6 Amateur Mistakes That TANK SaaS Success 📉 Avoid These!

Summary

The 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

00:00

😟 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.

05:02

😥 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.

Keywords

💡software as a service

A software distribution model in which applications are hosted by a vendor or service provider and made available to customers over the internet. Customers pay on a subscription basis rather than buying licenses upfront. The video focuses on building successful SaaS businesses and avoiding common mistakes entrepreneurs make.

💡business model

The plan for how a company will generate revenue and make a profit. Choosing the right business model is critical for the success of a SaaS startup. The video discusses pricing models, optimal customer segments, and other key elements of constructing a viable SaaS business.

💡entrepreneurs

People who take the risk to start and operate new businesses. The video is aimed at aspiring SaaS entrepreneurs who want to avoid common mistakes when building their startups.

💡pricing

The amount companies charge customers for using their products/services. Pricing is a major determinant of revenue and profitability. The video emphasizes getting your SaaS pricing right from the start.

💡marketing

Activities focused on promoting and selling products/services to reach new customers. Effective marketing is essential for SaaS growth, but relying solely on luck or virality usually fails.

💡B2C

Business-to-consumer model focused on selling to individual customers rather than to other businesses. The video argues B2C SaaS is very difficult and entrepreneurs should stick to B2B models instead.

💡premium

A pricing model where core features are free but more advanced capabilities require payment. Also called freemium. The video warns this is very tricky for SaaS startups to implement properly.

💡customer feedback

Input from customers about their experience using your product/service. This is critical for refining the SaaS and cannot be obtained without conversations with prospects and users.

💡two-sided marketplaces

Platforms connecting two distinct customer groups, like buyers and sellers. The video cautions against building these because solving the cold-start problem without funding is extremely difficult.

💡successful

Achieving strong sustainable growth in revenue and users. The video aims to help viewers avoid mistakes and increase their chances of building a successful SaaS business.

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