The world of SaaS is constantly evolving to be better, smarter, and more efficient. To stay ahead of the curve, SaaS businesses need to be adaptable and flexible.
One area that is long overdue for an innovative makeover is B2B sales and payments. Traditionally, B2B SaaS products are offered in high-value annual or multi-year contracts because they generate the most revenue and stability for the vendor.
But, this method has its problems. To entice prospects to buy, vendors must offer steep discounts on these contracts and sell in long, expensive sales cycles. When combined with implementation costs, this can lead to a large chunk of potential revenue being lost. And if the vendor wants to avoid these problems, their only option is to sell in short-term contracts that generate less revenue and more churn.
This system can make it challenging for SaaS vendors to secure the stability and upfront capital needed to grow and invest in strategic growth initiatives. And with the economic downturn causing runways to shrink, sales cycles to lengthen, and conversion rates for high-value annual contracts to lower, this problem is only getting magnified.
Fortunately, there’s a solution: B2B buy now, pay later (BNPL).
This revolutionary approach allows customers to pay for annual contracts in installments while vendors get the full contract value upfront. By increasing cash flow, shortening sales cycles, raising conversion rates, and simplifying billing processes, BNPL for B2B can help both finance and sales teams hit their goals with ease.
This article will take a closer look at how B2B BNPL solutions can help businesses overcome the challenges of modern SaaS sales cycles.
The benefits of B2B BNPL for SaaS businesses
B2B BNPL solutions can provide several benefits to your organization that can help you spend less on customer acquisition, generate more revenue, improve your bottom line, and reduce the time it takes to close deals.
However, the three most tangible and immediately noticeable benefits of B2B BNPL are accelerated sales cycles, increased ACV, and the chance to improve your cash flow management. Here’s a closer look at how BNPL for B2B SaaS can improve these factors.
Accelerate sales cycles
B2B SaaS sales cycles have always been long, but since the downturn, they’ve gotten even longer. A survey from RevOps reports that 49% of SaaS businesses have seen an increase in their sales cycle length in 2023, while a report from venture capitalist Tomasz Tunguz shows a 24% increase in sales cycle length for startups, with the average sales cycle increasing from 65 to 75 days.
As lenders become less generous with funding companies and budgets tighten, businesses have less cash to spend on expensive annual contracts, which drives up how long it takes them to make a purchasing decision. This also increases the need for vendors to offer discounts or lower-value, short-term contracts.
A B2B BNPL solution can help with this because it allows you to offer less expensive, flexible payment terms, which relieves the financial burden on buyers and allows them to make a decision more quickly. When less upfront cash is required, it’s a lot easier to convince buyers to buy, especially if they’re in a tight financial position.
Achieving shorter sales cycles without sacrificing the full contract value also allows you to secure a higher and more predictable ARR while spending less time and money on customer acquisition. This can help you satisfy the needs of both your finance and sales teams.
Increase ACV
Another significant positive benefit of implementing BNPL for B2B transactions is that it can help you increase your ACV, without having to make the sacrifices ordinarily involved with a high ACV.
Usually, a SaaS business needs to choose between two imperfect options. They can either focus on closing high-value deals with long-term contracts to maintain a high ACV, which translates to longer sales cycles and a smaller customer base. Or, they can offer lower-value short-term contracts, which has the benefit of shortening sales cycles and allowing you to access a wider pool of potential customers—but leads to a lower ACV and higher churn rates.
B2B BNPL solves this conundrum by allowing you to immediately get paid in full for a high-value long-term contract, while your customer gets to pay in more affordable, easier-to-sell installments. This means that you can combine the short sales cycles of low-value contracts with the high ACV of high-value contracts, without any of the downsides.
And, since it requires less of an upfront investment from your customers, you also get to sell to a wider range of prospects who ordinarily may not be able to afford your full annual or long-term contract.
Improved cash flow management
With the downturn tightening everyone’s budgets, SaaS companies are finding it harder to generate revenue from sales or secure funding from VCs or debt lenders. This can make it extremely challenging to extend your runway and free up the cash flow necessary to grow.
This is especially an issue for startups that are working with tight budgets and businesses that are plateaued at a certain level of growth, but SaaS businesses of all sizes are feeling the squeeze.
Fortunately, B2B BNPL can act as a crucial bridge to secure the cash you need to grow when your typical cash generation methods fail.
By expanding your customer base and shortening your sales cycles through offering easy and affordable installment payments, a B2B BNPL solution can help you secure more sales. And, since you get the full annual contract value upfront rather than waiting months for recurring payments to accumulate (like you would if you offered short-term contracts), a B2B BNPL solution can drastically increase the amount of immediately accessible revenue you have to invest in growth.
This extra cash can be just the thing your business needs to boost your numbers to secure more funding, make it to your next funding round, or invest in an important round of new hires, equipment, or product development initiatives. It can also help you get out of the common startup trap of a bad cash flow management routine based on paying back debts and just barely managing to tread water.
How BNPL for B2B works
Much like BNPL solutions for B2C companies, a B2B BNPL solution is an installment loan provider that acts as a third-party payment processor for the transaction and financer for the buyer.
After the buyer agrees to the payment terms of a deal, the BNPL provider pays the vendor (i.e., the SaaS company) the full contract value upfront and creates a loan that the buyer can pay back in installments. For SaaS companies, this usually means the buyer agrees to pay off an annual contract through monthly or quarterly installments—but BNPL solutions can be configured to handle other scenarios as well, like biannual contracts or quarterly installment plans.
This setup ensures that all parties benefit from the transaction, without the vendor bearing any risk if the buyer defaults on payments. The BNPL provider handles collections, billing, reminders, reconciliation, and all other aspects of the buyer’s payments, leaving the vendor to focus solely on closing the deal.
How it works for vendors
SaaS vendors can quote and close deals more quickly by offering buyers the chance to use a BNPL solution rather than paying their full contract upfront. All you have to do is set up the payment terms and details of the deal within the vendor portal on a BNPL platform, then send a link to your buyer.
From there, the buyer can agree to the terms, submit their first payment, and set the rest of their payments up to be submitted automatically. Then, the BNPL solution sends the vendor the full value of the contract upfront for immediate access, while the buyer gets to enjoy paying in affordable installments.
How it works for buyers
After agreeing on the terms of the contract with the vendor, the buyer will receive a link to their BNPL buyer portal through a direct email, or an integration with a CRM or sales management tool of the vendor’s choice. From there, the buyer can formally agree to the terms, submit their payment information, and start making payments.
Buyers get immediate access to the software tool and can choose what installment plan works best for them.
How B2B BNPL combines the best of long-term and short-term contracts
A SaaS B2B BNPL solution offers several advantages over both long-term and short-term contracts and often can combine the benefits of both, without the downsides of either. Here’s how BNPL for B2B can improve each scenario.
Long-term contracts
Traditionally, long-term annual or multi-year contracts require customers to pay the entire cost of the contract upfront. Although this means improved access to cash flow and a better ARR for the vendor, this can be a significant barrier to entry for buyers, particularly for small businesses or startups—which can, of course, decrease the vendor’s success at closing deals.
With a B2B BNPL solution, customers can pay for long-term contracts in short-term installments, making it easier for them to manage their cash flow. This allows vendors to access a larger pool of potential customers, without having to sacrifice the typical high ARRs of long-term contracts. Plus, vendors don’t have to sacrifice their immediate access to the full long-term contract value.
Short-term contracts
Short-term contracts can be an attractive option for buyers that need flexibility and vendors that need higher conversions. However, they can also be challenging for vendors, as they often require more resources to manage, more energy spent on billing and collections, and, of course, more churn and less immediate access to cash.
Through the use of installment payments, B2B BNPL solutions offer the flexibility of short-term contracts to buyers, without the usual hassles for vendors. Vendors get to enjoy the upfront access to cash and guaranteed ARR of a long-term contract, without the loss in conversions. And, they don’t have to deal with the time-consuming billing and collection hassles of short-term contracts, as the BNPL solution takes care of that for them.
Close more deals faster with Capchase Pay`
If you’re a B2B SaaS business looking to shorten sales cycles and increase your ACV, a B2B BNPL solution may be the missing link between where you are now and where you want to be. Capchase Pay is one such solution that can help you close more deals faster, accelerate sales cycles, increase ACV, and improve cash flow management.
The benefits of Capchase Pay
Capchase Pay is a BNPL solution that allows you to offer easy and affordable installment payments to your customer while you get paid the full contract value upfront. In addition to helping you access more cash immediately, shorten your sales cycles, and increase your ACV, Capchase Pay also delivers these benefits:
- Manages billing and collections for you, so you don’t have to worry about it.
- Converts more prospects and expands your pool of potential customers.
- Offers a user-friendly platform that lets your customers easily submit payments.
- Increases your runway without needing to take on debt or dilute ownership.
Get started using B2B BNPL with Capchase Pay
If you’re interested in closing more deals faster, increasing your cash flow, and experiencing the host of other benefits a B2B BNPL solution can offer, schedule a call with us to learn more about how you can integrate Capchase Pay into your sales process—or click here for more information.
