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ERP for Investor-backed Startups in Tech

by | Apr 4, 2022 | NetSuite, Software

The world of investor-backed tech companies is a roller-coaster. Planning for rapid expansion, navigating rounds of funding, and making strategy pivots on the fly are just a few of the reasons why leaders in tech startups  and expansion stage companies are experiencing headaches. Further, the tech market changes rapidly along with customer preferences. With the uncertainty of the atmosphere, it’s important to maintain control of any areas of your business that you can. A key strategy in this stage involves putting the technology in place that will not only serve your business now, but will continue to serve it as you scale and expand.

Startup Stage

All too often, young startups put the most budget friendly technology into place to save on costs in the short run. However, after receiving a round of funding or experiencing the explosive growth that is common in young tech companies, they struggle to scale due to their limited tech stack. This leaves them at a difficult crossroads, deciding between maintaining their existing technology and struggling with the growing pains, or biting the bullet to adopt new, more powerful technology, while undergoing difficult data migrations and employee training.

An alternative is to put the proper technology in place in the early stages, so that seamless scaling can be achieved. Here are 6 reasons why NetSuite for startups in the tech industry is a strategic choice:

Scaling

When tech companies receive a private equity infusion or other form of capital, there’s an expectation from the investors and the company that growth will ensue. When parabolic growth is anticipated, it’s essential to have the technological systems in place that will allow it to occur.

If your business is running on an accounting software for startups like QuickBooks, exponential scaling becomes close to impossible. Therefore, you’ll eventually need to undergo a migration from QuickBooks to a more powerful platform like NetSuite. Unfortunately, this process is not as simple as turning one platform on and turning the other off. Successfully migrating from an entry-level accounting platform like QuickBooks or Xero to a full-power enterprise resource planning system can take hundreds of hours of consulting work. It involves complex data migration, mapping, customization of the new system, employee training, technical integrations and much more. By implementing a cloud ERP like NetSuite early on, you can take away a lot of the labor and costs associated with a migration.

Decreased Overhead

Thanks to near endless automation and optimization capabilities, NetSuite can help keep your headcount on a scaled path even as you grow your business. One accounting employee on NetSuite might be able to handle the workload of 2 or more employees operating on QuickBooks. Not only can NetSuite handle the complex accounting that comes with a growing company, but it reduces the workload of Human Resources while decreasing overhead. You can boost your ROI even higher by outsourcing your accounting & finance functions entirely to a NetSuite BPO provider like ScaleNorth. More information on our outsourced NetSuite accounting can be found here.

netsuite for start up businesses

Potential for Liquidity Events

If your company is fortunate enough to have had a capital infusion from investors, adopting the world’s leading cloud-ERP NetSuite is a strategic move that will benefit your company for years to come. NetSuite leads the competition when it comes to ERPs for the software and tech industries.

In fact:

  • Roughly 2/3rds of all tech IPOs are utilizing NetSuite.
  • 88% of Bessemer’s “Next Cloud Unicorns” use NetSuite
  • 56 of the JMP 100 Private Software Companies use NetSuite
  • 22 of the Wall Street Journal’s “Billion Dollar” Startups use NetSuite

If you haven’t been engaged with any PE firms, NetSuite is a great option for garnering interest. The detailed reporting and financial capabilities are aligned with what PE and VC firms consider to be best-of-breed. When you can show potential investors that you have the infrastructure to properly manage finances, easily scale, and automate routine processes, you’re setting yourself up for potential funding, acquisitions, IPOs and more.

Consistency

As a young company with big aspirations, your business will have to go through multiple phases and transformations as it expands and adapts. NetSuite handles advanced accounting and finance, marketing, CRM, HR and more. If you implement entry-level point systems for each of these functions, you’ll likely end up outgrowing some if not all of them. By instead utilizing NetSuite, your staff can be trained on one platform, and continue to use that platform throughout the life of the business.

This type of consistency simplifies onboarding, improves efficiency, reduces errors, and decreases waste.

Complex Software Accounting

In the technology and software industries, you often deal with recurring revenue and subscription billing. Whether customers are on month-to-month, year-to-year, or usage based payments, being able to properly manage these billing cycles is essential to remaining profitable and retaining happy customers.

With NetSuite, you can automate subscription and maintenance billing for a wide range of payment terms. You can also automate the revenue recognition process over the length of the contract terms or utilize partial-month proration.

When customers do miss automatic payments due to expired payment methods, insufficient funds, etc. you can automate the collection and dunning process with ScaleNorth’s Dunning for NetSuite ScaleApp.

Plus, if you ever do plan on going public, your revenue recognition practices and billing compliance will need to be bulletproof to prevent regulatory disasters. Having these practices automated can reduce manual error and keep your business from legal scrutiny.

monetization of startup companies through erp

Monetization

Money is the name of the game, and increasing your average customer value is an extremely efficient tool for maximizing revenue. With software, it’s common to have multiple tiers of functionality and price for certain products (i.e. Basic, Pro, and Enterprise level subscriptions). Cross-selling and up-selling customers to the next tier will help you fortify your bottom line. By providing in-depth analytics about customers’ order history, notifications when a renewal is approaching, detailed reporting dashboards and more, NetSuite will help arm your sales team with the tools they need to convert customers to a higher paying subscription.

Multi-Currency

Many types of software have been built or adapted for use all over the world. Being able to sell without borders can be highly lucrative. However, it creates friction in your accounting department as you manage multiple currencies and tax jurisdictions. With NetSuite, you can manage multi-currency, international orders, subsidiaries and more all from one instance. The ability to expand your operations globally without a major revamp of your accounting department is a very powerful feature.

Acquisitions 

A recent study by Boston Consulting Group showed that software companies accounted for 6% of all merger and acquisition deals in 2020. Of these, 73% of them were valued at $100 million or less. In fact, many young tech companies aim to create a product and business model that is “built to sell”, with the idea of building a product, proving its feasibility and market acceptance, then selling it to a corporate giant. Others plan on gaining enough capital to acquire younger competitors to boost market share.

Regardless of your company strategy, there’s a decent chance that acquisitions will be in your future whether you’re on the buy side or sell side. Having the right infrastructure in place to navigate these extremely complex circumstances is crucial to success. NetSuite has the ability to handle subsidiaries, multi-currency, multi-national, and other challenging structures that may appear post-merger.

By adopting NetSuite, you’ll not only appear more attractive to potential buyers, but you’ll be better positioned to acquire competitors and younger firms.

Conclusion

NetSuite is the ideal ERP for software companies who plan to grow and expand their business to new heights. Afterall, the average software company who switches to NetSuite sees over 250% growth, improved employee productivity, and a 66% reduction in the time required to close the books.

In the fast paced world of Software and Technology startups, rapid expansion can always be just around the corner. If you don’t have the proper systems in place, you might miss the opportunity to experience exponential growth.

By implementing NetSuite for accounting, finance, HR, marketing, and more, you’ll be setting your business up for continuous success and easy scaling.

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