SaaS Companies: Four Signs You've Outgrown Stripe
If you're employing a DIY payment solution such as Stripe, making it work for you and your company is the responsibility of the developers. From testing plugins, or implementing new payment methods, maintaining Stripe can be very time-consuming.
Instead of spending all day working on your payment platform for you, your developers could be focusing on your product?
It is among the most important reasons growth consultant Fred Linfjard advises SaaS businesses to think about the use of a merchant of record instead of a DIY approach.
Fred is a prior customer of Stripe and is now an advisor. I spoke with him live on LinkedIn about four signs that SaaS firms have outgrown Stripe. Below are some the highlights of our discussion.
1. You're Running into Issues Localizing Payments
"If your strategy for growth is to sell your product in more than, let's say 2 to 3 currency or payment options that are local to you and you want to scale, then the Stripe model could be slow." Fred explained.
Another sign that you've grown out of Stripe is when you're experiencing an increase in demand for your product in countries Stripe isn't able to support.
In general, if you're spending a lot of your time localizing payments then you should consider the use of a system that handles much of it automatically.
2. Recurring Disruptions to Service Are Impacting Your Sales
Perhaps you keep finding yourself in situations that you're experiencing cards being declined or disruptions to services related to integrations, or technical issues.
One question to consider in this instance is whether you're getting the support you need from Stripe to resolve these issues fast. If you're not getting the support you need, and the issues keep continuing to happen, it could be time to move on.
A major distinction in an DIY solution such as Stripe and an MoR solution is support around risk and compliance. When using the DIY system, all the obligation to stay PCI compliance (and similar regulations) is on the seller. If you transfer all this responsibility over to an outside party, it is possible to concentrate on the core of your product. This leads us to our third point.
3. Your Developers Are Too Busy To Focus On Your Product
If you're in a situation where you're using a large amount of internal development resources to build and manage your backend monetization configuration with Stripe, this is an issue. This means you're shifting your attention away from more important task, which is improving product market fit and user experiences that are pleasing to the customers.
It is common when the setup you have is complex integrations that are difficult to keep up.
So if you're spending so long on difficult issues, bugs and other tasks that have to deal with Stripe and your backend's monetization configuration, then it's definitely will be the right time to think about the possibility of a different solution.
4. Managing Sales, VAT, and GST Taxes Is a Huge Internal Burden
"Along with development resources, another major component of constructing and maintaining a payment system is tax compliance and management," Fred said.
There's a lot to be done to ensure the right sales tax or VAT is taken out of every order, and also that you're legally registered in every state or country you do business in.
Furthermore, every nation is subject to different rules regarding how taxation is applied to digital goods which are changing all the time. If you're not keeping up with the latest changes, or are demanding a significant amount of bandwidth and time, the MoR model may be beneficial for your needs.
You may encounter other circumstances such as high charges for transactions, difficulties in creating a custom checkout or an inability to stay compliant to industry standards -- that are causing you to review your payment options.
Here's the reason Fred suggests the merchant in record system (and what exactly it is).
What exactly is the definition of a Merchant of Record and Why Is the MoR Model ideal to Software Companies?
"Operationally this becomes an resell partnership" Fred explained. "So there is an MoR vendor as the middleman that sells your product to the vendor of record, and the MoR vendor then resells the item to the end customer."
A majority of this procedure is invisible. Customers still come to your website to read about and buy your products. However, the MoR will appear on the receipt.
Fred was working with a photography SaaS firm as their ecommerce manager when he discovered .
"I basically stumbled upon the the MoR model on the spur of the moment. I saw the opportunity to outsource and free up resources without having to worry about taxes and whatnot, so we could concentrate on our the core business and product activities," Fred explained.
Every aspect that come with selling a productsuch as collecting and remitting taxes to customer assistance around their purchase -- are managed by the MoR.
A merchant of record takes charge of:
- Maintaining a best-in-class branded and localized checkout system.
- Global compliance, fraud and management of risk.
- Manage your worldwide VAT tax, GST, as well as sales taxes.
- Help with billing queries Digital fulfillment, billing, and much more.
According to Fred summarized: "It's the sort of business that accepts the burden of being PCI conformant and make sure you pay your taxes properly. So once you move all that responsibility to a third-party, you can concentrate on your core product in order to be more efficient and lean."
Ask Your Questions Live
Join us live on LinkedIn on the 8th of March at 4pm CET to participate in an "Ask me Anything" regarding the retailer of record models. RSVP here.
Information About Frederic (Fred) Linfjard
Fred is the director of Growth Marketing at Planday and the former head of Commercial Innovation at Capture One, where he 4x'd their revenue, leading to an acquisition. With more than 10 years of experience, Fred serves as a growth adviser for many of SaaS and software companies, with a unique background in marketing automation and experimentation to help them scale.