Why startups should consider CPQ (Configure, Price, Quote)

Why startups should consider CPQ (Configure, Price, Quote)

Why startups should consider CPQ (Configure, Price, Quote)

In today’s tech world, Modern Business has taken center stage, with a focus on evolving how the world does business in ways that are better for people, companies, and the planet. This school of thought is centered around subscription-based business models, which require a different approach to pricing and quoting than traditional one-time transactions.

As a result, the requirements for CPQ (Configure, Price, Quote) software have shifted towards monetizing recurring, usage, and hybrid offerings. CPQ software should be able to handle complex contract structures, allow finance to invoice and recognize revenue accurately, and manage subscription modifications. CPQ should provide the flexibility and guardrails for sellers to rapidly close deals.

Let’s explore how CPQ software has evolved to meet the demands of Modern Business and the benefits it can deliver to startup SaaS companies.

 

When and why should startups consider adopting a CPQ solution?

CPQ is often the first opportunity for startups to connect the silos between sales and finance. Once startups establish product market fit and are ready to scale, they should consider CPQ to scale and achieve the following goals:

Scale enterprise/assisted-sales

Successful B2B and PLG startups often move upstream to grow revenue, contract sizes, and increase their customer base. To transition successfully, startups should turn to CPQ software to standardize deals, implement guardrails for sales, manage complex deals, and operationalize approval processes.

PLG choices to scale sales have a long term impact on growth and friction

Engineering a bespoke process for sales-led customers can result in heavy technical debt and a process that is not optimized for growing enterprise business. In addition, bifurcating the sales and billing processes can lead to poor customer satisfaction and an inability to shift customers between direct and sales assist.

Iterate pricing and packaging; add multiple products

To capture more market share, increase revenue, and hone in on optimal pricing, startups should iterate pricing regularly. Openview recommends that SaaS companies assess pricing for improvement opportunities on an annual basis, if not more often.

For many startups, the technical debt to iterate pricing and packaging for sales or product-led sales is too great.

Finance is buried in manual quote-to-revenue processes

At scale, startups struggle with time-consuming and error-prone manual processes for quoting, invoicing, and payments.

Automating the quote-to-cash process with a CPQ helps to reduce errors, improve accuracy, and speed up the sales process, while freeing up finance teams to focus on more strategic activities.

 

What are the benefits of a CPQ software?

There are several other advantages of using CPQ software for startups, including:

Improved sales productivity

CPQ software can automate the approval flow and many of the manual tasks associated with creating quotes. CPQ facilitates faster closes, fewer contract mistakes, and happier customers.

Guardrails reduce sales friction

Operationalize the parameters and controls for the sales team through CPQ, ensuring that only the current products and pricing options are available to create quotes.

“What helps me sleep at night is that there are greater controls in place … The sales team has clear guardrails in place and can’t sell things that are on the roadmap, but not yet available. We now have much more oversight upstream in the sales process.”

Lauran Feeney, Secureframe Controller

Improved customer satisfaction

CPQ software can provide a seamless experience for customers, with quotes that clearly communicate contract terms, fees, and schedules. Downstream, automated, and accurate invoices will improve customer satisfaction.

Automating finance operations

An impactful and differentiated benefit of Zuora CPQ is that downstream financial operations are automated. When contracts approved in Zuora CPQ are executed, and flow seamlessly into Zuora Billing, invoices are generated accurately and on-time according to the contract terms, saving the finance team valuable time and reducing errors. Automated financial operations lay the foundation for revenue recognition and reduce audit risk.

Painless contract modifications

As the needs of customers change and grow, Modern Businesses should enable their teams to efficiently support contract modifications. Recurring revenue, including SaaS, usage-based pricing, and hybrid pricing have multiple contract elements including contract durations, payment terms, and allotted usage.

Manual contract modifications can be time-consuming, error-prone, costly to manage, and confusing for customers and sellers alike. CPQ software that incorporates real-time contract and billing data to amend contracts automatically can save a lot of time, confusion, and downstream workflow.

Better analytics and reporting.

CPQ software that uses a well architected product catalog with flexible pricing models, contract terms, and support for contract modifications can enable businesses to gain valuable insights into product and sales performance, allowing data-driven decision making.

 

Conclusion

Configure, Price, Quote (CPQ) software can be a valuable tool for SaaS startups who value agility, frictionless growth, and experimentation. CPQ software can also help startups standardize their sales processes and improve efficiency, reducing errors, and maximizing revenue.

All CPQ solutions are not created equal. Startups with recurring revenue models should consider the ability for their CPQ to:

  • Support usage-based and hybrid pricing models
  • Support multiple products on a single contract
  • Automate quote-to-cash
  • Integrate deeply and natively in their CRM
  • Support complex midterm changes

Written by:
Ronak Majmudar – Head of Zuora for Startups

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