Buy vs. Build: Taking Charge of the Subscription Future
With subscriptions running the world, registering the highest profits, and becoming a household business model, it seems fair to question the origins of the subscription billing software. Would it be better for your business to invest in a billing solution or build your recurring billing system?
This is one debate that keeps on reappearing without ever being solved. The current circumstances complicate matters a bit. With higher inflation levels and the subscription market more challenging and crowded, businesses must struggle to ensure their service stands out. So no longer is the investment cost the primary argument in this debate, but rather a combination between this and the fundamental components that can turn any subscription into a unique business.
Opportunity costs, implementation times, and in-house resources are some elements currently dominating the build vs. buy debate. Business needs and market expectations have overly complicated this discussion, making it difficult for businesses to make decisions.
So, let us dive into this discussion and analyze what kind of billing solution would best suit your needs.
Subscription Billing Solutions: Basic Facts
Before we plunge into the build your billing system or buy one, it would be wise to understand a few fundamental aspects that apply in all cases. A powerful subscription billing platform, built or in-house, should have the following components. Without them, you could jeopardize your entire business, and you will see why in a moment.
One of the must-have features any recurring billing system should have is security. With the number of fraudulent transactions spiking through the roof in the last few years, you can’t be too careful. Fraudsters are incredibly creative in developing new ways of tricking the system. The biggest issue is that apart from heavy financial losses, which can be significant, you risk losing something almost impossible to regain, your customer’s trust. Equipping your business with innovative security software that can quickly identify fraudulent transactions should be a significant concern for SaaS developers.
Payment gateways are also of importance when discussing billing systems. One could say they are crucial. Unquestionably, you can imagine that no billing would take place without one. However, the problem isn’t integrating with one but facing up to technical difficulties that could appear in specific situations like downgrades, upgrades, or coupon handling. Any errors in this segment could negatively affect customer experience resulting in losses.
The 8 Features Your Billing Software Needs To Have
Indeed, the before-mentioned elements are essential. But we are no longer at the point where we can solely afford to review the vital features. To ensure your saas business processes are running smoothly and profit is making its way through the door, we have to look at desired features. To turn SaaS billing into a key business driver and customer experience differentiator, you need to expand your scope and evaluate build versus buy considerations in these additional areas.
SaaS Billing Flexibility
Given the increased level of competition within the subscription economy, it is imperative that you offer customers flexible billing options. A genuinely professional SaaS billing software permits users to set up different subscription options, test pricing models, and manage promotions, discounts, free trials, and even freemiums. One must not forget about upgrades, downgrades, packages, and bundles, as these are the sales mechanisms that will bring home more subscribers and allow your business to stay among your customers’ preferences.
Tax Compliance
This feature is, without a doubt, complex. However, it is crucial. 2019 changed everything for digital product developers, as that was the year software became subject to tax. The problem with tax isn’t necessarily that it exists, but rather the multiple shapes and forms it takes worldwide. When selling internationally, you are subject to global tax and exposed to thousands of very different jurisdictions. Sales tax, VAT, GST, whatever the global checkout tax type might be, your business needs to effectively assess and apply rules and regulations whenever the client reaches your SaaS checkout.
Automated Invoicing
The core business goal for all SaaS developers is to get paid. And achieving that goal relies on your software’s capacity to send invoices in time. It is advisable to avoid third-party integration with invoicing platforms, as this could considerably complicate things and expose you to what you will quickly recognize as costly errors. The automated invoicing feature will organize your SaaS business, maintaining a firm grip over your recurring revenue.
However, it would be wise to ensure that the automated invoicing software can support complex account structures. It can easily configure and deliver unique invoices depending on business type or location.
Payment Methods & Currencies
To sustain your global growth, your billing software needs to be able to process payments made through different methods and in various currencies. Localizing transactions secures your business with the trust of your customers and helps you penetrate foreign markets more easily.
Another factor you need to consider regarding payment is using PCI-compliant software. Knowledge of compliance is essential in this regard, and you cannot do without expert knowledge. So, either you welcome industry experts to your staff if building your billing software or ensure that the solution you invest in can provide your extensive compliance support.
Smooth Integration
Your billing solution needs to integrate seamlessly with all other systems you might be using to ensure stability and efficiency. This feature is particularly relevant for the overall health of your SaaS business.
Imagine experiencing an integration glitch between your SaaS billing platform and a third-party finance and tax solution you may be using. Your customers may end up on your checkout pages. Because of a faulty integration, they might be unable to visualize the taxes specific to their purchases, failing to complete the transactions. The financial health of your company may be at stake.
Reporting Capabilities
Being part of a heavily competitive market, you need to constantly stay connected with the state of your SaaS business health. And the only reliable way you can do that is by looking at data. Access to relevant data like the MRR, churn rate, ARR, and so on through in-depth reports is a great way to remain transparent regarding your SaaS’s profitability.
Data helps in more ways than you might think. From setting up a growth campaign to assessing costs and operational efficiency, data is a partner you will most certainly rely on. Therefore, whether you buy or build your billing solution, try not to overlook the reporting feature of the system.
Dunning Management
Credit card declines represent a problem for the subscription business. Significant revenue is lost due to failed transactions. While you might not control each transaction, you can decrease credit card declines to a certain point, improving your overall recurring revenue. A way to do this is through dunning management.
This feature refers to monitoring customer accounts, searching for credit cards with an upcoming expiration date, and notifying the clients regarding this issue. By sending automated messages, you can recover revenue that would otherwise be lost.
Customer Support
Customer support might seem like a nice-have feature, as billing software can operate efficiently regardless. However, customer support becomes essential in reality, given the highly competitive nature of the subscription economy. What if your customers require help? How can you provide them with the much-needed assistance?
Customer support takes many forms. Apart from an actual phone number, email address, or online chat option that permits subscribers to contact you directly, you can also provide users with resources like articles, onboarding documents, tutorials, and guides
When do you need it?
Need is the one that shapes time. So, if you urgently need a solution of this kind and by urgently,
we do not mean tomorrow, but rather 3-6 months from now, then you might discover that buying is the right solution for you.
Build vs. Buy: What to consider?
Now that we’ve reviewed the must-have features of SaaS billing software, we need to settle this debate. Or at least leave you with sufficient information to decide for yourself.
Comparing these two alternatives comes down to three aspects:
Time-To-Market
Cost
Knowledge
Time-To-Market
Considering this system’s importance, one can easily assume that having functional software is quite urgent. The level of urgency will determine whether you wish to build your own platform or buy an existing one. Of course, if you already have a system in place and are merely looking for an improved version, you could consider building one.
Investing in an existing billing platform takes weeks, so there is no comparison as far as time-to-market is considered. However, this, too, might be risky, as it could take years to build efficient, fully operating software. During this time, your business might be losing revenue, unable to keep up with its competition.
Cost
This is an aspect all SaaS developers consider first and is only natural. Try to look at the billing platform as more of an investment in your business rather than a necessity. As long as it has the previously mentioned features, you will be able to recover this operational cost and boost your revenue.
An in-house team of developers will be required to build complex, feature-rich software and any solution for that matter. This generates costs of different kinds. You must hire dedicated developers or let your existing tech team handle this project. This would mean taking them off other projects, leaving you with fewer resources to expand.
Unique Features
For the sake of the argument, think of how billing software developers market their product. They start to explain the benefits clients can enjoy,
benefits such as support, customer and vendor support that is, fast error handling, reputation, promotion management and so on. These are
features you need to offer yourself.
When deciding to build instead of buying, you need to be able to offer yourself everything an already existing solution would otherwise provide you with.
Sounds simple, but in reality, it’s not.
Knowledge
Let’s think a bit about the must-have features we’ve previously named. Tax compliance, payment methods, and customer support all require extensive on-topic knowledge. Do you have global tax experts ready to take on the workload? Monitor and implement changes? How about customer support specialists?
When buying an existing billing platform, the pressure has been lifted off your shoulders. You’re only required to be an expert in your field. Your partner will handle everything else.
Bottom Line
This debate can go on forever. You are the only one who can decide upon your company’s direction. The only thing you need to remember before calling up your IT team is whether or not you can afford a project of this magnitude. And one more thing. There is no recipe for developing the ideal SaaS subscription billing software. It’s not going to happen on your first tricky. Do you have the time to handle all sorts of hiccups and still grow your business? Or wouldn’t it be better to partner up with one of the many SaaS eCommerce solutions out there? We’ll give you a tip. We are your best choice.
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