My journey of discovery into the SaaS world happened entirely by accident. I’d been in the media industry for nearly 10 years and knew by the end of my time at the Press Association that it was time for something different. Life involved lots of work on digital transformation with some smart and lovely people, but I had grown frustrated by the industry’s characteristic combination of structural and cyclical challenges.
So I started asking about which companies were doing cool stuff (that was literally the beginning and end of my brief for the new company I wanted to work for ????), and was introduced to some entrepreneurs in the SaaS world.
Immediately the vibe felt different – these were companies that were actually going somewhere! I loved the fast-paced environment, the 100% focus on business growth, the technical solutions to real-world problems and the data-driven decision making.
When I met the fantastic Michael De Monte and the brilliant Mark Walker from ScribbleLive, I knew I’d found the right company to start my rapid-education into all things SaaS. So I jumped in and joined the team as a VP (a job title that rather amused my Mum who happily pronounced that I was The President of Vice), looking after all things European expansion and bringing my experience of the media industry to shape Scribble’s content syndication proposition.
Not going to lie – for the first couple of weeks I had no clue at all what was going on! Thankfully I’d been running my own budget at PA for the previous few years so I needed no introduction into the world of MRR (monthly recurring revenue, just in case) and its unquestionable merits. But even so, there were a host of new business principles to learn in the form of Lean Startup and the build of MVPs, client success teams, enterprise sales plans with set up fees and monthly bolt on, and growth hacking to push a business forward.
Then there was the wildly different business culture, with passionate teammates, flexible working opportunities, jeans and Converse, office dogs, fußball tables and burrito deliveries on Fridays. Made a massive change from my corporate days, I can tell you!
There certainly are a few differences between companies in the SaaS world and other types of businesses. The perks are great but there are challenges too. Such as trying to disrupt a market that doesn’t entirely want to change…
For me, the biggest challenge in SaaS is how capital intensive a business it is to build and scale. It is really important to find the balance between investing cost in building out a product roadmap quickly and focusing resources on bringing onboard new clients to increase revenues. One builds service value and the other builds company value.
It’s a complex tightrope walk of figuring out how to do both business functions well, without burning so much cash that the business will run out of investment before the returns come in.
Of course those people who get the balance right, win big and then it’s all worth it! So, here are my takeaways from 8 years working with SaaS companies of all shapes and sizes. Many of whom I’m pleased to say are still kicking arse today
1 – It’s important to really understand the market and its pain points
This is number one on my list, as getting this right spells the difference between a journey to success or a spiral into failure. Bit overdramatic? Yeah maybe, but I do mean it in those stark terms because you can’t fluke this stuff. The SaaS companies who I’ve seen gain great market traction are those that have nailed their product/market fit.
When I say ‘nailed their product/market fit’ I mean that these companies perfectly understand their target market, their buyer personalities and the pain points of each. They provide services to those markets that are not just interesting but actually relieve pain points, to the degree that people will be prepared to CHANGE THEIR BEHAVIOUR and spend their budget.
Whilst this is bloody obvious in many ways I think this is a tough one to get right because it comes down to being open to the fact the “Big Idea” may not be compelling enough in its initial form. It can also be a tricky business issue to spot too, as the sheer force of an entrepreneur’s character can often deliver traction in a market that leads to a few clients and a lot of meetings, even if the market fit isn’t great.
Over the years I’ve noticed that you can particularly spot that this problem is present if a company has lots of meetings where potential buyers are interested, but they rarely or never convert to sales. This scenario shouts that a company is selling a nice-to-have rather than a pain-relieving solution.There are scenarios that shout that a company is selling a nice-to-have rather than a pain-relieving solution. Click To Tweet
2 – Sales and marketing have lots of useful product development insight
No, this isn’t written for the benefit of any one former colleague, but it could be! Product development teams can often be guilty of closing their ears to the influence of anyone outside their own teams. This is shortsighted in the extreme as there is so much knowledge in other parts of a business which can be used to find the best development path available.
Of course, product development should not be driven by the whims of one salesperson who is good at selling products that are square and orange. Nor should it be dictated by one client who has their own customisation challenges. However, sales and marketing are talking to the market every day, and are therefore a constant source of information as to what is proving compelling to target audiences, and what isn’t.
Having good product/market fit isn’t just about giving sales staff a pitch that is successful. It’s about building a product which is really required by your target audiences and that meets their needs. What that product does, or does not do, should be influenced by how close to fixing the ‘core market problem’ the feature is.
For anyone who doesn’t yet know it, check out the Jobs-to-be-Done Framework which is definitely worth a look. It helps SaaS entrepreneurs to identify the jobs that target buyers are trying to get done, categorise them (see below), look at the desired outcomes of a job and learn how to prioritise how to tackle the requirements.
By forcing product development into considering the perspectives of a target client, it results in a mindset change which allows developers to see what is important to give a client, and what is not.
3 – Monthly recurring revenue AND one off charges? Yes please!
Fully effective SaaS companies are great at making sure that you’re paying for everything you’re getting. Think Hubspot as an example. Each and every module has its own pricing in user brackets and its own onboarding fees.
Source: Hubspot pricing page
This means that SaaS companies can balance ongoing monthly recurring revenue (MRR) with short term cash boosts through one-off charges, which is great for scaling businesses. It also means that there is a precedent to charging based on the size of users or traffic etc, that a client needs. Which means you get plenty back from investing in retention and upsell as well as new client onboarding.
When you’re a SaaS company it is perfectly fine for you to have a list price, and stick to it. There are reasons for the brackets you have in place, likely to do with your storage or customisation requirements, and users are used to the process of picking their selection of modules from a schedule you make available.
Of course if you’re at early stages you’ll need to do free pilots in order to get use cases on board that you can use to show value to future paying clients. That’s all part of the development curve. However, once you’re at the point where you can scale it is fine to be straightforward about your price point.
4 – Fundraising is a headache. It’s critical to do, and to do well, but it is a drain on time
There’s a whole load of understatement going on here! Fundraising is a major headache and a huge distraction to the business at absolutely the moment that you want to be putting time into it. It always takes longer than you will want, and is harder than forecast when you’ll get the cash.
Probability of Getting Funded over Time (Source: Carta Data)
Work needs to be done right the way through the process. Firstly, comes figuring out ‘the pitch’ itself, and pulling together a realistic business plan with ambitious but realistic growth objectives, a clear understandable USP and a plausible exit strategy. That piece of work can take as much as a month to get right, what with all the refining.
Then the leg work. This involves finding investor targets, getting out there, presenting, discussing terms, negotiating and that’s all before the due diligence and contracts process.
I mean there’s more than enough to rant about for a blog post on its own! From start to finish, our process at GrowthMinds took a year. And no, I wasn’t working on it full time for that period but it had a knock-on impact on disruption for the duration of the cycle.
In order to get your cash in the bank without disrupting business too much, you’ll probably need help. Yes you might need to spend to get it but it is still probably worth getting. Doing it on your own is hard. Believe me.
But of course once you get that cash, you have the freedom to scale products and teams, which you will surely need. Just make sure you raise enough so you don’t have to do the whole process again in 12 months time…
5 – Don’t hire a salesperson before you’ve found your product/market fit
Ah, top-performing salespeople. The unicorns of every startup. Sometimes they are seen as the solution to every SaaS founders nightmares. All you need to do is find a good salesperson and you’ll get all the pots of gold that you’re after.
Wrong, wrong, wrong.
One common mistake lots of SaaS founders make (I’ve spoken with 3 examples in the past week) is to hire salespeople too early. Stick with me, I know that sounds daft, but the reality is that the point at which a salesperson is able to sell effectively is going to happen further down the road than you’d expect.
Source: Wadhwani Foundation
In order to need a salesperson, you need to have a sales pitch which is working and a market which wants to buy you. If you’re not at the point where people are biting your hand off, a salesperson isn’t going to do you any good at all.
You can judge it by the length of your sales cycles and your conversion rates. If you pitch, people say yes within an acceptable window and a decent rate of people say “yes!” then you’re ready. If your sales cycles are slow slow slow you’re not ready yet.In order to need a salesperson, you need to have a sales pitch which is working and a market which wants to buy you. Click To Tweet
By getting salespeople when you’re not ready, you are just wasting money on people pitching a proposition which isn’t compelling. If you as a founder do that pitching yourself, you can learn what isn’t working and pivot. However, a salesperson won’t do that, so you’re not getting the learning you need to evolve and improve.
6 – It can be a bit tricky to maintain a cool SaaS culture as a business scales
To be fair, this isn’t limited to SaaS companies, although SaaS businesses are more self-consciously “cool” than most other companies. But it is hard to maintain company culture as any kind of business scales.
It kinda goes like this: founders build businesses with a flat structure, flexible working, all fully incentivised etc. These founders hire their first people and communicate well with them and they are passionate too and it still works well.
Then a new raft of people come in and it feels more like a company and so those people expect proper company things like monthly team meetings and soap in the dispensers.
Then investors come in and put pressure on everyone to deliver to targets and everyone starts getting super stressed.
Before you know it, the business is like the one you left to be a founder, and not like the one you wanted to build.
It’s hard, for all of us, but certainly worth keeping an eye on. What I have learned both being a founder of a growing business and also being a leader for a growing SaaS startup is this:
- Keep talking to people, so they know what’s going on when you’re behaving like an erratic lunatic. Formalise it so it can’t drop off.
- Get help with the culture so that when you’re flat out putting out fires, there’s someone else keeping things smooth for the team
- Good culture ≠ having a ping pong table or office dogs. Good culture is about trust + autonomy + vision + organisation
Startup world is different for everyone so feel free to ignore all advice and trust yourself
And yes that includes mine. 🙂 You know your market better than anyone else. Well you do, if you’re on the path to success anyway!
People may come along and say, well what about x charging model or x market instead. But they won’t know your business as well as you do. If you have data that you have gathered that shows you have a product/market fit in your current area. Trust yourself and don’t get blown around.
It’s about finding that fine balance of confidence in your own choices, and being open to learn that you might not be doing things perfectly. No, I’m not yet perfect at that balance either. But thankfully we work with other people who help us find the right way. Hooray for them!
That’s all I’ve got time to put on paper today, but I’m always happy to chat over a coffee or a pint if it would be useful. If that’s the case, ping me a line. Good luck on your adventure to becoming the owner of the next big SaaS company.
It ain’t easy but if it were, everyone would be doing it. 🙂
Kate Fairhurst is the founder and CEO of GrowthMinds.