b SaaS business.

1️⃣ Choose the right type of financing.

There are two ways you can offer installments to your customers: In-house or via 3rd party vendor.

1. In-house financing: With this option, you manage the financing process yourself, offering flexible payment plans directly to your customers. Although this gives you more control over the financing process requires additional resources and expertise to manage, as you have to access creditworthiness, develop financing options, set terms and conditions, manage risk and ensure you comply with regulations and laws.
2. Via a third-party vendor: A favorable solution would be to partner with a third-party financing vendor that specializes in providing financing solutions to B2B SaaS businesses. This can be a more cost-effective solution, as the 3rd party handles all the financing processes, freeing you up to focus on your core business.

2️⃣ Find the right financing company.

If you decide to implement B2B Buy Now Pay Later as your software financing strategy, there are only a few providers available depending on where your customers are based.

If you are targeting the US, Canada, or Northern EU markets, consider implementing Comfi as your BNPL service provider.

With Comfi, your users can split payments into 12 tranches over 12 months, while you get paid the whole sum upfront within 7 days.

Interested? Schedule your 30-minute call with our Co-Founder, Amal, today.

3️⃣ Integrate The BNPL In All Your Sales Channels.

Comfi has 2 options:

1. Send Payment Link

The no-code version is in the form of a user-friendly dashboard from which you can generate payment links and send them to your customers. We can set it up in a couple of hours.

2. Integrate as your payment gateway

If you are selling through self-serve checkout on your website you can integrate Comfi payment option to your checkout as one of the options and run a test.

4️⃣ Promote Your New Value Proposition  

Now that you have a unique selling point that puts you at advantage over your competitors, it`s time to spread the word by incorporating it into your marketing and sales messages.

Don’t forget to train your sales representatives to offer the BNPL option to your customers and mention it to your prospects as a sales leverage.

Conclusion

To sum up, scaling annual subscription sales as a b2b software provider can be achieved by implementing the right customer financing strategy. Whether it’s through offering flexible payment options via traditional lenders such as banks or integrating the Buy Now Pay Later technology, finding the strategy that works best for your business and customers can greatly impact your future success.

Sell more annual contracts with Comfi!

Let’s talk your revenue together

Amal Abdullaev

Co-founder at Comfi

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