Did you know that on average, companies use more than 300 SaaS apps? We use them to run our entire business — from sales & marketing, to operations & HR and everything in-between. And as we have come to rely ever more on SaaS, it has become a major spending category, the third largest in fact, behind people and rent!
For startups, conserving cash has always been important, and this is even more relevant in the current economic landscape. So keeping on top of recurring payments is critical, yet it’s often badly managed or even neglected entirely.
We see three sources of over-spend:
- Hidden SaaS
- Unused licenses
- Multiple tools with overlapping functionality
Let’s take a look at each of these in more detail.
Hidden SaaS
A common yet often overlooked issue in many startups is the existence of “hidden SaaS” tools that fly under the radar. These are the applications picked up by various teams or individuals to help them with a task or process. But without a centralised adoption process, it leads to a scattered landscape of software tools that finance and operations teams are unaware of.
This lack of oversight results in overlapping functionalities, unnoticed subscription renewals, and a murky central understanding of overall software spend.
The impact of Hidden SaaS:
- Financial transparency: Without clear oversight, SaaS expenses can quietly accumulate, creating financial blind spots in your budget.
- Operational inefficiency: A jumble of overlapping tools leads to confusion and reduced productivity, as employees navigate through an array of software options.
- Security & privacy considerations: Each new, unvetted SaaS tool potentially introduces security and privacy risks, making your startup vulnerable to data breaches or compliance issues.
- Resource optimisation: Understanding the full scope of SaaS usage is crucial for allocating resources effectively and ensuring each tool genuinely adds value to your operations.
Unused licenses
According to insights from Productiv, a staggering 53% of SaaS licenses go unused. This isn’t just about a few dormant accounts; it’s a significant drain on your startup’s resources.
Here’s why this can happen:
- Overestimation of needs: When subscribing to a SaaS tool, it’s common to overestimate the number of licenses required. Startups, in their growth phase, might buy more licenses than currently needed in anticipation of future expansion.
- Employee turnover: High turnover rates in startups can lead to a surplus of licenses. When employees leave, their licenses often remain active, unused, and unnoticed.
- Lack of usage monitoring: Many startups lack a system to monitor how frequently different tools are used. Without this data, it’s challenging to identify and eliminate unused licenses.
Multiple tools with overlapping functionality
In the quest for the moving quickly, startups often adopt new tools that only marginally differ from existing ones. Teams or departments choose their own tools without considering what’s already being used elsewhere in the organisation.
Just think about how many project management apps your business probably already has…
How to do a SaaS inventory
So now we understand why it is important to have clarity on your SaaS stack and how complex the situation can be. It’s time to roll up your sleeves and conduct a thorough audit of your SaaS subscriptions.
Step 1: Establish the goal
Before diving into the inventory, it’s crucial to establish a clear objective. This will serve as the guiding light for the entire process and the people involved. Your goal will be specific to your company and your situation, but it may include saving money, enabling better financial management, enhancing operational efficiency, and/or ensuring software compliance and security.
Step 2: Gather your troops
In very small startups, this project might be undertaken by a single individual, but for most you’ll want to tackle it with a cross-functional team. This team might include finance, IT, operations, and key department heads.
This audit is like any other project in your business — so assign a project lead to coordinate the efforts, maintain communication, and ensure that it stays on track.
Step 3: Collect the data
First you need to decide on how information will be collected. You can run staff surveys and work directly with each team to find out what they are using, but your main source of data will be from your financial records. Scour through your bank statements, credit card bills, and accounting software for any SaaS-related expenses.
Next you need to choose how to record the data. For many startups, a simple spreadsheet or a platform like Airtable is a good starting point. They are flexible and can be customised according to your needs.
Another option is using a dedicated SaaS management and tracking tool. We might be a little bit biased, but we believe that 🍋 lemon is a great solution for startups. It’s a subscription management tool designed specifically for startups, and it’s free too!
Tip: Ensure whichever tool you use is accessible to all relevant team members and can be easily updated.
Tip 2: Don’t forget your free subscriptions. Whilst you’re not paying for them, they are still worth tracking. They may be upgraded one day, or present a security risk.
What to track: for each SaaS tool, ensure you record the following information:
- Vendor name: The company providing the service.
- Product or tier name: Specific product or service level being used.
- Status: paid subscription, trial, free, etc.
- Payment frequency: Monthly, annually, or per usage.
- Payment method: credit card, direct debit etc
- Price & currency: How much you’re paying, and in what currency.
- Value metric: What does this app charge for — it could be a flat fee, per seat, usage (e.g. projects, contacts) a tiered set of features, or something else.
- Add-ons: what extras you are paying for.
- Renewal date: When are payments due.
- Which department use this: Which teams or functions in your business are using this tool.
- Owner: which person is responsible for this tool (if any!).
- Purpose: The role that this tool serves in your organisation.
- Key features: The key functionality and features that you use.
Step 4: Review and insights
Well done, the hard bit is over!
You now have an overview of all your SaaS subscriptions and can start answering questions such as:
- How much are you spending?
- Which team is spending the most?
- Are there any redundant or overlapping tools?
- Which tools have unused licenses?
- Are your SaaS expenses aligned with your business priorities and objectives?
- Is there a significant variance in tool usage across different teams or departments?
- Are there any upcoming renewals or contract negotiations where you can optimize spending?
- Do you have the right mix of tools to support your current and future business needs?
With these insights, you can make informed decisions to optimise your SaaS portfolio, ensuring that every tool you invest in adds real value to your startup.
Beyond Inventory
Setting budgets
Using the data from your inventory, set clear budgets for your SaaS spend. This will help in making informed decisions about new subscriptions and evaluating the existing ones. If you have heads of functions (e.g. engineering, marketing) consider whether each department should have its own SaaS budget.
Decision-making and responsibilities
Determine who in your startup will be responsible for SaaS spend. This might be the CFO in larger startups or a collaborative effort in smaller teams. The key is to establish a clear decision-making process.
Tracking usage and expenditure
Keep an eye on how each SaaS product is used. Are you getting value for your money? Regular tracking helps in identifying underutilised tools that can be downgraded or eliminated.
Integrate into your employee on-boarding & off-boarding process
When a new employee joins the team or leaves the company, ensure that your SaaS usage is updated accordingly.
Regular review and audits
This review process is not a one-time activity; make it a regular part of your operational review to keep your SaaS ecosystem lean and efficient. Changes in subscriptions, new tools, or discontinued ones should be promptly reflected — get into the habit of updating your inventory as soon as software usage changes.
🍋 Meet Lemon
Think of Lemon as your management solution for all things SaaS. Designed specifically for small businesses and agencies, Lemon offers a user-friendly platform to effortlessly manage your subscriptions.
Why Choose Lemon?
- Centralised dashboard: Get a unified view of all your SaaS subscriptions, including costs, renewal dates, and usage metrics.
- Intelligent insights: lemon doesn’t just organise your data; it gives you insights into your spending trends and helps identify areas where you can save.
- Collaboration made easy: Share access with your team, making collaboration and decision-making more transparent and efficient.
By conducting a thorough SaaS inventory and utilising tools like Lemon, you’re not just organising your subscriptions; you’re paving the way for more informed decisions, better resource allocation, and ultimately, a more efficient and cost-effective operational model for your startup.