Editor’s note: This is a series of stories brought to you by Julius Bachmann, a Berlin-based founder coach, and Joyce Mackenzie Liu at Pegafund, providing hands-on advice for how to build and define a startup’s operating model — feel free to reach out to them if that’s something you need. The articles are written exclusively for tech.eu and edited independently by our team.
In 2012 Bas Smeulders and two friends founded Sendcloud, an e-commerce shipping platform that helps online stores of various sizes grow by optimizing their shipping processes. Now, Sendcloud is one of the leading European B2B SaaS scale-ups in the Netherlands, with a team of over 270 employees and branches in both Germany and the Netherlands.
We spoke to Bas about how the company managed to scale this fast and the role of Sendcloud's operating model in its growth and day-to-day operations. Bas shared his insights into the nature of their scale-up operating model, highlighting the customer-centricity at its core. We discussed achieving negative cash cycles through smart revenue management, and intentionally building a resilient business by designing a model based on a combination of subscription and transaction revenue.
We began our call by discussing what a successful operating model means to Sendcloud — and asked why it is crucial to their growth?
For Sendcloud having a successful operating model is central in making sure their company's growth is sustainable. They achieve this with a business model based on a combination of SaaS and Transactional Revenue, and a highly automated customer-focused onboarding flow that enables growth and smooth day-to-day processes.
"What we're trying to achieve," says Bas, "is enabling world-class shipping for small and medium enterprises and larger e-commerce platforms." This requires onboarding as many small and medium enterprises as possible, from within Europe, with the appropriate systems. These systems form the foundations of their business model, enabling a level of self-service, designed to minimize daily manual tasks to support businesses in concentrating their efforts on customer delivery and experience.
Sendcloud has developed a self-service onboarding whereby new clients can easily set-up their shipping software, reducing the need to scale their warehouse and support teams. By continuously improving automated onboarding, in-app message flows, and support content, the company has created a scalable operating model that relies on frictionless, self-service customer acquisition.
Putting the customer at the core of their scale-up operating model
In today's digital economy, value is generated by the cultivation of successful customer relationships. Companies must align customer needs and organizational design to ensure that processes are simple, flow smoothly, and are error-free.
Customer-centricity is a high priority at Sendcloud. It is the core theme that Sendcloud aligns its strategic and operational priorities and enables ongoing and continuous structural growth.
Sendcloud has created an optimized shipment processing flow that enables both small and large online stores to grow successfully. A combination of intelligent software and smart logistics creates a customer flow that allows their users to manage their orders in a flexible and scalable way.
"It's both the software onboarding," says Bas, "and giving the customer the right service at the right time that's important." Onboarding is designed to be user-friendly and can be done automatically and 24/7 without speaking to sales or support. The most valuable aspect of their simplified customer sign-up experience means the company can scale quickly with minimal effort.
Their systems are designed to respond to their customer's specific needs. If the company sees a user signs up with a small shipping volume and is only looking to ship domestically, then the content they receive must be simple and straightforward. For larger volumes, Sendcloud chooses a more customized approach, "If you see that a customer is shipping tens of thousands of shipments per month, then that requires a particular approach to providing the right shipping carriers and methods for their products and destinations."
This model has significantly evolved over time. In the early days of Sendcloud, there was no self-service onboarding. The founders would reach out to prospects, create test accounts manually, and hoped for the best. With the new automated systems, 50% of customers can begin shipping without human support. "The key," says Bas, "is to determine the customer's specific needs during the onboarding process to guarantee they align with the right resources and the deal best suited to their needs."
At the heart of Sendcloud is an end-to-end technology stack and operational process which enables a "single source of truth" and seamless customer experience
Bas stresses the importance of a business model where the front, middle, and back-end processes are aligned and interconnected. "Both the front-end and back-end of the customer journey require different tools and different flows, but they all connect." From the customer's perspective, there is the software, the UI, content, and multiple touchpoints. Following the lead through our CRM and business processes requires several systems that manage everything from marketing, conversion rates, and sales funnel to being an active customer.
This connectivity is made possible by combining various SaaS software tools to understand customers and their needs better. From attracting the leads via our personalized landing pages, content funnels, call-to-action-buttons, data platform Mixpanel and messaging platform Intercom are utilized to track and convert visitors. After a customer signs up, pop-up messages from AppCues appear on the platform, providing personalized onboarding flows for different users.
At this point, sales CRM comes into play, "Once you're a bigger lead, you go into our sales pipeline in HubSpot CRM, and there you are directed to the right location and one of our E-commerce experts. They receive an automated task that can also trigger communication workflows, including emails with the onboarding information, but also tasks to check in with the customer right away, and schedule a product demo."
After a customer starts shipping with Sendcloud, they will interact with our customer support and success teams via chat or tickets raised in Zendesk, to access fast online support. Sendcloud has fully automated this in its own back-end so that if the customer wants to ask a question, they automatically get directed to the right expert, or their case is directly filed at the shipping carrier — saving valuable time for everybody.
Achieving negative working capital through smart revenue management
With multiple revenue streams in different markets, Sendcloud's automated invoicing system is essential to managing cash flow efficiently. "For our subscription model, we offer both monthly and yearly payments just like other SaaS scale-ups. However, for our transactional model, we send out the invoices based on your usage of the past 14 days and then automatically collect the money from our customer's accounts via Adyen, which provides an easy process for our clients and automated cash collection for our company.
Building native software gives them more tailored flexibility. That's why invoices are generated via Sendclouds' platform, while the invoice transactions are recorded within NetSuite, a financial ERP system. Payments are automatically accepted and processed via Adyen, which sends out an automated revenue collection batch once a week. A seamless combination of these platforms sees 50% of their customers automatically invoiced at the beginning of each week, meaning Sendcloud has a steady business cash flow in a fully automated cash collection process that automatically manages tens of thousands of customers. This creates a smooth and transparent process, resulting in consistent negative working capital - one of the key drivers of value and growth funding for a SaaS business.
The subscription and transaction revenue mix: Intentionally building a resilient business
Sendcloud's revenue model is based on a subscription and transactional revenue mix. The transactional model — where revenue is generated by directly selling shipping labels to their customers — was their only model when the company started back in 2012. Now, combined with the increasingly popular subscription model, the mix proves to be a valuable combination in their journey to building a resilient business despite high uncertainty across the world.
Customers can buy the advanced shipping software at a monthly fee or choose a free plan which offers a discounted price per shipping label. Alternatively, they can combine both models to optimize efficiency and cost savings. With this combined model, customers can start small, for free, and grow their business with Sendcloud. This allows them to experience the benefits of automation, access to shipping carriers throughout Europe, and pay the best price per shipment.
"For the last three years, we have been building a combined revenue model and are definitely seeing its positive effects," says Bas, "Almost fifty percent of our earnings are now coming from our relatively new subscription model, which was launched in 2018. The mix of both models provides the company with strong retention and optimizes revenue growth while customers maintain full flexibility."
How does Sendcloud continuously improve its operating model?
Sendcloud actively listens and tracks customer needs and relies on various entrepreneurs and advisors at different stages of their growth — with everything from legal and growth advice to more conceptual ideas. What's most important to the founders is closely studying companies that are two or more years ahead of the business, identifying successes and challenges in their operating models, and learning how they get there in the fastest and the most optimal way. They have been learning from founders and companies like Adyen, Takeaway, CM.com, and directors at the major shipping carriers.
One of the biggest challenges posed by Sendclouds' growth and international expansion is the difficulty of integrating many different shipping carriers, local webshop software systems, and ERP/WMS systems across different countries by themselves. By providing an ecosystem for partners by opening up their shipping software for shop system, partner, and carrier integrations, the company speeds up its growth towards becoming the European hub for E-commerce logistics. "What we did was open up our platform for external integration of new carriers last year. By providing our 'carrier SDK,' logistics companies can now integrate themselves into our ecosystem and provide their shipping services to our 20,000 business customers, increasing the value we bring to both our partners and our customers."
Bas believes that future growth will come from working together, "We strongly believe that this is a flywheel effect, so the more shop systems we have integrated, the more carriers are interested. The more carriers we have on the platform, the more systems that can benefit. Ultimately our customers will benefit from the growing amount of webshop and carrier integrations we can offer to be successful in their international expansion efforts."
In summary, by creating a scalable self-service experience, continuously improving your product suite, and optimizing your operational and financial processes, companies like Sendcloud have a business model that is set up for success.