6 Amateur Mistakes That TANK SaaS Success 📉 Avoid These!
Summary
TLDRThe video outlines six common mistakes that wreck the success chances of software-as-a-service startups: building solutions without identifying real problems first, mispricing products, relying solely on luck for marketing, targeting consumers instead of businesses, attempting freemium models without expertise, and not speaking to potential users. It emphasizes validating ideas by talking to prospects first. The video also warns against two-sided marketplaces which struggle with cold start problems in bootstrapping and require immense funding.
Takeaways
- 😀 Start with identifying a problem, not just an idea. Validate that people actually need a solution.
- 💰 Pricing is critical - set it too low and limit growth potential. The pricing model also needs to measure the right value metric.
- 🚫 Don't rely on luck or virality for marketing. Building marketing skills and putting in hard work is key.
- 😤 Avoid B2C SaaS - high churn and hard to charge much or acquire customers.
- ⚠️ Freemium is complex - understand when and how it works before attempting for a new SaaS.
- 🗣️ Talk to potential users throughout idea development and post-launch. Get product feedback.
- 😖 Avoid two-sided marketplaces - very tough for new startups to gain traction.
- 📝 Validate that the problem exists and people need the solution first.
- 💡 The pricing model should match the value delivered.
- 🎯 Acquire marketing skills rather than hoping for viral growth.
Q & A
What is the first mistake entrepreneurs make according to the speaker?
-The first mistake is building a solution without identifying the problem it will solve. Entrepreneurs should start by finding a real problem that customers face, validate that need, and then build a solution.
What is the implication of having the wrong pricing model?
-The implications are that the business may only do a fraction of the revenue it could with proper pricing. It also limits the marketing strategies a business can afford, which slows growth.
Why can't entrepreneurs rely on luck for success?
-Success requires a mix of hard work, skill, and some luck. Entrepreneurs can't control luck but they can control how hard they work and what skills they develop, like marketing and sales.
Why does the speaker recommend avoiding B2C SaaS models?
-B2C SaaS has high churn, inability to charge much, and insufficient funds to acquire customers. There are many better B2B SaaS opportunities the speaker recommends focusing on instead.
What does the speaker say is the number one problem with building premium SaaS without experience?
-The number one problem is thinking premium is just a pricing strategy when it's actually a sophisticated marketing strategy requiring experience to get right. Inexperienced founders often get it wrong.
When throughout a startup's lifecycle is talking to customers critical?
-Talking to potential users is critical during idea validation, while building the product, at launch for feedback, in customer support, sales, and marketing. It's needed throughout.
What business model does the speaker say is very difficult for bootstrapped startups?
-Two-sided marketplaces are very difficult for bootstrapped startups because they require fighting a war on two fronts - building both sides. They often require lots of funding.
How can wrong pricing limit the marketing strategies available to a SaaS startup?
-With low annual contract values from wrong pricing, startups may only be able to afford 5-6 marketing strategies instead of the full 20 the speaker lists as possible.
What channels does the speaker recommend posting on instead of relying on them for marketing?
-The speaker says posting on Hacker News, Product Hunt, or trying to go viral on social media is not a reliable strategy and will likely not make a real difference.
What event and when does the speaker invite viewers to for learning SaaS sales tactics?
-The speaker invites viewers to MicroConf Remote on March 12-13, an online conference focused on practical SaaS sales advice with expert speakers and founder discussions.
Outlines
😟 Six common mistakes that can wreck your SaaS startup
The first paragraph discusses six common mistakes entrepreneurs make when starting a SaaS business that can ruin their chances of success: 1) Building a solution without identifying a target problem and customer, 2) Having pricing that is too low or using the wrong pricing metric, 3) Relying solely on luck instead of hard work and skill, 4) Targeting consumers instead of businesses, 5) Attempting premium pricing without expertise, and 6) Not talking to prospective customers.
😥 Avoiding human conversations is a critical mistake
The second paragraph emphasizes the importance of having conversations with prospective customers throughout the startup process, from idea validation to post-launch. It states that avoiding these conversations can lead to building solutions no one needs. It also advertises an upcoming conference focused on improving SaaS sales.
Mindmap
Keywords
💡software as a service
💡business model
💡entrepreneurs
💡pricing
💡marketing
💡B2C
💡premium
💡customer feedback
💡two-sided marketplaces
💡successful
Highlights
Software as a Service (SaaS) is one of the best business models
Many entrepreneurs try to build SaaS businesses but struggle to find a successful idea
Biggest mistakes entrepreneurs make: building solutions without identifying the problem first
Pricing is critical - low pricing limits growth, high pricing enables more marketing
Can't rely on luck for marketing and sales - need hard work and skill building
Avoid selling consumer SaaS - focus on business customers instead
Freemium model is very challenging if you don't understand it fully
Critical to talk to users and customers throughout the startup journey
Two-sided marketplaces very tough for bootstrapped startups due to cold start problem
Validate the problem before building anything
$10-35k+ in annual contract value enables more marketing activities
Can't rely solely on viral marketing - need diverse set of activities
Most successful two-sided marketplaces raise lots of VC funding
Having just one user brings value already in SaaS model
Choosing a SaaS idea requires lots of work and the right strategy
Transcripts
the secret it's out software as a
service is arguably or I would almost
say inarguably one of the best business
models in the world and a lot of
entrepreneurs are trying to get into it
but as you know it's not easy to find an
idea that you can be successful with so
today in this video let's talk about six
mistakes that very well might wreck your
chance of success so that instead of
making these mistakes you can get going
in the right direction and build a
business that's not doomed from the
start and if you stick around to the end
I'm going to tell you about the business
model that I hear pitched a lot that
almost inevitably fails so we're going
through six mistakes let's start with
number one which is building a solution
in search of a problem just because you
can imagine it think it up or build it
doesn't mean you should so when an
entrepreneur comes to me these days and
they say I have an idea for a startup or
a SAS app I say don't tell me your idea
tell me what problem it solves and I
usually say for whom as well so first
find the problem start with a problem
that someone has usually a business then
have conversations validate the they
need it and start to build you don't
want to go and build in your basement
for 6 months you want to have answered
this question as best you can and you
can't get to 100% maybe we can get to 30
40 60% the question you're looking to
answer is what problem do you solve and
for whom I'll talk about another mistake
related to this in a minute but right
now let's look at mistake number two one
of the most common mistakes we see with
folks who apply to my startup
accelerator Tiny Seed is their pricing
is off either their pricing is too low
or the way they're charging meaning
their value metric is off it's measur
ing the wrong thing the implications of
this are pretty tremendous number one
you can have a business that should be
doing a million dollar a year that's
only doing $250,000 a year if you've
underpriced yourself and I've seen
firsthand businesses like this another
implication is that depending on how
much your annual contract value winds up
being even if you're charging monthly
your ACV annual contract value is really
important because let's say you only
have a $500 annual contract value you
can only afford to do literally a
handful probably five or six different
marketing approaches you know it's SEO
and content and there's some virality
and a few others and I list all the B2B
SAS marketing approaches that I know in
my book The SAS Playbook which came out
last year SAS playbook.com if you want
to pick up a copy so if there are 20 B2B
SAS marketing approaches but you can
only afford five or six of them you
really are doing yourself a disservice
and potentially not growing your
business fast enough versus if you have
an annual contract value of let's say
$10,000 you can do 10 or 12 of the
marketing approaches and if you have an
ual contract value of $25 or $35,000 you
can do all 20 that I list in the book
pricing is the biggest lever in SAS and
it's one of the things that I see
Founders screw up most often mistake
number three is thinking that all you
need to succeed is luck I hear folks say
my marketing plan is to post it on
Hacker News or product hunt or go viral
on social media and really all of those
things are either not going to happen or
even if they do they're just not going
to make a difference in your business in
order to succeed you need a mix of hard
work luck and and skill you can't
control your own luck but you can
control how much hard work you put in
and you can build up skills over time
and in this case you're going to want to
build skills to Market and sell your
product we talk a lot about that on this
channel I talk a lot about it in my
books but if you can build a product but
you have no idea how to Market or sell
it that's a problem and relying on luck
thinking that that's going to help you
Market or sell almost never works out
mistake number four is selling to
Consumers so there are approximately
zero successful B to C Business to
consumer SAS apps and whenever I say
this in a video Someone suggests what
about Spotify or Netflix or Hulu or
Apple TV plus and those are actually
just content Services they're not sass
there not software as a service they're
content as a service right you're paying
an amount of money in order to watch a
movie or listen to a song now one could
argue that say iCloud or Google drive or
Dropbox is BTC but all of those
businesses make the vast majority of
their money from selling to small
businesses and big Enterprises the
problem with BTC SAS is it's high churn
you can't charge very much therefore you
don't have the money to acquire
customers and it just Stacks everything
against you when you're trying to launch
there are so many B2B opportunities stay
away from BTC it's my recommendation
these days when someone writes into my
podcast startups for the rest of us with
a question about B Toc I typically just
say don't I'm kind of joking but also
I'm pretty serious about it I have run a
couple of B Toc apps back in the day
before I knew any better 15 16 years ago
and I will never do it again mistake
number five is trying premium without
knowing what you're doing if you think
premium is a pricing strategy that's
your first mistake right premium is a
marketing strategy and while premium is
not always bad it is not for beginners
fremium is like a samurai sword if you
know what you're doing you can do
amazing things with it and if you don't
you're likely to cut your arm off so
knowing how fremium works and when it
works and when it doesn't is super
important I've actually talked about
that in another video on this channel or
do your research and learn about how
hard fremium actually is to work cuz
just rolling it out is not a recipe for
Success it's a recipe for getting a lot
of price sensitive customers who are
probably going to give you feedback
that's going to lead you astray and the
sixth and final mistake is avoiding
talking to other humans so in mistake
number one I talked about building a
solution in search of a problem and
avoiding talking to people is probably
the number one cause of this mistake you
have to talk to people throughout your
entire startup Journey right through
throughout the entire life cycle of your
startup and you don't just need to talk
to people but prospects people who might
want to use your software so during idea
validation as you're building the
product once you launch it you need
product feedback you're going to be in
Customer Support you're going to be
doing sales and marketing you're going
to learn how your prospects talk about
it so you can use it in your copy
there's all kinds of things that you can
learn by talking to humans and as much
as so many of us want to sit in a
basement and write code for 6 months
avoiding talking to people is a big
mistake and it's one I see especially
develop entrepreneurs make pretty often
if you're looking to get better at SAS
sales specifically sales you should join
us on March 12th and 13th for microcom
remote it's a fully remote and virtual
conference we'll have four Keynotes
filled with practical tactical advice on
how to improve your sales game our
speakers include Rachel Lea of fuse
inventory Craig HT of kastos and Daniel
ebear of sales MVP after the Keynotes we
have founder by founder sessions where
you'll get to chat with other attendees
get your ticket at microcom remote.com I
mentioned at the top of the video that
there's a business model that a lot of
people think is so great and they try to
launch it and it completely implodes and
that is two-sided marketplaces I don't
know why so many folks want to launch
two-sided marketplaces it's almost like
they're drawn to it like a moth to a
flame or to a bug zapper that's going to
kill the business problem with two-sided
marketplac is if you don't already have
one side of it you're fighting a war on
two fronts you know have twice as much
marketing to do you have twice as much
sales no one on one side gets value
unless you have the other side whereas
if you build a sasap and you have one
user or a 100 or a thousand users they
get the same value out of your
application but trying to Kickstart the
cold start problem it's called trying to
Kickstart a two-sided Marketplace
especially if your bootstrapping is damn
near impossible if you don't already
have one side of the equation if you
look at the successful two-sided
marketplaces nearly all of them have
raise tremendous amounts of venture
capital and there's a reason for that if
you watch this channel you know there's
a lot of work that goes into choosing a
successful SAS idea and there's one
thing that I would never start a SAS
Business Without but it takes a couple
minutes to explain check out this next
video to get that cheat code thanks for
watching
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