Surviving and Thriving While Building the Impossible
When it comes to SaaS, cash flow is king. But with unpredictable markets, soaring customer expectations, and high scaling demands, balancing cash flow isn’t easy. Sharat Potharaju (Founder, Uniqode) and Chase Wright (Head of Finance, Uniqode) recently shared their insights on optimizing cash flow in a SaaSBoomi webinar, diving into real strategies and steps to manage finances smartly.
Here’s the distilled playbook for SaaS founders who want to grow following the simple golden rule: “Don’t run out of cash.”
The Power of Annual Contracts
Why Annual Beats Monthly
Cash flow for a SaaS startup is dramatically improved when customers commit annually, especially when they pay upfront. With this approach, your revenue is locked in for longer, helping you plan for hiring, R&D, or expansion. Plus, an annual contract keeps churn at bay—clients who’ve committed for a year are more likely to renew.
The Catch? Execution Matters
Annual contracts sound great, but implementing them can be tricky. Your product, pricing, and customer trust all play a role in how effective this approach will be. A lower-cost product may face less resistance, while higher-ticket items might need trial or milestone-based payment options to ease customer hesitancy. Testing the waters with a subset of customers can help you refine and figure out what’s right for you and strike the right balance.
The Multi-Banking Advantage
Protect Your Cash with Multi-Banking
Relying on one bank for all funds is a risk few can afford. Diversifying your cash across multiple accounts safeguards your reserves against bank-specific issues. Uniqode’s approach, for example, includes four banking relationships, each serving different cash management purposes.
Leverage High-Interest and Cash Sweep Accounts
With interest rates varying across banks and the added layer of insured cash sweep accounts, your cash can earn more while it sits. For Indian SaaS founders managing US cash flow, popular banks for multi-banking include SVB, HDFC, and Wells Fargo. An often-overlooked hack? Open a line of credit. Even if you don’t need it now, it’s a strong insurance policy for times of cash flow constraint.
Smart Spending: Scaling Sensibly
Frugality with a Purpose
Growing revenues don’t mean a license for unlimited spending. Each expense needs a purpose aligned with productivity. Critical analysis of expenses, regular reviews, and prudent hiring can curb unnecessary outflows. A weekly review—a dedicated time to scrutinize expenses—gives founders control over cash burn and builds a culture of financial accountability.
Track Leading Indicators and stay Cash Efficient
Building cash efficiency as a mindset starts with avoiding a linear increase in expenses as revenue rises. Keep a close pulse on key performance indicators like ARR growth, pipeline coverage, gross/net retention, cash burn, and burn multiple.
Contingency Planning: What If It All Goes Sideways?
Get the Right Support
No founder should go through cash flow challenges alone. Building a network of trusted advisors and supportive peers is invaluable, especially when the unexpected happens. Seek out SaaS-specific advisors who understand the financial nuances of a subscription model, and keep close contact with founders who’ve navigated similar waters. External perspectives are a game-changer during times of rapid decision-making.
Set Metrics and Stick to Them
Tracking and understanding key metrics, like the “Rule of 40” (growth rate + profit margin should equal or exceed 40%), gives you a realistic snapshot of financial health. Weekly metric checks keep the numbers front and center, ensuring you’re on track to hit long-term cash flow and profitability targets.
Contingency Plans Are Not Optional
Secure additional credit, maintain reserve funds, and/or have an alternate payment plan for critical vendors. Do this before you need it. Having a backup plan buys you time and options.
Key Takeaways
- Prioritize Annual Contracts – Aim for upfront payments and a longer-term commitment with clients. Your cash flow will thank you.
- Multi-Bank Your Money – Spreading cash across different banks, especially with high-interest options, reduces risk and maximizes returns.
- Practice Productive Frugality – Every rupee or dollar spent should drive productivity. Weekly reviews help spot unnecessary expenses.
- Build a Network and a Plan – Surround yourself with supportive advisors and peers, and have contingency plans in place before you need them.
- Track and Review – Consistently monitor metrics like ARR growth, burn, pipeline coverage, retention, and the Rule of 40 to stay financially healthy.
Final Thoughts
Cash flow can be the silent killer or the secret strength of your SaaS business. By taking small but deliberate steps, founders can navigate financial challenges with confidence. In the words of our guest speakers: “Build a cash-efficient mindset from day one to not only survive but to thrive as you grow.”
This article captures the learnings from our Playbook Roundtable Session. To learn more about Playbook Roundtables check out our initiative and join the community for exclusive insights and takeaways you can put to action.
