SaaS and professional services: retaining clients in tough times without deep discounts

Customer Retention During a Financial Crisis

An economic downturn puts immediate pressure on every part of a startup. Your runway shrinks, new sales cycles lengthen, and existing customers begin scrutinizing every expense. For founders at the pre-seed to Series B stage, the fear of churn becomes a daily reality. Without large finance or data science teams, you are personally involved in retaining clients in tough times, often armed with little more than Stripe, a basic CRM, and spreadsheets.

Losing customers now is not just a revenue problem; it is an existential threat. The challenge is knowing how to keep customers during an economic downturn without resorting to deep discounts that erode value or making cost cuts that damage the product. This requires a structured approach, not a series of reactive decisions. What founders find actually works is a three-phase journey: Triage to stabilize the business, Insight to identify risk, and Proactive Retention to save valuable accounts. This framework provides a practical, manageable path for navigating client communication in downturns and protecting your hard-earned revenue.

Phase 1: Triage — Stabilizing Operations and Client Relationships

The first instinct during a crisis is to cut costs, but the wrong cuts can accelerate churn. You must balance immediate financial needs with long-term customer trust. This is where a clear decision-making framework becomes essential for maintaining service quality in a crisis.

Smart Cuts: The Visibility Framework

The Visibility Framework divides costs into two distinct categories: customer-visible and customer-invisible. This simple separation helps address the core challenge of cutting operating costs fast while preserving the product reliability and support levels customers expect.

• Customer-visible cuts directly impact the user experience. These include actions like reducing support hours, slowing bug fixes, sunsetting features, or limiting access to previously free resources. These cuts are felt immediately by your clients and can quickly lead to dissatisfaction and churn.
• Customer-invisible cuts happen behind the scenes. Examples include optimizing cloud infrastructure, renegotiating vendor contracts, reducing marketing spend on low-ROI channels, or implementing a strategic hiring freeze that specifically protects customer-facing roles like support and success.

The rule is simple: cut invisible costs first. This approach allows you to strengthen your financial position without compromising the value you deliver to customers. Only after exhausting all invisible options should you consider making cuts that your customers will notice, and even then, they should be communicated with transparency and care.

Proactive Conversations: The ‘Give-to-Get’ Principle

With a more stable operational base, the next step is handling inbound requests from clients feeling financial pressure. This is a critical moment in handling client concerns during a recession. The goal is to move from a defensive crouch to a collaborative partnership. Instead of offering immediate discounts, which sets a dangerous precedent, use the ‘Give-to-Get’ Principle. It reframes a discount request as a negotiation where both parties find value.

Consider this common scenario:

Client Request: “We love your service, but we’re facing internal budget cuts. We need a discount to renew.”

A 'Give-to-Get' Response: “We understand completely and want to support you. We can offer a 15% discount for 6 months. In return, would you be open to extending your annual contract for an additional 12 months at the standard rate once the discount period ends? This helps us with our own planning and ensures you have price certainty.”

This is a form of Flexible Partnering, which is a powerful tool for reducing customer churn. The key is to Frame every negotiation as a partnership. Other creative options include:

• Offering a temporary downgrade to a lower service tier with a clear path to upgrade later.
• Adjusting payment terms from annual to quarterly or monthly to ease their cash flow.
• Pausing a contract for a short, defined period (e.g., three months) if a client’s project is on hold.
• Swapping a monetary discount for non-financial value, such as a commitment to provide a detailed case study, a video testimonial, or participate in your product advisory council.

Each option keeps the customer in your ecosystem without simply slashing your monthly recurring revenue. It reinforces that your service has value and that you are willing to be a flexible partner in their success.

Phase 2: Insight — How to Keep Customers During an Economic Downturn with Proactive Monitoring

Once triage is complete, the focus shifts from reacting to requests to proactively identifying churn risks. Most early-stage startups lack the resources for a sophisticated data science team, leaving founders worried about a lack of real-time insight into which accounts are on the verge of leaving. The key is to accept that a perfect system is not necessary. A ‘Good Enough’ Health Score, managed in a simple spreadsheet, is far more effective than a complex project that never gets finished.

Embracing Pragmatism Over Perfection

You already have the necessary data scattered across your tools. The goal is to pull it together to spot meaningful changes in behavior before they become irreversible problems. To make this manageable, start your churn analysis by monitoring the top 20% of accounts by revenue. These are your most critical relationships, and focusing your limited resources here yields the highest return.

The principle to remember is that pragmatism beats perfection. An imperfect, manual system that you use consistently is infinitely more valuable than a perfectly architected data warehouse that you never build. Your goal is directional accuracy, not statistical certainty.

Building Your Customer Health Scorecard

Create a simple tracker in a spreadsheet or a shared document with the following columns. The goal is to consolidate signals from different sources into one view.

• Customer Name: The account identifier.
• ARR/MRR: The account’s financial value to your business.
• Last Login: The date the primary user or champion last accessed the platform. A long absence is a clear red flag.
• Key Feature Usage: A metric for your product’s stickiest feature. For a project management tool, this might be "projects created." For an analytics platform, it could be "reports generated." A significant drop here indicates declining value.
• Support Tickets (Last 30 Days): Both a sudden spike and complete silence can be warning signs. A spike may signal frustration, while silence from a previously engaged account could mean they are disengaging or exploring alternatives.
• Health Score (Red/Yellow/Green): A simple, rules-based assessment based on the data above.

To assign the score, set straightforward, non-negotiable rules. For instance, a ‘Red’ score could be triggered if a user has not logged in for 30 days or if key feature usage has dropped by over 50%. A ‘Yellow’ score might be assigned for a late invoice payment or a new, high-priority support ticket from a key stakeholder. This simple, manual process provides the visibility needed to move from reactive to proactive retention, armed with A ‘Good Enough’ Health Score.

Phase 3: Proactive Retention — The Lightweight 'Account Rescue' Playbook

Identifying an at-risk account is only half the battle. The next question is always: what do I actually do? A Lightweight ‘Account Rescue’ Playbook provides a simple, repeatable process for your team. It replaces panic with a clear sequence of actions, which is essential for effective crisis management for SaaS and professional services firms.

Step 1: Observation-Led Outreach

This is the critical distinction between personal, valuable communication and impersonal, automated emails. Instead of a generic “checking in” message, your outreach should be based on a specific observation from your health score tracker. Observation-Led Outreach shows you are paying attention and provides a natural entry point for a conversation.

Here is an example of an Observation-Led Outreach message:

Subject: Question about your team's report generation

Body: “Hi Sarah, I noticed your team hasn't generated any new financial reports this month. From what we've seen, this sometimes happens when there's a change in the finance team or a shift in reporting priorities. Is that the case here, or is there something else we can help with? Happy to share how other clients in your position are adapting their workflows.”

This message is empathetic, adds potential value, and opens the door for a diagnostic call. It avoids accusation and instead offers help based on a pattern you have observed.

Step 2: The Diagnostic Call

When the client agrees to a call, your primary role is to listen. The goal is to listen, not sell. Your objective is to understand the root cause of the behavior change you observed. Ask open-ended questions to uncover the context:

• "What has changed in your internal priorities over the last month?"
• "What challenges is your team currently focused on solving?"
• "Is the platform helping you achieve [original goal]? Has that goal changed?"

By understanding the "why" behind their disengagement, you can move to the final step of proposing a relevant, helpful solution instead of a generic one.

Step 3: Proposing a Collaborative Solution

Once you understand the problem, you can use the Flexible Partnering and ‘Give-to-Get’ tools from Phase 1 to propose a solution that works for both of you. If their project is delayed due to budget cuts, perhaps a contract pause is appropriate. If they are struggling to see value because of a team change, maybe a re-onboarding session is the answer. The solution should directly address the root cause you identified in the diagnostic call.

A scenario we repeatedly see is this playbook in action. One SaaS company noticed a key customer's API call volume dropped 80%, a clear ‘Red’ signal. Their observation-led email opened a conversation, revealing the client's internal project had been delayed by budget cuts. Instead of losing the account, the company offered a three-month subscription pause and some free strategic consulting to help replan the integration. As a result, they saved a $100k ARR contract and solidified a long-term partnership.

Building Resilient Customer Relationships in a Downturn

Navigating an economic downturn is about making smart, deliberate choices to protect your customer base. The three-phase journey of Triage, Insight, and Proactive Retention provides a clear and manageable structure for founders who are short on time and resources. True customer loyalty strategies are built during these difficult periods, not when everything is easy. By adopting a few core principles, you can move from a reactive, defensive posture to a proactive and strategic one, turning economic uncertainty into an opportunity to build stronger, more resilient customer relationships.

First, visibility is key. Always differentiate between customer-visible and invisible costs to protect the customer experience. Second, prioritize partnership over price. Use ‘Give-to-Get’ to ensure any concession you make is met with a commitment from the client, reinforcing your value. Third, remember that pragmatism beats perfection; a simple health score you use weekly is better than a complex system you never build. Finally, for your most valuable accounts, recognize that observation is the best automation. Use your data to craft personal, informed outreach that demonstrates you are invested in their success. For more on this topic, see the Crisis & Contingency Planning hub for broader resources.

Frequently Asked Questions

Q: What is the biggest mistake founders make when handling client concerns during a recession?

A: The most common mistake is offering a discount immediately without asking for anything in return. This devalues the product and sets a precedent that price is negotiable based on pressure, not value. Always use a 'Give-to-Get' approach to frame the conversation as a partnership.

Q: How can I implement a customer health score without a data team?

A: Start with a simple spreadsheet. Manually pull key data once a week for your top 20% of customers. Focus on 3-5 simple metrics like last login date, usage of one key feature, and recent support tickets. A basic Red/Yellow/Green status based on simple rules is sufficient to begin proactive outreach.

Q: Is it ever okay to make a customer-visible cut to services?

A: While it should be a last resort, sometimes it is unavoidable. If you must make a visible cut, communicate proactively, transparently, and well in advance. Explain the reasoning behind the change and, where possible, offer alternatives or support to help customers navigate the transition.