How to Start a SaaS Business With $0 [Simple 7 Steps]

Summary

This 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

00:00

🚀 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.

05:01

🛠 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.

10:03

🏗️ 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.

15:05

🔍 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.

20:06

📈 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.

25:07

🌟 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.

Keywords

💡SaaS

SaaS stands for Software as a Service, a software licensing and delivery model in which software is provided on a subscription basis over the internet. In the video, the speaker emphasizes the recurring nature of the SaaS business model, where customers pay a monthly fee for continuous use of the software. This is a central theme as it highlights the appeal of SaaS for building a sustainable and scalable business.

💡Consulting

Consulting in the context of the video refers to the process of providing professional advice to businesses. The speaker mentions starting with consulting as a strategy to identify problems and gaps in the software world, which later can be addressed by building a SaaS solution. It's a practical approach to understanding customer needs before creating a product.

💡Problem Identification

Problem identification is the process of recognizing and defining the issues that a potential product or service could solve. The video script emphasizes the importance of starting with a problem rather than an idea, suggesting that successful SaaS businesses often begin by identifying a gap or a pain point in the market.

💡Prototype

A prototype in the video is a preliminary model of the SaaS solution that allows the creator to test and refine the concept before full-scale development. The speaker recommends creating a clickable prototype to ensure that the solution is user-friendly and meets the needs of the target audience, which is a critical step in avoiding the development of unwanted features.

💡Validation

Validation in the script refers to the process of confirming that there is a demand for the SaaS product by having potential customers pay for it before it is fully developed. The speaker discusses using crowdfunding and early adopter programs as methods to validate the product and gather funds for development.

💡MVP (Minimum Viable Product)

MVP stands for Minimum Viable Product, which is a version of the product with just enough features to satisfy early customers and provide feedback for future product development. The video emphasizes the importance of constraining features to what can be built within a short timeframe and budget to launch the MVP effectively.

💡Customer Feedback

Customer feedback is essential for understanding how the SaaS product is being used and where improvements are needed. The speaker stresses the importance of being 'maniacal' about collecting and analyzing customer feedback to iterate and enhance the product, ensuring it meets the users' needs and expectations.

💡Demand Generation

Demand generation refers to the strategies and tactics used to stimulate interest in the SaaS product and attract potential customers. The video outlines four primary methods: publishing content, paid acquisition, partnerships, and press. Each method has its own context within the script, such as using partnerships to leverage existing customer bases.

💡Growth Hack

A growth hack in the video is described as a creative and innovative marketing strategy aimed at acquiring customers rapidly. The speaker provides examples of unique channels and tactics that give an unfair advantage in the market, such as leveraging existing data or partnerships to reach potential customers in a novel way.

💡Equity

Equity in the context of the video refers to ownership shares in the SaaS business. The speaker advises caution when offering equity, suggesting that it's often more beneficial to pay for services or partnerships in cash or as a percentage of revenue rather than giving away a percentage of the company, which could be very valuable in the future.

💡Crowdfunding

Crowdfunding is the process of raising small amounts of money from a large number of people, typically via the internet. In the video, the speaker uses crowdfunding as an example of how to validate the SaaS business idea by having people pay for the product in advance, which is a way to test the market's willingness to pay for the solution.

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

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