How to Start a SaaS Business With $0 [Simple 7 Steps]
Summary
TLDRThis video outlines a seven-step strategy for building a successful Software as a Service (SaaS) business from scratch. The speaker, an experienced entrepreneur, emphasizes starting with a real problem, consulting to identify gaps in the software market, and validating ideas through crowdfunding. Steps include creating clickable prototypes, validating the product with early adopters, building an MVP, collecting customer feedback for iterative improvements, generating demand through various channels, and discovering unique growth hacks to acquire customers. The script provides practical advice for aspiring SaaS entrepreneurs.
Takeaways
- 🔑 Start with a Problem: The speaker emphasizes the importance of identifying a real problem in the market before building a software solution.
- 🔍 Consult and Discover: Consulting can reveal gaps in the software market by understanding the frustrations and needs of potential customers.
- 📈 Tailwind Markets: Look for growing markets and technology trends to find opportunities where software solutions can help expand those markets.
- 💡 Identify Pain Points: Recognize the acute pain points of users that are frustrating enough for them to pay for a solution.
- 🛠️ Prototype Creation: Build a clickable prototype to ensure the software meets user needs and to avoid costly redesigns during development.
- 🔄 Validate with Payment: Validate the product by getting customers to pay for it, which is a strong indicator of demand and value.
- 📊 MVP Development: Develop a Minimum Viable Product with constrained features that can be built within a short timeframe to test the market.
- 🗣️ Collect Feedback: Actively seek customer feedback to understand how to improve the product and where the opportunities for expansion lie.
- 📈 Generate Demand: Utilize content creation, paid ads, partnerships, and press to create demand for the software product.
- 🚀 Growth Hacks: Discover unique and creative channels to acquire customers that give an unfair advantage in the market.
- 🤝 Equity Caution: Be cautious with equity offers, preferring to pay for results through affiliate fees rather than giving away valuable company shares early on.
Q & A
What is the recurring nature of the SAS business model?
-The recurring nature of the SAS (Software as a Service) business model refers to the predictable, recurring revenue stream from customers who pay a subscription fee for the use of the software. This model is appealing because it provides a steady income as long as customers continue to find value in the service.
Why is consulting a recommended starting point for identifying SAS business opportunities?
-Consulting is a strategic starting point because it allows you to understand the problems and gaps in the software world by working closely with clients. This hands-on experience helps you identify industry-specific needs and frustrations, which can inform the development of a SAS solution.
What is the significance of creating a 'frustration list'?
-A 'frustration list' is a compilation of problems or pain points that individuals encounter, even if they are not software-related. This list helps in identifying common issues that could be addressed by a software solution, fostering innovation and problem-solving in the SAS space.
Why is it important to look at spreadsheets when seeking software solutions?
-Spreadsheets often represent manual workarounds that people use to make their jobs easier. Examining these can reveal areas where software automation could provide significant efficiency improvements and solve real-world problems.
What does the term 'Tailwind' refer to in the context of market growth?
-In this context, 'Tailwind' refers to emerging technologies or industry trends that are experiencing growth. Identifying and aligning a SAS solution with these growing markets can increase the potential for success, as the expanding market can naturally drive demand for related software solutions.
Why is building a clickable prototype crucial before developing a SAS product?
-A clickable prototype is essential as it allows you to test the usability and functionality of the software without investing in full development. It helps to ensure that the final product will meet user needs and expectations, reducing the risk of wasted resources on undesired features.
What is the purpose of validating a SAS product through an early-adopter program?
-Validating a SAS product through an early-adopter program helps confirm that there is a market need for the product and that customers are willing to pay for it. This approach reduces financial risk by securing upfront payments and gathering valuable user feedback before full-scale development.
What does the acronym 'MVP' stand for in the context of software development?
-MVP stands for Minimum Viable Product. It refers to a version of the software with just enough features to satisfy early customers and provide feedback for future development. The goal is to launch a functional product as quickly as possible.
Why is it recommended to constrain features when building an MVP?
-Constraining features for an MVP is important to ensure that the development process is focused and efficient. It helps in launching the product within a short timeframe and staying within budget, while still delivering value to early adopters.
How can customer feedback be used to improve a SAS product?
-Customer feedback provides insights into how the product is being used and where it may fall short. By actively seeking and incorporating this feedback, developers can make informed decisions about feature enhancements, usability improvements, and other adjustments that will increase user satisfaction and retention.
What are the four primary methods for generating demand for a SAS product?
-The four primary methods for generating demand are publishing content, paid acquisition through ads, leveraging partnerships with existing customer bases, and gaining press coverage to increase awareness and interest in the product.
What is the difference between a growth hack and traditional marketing?
-A growth hack is a creative, often unconventional strategy for acquiring customers that provides a unique advantage in the market. It differs from traditional marketing in that it seeks to exploit overlooked opportunities or create innovative channels for customer acquisition, rather than following standard marketing practices.
Why is it important to avoid giving away equity too early in partnerships?
-Equity is a valuable asset in a software business, representing a share of ownership and future profits. Giving away equity too early, before the value of the partnership is proven, can be detrimental, as it may lead to dilution of ownership without a corresponding increase in value.
What is a common mistake made when seeking partnerships for SAS product growth?
-A common mistake is assuming that a partner with a large audience or customer base will automatically translate into a significant number of customers for the SAS product. It's important to ensure that the partnership is mutually beneficial and that the partner's audience is genuinely interested in the product.
Outlines
🚀 Building a SAS Business from Scratch
The speaker shares a seven-step strategy for creating a successful SAS (Software as a Service) business from the ground up. With personal experience from building and selling software companies, the emphasis is on the recurring revenue model of SAS businesses. The first step is identifying a problem to solve, which can be achieved by consulting and understanding the gaps in the software market. The speaker suggests talking to technology companies in the desired industry to uncover common pain points. The strategy also involves looking for 'tailwinds' in the market, such as emerging technologies or industries that are growing rapidly, presenting opportunities for software solutions.
🛠 Crafting a Prototype and Validating Your Idea
The speaker discusses the importance of creating a clickable prototype to avoid developing a product that users do not want. A prototype helps in understanding the functionality and user experience of the software. The speaker shares a personal anecdote about learning from a prototype that a property management software idea needed to be more user-friendly. The focus is on validating the product by getting users to pay for it, which is a form of crowdfunding. An 'early adopter program' can be used to pre-sell the software at a discount in exchange for upfront payment, which helps in collecting funds for development and validating the market need.
🏗️ Constructing the Minimum Viable Product (MVP)
The speaker emphasizes the importance of building a minimum viable product (MVP) with constrained features to launch quickly. The MVP should be developed within a three-month timeframe, using the budget raised from validation. The speaker advises against over-customizing the product for individual customers, which can lead to a loss of focus and a diluted product. Instead, the goal is to create a product that can be rapidly iterated upon based on customer feedback, without overextending resources or time.
🔍 Collecting and Analyzing Customer Feedback
Gathering customer feedback is crucial, and the speaker advises doing so maniacally. It's important to speak directly with customers to understand their experience, rather than relying solely on analytics. The speaker suggests asking the right questions to identify areas for improvement and innovation. The process involves collecting feedback, analyzing it to identify common issues or suggestions, and then deploying updates based on this feedback. The goal is to improve activation, retention, and overall customer satisfaction by addressing the needs of the majority of users, not just the most vocal ones.
📈 Generating Demand for Your Software Product
The speaker outlines four primary methods for creating demand for a software product: publishing content, paid acquisition through ads, leveraging partners with existing customer bases, and gaining press coverage. Partnerships can be particularly effective for quickly reaching a relevant audience. The speaker also mentions the importance of choosing a demand generation strategy that aligns with one's strengths and can be sustained over time. Additionally, there's a cautionary note about equity partnerships, suggesting that paying for results through affiliate fees can be more beneficial than giving away equity early on.
🌟 Discovering Your Unique Growth Hack
The speaker defines a growth hack as a unique channel for acquiring customers that isn't widely known. Examples given include using internal data from a competitor to open new airline routes and leveraging platforms like SlideShare to find experts for a consulting platform. The key is to find creative ways to reach potential customers where they already spend their time or to identify who has access to the target customer base. The speaker advises against common marketing strategies, urging instead for out-of-the-box thinking to find these unique advantages.
Mindmap
Keywords
💡SaaS
💡Consulting
💡Problem Identification
💡Prototype
💡Validation
💡MVP (Minimum Viable Product)
💡Customer Feedback
💡Demand Generation
💡Growth Hack
💡Equity
💡Crowdfunding
Highlights
The presenter has built and sold three software companies and invested in over 60, emphasizing the recurring nature of the SaaS business model.
The first step to building a SaaS business is starting with a problem, often discovered through consulting and identifying gaps in the software world.
Learning to build custom software can reveal opportunities by understanding customers' frustrations and needs.
The strategy of building a tool for oneself or clients before productizing it for others is highlighted, with examples like Shopify and FreshBooks.
The importance of identifying acute pain points for users that they are willing to pay to solve is underscored.
Building a clickable prototype is recommended to avoid developing a solution that users may not actually want or use.
The function and flow of a prototype are essential, involving APIs for functionality and UX for how the solution is presented.
Crowdfunding is presented as a method for validating the need for a solution by getting people to pay for it before it's built.
An early-adopter program is introduced as a strategy for validation, involving upfront payment for a year's license at a discount.
The concept of an MVP (Minimum Viable Product) is discussed, emphasizing the constraint of features that can be developed within three months.
The importance of collecting and analyzing customer feedback for product iteration is highlighted.
Focusing on middle-ground users who could become power users with minor feature additions is suggested over catering to the loudest or least engaged customers.
Four ways to create demand for software products are outlined: publishing content, paid acquisition, partnerships, and press.
Partnerships are noted as an effective way to quickly get in front of a relevant audience, with the potential for high conversion rates.
The strategy of using paid acquisition cautiously, given the need to invest money upfront to acquire customers, is discussed.
The concept of a growth hack is introduced as a unique channel for acquiring customers that others are not aware of.
Examples of growth hacks, such as using SlideShare to find experts for a platform or leveraging Google Apps usage to identify potential customers, are provided.
The importance of creativity in growth hacking and the question 'who has my customer data' is emphasized for identifying unique opportunities.
Transcripts
in this video I'm going to share with
you the simple seven steps to build a
SAS business even if you're just
starting out for those that are new here
I've personally built and sold three
software companies spent tens of
millions of dollars on developers and
invested in over 60 plus software
companies I fell in love with SAS
because of the recurring nature of the
business model every month people keep
paying you as long as they're getting
value over and over and over it's a
beautiful way to build a business but if
I lost all my money followers and
network this is how I would build a SAS
scratch in seven steps first step is
kind of obvious but it's a start with
the problem back in the day I was trying
to figure out the idea what do I build
you know I want to make money in this
software world but I don't want to build
something that nobody's going to use and
what happened is I just started
Consulting it's actually a really cool
strategy the more I was helping people
build things for their businesses I
would learn what was broken and where
there was a gap in the software world so
in many ways learning how to build
custom software for other people showed
me where the opportunities are so this
is the big hack see most people try to
come out with the big idea I'd rather
find out what the customers are already
dealing with so if you know what
industry you want to solve a problem for
go talk to the technology companies
already Consulting in that industry and
ask them what do customers in that
industry in the law firms or dental or
Cairo or AI what are you building over
and over and over for them many of the
biggest companies out there like Shopify
like fresh books like 37 signals they
all started by being cons Consultants
first building a tool either for
themselves or for their clients and then
productize that for other people see the
biggest challenge in building a software
business is avoiding building something
nobody wants it's the most expensive
thing you could do the best way to do
this is to get really familiar with
people's frustrations even in your home
I would encourage you to just go around
and add to what I call your frustration
list make a list of all the things in
your home that frustrates you even if
it's not software focused because what
it'll teach you is how to identify
problems in the world World pain that
you're having or listen to the words
other people say to you so that you can
find those opportunities to solve their
problems one of my favorite things to do
is to ask people to show me their
spreadsheets the head of marketing the
head of Finance the head of operations
they all have these crazy spreadsheets
they've created to make their job easier
and those are perfect places to look to
find software solutions to build the
other strategy that I look at is where
is there already a Tailwind in the
market so understanding what are some of
the upand cominging technology IES the
industry trends that are growing in
nature things like AI drone technology
3D printing find these markets that on
their own are growing and see if there's
a software solution to be made to help
those markets expand there might be
Inventory management challenges billing
challenges logistic issues manufacturing
issues there's all these new problems
that are going to occur as something
grows really quick and finding those
technologies that are already growing 30
40% year-over-year compounded that's
going to get you the biggest bang for
your buck in regards to solving a real
problem that doesn't have a solution for
it the cool part about getting involved
in a market that's growing is that even
if you're good you'll be great because
High Tides rise all boats if you're not
doing good you'll do decent because the
whole Market's growing so you just got
to get into it think about Facebook ads
in 2013 versus the newspaper ads of
today there are literally Tailwinds in
the current market that you can jump
into and grow and build your software
into versus getting into something
that's a headwind like the newspaper ads
of yesterday so don't tell me your
business idea tell me what problem it
solved I don't think you find a huge
problem in the market you find a
customer that has a huge pain Point
often times software starts off as
almost like a feature but it gets a tow
hold into the market for you then to
build a complete solution but you just
want to find that one place where
there's a gap it might be for somebody
copy and paste something from a
spreadsheet and paste it into some other
tool so it could be a connector solution
it could be some kind of configuration
tool a translation tool but you just
want to find something that's got an
acute pain that's frustrating enough for
the user to want to pay to solve it so
they never have to do it again once
you're in then you can expand the
feature set to create a complete
solution and that's where people get it
wrong they're like what's a big enough
problem to build a billion dollar
company no billion dollar company
started when it started as a billion
dollar solution it started as a $50 a
month tool which brings us to number two
which is to build a prototype one of my
favorite things to create is a clickable
prototype a wireframe of the solution
that you want to build why do we do this
so that you don't end up building the
solution in a way that the user would
never use see most people think well
there's a problem here and I'll just
build it this way it's not can it be
solved it should it be solved my
youngest brother he had a property
management software idea and he was like
I think people need software to manage
the property and if we had tenants using
it and they interacted with their
landlords it'd be a great solution I'm
like cool wireframe it Sharpies and we
just wireframe it and then we went to
the mall and we said hey do you rent or
do you own they're like I rent cool
here's the solution we're thinking of
creating where the tenant gets to
interact with the landlord through this
solution and it was cool a lot of
questions came up about like well does
this work on my phone and can I text
message and it was fascinating to see
him want to build a solution that the
end user actually didn't want it solved
that way they wanted to be a ble to just
text their landlord the way they do it
today now as a landlord I want to be
able to organize and Route all these
different job orders and manage the
relationship with my tenants in a more
efficient way but the tenant themselves
they didn't want the solution learning
that when it was in a paper stage saved
him tens of thousands of dollars in
building a solution that nobody was
going to ever use that's why clickable
prototype is so important having the
example of how the screens are going to
work and how the information is going to
be requested and can I remove it as much
information request from the user and
literally make it click click value can
they connect this system connect that
system two button clicks boom and then
get values from my software the faster I
can go from sign up to receiving value
the faster I'm going to activate them
and that's why we want to design those
flows using the clickable prototype
prototyping the solution before we ever
go and pay an engineer to build it cuz
that's the most expensive thing having
somebody change code is way more
expensive than just deleting a line on
an interface or removing a screen in a
software there's two parts though that
you need to understand to be able to
build a clickable prototype number one
is the function the second one is the
flow the function comes down to are
there apis application program
interfaces data sources that allow you
to actually make the solution work
that's just functionality speaking can
you actually technically solve the
problem the way you envision so those
are the apis you're going to integrate
with a Facebook or a Salesforce or CRM
solution like a go high level go look at
their documentation to see if they
expose that data or that information or
that function so that you can actually
build it that's the first part and the
second part is the flow the user
experience the ux it's called how would
that solution be presented to a user
even if the function exists but if I'm
confusing in how I prompted or explained
to people how the software works I'm not
going to get them to use it and those
are both areas you want to solve upfront
before you ever pay somebody to code
anything so there's different ways to
prototype software you can start with
pen and paper that's an easy one every
piece of paper is a flow a screen and
you just kind of put them out and lay
them out in a sequence of how somebody
would sign up for the software and enter
the information and use it and what kind
of report would they get you want to be
more advanced than paper and Pen
although I would encourage you start
there then you could go to a product
like a balsamic which kind of simulates
a digital version of a paper and pen and
kind of like wire frames The Next Step
Above from there would be like a figma
where it's very close to like simulation
where it's got like flows and you click
around and it's got potentially even
fake data to make it look like it's
working the next level above that the
highest level which is almost like Pixel
Perfect software but it's still kind of
a simulation is an Invision app it all
depends on how realistic you want to
make the software so that you could show
it to a user to be able to get feedback
and some of them are like you install
the app on your phone and it looks like
working software but again it's a
simulation a lot cheaper to change that
than to change the code from software
developers that you've paid which brings
us to number three which is to validate
your product one of my favorite things
to do is to validate if there's a need
for my solution based on if people are
going to pay me money see the
crowdfunding industry when people say
this nobody's going to pay me for my
software until I build it and give it to
them and I go that's not true there's an
industry called crowdfunding it's a $18
billion a year industry where people
show examples of what they're going to
build once you give them the money and
they crowdfund the development to me
this is no different you want to
validate it by getting somebody to pay
you for your software I mean the other
day I was actually working with a bunch
of teenagers I run a program called
Kings club which is for Youth and we
were talking about the idea of when is a
business birth the consensus was is the
moment somebody pays you for the
solution or product that you offered
most people don't want to go validate
cuz they don't want to find out that
nobody wants their thing that is
actually the highest risk building
something for somebody they never wanted
to buy in the first place the truth is
they'll be nice to you they'll tell you
great idea go build it so you go borrow
100,000 from your parents you quit your
job you go all in and then when you
Circle back and say you told me it it
was a good idea I've got the software
done do you want to buy it they're like
uh not really we're kind of busy and
then you go what the heck like you said
that this was a good idea it's like yeah
it's a great idea good luck with it what
happened you didn't ask for money
nothing survives first contact with the
customer and the best way to validate is
to get them to pay you dollar so here's
the strategy I call it creating an early
adopter program where you show people
the prototype to get feedback and then
at the end when they tell you how great
it is then you ask them to get involved
in your early adopter program which is
you get them to invest in buying a
license of your software typically it's
whatever you're going to charge for the
year give them 50% off for that year but
get them to pay up front for the whole
year so that you can collect some money
many people do this on the back end of a
webinar we they invite a bunch of people
and they'll teach and then they'll say
you know when I teach this thing most
people get stuck here because we know
they get stuck here we've got this
vision of creating this software if you
want to be part of the early adopter
program here's how we're doing it for
those people we're calling it the Inner
Circle and you can invest by buying a
year license Upfront for 50% off and
then there's benefits of that you might
have your name on the website you might
allow them to be part of the product
roadmap feedback system so they can give
you feedback on what you build some
people even give Equity depending if the
person has a large audience where they
can promote your product into their
customer base you might do that as well
I mean this is literally something
that's been going on for decades where
people crowdfund ideas to validate the
idea then build it I've used this
strategy to launch and pre-sell every
service coaching product I've ever built
even back in the day when I started my
company flowtown the way we validated
this idea to give you social data on top
of your email addresses is we created
three fake landing pages and on the last
page when we collected the credit card
to actually verify you were willing to
pay on the thank you page we didn't
charge a credit card and we just said oh
sorry our servers were over capacity let
us Circle back once we get things fixed
just to test if they would put a credit
card in and pay so there's many ways to
crowdfund or to validate your idea but
getting people to pay is mandatory
because if they don't pay they won't pay
attention they don't pay they won't
invest and when you go to launch they're
just going to tell you it's nice but
they're not going to actually use the
product most people think they validated
cuz they got three people that paid the
money when all they did they were just
really good at selling my co-founder
used to call me cell Martell cuz I
thought I was doing validation and all I
was doing is selling people on the
vision but what I would do is whatever
the person has an objection I would just
say yeah we're going to put that into
the product and then get their money so
if you do that what you end up is even
if you presold 10 people you're
essentially a very lowcost custom
development shop because every person
had a different request for a feature
and you said yeah we're going to build
that give me your money yeah we're going
to build that give me your money yeah
we're going to build that give me your
money and then you've got 10 different
specs of your product to get those
customers which actually doesn't make
for great business so you got to make
sure that when you pre-sell and validate
your prototype you stick and stay to the
same thing that you're going to build
for all 10 people you cannot deviate
each conversation which brings us to
number four which is to build your MVP
or a minimum viable product the key
there is to constrain your features I
remember a long time ago me and my
co-founder were arguing with each other
around the future strategy for growing
the business and we had two different
completely different ideas for this
product and the way we resolved it is we
each took the prototypes and went to the
market pre-sold them and figured out who
could sell it the best now the
constraint we put on ourselves was that
they had to be things that we could
build in the next 3 months Max so right
off the bat when you go to build this
make sure that the features are things
you could put together with the
development team within 3 months so
whatever amount of money you raise by
validating it that's your budget to hire
contractors or team to to build it just
constrain it to 3 months to launch the
first version if not you will go months
and months and months I had a friend of
mine reach out to me they were $5
million 3 years into the Prototype and
they had yet to launch and they asked me
for advice my advice is you should have
called me 3 years ago my advice is you
should have created some constraints
around how much time you spend on the
software 5 million is way too much money
I mean most people that I work with they
can get a working prototype in the
market with paying customers for less
than 100,000
sometimes $50,000 right it all depends
on how much you can kind of Connect into
other software to do some of the heavy
lifting so you don't have to write that
code yourself so the key is if you're
trying to hire a Dev team do this go on
upwork find developers that are good
reviews that are relatively inexpensive
for their experience give them all a
test project which could be one feature
in the software that you want to build
and see how they all code it you want to
pay them for it but the key is is you
want to give them the wi frames that you
created to pre-sell your software that's
why it's important to do that work up
front that way you don't have developers
designing your software that's very bad
developer design software usually sucks
it's ugly it's it's weird you can tell
when a developer designed software
versus a professional designer or even
better yourself using the right tools so
don't let a developer create the design
give them the product specs you could
also use a no code solution like bubble
make.com go high Lev for a lot of people
recently rapid API and these are great
the only challenge is is that if you
prototype something that's actually
working software with it it's not built
on your own stack so if you do have an
aspiration to exit the business someday
you might have to rewrite the software
in your own code so that an acquirer
could actually maintain and modify the
software without you being held prisoner
or Hostage to a platform see the reason
you never want to build on somebody
else's platform is that at any point
they could get bought they could change
their pricing and all of a sudden make
your whole business model mod not work
anymore I ran into that when I built my
company flowtown we built a whole
platform on somebody else's data and
apis all of a sudden they changed things
and made our whole product stop working
when we could have made that decision
earlier and upfront before we had 50,000
customers on our platform so
understanding that there's tradeoffs on
speed you could go a lot faster using a
no code solution but you might butt up
around feature constraints where you
can't build certain things and or
somebody changing their pricing or their
API making your whole solution not
viable anymore which brings us to number
five which is to collect customer
feedback now here's the deal I want you
to be maniacal about getting feedback
from customers not just looking if
they're using it see too many people
want to lie to themselves and they're
like oh yeah people are using it they're
loving it I'm hearing all about it I've
had people say to my face lie to me say
oh man I love that company I love that
tool I love that product and then I go
look behind the scenes and they haven't
even signed up for it or used it people
are weird so you could take these as
false positives that you built something
that's great instead what I want you to
do is actually talk to customers get on
the phone I used to call this smile and
dial every Thursday I would sit down for
90 minutes and I would call new
customers that signed up figure out what
they thought how they heard about me
what we could do to improve it to really
understand where the opportunity is to
improve the product see most people
building software will hide behind the
scenes looking at the data and the
reports and the analytics that's like
having a retail store and hiding in the
back room looking at everybody's shop in
your store through the closed circuit
television instead of getting out of
that back room and just talking to them
in person they're literally in your
store and they're not buying you might
as well find out why do you not have the
size is it the colors not working for
them they were they looking for
something completely different that you
didn't carry understanding why people
that don't use your software are not
using it doesn't mean you got to fix
anything but it's at least going to tell
you where the opportunities are to
improve your activation how quickly
people get value from your product and
your retention how often people stick
around and keep paying you month over
month so one of the key areas is to
always work backwards from the customer
understand what they're trying to
accomplish and where they got stuck or
it wasn't easy for them to complete
often I'll ask the customer what do you
do 3 minutes before you use our product
and 3 minutes after you use our product
because that is also a huge opportunity
to figure out where your solution could
expand and create more value for them
because if they're getting ready to use
your product or going some's else with
the information that you produce for
them that could be an opportunity for
you to expand the value that they're
going to get from your Your solution see
most people confuse a customer by not
asking them the right question and it's
an art form is the wrong question will
get you the wrong solution which could
cost you tens of thousands of dollars
building a feature that they didn't
actually want because you didn't ask a
question right most people get stuck
building software for a customer or two
customers or the most paying customer or
the loudest customer they don't actually
look at it as like my job is to be an
investigator to look at all my users and
figure out what are they all facing and
where can I innovate based on what
exists in the market there's actually an
opportunity to differentiate to create
something sticky to look at features
that are going to have higher retention
if you just keep doing what people tell
you to build you're going to run into
being a lowcost customer development
shop you want to be an innovator and to
do that you need to ask the right
questions and come up with the best
solutions to solve the problem that
they're telling you about so the three
steps is once you're getting feedback
step one is to collect all the feedback
from all the customers then you want to
analyze it and put them into like
grouping of problems and how they're
giving you that feedback and what they
think you could do fix the product and
then deploy the roll outs so those three
steps collect analyze and deploy the
roll outs is how you iterate on the
product here's where most people mess it
up most people ask customers that aren't
even using the product for feedback on
how they can make it better what I want
to find out is who's kind of using the
software but not like a power user and
figure out from those users what's the
one or two features if I added would
make them all power users cuz it's a lot
easier to have somebody that's kind of a
yellow usage and turn him into a green
then to go from a red not using it to a
green most people spend too much time on
the Reds they were never going to use
your solution in the first place cuz
they probably didn't have your problem
as big as these customers in the middle
because AOW minority if you solve for
them you solve for a very small group of
customers compared to the rest if you
have 100 customers and there's only two
people that are being louded about a
specific area of your product that isn't
working for them and you spend any time
on those two customers you're ignoring
98 of the other ones where you could get
40% of the people really using your
product to retain 40% not just the 2% of
people that are being allowed in the
support emails if you actually want my
list of questions for problem
identification and solution
identification and Innovation I actually
have a Google doc where I've collected
my favorite hundred questions to ask
customers depending on what you're
trying to learn just go on Instagram
click the link in the description below
and message me cust Dev for customer
development and I'll send you a direct
link to that Google doc to help you with
your questions which brings us to number
six which is to generate demand there's
only four ways to create demand for your
software product the first one is
publish content second one is paid
through paid acquisition so ads third is
Partners people that have the existing
customers and trying to get in front of
their groups or the fourth is through
press having people write about you so
that it drives attention and eventually
people might sign off for your solution
the one that most startups use when
they're building their software is
Partnerships and the reason why is it's
so fast for me to get in front of an
audience of Perfect Fit customers that I
know have the problem and present my
solution to all them at once pay the
partner an affiliate fee 20 30 40% of
monthly lifetime value of the customer
for the perfect partner I might give
that much 40% of the monthly fee that I
get they get as a promotional partner
and that way I just have to find one
partner that gets me in front of
thousands of potential customers and
trying to go one after one after one for
a $50 a month subscription I remember
one of my clients Matt at review wave he
did this brilliantly with events where
he figured out a rhythm to get in front
of the people that attended certain
events for his industry and would
present on stage in 5 minutes this quick
little pitch that would get everybody
running to his booth for him to have a
conversation collect business cards and
many times close those customers at the
events to help fund all of the cost of
travel and sponsorship so so events
webinars emails Facebook groups all
these are examples of places where your
potential customers are aggregating and
whoever owns those will allow you if you
pay them to get in front of them you
could do a lot of stuff around paid
acquisition the problem is is that you
got to put your money out first to
eventually get a customer you could
publish like SEO challenge there is you
got to spend a lot of time trying to
create that traffic social media Etc
before you ever get a customer and then
you could do the Outreach to press which
can work it worked a lot better back in
the day for for the right types of press
think about podcast those are great
potential channels for you to get the
awareness out there in your market for
your solution I mean at the end of the
day do the thing you're going to keep
doing for a long period of time if
you're good at blogging do that if
you're good at short form content do
that if you're good at building your
personal brand do that you could even
partner with somebody that has a massive
personal brand that already has an
audience of people that you want to sell
to here's where most people mess it up
you got a cool software solution and
you've got this person that tells you
they're going to bring you thousands of
customers if you give them 10% Equity
40% equity in your business and then
they don't do the thing I would just
rather not give them Equity at first
have them promote your product to their
customer see how many people buy and if
they want they can convert the amount of
money you gave them every month for the
amount of customers that pay cuz they
could send you a th000 customers but if
they only stay for a month and then
cancel then that's not going to help you
you want to pay them when you get paid
and then if they make enough doing that
you can always give them the opportunity
to convert that dollar amount into
equity into your business into shares
into your business they're like hey man
I could sell a lot of your product to my
audience you should give me Equity I'll
do some shoutouts in my content it's
like how about we just make you an
affiliate I'll give you 40% every month
of what people from your audience sign
up for and pay me and then if that's a
large amount of money let's say 50,000 a
month they could always convert that
royalty into equity in your business as
an agreed upon valuation Equity is the
most valuable thing you have in your
software business it's not about the 10%
it's about what does that 10% mean in
the future if you sell your business for
100 million and some guy helped you get
a 100 customers at the beginning 10
years later you sell for 100 million are
you going to be happy giving him a check
for $10 million when all he got you as
the first 100 customers and most of
those people didn't even stick around
very long like you better off just pay
him the affiliate fee the dollar amount
of what that was worth and keep your
Equity to yourself because you want to
use that for top employees potential
investors and honestly maybe to sell
some shares for yourself down the road
so you can get some money early and not
have to go and exit it right away and
just create some options for yourself
which brings us to number seven which is
to find a growth hack see most people
think growth hacks are marketing they're
not a growth hack is a unique channel
for you to acquire customers that most
people don't know about for example
there's this crazy story of a Canadian
Airline called WestJet when they were
starting off and they were trying to
figure out what are the new routes that
they open up between which cities they
actually had internal data through an
old employee that had their number one
competitor Air Canada where they could
log in as this employee scraped the
information from their internal portal
and figure out where there was the most
demand for certain flights and that was
the sequence when they got new Jets
added to the fleet that they would open
up new routes to help Finance their
growth now this is completely illegal
they got sued for it and they settled so
don't do that but the concept is
brilliant where does your customer spend
time is there a way to get in front of
them when I was starting Clarity we were
trying to get experts on our platform
people that were willing to take phone
calls and it occurred to me that most
experts speakers creators folks that
were out there thought leaders they
spent a lot of time creating slides that
they would share on a site called
SlideShare so what we did is we actually
took all the demand for people seeking
advice and then had people that would
manually go through SlideShare find the
top three experts based on the
popularity of their slides go to the
last slide on SlideShare which was their
contact information and then email them
asking them if they're willing to take a
phone call for a price to help the
person looking for advice now we did
that manually at first and eventually
automated through some software we
called that feature bonejour which is
French for hello because it created
liquidity in our Marketplace for experts
to get paid for their advice I've done
this several times for example when I
help HR software in Asia try to find
their early adopter customers we
realized back in the day that if a
customer was using Google apps for
domains which is Google's Suite of
business tools they were more likely to
buy their software so how did we find
them we took all the domains of the
businesses all the email addresses ran
them through a domain lookup to see if
they were using Google Apps as their
mail record for their email if they were
then those get scored higher from a lead
score opportunity and called on first
that tripled their ability to generate
outbound sales productivity these are
examples of growth hacks Uber did this
they'd enter in a new city they would
partner with all the event organizers at
an event venue and give gift cards for
Uber to put in the attendance 's gift
bag so that when they would show up and
they got their gift bag they would have
a credit for an Uber Drive they never
used Uber they had to install the app
they' use $20 gift certificate and then
they would go like oh I need to use this
to get back to the airport at the end of
this event and that's how they would
activate new cities amongst many other
things and many of them got them in
trouble but that's the big idea a growth
hack is only a growth hack if nobody
else knows about it and gives you an
unfair and unique advantage in your
market so think about who has your data
so real growth taxs require creativity
the question I like to ask is this who's
got my list who's got my data who's got
my customers who's already done all the
heavy lifting to identify the perfect
fit customers for me the more I
understand who buys my software who has
the biggest budgets quickest to buy has
the highest need if I can look in the
market and identify those people get in
front of them reach out to them just
make them aware that I exist that's a
great opportunity another example I had
a friend that paid somebody to run ads
on top of their pixel on their website
because they knew people that bought
their product would buy their customer
so they paid them to borrow their
Facebook pixel to run ads to get in
front of that customer in a way that
that person didn't even have to
affiliate for them really smart strategy
again does that violate the terms of
service I don't know but those are ideas
where you got to kind of go on the edge
to figure out who's got my customer
who's got my data who's got my list and
then work backwards to find ways that
are obviously not illegal to get in
front of these customers it's all about
creativity it's called a growth hack
because it is a hack most people mess
this up because they're just doing
marketing instead of trying to figure
out a unique opportunity either it's
cheaper traffic it's cheaper attention a
really hard thing to scale but you've
built a system and process around
scaling it or you can create a Playbook
that nobody else would do because it
just seems so complicated they would
just rather do something that costs more
to do it and by building these growth
hacks you create unique demand marketing
channels for your software that nobody
else has if you want to learn about the
best businesses you could start in 2024
click the link and I'll see you on the
other side
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