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Managing your SaaS Company through COVID Pandemic (May 2020)

6 Mins read
  • Five phases of the COVID-19 Pandemic
  • Short-term Distress and Long-term Recovery
  • What you can do as a SaaS founder
  • Questions to Ask and Answer Internally
  • Self Growth and Management
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The coronavirus outbreak is bringing about profound changes in the operating model of the SaaS business; the most significant impact of disruptions is seen in:

  1. How we define churn – pause, lost, or recovery. The details are mostly blurry 
  2. How we manage a new remote workforce with improved operating efficiencies
  3. How we deal with uncertainties and plan for beyond COVID-19 Outbreak
  4. How we develop the LTV curve and enhance the revenue situation

Studying the COVID-19 infection pattern and how governments are responding to it, we predict that the pandemic spanning across the world will be summed up in these five phases:

Phase 1: Transmission:

Jan to March 2020, there was no clear understanding of this pandemic and the impact of it. Businesses were running as usual except in China. The Virus transmitted very rapidly with no or little control or regulation in place.

Phase 2: Restriction:

March 2020 to mid-June. Social distancing has become a new mantra across the globe, with restrictions laid on physical interactions. We predict that during this phase, the infection will rise to around 200,00000. The number of new infections is likely to decline around June

Phase 3 Regulation:

Mid June to First Quarter of 2022. there will COVID control protocols (CCP) deployed in place. Regulations laid by governments across the world will define how we work, travel, eat, wear, move, meet, and do things collectively. There will rise in increased surveillance activity to enforce these regulations. Border management, travel restrictions, workplace protocols, restaurants, operational guidelines, schools, and college operational directives, public transport, food, and grocery distribution will be closely monitored. SaaS Industry is analyzing the various measures that are being deployed.

Phase 4 Eradication:

Third Quarter of 2022 to 2024. With the availability of the vaccines, the Virus will be contained, provided there are no new genetically modified strains.

Phase 5 Prevention:

The CCP will still be followed in order to prevent and avoid a future pandemic mishap similar to COVID-19

We are presently surveying how SaaS companies will be impacted due to CCPs in place and how it will transform the way we do business.

This is insane!

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Short-term Distress and Long-term Recovery

  • CPG industries are already experiencing real loss of business. They saw a steep increase in phase one of the pandemic, but with low production, there is a severe impact. 
  • The travel industry has badly been hit; airlines across the world are facing desperate times ahead.  
  • The U.S. saw the lowest unemployment rates, with 30 million people filing for unemployment benefits. Massive layoffs are a reality.
  • The price of oil fell to its lowest since 2009, ever trading at less than a dollar.
  • IMF predicts that the global economy will be down by 3% and major economies are at the brink of recession
  • Now the impact data on the U.S. economy is starting to surface and except for a few industries (e.g., digital healthcare, online education, online streaming, video conferencing (VOIP) food delivery, groceries, etc.).

Here’s what you can do as a SaaS founder:

  • Take Control. Be proactive, and As in all crises, delayed action has terrible consequences down the road. Unlike the average time, when bias toward overreaction than underreaction.
  • Have a clear plan and communicate:  Chalk out’ business as usual’ plan, factor all the significant contributions and impact factors. Not being clear leads to stress, and stress leads to poor relationships. Communicate resonantly.
  • Lengthen your runway to 36+ months as a priority. Historical data on the U.S. recession suggests 12-24 months of recovery (sometimes as long as 5+ years, or a short as six months). In the 2008-2009 financial crisis, a lot of companies went out of business, and some laid off a lot of workforces. Covid-19 is and will be much worse. The industries are getting affected, not owing just to financial markets, but because of real unemployment, travel restrictions, and change in consumer behavior.
  • If your company has < 12-18 months of operating capital and is in the industries that are severely impacted, layoffs might be inevitable. If you have a term sheet, look at closure as soon as possible. If you have 12-24 months of operating capital, cut costs efficiently to extend it as much as possible. Many companies have opted to decrease salaries and freeze hiring.
  • Prepare to cut your projections to match reality. This means anywhere from 25-50% downward projection. (Remember, some industries lost 80-99% of their revenue in a matter of months) If you have the provision to survive, then this will be a do-over year for you. But if you don’t have the operational capital, then the measures need to be a lot more drastic. If your business is on the brighter side of opportunity and can leverage the present occasion, don’t increase your projection right away but sit through the next quarter. The impact is a lagging indicator.
  • Don’t cut down budgets reactively, be smart, and do it at once. “Laying off” empty seats are more comfortable than seats with actual people. Prioritize the hires and focus only on the essential hires to keep the business going. 
  • Cash and profitability are the life-boats in all recessions. But pandemic is a level-beyond a pure economic downturn, that most industries can never really plan for or hedge against. If you happen to find your company on the lucky-side of history, be generous and helpful.
  • Get good at Communication. In remote/WFH situations, seamless communications fail, select few channels, and often share, ensure you document these communications for people to access these later. Lead by answers questions.
  • Raising Funds will be challenging, owing to the impact of the recession in financial sectors. The information asymmetry will feel much higher as the uncertainty makes everyone withdraw from the situation and preserve cash. Limited Partners will pressure general Parters. If you are in between funding discussions, evaluate your equity trade-off and close fast.
  • Build an excellent relationship with your customers. Go overboard if you need to, but be in constant touch with your top recurring customers, attend to their support proactively. Learn what are their top challenges and see how you can help if it corresponds to your context. Share your business continuity plan with them so that everyone is on the same page.
  • Embrace Work from Home as the new normal. Ensure you have an effective transition plan for everyone. Lay down protocols, productivity targets, and see how best you can support them. People will be eager to join back work, have an adequate response adhering to the CCP (COVID Control Protocol). Hiring quality will dip because of mass layoffs, take time and hire the best post the pandemic.

Questions to Answer Internally

  • What are the must-haves vs. good-to-haves? What roles do we need to hire vs. good to hire? What is the must-have software vs. good-to-have software?
  • What’s our focus? Objectives, key results, initiatives, campaigns, and roles to hire. Always think preferences in mind. What do we need to achieve?
  • How do we improve our customer relationships? The returns are going to be great, therefore focus on this; this will help you weather the storm. A greater focus on NPS is crucial.
  • How do we become more financially efficient? Where can we invest more efficiently/differently? For example, instead of traveling (which is practically impossible at this point), what can we do differently/creatively to augment such circumstances? How can we replace physical with virtual across all activities?
  • How do we become better at working remotely? How do we increase team cohesiveness and productivity as a company? How do we take better care of people, and learn to thrive in this new working environment?
  • What’s our leverage? This is a tough challenge, but this is a once-in-a-lifetime leverage opportunity for all of us. Global pandemic and economic recessions are innovation incubators.

Self Growth and Management:

  • Transition and adapt to the new work-life harmony as swiftly as possible. Have set routines, rituals, managing mental and physical wellness in a new way, working environment changes.
  • Eat Healthy and exercise: Eat well, be creative with your diet and exercise (e.g., running and walking, in-door activities). Measure them through wearables to keep yourself engaged with routines and goals.
  • Find rituals to keep yourself mentally rejuvenated. Adopt new reading patterns, resting, going for a drive, T.V. shows, whatever that works, set up a portfolio of them with time blocks. It’s easy to fall into dopamine addiction without structure and rituals, so design time blocks and routines.

SaaS Business vitality in the face of this outbreak will be a competitive advantage. SaaS Industry defines SaaS business vitality as “the ability of a SaaS business to deliver on its objectives regardless of the disruption.” SaaS companies must bounce back faster, cruise blended work seamlessly, and deliver value to customers — while keeping the team and their families safe. It’s a challenge, but we will come through this! We are in this together.

Emerge Stronger from COVID-19

We don't have all the answers. But what we do have are a very particular set of capabilities. Capabilities we perfected over a decade working with 10,000+ SaaS businesses.

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About author
Joseph is the founder of SaaS Industry (community site) and oversees its growth. He is also the CEO of Growthfluence - ABM consulting firm for SaaS organizations serving across the spectrum from Fortune 500 to newly funded product companies. Prior to this, he has been an enterprise leader at Royal Bank of Scotland and Great Lakes Institute of Management.
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