How Paddle's Data from 35,700 SaaS Companies Can Help Make Your Business Recession Proof (Interview with VP of Global Sales Tripp Brockway)

Introduction and Talk Format

Tripp Brockway

00:00Yeah. Tripp Brockway, VP of global sales at paddle. It's gonna be a very different kind of talk. So less focus on sales funnel, more focused on kind of broader trends and how to deal with the economy getting weird, which is really what we're gonna focus on here. So, let's keep this super conversational, by the way. So just like with Kyle, like, jump in with questions, interrupt me at any point if you guys wanna go deeper on

Paddle's Data Set: 35,700 to 40,000 SaaS Companies

Tripp Brockway

00:25on one of the topics here. So you all are probably feeling this a little bit. Anyone feel like the everything's going great? Economy's great? Nothing's changed? Yeah. Cool. We're seeing the same thing. So, we sit on data for about 40,000 SaaS companies, and so we have a little bit of a lens into this. And so we aggregate this in two ways. One is looking at B2C SaaS companies, so often a leading indicator as to how the

B2C and B2B Growth Trends: Churn Rising

Tripp Brockway

00:50economy is doing. And what we've seen here is that growth is very much flatlined in the past couple of months, especially. And when you look at it from a B2B perspective, this trend also continues, mostly in the form of churn. So this chart's a little busy, but basically, is up a whole point and a half relative to two and a half years ago. So things are harder. If you're feeling that, it's real. It's justified. So if

01:17you're a CEO and you're nervous, tell your board that, yeah, it's real. Everyone's feeling it, etcetera. So, obviously, the question from here is, like, what do we do? Before I get too much into that though, I wanna make things a little worse for you. Things are are just broadly hard, and they have been trending in that direction in general. This is over the last five years. Average competitors in a given industry in SaaS is up fifteen

Structural Headwinds: Competition, CAC, and Retention

Tripp Brockway

01:40fifteen, 16 x. CAC is way up. Obviously, people are demanding more money, and they're leaving faster. So things were already getting hard, and now they've just gotten a lot harder and and worse. So say all this to say, status quo probably isn't gonna work. So you do need to think about how do we how do we get ahead of this and start to make some changes so we're not surprised. So let's get into that a bit.

The Case for Focus in a Tough Economy

Tripp Brockway

02:05Our view at paddle, we're very opinionated about this, is the right thing to do here is to focus. And what I mean by that is, on the things that your company is uniquely qualified to do to win. So that's your team, hiring great people, having an anti fragile sales team, for instance, making sure they're well taken care of, and know what they need to do to succeed, having a world class product and understanding your customer better

02:30than anyone else. We did a survey of these 30,000 SaaS companies, 40,000 SaaS companies that use our platform to ask them, why can't you do this? Like, what's in your way of actually focusing on on the things you should do to win? By the way, we also asked, do you agree with this? And they all said yes, of course, or like 9095%.

02:53And what we saw from folks is there's sort of like six big buckets of things that were causing them to be a bit distracted from those core competencies. One is customer acquisitions, like how do we how do we grow, how do we acquire more customers, pricing and packaging, expansion revenues, how do we upsell, all the operations around finance, billing, compliance, sales tax, all the boring stuff, and then, of course, churn. And if you know our Patrick

03:21Campbell, he does a twenty five minute talk where he only says churn, for twenty five straight minutes. So I suggest googling that if you haven't seen it because it's fun. There's a ton of stuff underneath this that that we also uncovered, and we're actually gonna get really tactical and talk about some of these things. Because while we do think that you should be focused, you know, with almost all of your attention on your customer, your team,

03:44and your product, obviously, these things are real and they're gonna be hitting you in the face every day and there's stuff that we can do to address some of them. So let's get into it. The first thing we recommend thinking about right now in this moment, given where the economy is going, is is your positioning. So how are you talking to the market? Who are you talking to? And, like, tomorrow, our recommendation would be to go

04:06look at this. You should probably change what you're doing if you haven't already tomorrow.

04:13Specifically, a couple of things to look at. What is your sales messaging? So to to Kyle's point, how is your team actually going to market? What are the things they're saying to customers right now? If it's the same as it was twelve months ago, you've got a problem.

Six Distractions Keeping SaaS Companies from Core Competencies

Tripp Brockway

04:30Second point is, who are you targeting? As we talked about earlier, a really smart question around how we optimize the funnel. Thinking intelligently about focusing on who you're talking to right now, what we recommend is is to really hone in there. So rather than trying to talk to everybody who's over a 100 employees, blah blah blah, looking at your data to understand where you win, how you win, and really focusing in on key core segments. So

04:56at paddle, for instance, we were selling to every SaaS company. We've stopped doing that. We are selling to only a very small subsection of the market right now, and we're basically saying no to everybody else. We know our effort is better placed there. It's more likely to convert to revenue. We're literally turning people away right now and not doing any outbound outreach on companies that don't look exactly like the kind of companies we know are gonna

05:19convert or more likely to convert.

05:24Expansion revenue. So, old adage, I think most of you probably know this one, it's easier to get an extra dollar from a customer you have than from a customer you don't. So what we see when we look at this across, the 40,000 companies in our portfolio is that the highest performing ones, 20% of their revenue or more is from their existing customer base. Unfortunately, most, the vast majority have zero or negative. So what do we do

Expansion Revenue and the Multiproduct Advantage

Tripp Brockway

05:51to fix that? The first thing is multiproduct. So this is a little bit beyond sales and marketing, obviously. So for those of you who are VPs of sales, CMOs, go yell at your product team or your CEO about this. But one of the first things you can do is is adding a different product or splitting your existing product out into multiple products. Companies that do this grow at 50% faster rates than those that have a single

06:15product.

06:17Add ons is another really easy thing to do with an existing product or platform that you could go sort of mess around with tomorrow. We see this as, like, very commonly under thought about in the market, but companies that do this well have 18 to 54% higher lifetime value when they have at least one add on. Alright. This is one of my favorite topics. Localization. So, I work for paddle. We're a global company headquartered in London.

Add-Ons and Localization as Growth Levers

Tripp Brockway

06:48Most companies in Europe and abroad think about this from day one. US companies often do not think about this and it's a big mistake. If you look at Asana's s 40% of their revenue growth was from international and it grew at a faster rate than their US volume did. So this is often a thing that US companies just like ignore because like, oh, the market's huge, but there's usually a big opportunity here that's not that hard

07:11to get. Easiest thing you can do is cosmetic localization. So if you have a checkout, for instance, or, you know, a a sort of buy now page or talk to sales, change the language, change the currency you're showing on your pricing page to match markets you might wanna penetrate. Super easy to do. Like, there's widgets you can download tomorrow that do this for you automatically. We recommend going a lot deeper than that, and we see in

Currency Expansion and Payment Methods

Tripp Brockway

07:37the data that companies that do this well perform a lot better. So adding multiple currencies, companies that do that grow 12% faster. Those that have a lot of currencies, 25 plus, grow 25% faster. Payment methods, again, if you're just in The US, you're thinking credit card's fine, wire transfer ACH is fine. Around the world, there are a ton of different payment methods that are preferred. So for instance, in Germany, most people like to use PayPal to

08:03buy software. Kinda blew my mind when I learned that, but 60% of our transactions from Germany are done via PayPal. Something as simple as that can dramatically increase, your growth rates.

Pricing Power by Geography

Tripp Brockway

08:16Another really interesting, thing to think about is pricing power. So it's again, it's a thing you can do tomorrow, especially if you have a a sort of self serve checkout. Companies in The Nordics and Western Europe are willing to pay 20% higher prices for the exact same product relative to The US. So go increase your price by 20% in Western Europe and watch your conversion rates stay the same. In other parts of the world, they're they're

08:40not. Right? Purchasing power is lower, etcetera. You can actually grow faster if you reduce your price in places like India and Brazil relative to to US. So again, something pretty simple that you can look at tomorrow and improve growth rates.

Tax Strategy and Compliance Risks

Tripp Brockway

08:56Tax is a really fun one that if you want to go deep on, we think a lot about it, grab me after. It's a sneaky one that a lot of folks aren't thinking about. And a fun fact we have is in Europe, the expectation, especially from a b two b transaction, is that you essentially exclude the tax, meaning you you show them the amount of tax that you're applying to the transaction instead of just bearing it

09:20in your product in your in your pricing, excuse me. So companies that are quote tax inclusive, meaning they're just adding tax to their price instead of showing it as a different line item, grow at 15% slower rates. So you have to pay tax. It's not an option. This has all changed dramatically in the last seven years by the way, so if you're not paying sales tax today, you really need to look at that because we had

Pricing Cadence and Pricing Committees

Tripp Brockway

09:42a company approach us a year ago who owed $5,000,000 to The UK in back taxes and they were not giving up on collecting that money, so it can be a sticky one that can bite you if you're not careful. Alright, I'm not going to dwell on this because we did talk earlier here, on this topic deeply. If you want to talk more about this, grab me. We recommend you change your prices once a quarter. I'm going

10:09leave it at that, because you're probably not thinking about this at all as a monetization tool. Change the price once a quarter. Second thing is have a pricing committee. So having a having a group of people come from from products, sales marketing, probably your CEO, who are responsible for price and look at it monthly, easy thing to do to start to think about how to actually get into a rhythm of changing your price frequently.

Churn: Voluntary vs. Involuntary

Tripp Brockway

10:34Alright. Everyone's favorite topic, churn. It's obviously getting worse right now. Couple of things you can do to stem the tide. There's two types of churn. There's voluntary churn. Someone says, I don't really like your product that much. I don't wanna pay you anymore. Involuntary churn. I actually like your product, and I wanna keep using it. But for whatever weird reason, I'm not gonna pay you. We're gonna focus on that type of churn. Often, it's like around

10:5740% of total churn and focus in not to think about it. So one thing you can do is term length. This is fairly obvious. Ask for an annual deal instead of a monthly deal. I think a lot of folks know that. What's maybe a little more non obvious is that you can do it after the customer's already signed up. So WHOOP is one of our customers, and what they do after month one and they look at

11:19usage data to inform this is they'll send an offer to a user who's really happy, who's using a lot, and say, hey, by way, can get a big discount if you sign up for a year.

11:30Cancellation flows. So when someone's going to cancel your product, they're like on a freight train to, I hate this, I don't wanna use it ever again, see you later, I'm mad for whatever reason. So you're probably not gonna save a ton of them, but there's some subtle things that you can do to save some of them. And a lot of that is just basic human psychology. So what we recommend folks do is add a little prompt

11:54that says, hey, like, understand you're you're wanting to cancel. Why? Help me understand that better. Based on on the answer, serving up a little bit of nostalgia. Why did you like us? Think about the best thing of being a customer of ours. What was that thing? Doing something as simple as that, as prompting them to think about the positive, we've seen can reduce churn by 10% to 25%. Again, not a huge lift, simple thing you can

Cancellation Flows and Psychology

Tripp Brockway

12:22do taps into a little bit of psychology that can reduce churn. How many of you guys look at payment failure?

12:31Okay. Everyone should raise their hand next time I ask this question. This is another sort of low hanging fruit thing that a lot of folks don't think about and it's typically the biggest bucket of involuntary churn.

12:44So a lot of things you can do to fix this and again it's really not that hard.

Payment Failure Recovery

Tripp Brockway

12:51The simplest thing you can do is use our product retain. Otherwise, just making sure you have some dunning flow in place to get ahead of credit card failures. So making sure you're understanding when a credit card's about to fail and prompting the customer ahead of that to change their payment information. And then having recovery after that, retries, SMS, email, prompting them to update their information to actually have that transaction go through. Again, that's often 50% or

13:24more of involuntary churn, which is usually about 40% of total churn. So simple payment recovery can increase your recovery by 20%. Okay, we're basically done. Let's turn it over to Q and A. Anything you guys want to dive deeper on that we talked about?

13:49I went very fast.

14:06The credit card there's tools to help you do this, so I would just use a tool because it's gonna be the easiest thing to do, but it's based on when the credit card expiration date is.

14:27I'd be a billionaire if I knew the answer to that question. We're looking at like twelve, eighteen, twenty four months. We have no idea. I think it's going to depend obviously like things are very fluid.

14:39I think we in a recession or not? That's not up to me to define. I would argue based on our data, like, things are probably going to get worse before they get better,

14:50unfortunately. And I don't have an answer as to when it's going to get better again.

15:36And are you thinking about your content base? Are you thinking about localizing the content itself?

15:57Rebuilding everything.

16:06Yeah. That's going be a lot harder than some of the stuff I suggested obviously, and I don't have a great answer for that depth. It gets a little beyond what we've looked at. The buying experience is what we're normally thinking about, and that does matter. And we see like, we've seen rates vary as much as 10% up to 50% on a checkout. So, yeah, it's wild. And it's a pretty low hanging thing that you can that

16:36you can go do. So, you know, if you if you do that in the inverse, you're probably losing out on, you know, 10% of revenue potentially. The payment failures we see is a big one. We look at this all the time with our customers, and we'll see folks missing out both on the initial attempted payment and then on subsequent attempted payments. Yeah. Upwards of, like, 10% of their revenue, 15% of their revenue. And when you add

16:58all this stuff up, it can be super, super meaningful. That's all. Yeah.

17:07Anything else?

Nathan Latka

17:10Cool. Well, any this stuff is interesting, grab me. Happy to go deeper. Appreciate it. Get Trent Brockway.