Investing in management tools: why it’s a good move

Startup leaders often focus on acquiring new customers, yet the importance of managing the business’s operations can't be overstressed. Insufficient oversight can ruin projects and the company as a whole. Picking the right business management softwares significantly mitigates this risk. Here’s why CEOs and CFOs should gear up properly to track growth, cash flow, acquisition costs, and other critical indicators.

1 - Business Management Softwares: What Are We Talking About?

Regardless of what a startup sells, some softwares are essential to run the business from day one. Let's dive in.

1.1 - Enterprise Management Applications

From the startup's beginning, commonly used tools include:

• A CRM — customer relationship management (e.g., Pipedrive, Hubspot, Salesforce).
• Project management tools (e.g., Trello, Asana, Notion).
• Collaborative communication apps (e.g., Teams, Slack, Google Chat).
• Sales administration tools for quotes, orders, and invoices.
• Pre-accounting software and team expense management.
• HR management softwares (contracts, payroll, expense reports, recruitment, etc.).

1.2 - Financial Reporting Tools

A SaaS-accessible software ensures smooth operation across different company functions. For finance and management, additional tools aid in reporting and dashboard preparation. These offer features to process, store, analyze, and display data effectively, helping leaders:

• Generate reports through data aggregation and structuring.
• Facilitate day-to-day activity monitoring and operational decision-making based on actionable KPIs.
• Prepare for you next funding round (either equity or debt)

2 - Why Adopt Subscription Management Tools from the Start?

Business founders first prioritize offer development and product-market fit. However, setting good financial management habits early is crucial.

2.1 - Setting the Right Management Habits

To drive an innovative company project, start with a rigorous, coherent, and quantified business plan.

💡This step fosters good financial management practices, including calculating key KPIs. Comparing actuals with business plan projections in a tool like Fincome allows for swift and informed management decisions.

2.2 - Avoiding Cash Burn Through Adequate Monitoring

The first subscription management tool to deploy should monitor cash flow. Careful tracking prevents startups from running out of cash due to unawareness of their cash burn rate.

2.3 - Cost Control with a management tool

Startups must analyze costs from the beginning, especially when spending precedes revenue. Monitoring costs ensures they don’t exceed their capacity, a crucial step in avoiding financial strain and staying within the budget outlined in the business plan.

3 - Why Keep Track of Management During Growth?

Beyond launch and initial growth phases, young companies need to continue refining their financial oversight. Fast growth and team expansion require careful management, especially to track return on investment (ROI) metrics such as customer acquisition cost (CAC) and CAC payback period, ensuring sustainable growth and profitability.

3.1 - Tools to track return on investment

When planning growth, CAC (customer acquisition cost) is crucial as it determines long term viability. SaaS businesses must pay close attention to LTV/CAC — this measures average revenue for a customer against acquisition costs. If it is too low, it will be hard to reach profitability. As far as possible, it should equal or above 3:1.

3.2 - A Metric to Keep a Close Eye On: CAC Payback Period

It's also crucial to measure the profitability of the Customer Acquisition Cost (CAC) to avoid getting trapped down in high marketing expenditures, which will lead to minimal incremental customer revenue. To do so, the CAC payback period measures the ROI of your spending. This ratio allows a company to know how many months of customer subscriptions it takes to cover its average cost for acquiring a customer.

If the timeframe turns out to be too long, thanks to its management tracking software, a leader can consider several solutions:

• Reduce the level or nature of marketing expenses invested and seek ways to optimize their efficiency;
• Revise the commercial offer (like pricing, for example) to improve the average ARR (Annual Recurring Revenue) per customer.

4 - Focus on Your Business While Keeping an Eye on Your KPIs

For a leader of a growing startup, juggling all tasks, especially growth and financial tracking, can be quite a struggle. So, how can one save time on the financial management of their business?

4.1 - Identifying Resources, Skills, and Tools for Management

Entrepreneurs should delegate tasks either within the team or externally if they lack the resources in-house. The accountant (or part-time CFO) often becomes the right-hand of founders for financial and business management issues. They are invaluable for implementing the first business performance tools, analyzing the numbers, and making recommendations.

Leaders and their advisors may turn to decision-making management tools (or Business Intelligence tools). These tools provide valuable insights. They allow for a very detailed breakdown of revenue and costs. However, this type of software often requires a significant investment, both for implementation and for user training. The setup requires custom integration work, which can last several weeks, with a substantial cost.

4.2 - Choosing a turnkey subscription analytics tool built for startups

Fincome offers an accessible and customized solution for SaaS startups. Our platform automates the KPI calculation process. It retrieves data from various sources, processes it automatically, and displays it in a dashboard that summarizes the essential KPIs for managing a SaaS company.

Management tools are crucial investments for the inception and growth of a startup. If you’re looking to streamline the adoption of such software, Fincome is here to assist in integrating our solution into your company.
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💡 Discover more:

• ‍The most common mistakes that kill SaaS startups
• ‍SaaS reporting is a must (+ the best KPIs)‍
• Tips for communicating with your SaaS investors‍
• Your quick guide to automated reporting for SaaS‍
• KPI you should report on depending on your startup stage

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