You don’t have to understand macroeconomics to know that the words inflation and recession mean bad news for consumers and businesses, alike.
After an extended period of economic growth, low unemployment, and low-interest rates, inflation, in many industries, is at its highest point in the last 40 years.
If we want to place blame and point fingers, most of today’s economic crisis can be derived from a few of the following factors:
- Global geopolitical events
- Supply chain pressures
- An extended pandemic
- Relatively low unemployment rates (among many other issues)
We won’t get into the theory of cause and effect that has resulted in a real inflationary impact across all industries, across the globe, and no one is safe from the pressure of increasing costs and greater cause for attention to all expenditures. This economic headwind is making it increasingly difficult for subscription companies to scale & grow following the high growth that has been enjoyed across these organizations over the last few years
While investors should not avoid the sector, inflation is causing many companies’ expenses to rise while reducing their pricing power. Likewise, rising interest rates, albeit to combat inflation, will also impact an organization’s future earnings estimates.
In moments like these, high-growth organizations can take advantage of a cyclist’s mentality: If strong winds are forecast, plan your route to minimize their effects: Rather than riding an unsheltered road straight into the wind, look for an alternative route traversing the wind direction.
The Beacon in the Storm
Neocol and Salesforce Revenue Cloud, together, happen to have a few alternative routes and suggestions that organizations can implement to minimize the difficulty of the path forward. Scalability and automation are the names of the game:
- Standardized Contract Language for Price Increases
Sales teams are motivated to get the deal done with as little headwind as possible. So, make it easy for the sales team to close contracts that come equipped with standardized price increase language as well as a seamless approvals process. Automate these in your Salesforce Revenue Cloud instance and reduce the manual effort needed to increase prices across the board.
- Automate Price Increases Upon Renewal
Automate the price increase on renewals generated directly in Salesforce without the sales rep having to manually manipulate (or worse, remember the terms) the renewal opportunity. Start with strong contract language like “Prices may be increased by no more than the lesser of 3% of the change in the Consumer Price Index(CPI) per year, subject to a minimum 30 days notice of the renewal price increases”. From there, capture the baseline CPI upon contract signature and automate the CPI uplift within the system itself.
- Reconsider Evergreen Contracts
Evergreen contracts are usually a low-touch process by the renewals team. Unlike termed contracts, evergreen contracts do not renew. Therefore, pricing increases on evergreen contracts can only be generated by a contract amendment. To allow for smoother price increases, rethink your evergreen strategy by way of termed contracts where you can automate the CPI uplift more seamlessly.
- Negotiate Renewals with Impactful Data
Data-driven negotiations can be powerful for high-growth subscription companies. Use the data in Salesforce Revenue Cloud to holistically assess the ARR / MRR of the account, figure out which products they are subscribed to, when your customer last had an increase, and by how much, and what the current list price of a similar product set is. With this data, your sales reps can unlock fact-driven negotiations to help make a stronger case and higher close-rate of price increased renewals.
Smooth Sailing Solutions:
When facing times of economic strife, the unknown can be scary for both consumers as well as businesses. Ensuring your business is pairing the right resources and technology with the right partners, can make the difference between scaling and growing and setbacks and cutbacks. At Neocol, we’ve helped more than 200 high-growth technology and/or subscription companies scale and grow for more than 18 years. During that time, the state of the global economy has drastically fluctuated. We have harvested best practices, stayed on top of creating new and innovative technology solutions, and partnered closely with our customers to help them see around corners and manage headwinds on their route to scale.
If you are interested in learning more about the solutions mentioned above or have other inflation-related challenges to discuss, get in get in touch so that we can help keep your business on the right path.
About the Author: David Holstein has been with Neocol since 2018 and is the company’s Chief Revenue Officer. He has worked in the Salesforce ecosystem for over 8 years helping companies scale and grow by unlocking the full potential of their Salesforce CRM platform.
Learn more about Neocol:
*By partnering with Neocol and Salesforce, your business is able to fully unlock the power of Revenue Cloud, Sales Cloud, and the Salesforce Customer 360 Platform. We help businesses to connect their sales, partner operations, and finance teams allowing them to create a single source of truth for revenue and customer transactions, from purchase to renewal to revenue recognition.
Neocol is a rapidly rising and preferred Salesforce Summit consulting partner advising the world’s most innovative subscription organizations on how to optimize their revenue lifecycle management and billing processes to gain competitive advantage, promote cross-functional transparency, and provide a superior customer experience.