How to save money on SaaS subscriptions
Being clear on monthly spend is crucial – it enables you to make more informed decisions and can increase that all-important cash runway, especially in the current fundraise climate. After your team costs, one of the biggest types of expense is subscriptions, especially if they're not managed properly.
Many businesses are going through a cost review exercise currently, and the thing they’re finding alarming is just how much they’re paying on SaaS or subscription fees. High subscriptions costs easily happens – you start out with a small team on a basic plan that’s free or cheap, but as your team grows, the costs start to grow too. Fast.
Having full awareness of subscription usage and how you’re spending on various tools is good practice.
Get some visibility
Before you can save or even cut subscriptions, you need to have complete visibility on what you’re actually spending and how. There are a number of things you should be tracking when managing your subscriptions.
- It may sound simple, but having a list in one place is the starting point to making sure you know all the subscriptions your business uses.
- The products used in that subscription. While most product are the subscription these days, you have some subscriptions such as Adobe CC, which could include products such as Illustrator, Photoshop, After Effects etc.
- The number of seats/licenses you’re paying for and the number you have allocated. The price per seat and total cost of the app and the billing/invoicing frequency.
- Be clear on the dates: The start date, end date and auto-renewal (be aware of the timing to negotiate a new deal or replacing with a different provider).
Vertice, a SaaS purchasing platform, shared this advice in a recent blog, 'As time passes, it will become apparent that a static spreadsheet requires too much manual intervention. Look for solutions that help you gain visibility by sorting your entire stack into one simple dashboard through a straightforward upload or integration. This will give you easy access to all your contract details and provide timely reminders when renewals are coming up.' (Optimizing your SaaS purchasing – A step by step manual)
While you may not be at the size or complexity to need a purchasing platform like Vertice, something free like Airtable or even Google Sheets are good ways to start managing them.
Your current requirements
The next thing to consider is your current requirements. What you signed up to a few years ago, may not be what you need now. Equally, you may find that what you signed up to a few years ago, is no longer actually used in the business. In a fast-growth tech business, it’s easy to move from tool to tool and still be paying for legacy apps.
By knowing what you need, you can clean out apps that are no longer relevant and possibly even group requirements together for an app that can serve what two previously did.
To (re)assess your current requirements, consider the following:
- Review your existing stack – do you already pay for something that does the job or could be replaced saving costs elsewhere.
- Is your business still quite new or small? Could you consider a free or reduced plan to save costs?
Consider negotiating
Many companies don’t negotiate – they take website prices as the only prices available. However, knowing when and how to negotiate terms can be a way to manage cost and spend across your subscription tools. Many vendors would rather keep you at a lower negotiated price than lose you altogether.
Be sure to approach with caution though. Sastrify co-founder and CEO Sven Lackinger says, "Take a moment to think before agreeing to a 'discount' or change to your billing. I'd recommend any SaaS buyer only commit to a longer contract if they actually get better prices than their current ones, not simply to prevent a price increase."
Tactics to consider when negotiating:
Benchmark
Ask peers or others in your ecosystem who may use the same or similar tools.
Multi-year contracts
If you sign up to a multi-year contract, you can expect around 10% discount per year of commitment. For example for a three-year contract, it wouldn't be unfathomable to expect a 30% discount. It’s also possible to get some free months included (as much as one month for every year of commitment) and you can also benefit from 'no price increases' too.
Scaling costs
Look ahead and plan for your growth. If the subscription is £20 a seat for 1-20 users, how much lower would more than 20 users cost per seat? Also, consider if onboarding is covered or charged separately. It's often possible to get an onboarding fee waived for a contract that's more than 12 months.
Functionality
Don’t be sold on higher functionality that’s a 'nice to have' rather than what you actually need. Consider if downgrading pricing plans will still give you enough. Be critical about the functionality you need.
Timing
Negotiating closer to quarter or year-end puts you in a more powerful negotiating position. Vendors have sales targets to meet and are more likely to do a good deal to get you signed up coming to the end of a period. If you’re flexible on timing then consider waiting it out until then.
Managing spend
While there’s a current flurry of cost reviews to reduce burn and extend runway, reviewing your subscriptions is a useful regular exercise.
flinder COO, Luke Streeter offers this final advice, "Managing spend is an important part of the finance function – a good budget, variance analysis and forecasting should all be regular activities, but can be supported by deeper-dive cost optimisation exercises like reviewing your subscriptions for use and effectiveness on a less frequent but regular exercise."
Is it time for you to take a closer look at your subscriptions in order to increase your cash runway!
