# Introduction SaaS business building: Ideation, Validation, Costing, Pricing, Development, Marketing, Sales, Support, Traction, and Growth. ## Disclaimer: This book isn't finished. As the digital pages turn, you may realize that there are sections in this book that are incomplete or pages that end abruptly. I put this book out there for anyone building a SaaS business, so that you wouldn't make the mistakes I have in my endeavors. Even though this text is incomplete, it still covers so many areas that I couldn't find consolidated anywhere else on the web. I hope you find value in this book, despite a few missing pages and some incongruities. ## Get Notified When It’s All Done! Right now, this is a work in process. But it won't be forever. [If you want to know when this project is done and ready to be read in completion, just post your name and email address to this form and I will let you know!](https://docs.google.com/forms/d/e/1FAIpQLSdjneuCPSMfKS8VEm4AKZkEEoaxN80boVP5SijE_oFPRFDm-w/viewform?usp=sf_link) Feel free to make comments, and [reach out to me directly from this form](https://jasonmlong.me/contact) if you have questions. Please don’t send any solicitations though, just questions or comments. ## So you're starting a SaaS business? Or like so, so many people you've probably already gotten started and realized that maybe the path you're on isn't working out quite the way you expected. Don't worry, this happens a lot to a lot of people. Over the years I have talked to so, so many people that have thrown away millions of dollars trying to start SaaS businesses only to see the money go to waste, and that is the main reason I wrote this book, to keep this from happening to you. During my years of work in SaaS, I have started a variety of different companies, some successful and some failed. What I found is that the more I read books like this and gained experience from people that already went through it, the better I did in my endeavors. I sincerely hope this book helps keep you from or get you out of the troubles you may run into. ## I wrote this book for people that are: * **Thinking about starting a SaaS** business and want to know their process and what they're getting into, want to know how to validate the idea and estimate the cost. * **In the middle of the system build** and are realizing that things are taking longer, not progressing well, or costing more than expected. This book will help you figure out where things are going right and going wrong in your development process. * Finished the build, but now **can't seem to bring in the customers**. * **Are making money and want to know how to make more.** Having been at all of these different places running a SaaS business, I know what you're going through. ## Want to watch instead of reading? I did a few webinars to get this thing going. Personally, I thought they turned out pretty well, but I'd love to know what you think! Let me know in the comments in YouTube! * * You can also see some of the videos I did on the [JH Media Group Youtube page](https://www.youtube.com/channel/UC0OcAfHmr6XfIEUJcyf9mUg?view_as=subscriber) and [BrainLeaf youtube page](https://www.youtube.com/channel/UCQcDIql6ZaJNLYMmUDlndyA?view_as=subscriber). ## Connect with me! You can also get me on linkedin at: #### My Businesses: * [www.jhmediagroup.com](http://www.jhmediagroup.com/) * [www.brainleaf.com](http://www.brainleaf.com/) * [www.medrevup.com](http://www.medrevup.com/) * [www.sensiblesurveys.com](https://www.sensiblesurveys.com) * [www.sellmydata.io](https://www.sellmydata.io) * [www.diagnosticsmarketing.net](https://diagnosticsmarketing.net/) * [www.jasonmlong.me](https://www.jasonmlong.me) * [www.adacompliancetesting.com](https://adacompliancetesting.com/) # Forward ### I've made a lot of mistakes in business over the last 20 years and learned from most of them. I can’t tell you exactly how to succeed, but I can for sure tell you how not to fail. I hope these lessons I’ve learned will help you avoid some of the many mistakes I have made and help you to grow a thriving business and make the world a better place. Please, take this knowledge and grow something amazing! Jason Long # Who & How ## Who this book is this for and why it was written This book is written for people who have some business experience and are interested in growing their business by venturing into the SaaS world or starting a new SaaS business. This may be an entrepreneur with a new idea, a team member at a company that wants to provide a new offering for the company, a developer, designer, or project manager already in the world of development who wants to start a SaaS business, or a number of other people. While running a [SaaS business building company](https://jhmediagroup.com) and having launched many of [my own SaaS businesses over the years](https://jasonmlong.me/bio) I have met so many people who lost so much money trying to launch their SaaS businesses because they didn’t understand: * What they were getting into * How to know if their idea would work * The steps to building a usable system * What to expect during the build of the system * How to price their system * How to market the system and bring in users * How to help users become customers * How to keep users engaged in the system and in the business * How to efficiently support users If you're one of the people or have the questions listed above, this book is for you. ## How this book is written This book is about theory, practice, and implementation. It's partially a book on how to run a business and part step-by-step instructions. It won't teach you how to be a developer, but it will help you manage them. It won't tell you how do be a UX designer, but it will teach you what to look for when you're working with them. It can't solve all your problems, but it can keep you from getting into big ones and get you out of a few others. As I like say, "I can't tell you how to be successful, but I can for sure tell you how not to fail. And maybe by not failing, you'll have the time to be successful." This book was written with planning in mind because you want and need to know how much time and money this venture is going to cost you before you get started. The book takes you through much of what I learned over the years about: 1. The Business of SaaS 2. Validating Your Idea 3. Building Your System 4. The 4 A's of a SaaS Business: 1. Appraisement - Pricing your system 2. Acquisition - Getting new users 3. Activation - From user to customer to advocate 4. Attrition - Keeping people engaged in your business None of these areas stand independent from one another. Much like building a store or factory, you must have a foundation before you can have a roof, and what good is the roof without the walls? You have to build all the parts to have a structure that works. If you're just getting started building a SaaS, I highly recommend you at least skim through the entirety of the book rather than just reading one section or another and moving forward. If you don't, you may end up with a roof and some windows, but no walls to hold them in place or a secure footing for them to stand. #### Now, let’s get your SaaS in gear! # The Business of SaaS ## Welcome, SaaS entrepreneur! Whether you’re dreaming of a passive income stream that will let you travel the world, an executive planning on taking your business to the next level, a veteran SaaS operator trying to grow or scale your system, or perhaps a developer or designer thinking that it’s time you turn all these years of learning to code or design into something more lucrative: this book should give you anything from a huge boost to a validation that what you thought was right was, in fact, right. This book takes you through not just the build of the system, but the ideation, validation, growth, and traction of your concept. It gives you actionable processes and takes you through the mistakes that many SaaS entrepreneurs have made. In particular, this book takes you through the mistakes that I made, lessons I learned, and misconceptions I had while building and growing my businesses over the last twenty years. ## **What is a Software as a Service (SaaS)?** A Software as a Service (SaaS) is a cloud-based or partially cloud-based computer program that is constantly being added to, improved, and maintained and that users pay for on an ongoing basis. Payments are generally made monthly or yearly, but can also be made in a variety of different ways. These systems almost always require additional business systems such as maintenance, customer service, a knowledge base, ongoing development resources, and more to continue to operate. SaaS systems often require a high initially investment, and often have a high profit margin. Commonly used SaaS systems include: * Salesforce * Quickbooks * Asana * Zoom * Strava * Spotify * G Suite * Hootsuite * JIRA * Slack ## What does a SaaS do? A SaaS system fulfills one of two needs: * A knowledge gap * An efficiency gap. This means that it either makes your target market’s job easier by doing something for them that they would otherwise be spending time or money on, or it gives them knowledge that they didn’t otherwise have. In other words, your SaaS company exists to give value to your customers, which is why why they are willing to pay for it. **Every SaaS system does one or both of these things.** ## **SaaS is a Delivery Method, Not a Business Model** It's easy to think of 'SaaS' as a business, but it isn't. SaaS is just a way of delivering software products, and sometimes services, via the internet with no need to install a software system on a computer. This is often paired with subscription payment models. SaaS is a great business model because it enables you to charge in a way that lets you constantly maintain your team and grow you product and when or if you reach a certain threshold, have a higher than average profit margin. However, these are just deliver methods, and not business models. For example, the tasks involved in delivering and implementing quality healthcare patient experience and analysis systems versus a system that enables you to optimize the delivery of your project scope of work documents to clients are two vastly different systems, even though they both fall under the category of SaaS. Most SaaS businesses have very different clients, outreach methods, customer feedback methods, products, services, types of employees, and so much more. It is very important not to compare your system to other 'SaaS Systems' that may have nothing in common with you. Technically speaking Facebook and Twitter could be considered SaaS businesses, given what they do, and it would be a big ask to compare most companies to them. ## Hollywood, TechCrunch, and The Truth About The Business of SaaS {% embed url="" %} Let's burst some bubbles and be real for just a minute. If you're reading this book, you're probably familiar with our internet overlords at Google and social media giant Facebook. You're probably also somewhat hooked on the Uber dreams and Slack desires. You probably read about how if you pitch the next great idea, raise some money, do some steps which you hope to read about in this book, then boom! Money. In the words of the ridiculously successful software entrepreneur and [overall great guy Waikit Lau](https://www.linkedin.com/in/waikit-lau-89129/), current the founder of [RemoteHQ.com, a great rising Zoom competitor](https://www.remotehq.com/), "Techcrunch is Hollywood and Facebook is a one in a billion. Having a business like that is the equivalent to winning the lottery." Even if you are truly great at what you do, you will almost certainly not become a giant. Not only do you have to be in the right place at the right time, you have to look the right way, have gone to the right school, know the right people, have the right parents, and so much more. If that's you, then you probably already know it. If not, then you're just like the other 7.53 billion of us in the world. If I'm bursting your bubble, trust me, it's better this way. Now you can get ready to work hard and expect to work very hard for a long time, fail at least a few times before you have some success, and fight day in and day out to be successful. That's just the way it is. I'm glad we had this talk, and I hope you are as well. Now we can get to work. ## SaaS Success Questions Before we get too far along, let’s go through the basics. Below are a set of questions that you probably need to be able to answer before launching or growing your SaaS. * Do you know who you’re selling to? * Are you targeting the right people? * Do you really know who you’re selling to (personas)? * Do you know what they want and where you provide the most value? * Have you researched what your competitors are offering? * Do you know if people will buy your SaaS? * What are you selling and do you have the right value metric? * Is your SaaS priced properly? * Do you know how to price your SaaS system? * Do you know what metrics you should be tracking in your SaaS? * Do you know how to grow your SaaS revenue? * Did you ask people what is most valuable to them? * How do you get the SaaS system built? * Does it work? How do you know? * Is it easy to use (UX + functionality)? * Do you know how your SaaS will scale? * What systems will be necessary to support your customers? * What systems will be necessary to nurture leads and keep customers coming in? * How will you get your SaaS out there to everyone? * What is your starting point, and where do you go from there?
As you can see, the majority of these questions are about pricing, sales, revenue, and business. These are the things that should be on your mind if they’re not already. ## The 4 A’s of Your SaaS Machine {% embed url="" %} Now that you've got a few things on your mind about sales and marketing, now it's time to think about the levers you can pull to grow your SaaS. #### The four A’s of SaaS are: * Appraisement * Acquisition * Activation * Attrition ### Appraisement “The act of estimating or judging the nature or value of something or someone.” - Dictionary.com Appraisement here refers to setting the price of your system. This is by far the most overlooked lever of SaaS business growth. Most entrepreneurs and companies I’ve spoken to talk all about acquisition and attrition, but spend little to no time on appraisement. In the section on Appraisement, we will review how to determine who your customers are, what they want, how much they are willing to pay for it, and how to iterate on these ideas. ### Acquisition “The act of acquiring or gaining possession.” - Dictionary.com Different SaaS businesses acquire users in very different ways. Sometimes it’s about direct sales, meeting people at trade shows and following up with them. Much of the time, it is heavily focused on search engine marketing and ranking for the right keywords; other times it is done through partnerships and affiliate marketing. Every system has a different market, a different problem they’re solving, and a different set of users. Acquisition goes hand in hand with Appraisement. Once you know who are are selling to and what makes them tick, then you can figure out the best ways to reach them and help them understand the value you present. In this chapter, we will also cover the major aspects of user acquisition associated with web-based businesses as well as tricks of the trade that no one likes to talk about. ### Activation "The action or process of making something active or operative." - The Oxford Dictionary Getting people to your SaaS and having them take a look at the system is one thing, but it's not enough. How many people have pitched you on a product or service only to have you listen to their pitch ask a few questions then walk away? The same applies to your SaaS. If you don't take steps to help your users starting using your system and getting value from it immediately, they are going to walk away, and probably not come back. This chapter takes you through processes of helping users flow from being a window shopper to a returning customer. ### Attrition “A reduction or decrease in numbers, size, or strength.” - Dictionary.com Attrition is essentially how many people leave. This is also known as “churn” in the SaaS world. Conversely, we also talk about “retainment” which is exactly what you think, how many people stay. In our chapter on Attrition, we will take a look at all the reasons people stick around. From the value of the system, to the way you make people feel, to the support you give them and how you keep them engaged in the growth of the company and system. ## Understanding the A’s These are the buttons you push to make your SaaS company grow. There is a simple trick here that you need understand. You need to know: 1. How much money you make from the average customer over their lifetime. This is know as Lifetime Value (LTV) which is explained in-depth below. 2. The cost of acquiring a new customer (CAC). Obviously, the LTV has to be higher than the CAC, right? But by how much? According to [PriceIntelligently.com](http://priceintelligently.com/), it always needs to be higher than 3 to 1, preferably a lot more. That means that for every dollar you’re spending to acquire a customer, you’re making 3 dollars. According to the [same source](http://priceintelligently.com/), if you continually optimize your pricing, you can get this up to 11 to 1. Let’s examine this a bit more because it is **really important** that this part is clear. # Basic Lessons of Saas ## Getting Started: There are some basic lessons of SaaS businesses that are valuable for every entrepreneur. Take out the word SaaS and for the most part these lessons apply to many businesses. The difference in SaaS vs. many other businesses is that of scaling quickly. If you run a coffee shop on a busy day maybe you have thirty people in the store at one time, and perhaps a thousand over the course of a day. In this case, the only way to grow you business would be to process more people faster or to get a larger space. But in a SaaS business, you are generally not confined by space or your ability to serve tens of people at one time, perhaps hundreds or thousands though, so you have to worry more about getting people into the store before other stores open up and marketing. The lessons below cover this issue and several other major issues that so often crush SaaS entrepreneurs. ## Lesson 1: When you’re building a SaaS, you’re building a business. Most people I’ve talked to over the years about SaaS think a lot about the product and then what they’re going to be doing with their millions of dollars, but the work between those points is vital to reaching those goals. The first thing people don’t realize is that when you’re building a SaaS, you’re building a business just like any other. This is how most people think about SaaS. Some basic things you’re going to need in your new business include upfront and ongoing costs such as: 1. **A federal tax ID** - In the US, where I am, this is the first step in starting a new business.
2. **Website hosting** - It’s got to live somewhere, right?
3. **A phone number(s)** - Don’t think you can get away forever without one of these, ‘cause you can’t.
4. **Customer service agents** - A lot of people are going to be asking a lot of questions, and if you’re out traveling the world or collecting your millions, how are you going to answer them?
5. **Customer service software** - Got to keep all those requests straight.
6. **Electricity** - In one way or another you’re going to end up paying for this.
7. **Insurance** - You may not need this at first, but I guarantee you will eventually.
8. **Security Systems** - Those pesky hackers all want your money and information. Better to pre-empt them than pay a ransom (which happens everyday).
9. **An advertising budget** - Your Google overlords don’t work for free you know.
10. **Marketing** - The people of the world aren’t going to find you without you being in front of them, saying the right things, and lookin pretty!
11. **Marketing software** - so you can keep all those marketing dollars working.
12. **Customer Relationship Management (CRM) software** - A way to track and manage all those nice people giving you money every month.
13. **Sales team members** - someone has to answer those customer questions before they give you their money!
14. **Money management software** - now that you have things to pay for, you’re going to need a way to manage where all your money is going.
15. **Taxes** - How are you going to buy coffee for those long nights if you don’t have things like roads?
If that sounds like a lot of stuff, that’s because it is. Starting a business is time consuming, has an element of risk, and costs a lot. This is the mistake so many people make. They think they’re building software when in fact they are building a business. if all this stuff sounds like it’s right up your alley, then let’s keep going! If not, you may want to consider putting the computer down for a few minutes and taking a little walk to rethink this project; if you aren’t excited about working on all the things mentioned above, you’re probably just going to be throwing your money away and getting frustrated. Also, you’ve probably heard the saying that ‘as a new entrepreneur you get to choose your own hours, and that means you can work any 16 hours per day you want’. If this doesn’t sound like your idea of a good time or you don’t have the means to do this (at least for a while)… well, just think about it ok? ## **Lesson 2: The Number One Indicator of SaaS Success / You’re Probably Going To Fail… And That’s Ok.** {% embed url="" %} Here is the first big secret about SaaS success -- it’s important, and I hope will guide you through the rest of this journey. The number one indicator of success in SaaS, or any business for that matter, is how many times the person leading the startup has done it in the past. That’s it, that’s the number one, biggest thing. What that means to you is that you’re probably going to fail your first time, but that’s okay because now you know it’s going to happen and you need to start with something small so you can afford to fail. This is seriously one of the most important ideas in this entire book. Really. Failure is how we learn to succeed. If you haven’t failed, then you probably haven’t tried. ### **Storytime With Steven** Steven is successful CEO and a friend of mine. Through our casual interactions and more focused talks, he has helped lead me to success in ways I’m sure he’s never realized. The first time I met him he handed out value bombs like they were tic tacs. Perspectives and insight that changed my view on business were given out so freely that I was always left asking more questions. This one particular conversation was changing for me. It helped me go from feeling like I was lagging behind my peers to a strong potential success. I hope it can do the same for you. It was a perfect night in Medellin, Colombia. It was warm, but not hot. We had just had some delicious grilled octopus and an icy lemonada de coco (coconut lemonade - it’s their specialty there). It was also my last night of a 2-month stint during what would have otherwise been an oppressively cold winter in Atlanta, Georgia. My girlfriend and I had been hanging out with a bunch of other SaaS owners there and I was explaining to Steven that I was really bummed that the SaaS I had been working on for a long time wasn’t making any money. We were walking through the neighborhood of El Poblado around midnight as I explained that my team had just run into yet another technical challenge and was not progressing nearly fast enough. We were also years into the project and were still not breaking even. Fortunately, I told him, the SaaS was secondary to my main business at the time, a digital agency, and I didn’t need the money to make ends meet. As I was venting my frustration to Steven and asking for advice, he gave me an answer that surprised me, gave me hope, and helped me move forward. We wandered up to a bright yellow building with red shutters and red chairs on the corner “Here,” he said “This is one of my favorite places for a mojito in this neighborhood” as we sat down at a table. After the bartender took our order and quickly returned our drinks, Steven looked up from a bright green, minty mojito and said “What you’re going through is what pretty much every successful SaaS CEO I know goes through.” “Really?” I asked, putting my Aguilla on the table to listen more intently. “For sure,” he said “For my first SaaS, I had huge hopes. It was going to be so good. But… it crashed and burned, and I lost all my money. It was really, really tough. I felt like I let a lot of people down, and I really did. I had to go back to work as a developer, replenish my funds, and totally start over. But I learned a ton.” He stopped for a minute and sipped his mojito. I could see that he was thinking about it, and I could kind of sense that he was thinking about that time in his life. I was just about to ask him about what followed when he started back up. “The next SaaS made a little money and we sold it after about a year or so. We tell ourselves that we broke even, but really, my business partner and I still probably lost money on the whole thing if you count the time I spent on it” he said with a smile. “We felt really good about having exited somewhat gracefully. That got us enough money to start over again. And by the third time -- which was probably about year 4 or 5 -- we mostly knew what we were doing; and when we built that system, we turned it around fast and actually made a good profit! It was a few hundred thousand dollars for each of us!” he said with pride. “Now, I’m on my fourth SaaS, and this time we know what we’re doing and a few months after launch we already have five thousand paying users and we’re cash flowing at over 100k per month. This time, we are on track to sell this thing for millions.” he finished up. “Wow, that is great!” I responded. “So what do you think was your biggest takeaway?” “It just takes time and persistence, learning what not to do, and being okay with failure. That’s it. And don’t worry, you’ve got a ton of ideas, and if this thing doesn’t work, the next one will. Just keep at it. Being a startup CEO is a profession, and there’s no class in the world that will teach you how to do it. You just have to do it and keep doing it ‘till you do it right.” That conversation changed my understanding about how I was approaching the business. Even though it didn’t immediately stop the bleed in my SaaS, it made me realize that a lot of really successful guys failed over and over and over until they got it right, and even if your first SaaS is your baby, it’s ok for it to fail and for you to do another one. ## **Lesson 3: High Risk, High Reward. High Investment, High Profit Margin, High Potential For Failure in SaaS Development** One of the most beautiful things about a SaaS business model is the profit margin. The second most beautiful thing is that in a lot of SaaS businesses, you don’t need many smart people doing hard jobs that cost a lot of money. You’ll need a few developers and designers or maybe an agency to start off, but afterwards, you can set up people to do the same jobs over and over, track their success easily, and hold them accountable. This makes running a business a ton easier. Oh, and people that do the same things over and over are also generally less expensive or can eventually be replaced by a smart enough machine, so you can keep your costs down in several ways But with that reward also comes a good bit of risk: typically entailing a longer time to get to market and a greater potential for failure. So mitigating your risk, validating your ideas, and decreasing time to market can be key contributors to success. ### How to decrease risk, validate ideas, and cut time to market for a SaaS product all at the same time. Here it is, big secret number two. You’ll know when you have a winning idea when the people you tell keep coming back to you over and over asking to buy it. If you can get someone to pay you money for something before you finish or even start building it, you have a winner. If someone wants something so badly they will take a risk to get it, then you have an idea worth selling. If not, either you’re not conveying what it does well enough or what you’re building isn’t solving a problem worth solving. Don’t believe me that people will buy something before it’s started? Just look up Kickstarter. If that doesn’t convince you, this book isn’t going to help you. Personally, I can tell you from my SaaS systems that the times we’ve had winners, we knew it immediately because the people we told about it kept asking over and over and over about when we would have it done. ## Lesson 4: Platform vs. Tool {% embed url="" %} SaaS businesses can often be grouped into two different categories: platforms and tools. A tool is a system that does basically one thing really well. Whereas a platform is a system that is fully featured and users work in regularly. Examples of tools are systems such as: * Buffer.com * Sumo.com * Calendly.com * Getpocket.com Whereas a platform would be something more like * Asana * JIRA * GSuite * Adobe Creative Cloud Really, there is a spectrum and different systems fall all over the place. The thing to remember is that when you’re building a SaaS, especially your first SaaS, build a tool. Don’t make it do everything -- just do one thing and do it really, really well. ## **Lesson 5: A SaaS business is a sales and marketing company** {% embed url="" %} Don’t like sales? Don’t start a SaaS. Don’t like marketing? Don’t start a SaaS. Think you’re just building a system then people will use it? You’re wrong. Before your SaaS starts, while it’s being built, and especially after you finish your Minimum Viable Product (MVP) and from there forward, you are running a sales and marketing company. Every aspect of what the business does will be customer-focused and, thus, sales- and marketing-focused. A SaaS business is a sales and marketing company with a technology component. ## **Lesson 6: You have to be able to reach your market** The first step in reaching a market is choosing a market. That means that when you set forth to build your SaaS business, you NEED to have as specific of a target market as possible in mind and know how to reach them. This book delves extensively into identifying target markets in the [chapter on Appraisement](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit?disco=AAAACS6SXQQ\&ts=5c4c96c9\&usp_dm=false#heading=h.g1705oqg0bpb) and touches on it throughout. The lesson here is that if you don’t know how to get in front of your target market before your product is built you’re not going to have any easier of a time with it afterwards. Also, the more specific a group you target, the more likely you are to be able to sell to them. Your targeting could be specific to (to name a few): * Business type * Specialization * Region * Personality * Preference * Habit * Age * Gender * Income The key here is to pick something so specific that you would know exactly how to reach a large number of these people immediately and know that they have a need for the solution you are providing. If you can’t reach them, how will you sell to them? ## **Lesson 7: Little Problems become Big Problems fast at scale** {% embed url="" %} The phone rings. “Hey, this is Chris, just wanted to let you know that I’m having a problem with the system.” Chris was one of our first BrainLeaf paying customers. He’s a great guy, runs a great business, and has given us ongoing support and feedback on the system over years. He’s got my cell number and when he calls, I listen. “Hey Chris, what’s going on?” I ask. “On the editor page, I can’t add new cards” he says. “Thanks for letting me know, I will get on it immediately. Should be fixed somewhere between 10 minutes and an hour from now. And thanks so much for letting me know. I really appreciate it!” I tell him. “No worries” he says, “I figured you would want to know.” “I definitely do! Thank you!” Immediately, I get on Slack and start looking for the last deployment. Was it recently? Was it today? It was about an hour ago. The phone is ringing again, this time it’s a project manager, but they’re going to have to wait. This is critical. I immediately go to the system and double check to see if I can reproduce the issue Chris had. Yep. Sure enough, it’s right there. “How the heck did this get through our automated tests?” I think to myself. As soon as I know that the issue is reproducible, and especially that there was a recent deployment, I start pinging developers, project managers, and customer service. Messages were something like... * To customer service: Card creation bug. Reproducible. It’s going to be an issue, but I am taking care of it. * To development: Critical bug in last deployment. Cannot create new cards. Drop what you’re doing and fix it or customer service is going to come looking for you. * To individual developers: Please see note in #generaldevelopment channel. Critical issue! * To project management: Hey guys, there is a critical bug in the most recent deployment. Cannot create new cards. I already let development know. Took them off of other issues to fix this. Please make sure this gets done or we’re going to have problems fast. Customer service is already starting to chat back about issues they’re having now. Right away though, I see a message from our lead developer “I see the issue. We’re on it. Will have either a rollback or fix in 10 - 20m.” “Thank you!” I respond. So, why was this so important? Why the freakout? Because at scale, little problems become big problems really fast. It isn’t one person having an issue, it’s about to be a thousand people not being able to use our system. That means customer service being overloaded, project managers getting called in, developers being sent on wild goose chases, customers churning, lost money, lost time, goals being set back, and potentially a bad day. For more on this, take a look at the chapter on running a [Lifetime Deal](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit?disco=AAAACS6SXQQ\&ts=5c4c96c9\&usp_dm=false#heading=h.yzilfk74s8um) to see how a few small issues can cause you weeks of work and headaches. When you’re working at scale on a system, a tiny little issue can blow up fast. ## **Lesson 8: The Easiest Way To Fail** {% embed url="" %} About five years ago someone reached out to me about their SaaS. They said, “I worked with a team and built an amazing system. We spent about 430k, and after all of this, I am sure I have no idea how to make this successful. You can have the entire thing if you will just work out some kind of arrangement to pay back the investors slowly over time. These were my friends, and I want their investment to be successful, but I know I cannot do it. Can you help me?” Sadly, I couldn’t help him. At the time, I was already spread too thin and going through a ton of personal issues as well and just didn’t have the bandwidth to take on something new. The next time this happened, it was with a very smart, thirty-something lawyer-turned-internet entrepreneur who had raised millions of dollars to build a music app, which I still think is one of the coolest music apps I’ve ever seen, but couldn’t get it out there. He raised something like three million dollars, received patents, and put together a great team. The goal was to sell it to big companies, and he almost did, but in the end he couldn’t get it sold and it fell apart along with a lot of his life at the time (don’t worry, he’s doing fine now). Both of these guys learned their lesson the hard way -- the really, really hard way: and they’re just a couple of the thousands of entrepreneurs out there who take major personal and professional hits in learning this important lesson. Validate your idea before you spend real money on it. {% hint style="info" %} **PROTIP:** It doesn’t matter how good you think your SaaS business idea is, if you aren’t able to get enough customers to put enough money into your pocket for you to run the business and make money, you are wasting your time. {% endhint %} So don’t build something just to let it all get flushed down the drain along with your well-being. By validating your idea, you will know where your money is going to be going, know what you should and should not spend money on, better work towards bringing in revenue early, and know where you need to cut things off. Understanding the cost of getting a system to market is just the first part of this lesson, the next is in the next chapter on Process where we'll cover the step by step process to getting your system from ideation to growth. ## Check Out The Webinar: If you want to watch this whole section take a look at the webinar: {% embed url="" %} ## # The Process From Ideation to Growth ## Knowing The Path Is A Step In The Right Direction It's hard to get somewhere if you don't know where you're going, and most SaaS entrepreneurs I know start off for the first many years fumbling blindly through the forest. Some succeed despite themselves, others have assistance from people who have walked or been guided down this path before, but most fail. So let me show you your path and outline the skills you'll need to walk that path. ## Standard SaaS Process steps: ![](/files/-MGkf3Vl5dkmSpCSLHWS) Step by step, the process of developing your SaaS intertwines almost all aspects of business building, software development, customer acquisition and activation, and the aspects of minimizing attrition. You will need to know your path and how everything fits together. So in this section, I have outlined your process from start to finish and explained the principles of each area so you know where to start and where to go as you progress through the rest of the chapters. ## Phase 1: Business Validation & Presales Validating your business is **THE MOST IMPORTANT THING** you can do. It's so important that this book has an [entire chapter on product validation](/validating-you-saas/validating-your-saas). If you don't validate your idea, then your chance of success is absolutely minimal. I don't mean one in ten, I mean that you have more like one in one thousand or less chance of being successful. But if you have a good idea and get started building it without testing, you're probably just throwing your money away. Be sure not to skip the [Validation chapter](/validating-you-saas/validating-your-saas)! When validating your business, you need to ask yourself questions including: * Why are you doing this? * Do you know the market? * Do you understand the competition? * What will differentiate your business from the competition? * Do you have existing distribution channels? If not, do you know how to get them? * What kind of sale is this? Is it a marketing-based sale or a direct sale or some mix of the two? * Do you have quantified personas for your buyers? In other words, do you know how your target markets are segmented, how much each is worth, and what messaging should be used to target each market segment? * Have you surveyed your buyers to make sure you understand them and that they are willing to make a purchase at your price? * What is the cost to build and operate? * What is the cost to market and sell? * Is your full pricing model accepted? * Does your accounting model make sense? As in, are you going to be able to grow fast enough and well enough to make this work? It may sound like a lot of questions and a lot of work, but it's a lot easier to answer a few questions than explain to yourself, your investors, or your partner or spouse what happened to all their money. ### Phase 2: MVP, Community, SEO, The Hook & List Once you have validated the product, then it's time to get started marketing it. "Wait a minute... don't we have to build the thing first?" you may be asking. No. A SaaS business is a sales and marketing business. You need to start marketing first for a number of reasons. 1. It's going to take a lot of time for your website to start ranking, so if you're planning on people finding you to make a purchase, you need to get that website and some content live as soon as possible. 2. You need to know what people respond to best, and it's going to take some serious time to figure that out. 3. Communities don't just spring up out of nowhere, someone has to build them. If you're going to get great feedback, you need to know where to go to get the people and start collecting them. 4. How are you going to email all your raving fans if you have no emails? Where are you going to get these emails? If you think you can just buy them and that's going to work, think again. You have to gain trust, and that takes time. 5. Your first idea isn't going to be perfect, so get ready to talk to a ton of people to figure out the best ways to do things. What people you ask? Well, now you see why you need to start marketing right away. 6. Launch your website 7. [Begin SEO](/acquisition-gaining-saas-users/organic-search-marketing) 8. Find the hook 9. [Start community building](/attrition-supporting-your-community-and-growing-your-business/saas-community-building) 10. [Start gathering emails](/acquisition-gaining-saas-users/email-marketing) 11. [Build your system](/saas-build-process/saas-build-process) & [beta testing](/saas-build-process/steps-to-developing-a-saas/beta-testing) 12. [Iterate & ideate on community suggestions](/saas-build-process/things-to-know-and-expect/development-is-iterative) ### Phase 3: Release, Advertise, Marketing, Support, & Grow 1. Release your SaaS 1. May want to consider a [Lifetime Deal](/acquisition-gaining-saas-users/lifetime-deals) 2. PR + [Advertising](/acquisition-gaining-saas-users/pay-per-click-ppc) 3. Grow your SaaS 1. Podcasts - sponsoring and getting on the circuit 2. Education 3. [Blog / SEO](/acquisition-gaining-saas-users/organic-search-marketing) 4. Comparison sites 5. [Channel Partners](/acquisition-gaining-saas-users/affiliates-and-partnerships-for-saas-businesses) 1. [Affiliate Marketing](/acquisition-gaining-saas-users/affiliates-and-partnerships-for-saas-businesses) 2. Influencers 6. Outbound marketing 7. Support your customers 8. Grow your business and make money ### Phase 4: Scale & Grow 1. Grow user base 2. Increase team size 3. Grow market share 4. Scale your company ### Every business is different. Every business is different, and things change a lot depending your system, your customers, and much, much more. But the process noted above is what I have seen more often than anything else. Most of the steps will be followed one way or another anyway. # Parts of a SaaS Before getting into how you’re going to plan, price, build, sell, and grow your SaaS business, let’s get acquainted with the major areas of a SaaS. The areas examined below are aspects of most SaaS systems, although not all of them. ## Public facing sales & marketing website {% embed url="" %} This is one of your primary sales and marketing tools. This tool can be very large or fairly simple, and it must explain to your target market: * The value of the system * What the system does for this group * How the system works with the target group’s existing processes * How to get started, which leads to pricing and onboarding * Any necessary support systems * Pricing * If content marketing is necessary, a blog * A knowledge-base or support area where users can learn to use different features within the system. These needs are generally met with an architecture consisting of the following pages: 1. **Home** - Shows value of system to target market. 2. **Features or Tour** - Explains how the system works and explains in detail how the tool accomplishes the goals of your target market. 3. **Pricing** - Clearly defines the price of the system and the different options for purchase. 4. **Blog** - At the time of writing, this is used primarily for content marketing, but also very useful for community management, customer education, email marketing, and public relations. 5. **Knowledge base** - Usually a system with a separate management system that is used to educate users on how to use aspects of your SaaS system. There are a lot of other pages that are often added to a SaaS system marketing website, but these are the items that most need to at least get started. [A full explanation of the public facing website is listed in the chapter on Acquisition](/acquisition-gaining-saas-users/the-marketing-website). ## User Account Management {% embed url="" %} The user management system, in this case, is referring to a system that enables the user to manage themselves and their account. The user management system includes aspects such as: * Log in / log out * Account creation * Account deletion and/or suspension * Edit user information such as name, email, phone number, etc. * Subscription type management * Team management to invite other team members to the SaaS * Permissions management to grant access to different features of the system to different team members ## User Onboarding {% embed url="" %} When new users sign up for the system, the onboarding system takes them through basic setup and educates the user on how the system works, instills certainty that the system meets their needs, and gathers information from the user that is necessary for use of the system. The onboarding process is a key portion of both acquisition and retention. It integrates into your marketing and sales processes and is integral to the success of your system. User onboarding systems vary drastically depending on what the system does. Take a look in the chapter on traction for more information on user [onboarding systems and tricks](/activiation/onboarding) to improve this process with education, simplicity, UX, and processes. ## User Payment Management Area {% embed url="" %} This refers to the system used by users to manage their payments. This can be as simple as a list of invoices and as complicated as a system for increasing seats in the system, editions, and more. The user payments area needs to include, but is by no means limited to, transactional emails that inform a user that they: * Have paid a bill (a receipt of payment) * Owe money - credit card expired, payment did not go through, etc. * Owe more or less money than previously. This could happen if the users edition was changed, team members were added or removed, more credits were purchased, etc. ## Portal/Dashboard {% embed url="" %} The portal or dashboard system generally refers to the main page the user sees after logging in and the interface on that page. When a user logs in, this is the area that they see where they can interact with the system, view system statistics, navigate to user and team management, and generally use your fancy SaaS system. When building your SaaS portal/dashboard system, I highly recommend using an extensible, pre-built framework for this such as Angular Material, Bootstrap, Foundation by Zurb, or one of the many systems utilizing a pre-built framework. Especially if you are building an MVP, having a system that can be modified quickly and easily is critical. ## Payments management system {% embed url="" %} Payments management refers to a place where transactions, subscriptions, plans & editions, refunds, and other payment-related features can be viewed and processed. At the time of writing, commonly used systems were [BrainTree Payments](https://www.braintreepayments.com/), [Authorize.net](http://authorize.net/) and [Stripe](http://stripe.com/). However, most payment processors can be used for this purpose. Tools such as the ones noted above have great APIs for SaaS payment processing, but there are a large number of other payment processors that work just as well and are substantially less expensive. An important note about Stripe, BrainTree Payments, and other similar systems are that initially it is advantageous to start out using these systems because the initial cost of implementation is low, but after you hit a certain credit-card based revenue point, the cost of developing a custom system becomes lower than continuing to use these systems. That being said, my recommendation is to start out with product validation and the fastest, easiest system to build before adding any additional features. ## Admin panel {% embed url="" %} The administration panel is the top item in my opinion that is not considered or not fully considered by new entrepreneurs when planning out their SaaS. The admin panel is a system that enables the administrators of the system to manage data within the system. Some common features of the admin panel in a SaaS system include: * User management * Adding new users manually * Editing user information * Deleting users * Banning users * Logging in as a user so admins can see what they are seeing and edit their accounts through the system graphical user interface (GUI) * Promo codes * Adding, editing and deleting * Managing users with promo codes * System maintenance mode * Sometimes you have to take the system down for maintenance, and you need a place to do that from. * Communication with users * Send system-wide or individual notifications to users * Viewing system use statistics * Data entry and management * This can be especially important if the SaaS is data-based, meaning that what it is selling is data. * If your system fills a knowledge gap, than this area is especially important.
{% hint style="info" %} **PROTIP**: The easier it is for your team to enter and manage data the faster you’ll be able to grow your company. {% endhint %} ## SaaS Transactional Email Management {% embed url="" %} When you sign up for a SaaS and it sends you one of the following automated emails: * Welcome to the system * Verify your email * You made a payment * Someone was added to your team * Your account was cancelled See the full list of transactional emails in the [SaaS Build Estimate Spreadsheet](https://drive.google.com/open?id=1qC2h5e_YFvCAAoWA4Vaj1U7k7XPjsUMuqVoLKLAZh0I) This is what is known as a ‘Transactional Email’. A transactional email is an email that is automatically sent by the system because someone in or using the system did something that triggered it. Generally, this is what is known as a ‘transaction’, and thus a ‘transactional email’. Coincidentally, these events are often triggered by monetary transactions, but they are not specific to just that kind of email. ## User Tagging, Triggers, & Lead Scoring {% embed url="" %} This is probably the second most forgotten aspect of SaaS systems when an MVP is being developed. When a user signs up, you’re going to want to add them to your marketing email list, then when they take certain actions within the system, you’ll want to add them to different lists, automatically send them different kinds of information, and score them or mark them for upsells. If you implement a Chatbot, you’ll also want to know what your user is doing to best answer their needs in the most efficient way possible. For each of these actions, you’ll need a way to track the users within the system, know what they did and did not do that you wanted them to do, and generally how they used the system. This is something that is a lot easier to build in from the beginning than to add later. Besides, as soon as you launch your system, you’re going to want this data, so plan on building in at least a minimal system up front! [For more on this, take a look at the chapter on marketing automation.](/acquisition-gaining-saas-users/marketing-automation-in-saas) ## Third-Party Management, Tracking, & Reporting Tools Integration {% embed url="" %} As soon as you launch, you’re going to want to look at how people are using your system and interact with them outside of just emails. You’re going to need to know things like: * How am I doing money-wise? (profitwell.com, kissmetrics.com, baremetrics.com) * Am I meeting my financial goals? (same as above) * Are people having trouble and leaving without me knowing? (luckyorange.com, hotjar.com) * How are people finding me? What are they searching for? What is my conversion rate? (analytics.google.com) * Why is or isn’t my system selling? Are users in the system confused about the use of certain items? (luckyorange.com, hotjar.com) * Are my sales people effectively tracking users in the system and selling to them? There must be a thousand different CRM systems out there for this. Some of the ones I have used are: * [Pipedrive](https://www.pipedrive.com/) (what we use right now) * [ZohoCRM](https://www.zoho.com/crm/) * [SugarCRM](https://www.sugarcrm.com/) * What are people saying about my system outside of the actual system on social media? What can I do to rank my system higher on the search engines? (SEMrush.com, ahrefs.com, moz.com) * Are people getting my emails? (mandrill.com, mailgun.com) * If people are having trouble with different areas, how can I help them? Am I doing enough to help them? (intercom.com, chatbot.com, convertfox.com, verloop.com) * How can I get people to upgrade to the next edition or level? * What can I do to help people that are on my sales website buy a subscription? (intercom.com, convertfox.com, verloop.com) * And loads more… For all the questions listed above, there are SaaS systems to answer those questions, and you’re going to want and need to use those systems. Plan on integrating these systems up front, rather than later because as soon as you launch you’re going to need them. The systems noted are just the ones I have experience with, so make sure to do some research before going forward with any of these and make sure the solution fits your needs. ## API - Application Programming Interface {% embed url="" %} The API enables developers to work directly and securely with aspects of your system. If you want to enable other systems to get information into or out of your system, then you're going to need an API and documentation. With the exception of systems that are built specifically for developers or have some aspect that requires them to be connected to other systems, like an add-on or plugin into another system, then most systems start with just their core functionality and develop the API after phase 1. But if the success of your application depends on being connected to other systems, then you're going to need to develop the API in the first phase of development. ## Unit & Regression Testing {% embed url="" %} One of my top SaaS build lessons is on [unit and regression tests. ](/saas-build-process/saas-build-process#7-as-soon-as-you-have-project-validation-start-building-in-unit-tests) Regression testing is a way of building automated tests that tell you if the system is working correctly when you deploy new features. Depending on the type of SaaS you are building and how well validated the system is at launch, you may or may not want to start off building tests into the initial system. There are a large variety of testing suites. [My favorite system for testing SaaS systems at the moment is Katalon.](https://www.katalon.com/) It is free to use and a powerful system. ## Documentation {% embed url="" %} In a SaaS product development process, you’re going to be doing a lot. It’s a complicated web of interweaving ideas, systems, people, and money. So WRITE DOWN WHAT YOU’RE DOING. Please, for your own good, write down as much as you possibly can and share it with everyone, because you’re going to need it, and you’re going to wish you had if you don’t. My recommendation for this is to [use Confluence](https://www.atlassian.com/software/confluence) for your documentation. It’s an Atlassian tool that integrates with JIRA, my top pick for development project management. ## Customer Support Systems {% embed url="" %} Customers are going to have questions, they're going to have problems, and they're going to want to talk to someone about all of this. You could just put your email out there and have people email back and forth with you, but that's going to get real messy real fast when you have hundreds of customers with thousands of questions and several customer support team members trying to answer those questions. So rather than killing yourself and your reputation, how about starting off with a system that is going to help you manage tickets and requests right away? My recommendations for getting started are: * Helpscout * Zendesk These systems all allow you to scale up and add more and more team members to a support infrastructure that will scale with your business. ## Knowledge base All those users you’re going to have are going to have questions, and lots of them. When there is a question for one customer it just takes a minute, but when you have a thousand customers, it scales at a one to one ratio, and you end up with it taking a thousand minutes. So a knowledge base where users can find answers or you can direct them for answers very, very quickly becomes a critical system. Some systems you may want to consider for your knowledge base: ### Wordpress with a knowledge base theme. This is a lower-end solution, but it works. You can get started quickly and deploy a system that works well enough within a few hours. We’ve used the [HelpGuru theme](https://themeforest.net/item/helpguru-a-selfservice-knowledge-base-wordpress-theme/8465592?s_rank=4) a number of times and it is a good place to start. ### 3rd party SaaS knowledge base systems There are a ton of 3rd party knowledge base systems out there. Some that we have used include: * [Zendesk](https://www.zendesk.com/) * [Confluence](https://www.atlassian.com/software/confluence) * [Helpscout](https://www.helpscout.com/) * [Intercom ](https://intercom.com)(their knowledge base works hand in hand with their chatbot) ### List of Knowledge base systems [Quora has a great list of systems here.](https://www.quora.com/What-is-the-best-knowledge-base-software) Take a look for a full list. # Validating Your SaaS ## This is the MOST IMPORTANT thing in the book, don't skip it. {% embed url="" %} A lot of people get started with an idea, skip the validation, hire a team, and get going on the build of their project. Then, they get to the sales part and don't have a plan in place, know who they are selling to, understand how to reach those people, know what to say, and often end up realizing that either they built something that was not worth building or cannot compete in the market. ### What happens all the time: 1. I have an idea! 2. Hire a team to build my idea. 3. Wow, that was a lot more expensive than I thought it would be. But now I have something that kinda works about half way. 4. How do I sell this thing and who's going to buy it? 5. Throw money at marketing something that never had a chance in the first place. 6. Give up and complain about how the developers destroyed a great idea. 7. Cry & sometimes sue people. This happens more than anyone wants to admit. It hurts, it's embarrassing, it's a loss, and it can put you in the hole fast and in a bad way. It can ruin marriages and sink people into depression. If this is the position you're in now, it's ok. It happens to the best of us, and has happened to me more than once. Maybe you can pivot your business and still get some use out of the system, or maybe it's time to wash your hands of this, build up funds again and start over with a fresh perspective. Either way, you're going to learn a lot and it's going to [be better the next time](/the-business-of-saas/basic-lessons-of-saas#lesson-2-the-number-one-indicator-of-saas-success-youre-probably-going-to-fail-and-thats-ok). As you probably suspected, there's a much better way. ## Idea validation is a must There are a few people out there who did not do any validation and were still wildly successful. This is luck, plain and simple. For the rest of us, there is a process to ensuring success, it's call validation. For a SaaS project, I have outlined a process that works, but only if you do it. The validation process outlined in this book is specific to SaaS products. But I recommend going further than just this and reading [The Lean Startup by Eric Ries.](http://theleanstartup.com/) Since you’re already reading this book and you’re probably going to finish this one first, let's delve into the SaaS validation process. But first, let's talk about what happens when you don't validate. # What happens when you don't validate Over the years, so many people have come to me asking for help on systems that never stood a chance. By the time I realized that their concept was never validated to begin with and would never work, couldn't compete, wasn't targeted at the right audience, or wasn't viable for a number of other reasons, it was too late. Their money had been spent on something that was never going to return on the investment. It's a sad situation, and it happens all the time. I sincerely hope that by reading this chapter, you will understand the importance of validating your idea and what happens if you don't. Let's start by showing what happens when you don't. ## David: Simple questions go a long way David had an idea. He had been spending ten to thirty thousand dollars per year with consultants to get this data. For all of these years, those consultants were doing work that he *knew* could be automated. David was an Economic Developer at the regional level in the Southeastern US. He worked for the government and his job was to bring industries into a region. Part of doing this was to query regional industries about their wages and benefits so other businesses moving in would know what to expect to pay people, what benefits they needed to give, and the level of the workforce in the area. It was critical data, but it was hard to come by because no one wants to give that data away. But David had an idea. It was so easy, just a few simple features; a surveying system to ask questions, a template with all the questions pre-built, some simple systems to enable the survey participants to flow through the survey faster than other systems, and he would have a for-sure sale. He knew the industry, he knew the people. Heck, he was one of them! After a 60k investment, a year of work, and more testing and frustration than he could have ever imagined, it was done. Time to take it to market, and he knew exactly where to go. He took the team to the regional association trade show to show off everything he had built. Over the course of the tradeshow his heart started to sink. The system was perfect, it did exactly what he needed it to do. But over the course of three days, he realized that in states across the US other people in his industry didn't *want* the software, they wanted someone to do the work for them. They *wanted* the consultants. His target market didn't care about the software at all, what they wanted was the service, not the system. They didn't have time to implement the software he had built even if they wanted to. He had built a great system, but in the end, he could run the exact same business by just using the current industry leading survey software system and could have avoided all the cost of development. He realized that what he had built was not an innovative solution to a major problem. He was just a new consulting company to do the same work that all the other consultants were doing, but with less tested and less effective software. ## Eyal: Lost money & lost reputation Eyal approached me several years ago with a big problem and was in trouble. He had taken investment money from his friends and partners to build a SaaS. He heard about us through a friend and reached out immediately. It was the same story I'd heard so many times. He was a prominent person in the community and had previously held a position at his full-time job that gave him access to a lot of wealthy friends. Several of those friends invested in his idea to the tune of almost half a million dollars. When we finally got in touch with me things were not going well for him. Eyal had invested all the money in the build of system and a substantial amount had been spent making changes as the system build progressed. When we connected he had an incomplete system, little to no money left for marketing, investors that were asking a lot of questions, and had no idea how to lead the company to success. He didn't know his next step, how to market the system, or where to look for advice. This was several years ago when there weren't nearly as many Facebook groups, books, and online courses as there are now to do this kind of project. Without access to more information on how to run the company, Eyal was in trouble, big trouble. By the time Eyal and I connected, the business was already essentially over. He asked me if I would take the company off his hands and take virtually all of his shares in the system. He just wanted his investors to be made whole and have some amount of success or see some progress with the system. I couldn't take the project and it eventually went completely bust and all the investors lost their money. It was a terrible time for Eyal. His marriage, family life, and personal reputation suffered. He had a terrible time moving on from this time in his life. Eventually he did, but it was a scar that he still carries today. ## Jake: College student with aspirations Jake is a good guy. After all these years we still keep up with one another. Actually, as I am working on writing this book, I just saw that he and his wife had their first baby. This is the story of his first foray into business. Jake had seen me speaking at an event and wanted to talk about some ideas when he came into our office in Athens Georgia. It was near the end of his college days and Jake was an energetic man with big ideas, big dreams, and access to capital. Jake had a vision of following in the footsteps of Mark Zuckerberg. Unfortunately, I didn't have the experience at the time to know how to tell Jake what a mistake this was going to be. His could have been a good idea with a lot of tweaks, a lot more focus, and had it not been directly competing with Facebook. It goes without saying that it didn't work out. Even then, I knew that you weren't going to take down Facebook in a head to head fight. They were already doing over a billion a year in revenue at the time, and Jake had a 60k budget. In the end, it was a great learning experience for both of us, but no one was happy with the way it all went down. Jake and his investors lost the entire investment. Jake landed on his feet and now runs a great physical products company, but it took some time for him to recover from the first failure. ## Marshall: The attorney turned internet entrepreneur Marshall was on stage the night I met him. He was playing guitar and singing his rendition of "I Took a Pill In Ibiza". He was having the time of his life, but I could see right away he looked worn down, and not from too many nights playing at private clubs. I soon found out that the private parties, guitar, and his vocals were his way of moving on from his previous endeavor. We sat in a corner seat while the pink show lights flashed and another musician took the stage. As we sipped a fresh craft beer, he started to tell me about how he was in a rough spot in his life after a failed SaaS project. Right away, it looked like a shadow came over him as he told me his story. He had hated his job as a corporate attorney at the same big firm his father had worked. His passion for music, story telling, and entrepreneurship had led him to a great idea about bringing it all together. So he used his high-roller connections in law to raise several million dollars to build an amazing music app, something I still consider to be one of the coolest music apps I've ever seen. But after years of work, it had failed and he's lost everything. His job, his reputation, some family connections, his relationship, and his morale. The plan he'd hatched was to build the tool, which came with some hefty monthly music licensing fees then sell it to some of the local large businesses such as AT\&T and Turner Studios. The app itself was amazing, but it wasn't selling and the monthly fees were killing him. He spent two years trying to get the app built and another year or so trying to sell it. In the end, it wasn't possible. The system way the business and app were built, only a larger company could afford to run with it. Without a company with deep pockets supporting the system, it was doomed. By the time Marshall told me the story over more than a couple of beers late at night, the whole thing had already gone down. It was over and he was moving on. He brought up the possibility of me taking on the project, but it was far from my area of expertise, and I didn't think I could do any better than he could with the system. On top of that, he had just returned from a months long hike and soul searching across Spain on the El Camino De Santiago trail after non-stop work for several years followed by complete disappointment and he could barely stand to look at the thing app anymore. Marshall took it hard letting down his investors, his friends, his family, and his dreams. Like Jake, Marshall bounced back and is doing great these days, but this experience took a big toll on him as well. ## Dr. Russell: Success as a doctor does not equate to success as a SaaS entrepreneur I met Dr. Russell when I walked into an entire floor rented out in a large office building in Atlanta, Georgia. It was a beautiful building and a huge office, but there were only three people working in the spacious office. As I walked through the rows of empty cubicles I saw a man in his fifties in a brown suit and white shirt sitting at the end of a long conference table in a room made up of windows on three sides. He was looking down down at an beaten computer clicking the same couple of buttons over and over. We had received a call from Dr. Russell's friend who told us that he needed help badly, but that his position wasn't good and it may be too late to save his business. From the desolate state of the spacious office I walked through, I was thinking that was probably the case. Dr. Russell was building a web-based staffing service for nurses and particularly in a medical sub-specialty that is constantly understaffed. He had access to the people and he knew the groups that needed the people. He even had some notoriety in the market from a series of speaking engagements and subsequent educational email campaigns. So why the empty office chairs strewn across the unoccupied space? He had hired a friend to build the central part of his business, his website and web-application with no idea on how long it would take, what it would look like, or how it would work. His friend, we'll call him Nick, was an ok web-designer with experience building small websites for local businesses, but had no experience building an application, user experience, scaling an application, or managing a team. Without any experience in larger projects, Nick had also agreed to a flat fee on the first phase of the project. Dr. Russell had planned on the project being a huge success and had rented out an entire floor of a building, hired a fair number of people, and was just waiting for Nick to finish the project and somehow drive thousands and thousands of people to it for a few thousand dollars. After the first few months of delays in completion and people sitting around doing nothing, Dr. Russell started letting people go. At the same time severe scope creep and Nick's original agreement had put him into a position where he had been working for months without compensation to continue helping his friend, but could no longer work for free and still feed his family. The whole thing was already in a state of decay and crumbling apart when I walked into that glass-walled conference room. By that point, there was nothing I could do. There was no budget left to market the system, no way to get the doctor l to realize that the system he wanted was going to take months and tens or hundreds of thousands of dollars to build, and most importantly that what he needed was just a couple of lists on a homepage, not a giant application. I ended up walking from the project and the entire company ended up failing. ## Dr. Paul: The problem was clear, but the path was not Dr. Paul emailed me after watching one of the first webinars I gave on how to build a SaaS business. He and his team had taken grants and investor money from a multitude of sources to create a software solution for a major issue that almost every hospital in the world has. I reviewed his system prior to the meeting and it was very, very well done. He had all his security certifications, insurance, and systems lined up. The design looked a little dated, but it wasn't poorly done and it was definitely usable. "So what's the problem?" I asked over email, "why can't you take it to market?" "I don't know anything about sales" he responded, "and I have no idea how to take this to market." My first thought was that he had been successful in building a fairly complex system, could it be that bad? When I got on the phone with him though, I understood. It wasn't that he didn't know anything about sales, he was completely clueless when it came to selling anything. He was clearly a knowledgeable physician and probably someone that I would like to be my doctor. But even though his team had built the system, he had difficulty explaining to me what it did or how it worked, telling me who would buy it, what the value of the system, nor did he have any idea how to start. I had several meetings with him to try to get he and his team some sales training, but his son had fallen badly ill and he had to abandon the project the last time I talked with him. Even if that had not been the case, I am doubtful he would have been able to take it to market without new leadership. ## All of this could have been avoided In every one of these situations a few hours to a few days of time querying target buyers about what they wanted and needed, understanding the value of the product or service to that group, and learning if the market was viable or even wanted the product would have saved countless months or years of work, bankruptcy, ruined relationships, overwhelming debt, destroyed businesses, and the hopes and dreams of hard working, good people. A depth of understanding of the questions surrounding the feasibility and sustainability of major investments CANNOT be underestimated. Building a new business is no trivial matter, even for the wealthy, but it is constantly treated as such. I cannot stress this enough, you must spend the time up front to validate your business. So do your homework. Be a professional, understand what you're getting into, then go forth to build a sustainable and profitable business, and live a good life. # The SaaS Validation Process ## SECTION IN PROCESS... ## What is Validation ### Do you gamble? Without validation, you are walking into a smoky casino, putting your money on the table, and spinning the roulette wheel. Most business owners don’t want to take big gambles with their money though. After all, even if you win this round, you’re going to go bust eventually. Instead of what comes down to guessing, this chapter is going to show you how to guarantee you’re going to make money before making a big investment. Validation is not just important, it’s critical if you’re going to be successful. When people are critical of this process, I like to remind them that they can either go through this process at the start, before they have invested tons of money and time, or go through it after they have invested time and money and that money has gone to waste. One way or another, you’re going to face the validation process. Choosing to do it upfront and ensuring you have the right offering for the right group at the right price at is delivered in the right way before you start will rocket you ahead, rather than rebuilding, reworking, and wasting money later. Skipping this single step is the thing that drives most SaaS businesses out of business, and usually after a big investment of time and money. As you read through this chapter, if you realize you already skipped this step and your business isn’t growing, I would strongly recommend taking a step back, reading this chapter, and doing all the exercises. At the very least, it will help you organize your thoughts and validate that what you’re doing is correct. But if your foundation isn’t solid, this chapter will shine a light on the flaws and could potentially save you a huge amount of time and money. ### Validating a SaaS Validating a SaaS is very similar to validating other kinds of businesses, except with a SaaS you automatically know some specific information about how the business will work, how it will be delivered, how you will probably be pricing your services, what methods you will probably be using to market your services, and how your customer will find you (it’s probably going to be on the internet). Knowing that your business is internet-based is a great start, but you still have to go through ensuring that whatever you create or buy is still going to sell at a price where you make money and can grow towards your goals. So in these ways, it’s a hair more straightforward that some other businesses. But the process is essentially the same. There are many books that have been written on validating a business, one of my favorites being “The Lean Startup” by Eric Reis. I highly recommend you read this book before starting this or any other business. ### Validation is Research Sometimes it’s called ‘market research’ or ‘market fit research’ or a variety of other things, but at the end of the day, it is a lot of phone calls, list-making, emails, meetings, surveys, asking questions, changing plans, and sometimes frustration. As an entrepreneur or product owner working on a new system, you probably want to move and move fast. This is the downfall of so many SaaS businesses. Without doing your validation step, you’re going to end up with a lot of waste. So as you progress through this step, consider this the first step in your business or business unit growth. These questions and their answers are critical to the success of a new business or a new offering. By the time you finish this section, you will have a good idea of what you're doing and why, who you're selling to, who's already selling to that group and how they're doing it, how much money you're going to make and what it's going to take to get this to market, and most importantly if you still want to do this. We will cover the following aspects of SaaS validation: * Why & What * The problem, Need, Solution * Buyers * Competitors * Distribution * Revenue & Costs * Time & Investment * The secret sauce * Going to Market ## Key aspects of validation As you delve into your validation process, keep in mind a few critical items: ### The Unique Selling Proposition The Unique Selling Proposition or USP is the thing that that your system has that no one else has. This is also one of the primary reasons that your buyers will use your system instead of your competitors system. Sometimes you don't necessarily need a USP. If you are entering a market that is fairly untapped and there are a small number of competitors for a large audience, your target market does not have access to or is willing to research your competition, or your competition can't handle the full load of the market, then this may be a little less important. But most of the time, especially in SaaS, you have a ton of competitors so you'd better have a great USP! ### Is it worth it? As you start digging into your competitors systems you're going to find a lot of features that you didn't initially realize existed. You may realize that some of your competitors have been in this industry for a long time and have very robust tools. You may also realize that in order to catch up with them, you are going to need to spend a ton of money. For each new feature you realize is necessary, that is another month or two of work, tens of thousands of dollars, more knowledge base articles to write, more support that has to be done, etc. The 'is it worth it' question needs to stay on your mind throughout. Don't be afraid to admit that it may not be worth it, that's what validation is for. ### The Product Twist & The Market Hole Not the dance, and not the 'pivot'; the twist is when you look at all your competitors and realize that there is a way to do exactly what they're already doing and beat them at their own game. There may be a way to do what they're already doing better or in a new way. The trick is, you have to really, really look at how they're all doing everything before you can figure out the twist and if it's worth it. Because as soon as you twist the product, they're going to follow suit, and if they've been doing this for a long time they may still crush you. So make sure you're sure it's worth it! The hole is the hole in the market. Once you know all your competitors and all their tools and all their target markets, then you can much more easily find the hole in the market. You can see where there is a market segment that isn't being served. If it's a market segment that is never going to be served then you're in great shape. ## Storytime: The Market That Google Doesn't Want One of my companies, Map-Dynamics.com builds web-based mapping solutions for trade shows. The groups that run trade shows are associations, and people love associations. Well, maybe not your home owners association, but for any craft, profession, sport, or just about anything else, there is an association for it. What do people who do a thing like to do at least once a year? Get together and talk about the thing that they do. It turns out, there are somewhere between 50,000 and 90,000 associations just in America! Each of these trade associations has an annual trade show at a convention center somewhere, and each of these shows needs a floor plan map. In 2007 Jeremy and I realized that this was a market that Google was never going to touch because these maps would change minutes before the show started and even sometimes during the show. It wouldn't be worth the time for Google or any other large mapping company to edit the floor plan map multiple times per week leading up to a show and several times just before or during the show. Additionally, after some competitor analysis, we realized that almost every floor plan company was targeting the top 20% of trade shows, and there was no one serving the bottom 80%. So we choose a lower price and implemented a solution for the smaller shows. I wouldn't say it was a smooth ride or that we exploded. But after twelve years, we're still here and just about all of our competition is gone. We did it by finding a niche that wasn't being served, that had the problem and the need, and we're fairly stubborn and just didn't give up. SECTION OUTLINE 1. Start with the ‘why’. Why are you building this tool? 1. I need it for me 1. Have you checked to see if it is available on the web already? 2. If so, why are you doing this? 2. It’s a good idea and people need it. 1. How long are you willing to spend building this tool and how much money do you have available? 3. I have knowledge that others do not and I can make money selling it 4. I already have a system built and think people will buy it. 5. There is a similar system on the market and I think I can do it cheaper or better. 6. I have a market already that needs this tool and can sell it as soon as it is done. 7. I was hired to build it. 2. Do you know this market very, very well? 1. If no, why are you doing this? 2. Do you realize what you’re getting into? 3. I know this market very well because: 1. I am the target market for this system 2. I work with people who are the target market for this product 3. I have done a substantial amount of research into this industry. 4. I am not in the target market and don’t know the industry. 4. What is the problem, solution, & need? 5. We solve \_\_\_\_ for \_\_\_\_ - come back again after validation 6. What is the unique selling proposition (USP)? - come back again after validation 7. What is your unfair advantage? - come back again after validation 8. Competition 1. Do you have competition? 1. Yes - List your competitors 1. Company 2. List major features 3. List prices/pricing 4. What are the groups of people that your competitors are selling to? 5. Screenshot their pricing pages 6. Take a trial for each competitor 2. No 1. How did your search? 2. Did you call companies or people with the problem and ask how they solve it now? 3. Why is there no competition? 1. Not a viable market 2. Maybe you just stumbled onto a good idea that no one has come up with yet? Probably not though. 3. They already went out of business 4. There is a monopoly 5. There is already a solution that does not require a SaaS 3. What are your indirect competitors? 1. Competition 2. What makes it indirect 3. What percent of the market do they own? 9. Who are your buyers? 1. Did you ask people with the problem you are solving? 1. What did they say? 2. What is the current market size? 3. Is it worth selling to them? 4. If you can’t create a list at the beginning of the project, how will you do it later? 5. Ask current distributors 1. Distributors 1. Influencers 2. Competitors 3. Podcasts 4. Youtube channels 5. Facebook groups 6. Consultants 2. How to ask - example Chris Cooper 6. Creating a list: 1. Ask the distributors 2. Li, Tw, Fb groups, Ads, Socal Ads, Forums, Podcasts, tradeshows 7. Survey your buyers - get a list of 10 - 1000 people from either your distributors or your lists 1. Who are they? 1. Role 2. How long in business 3. Do they have the problem? 2. Do they have the need? 3. Do they know they have a need? 4. If not, why? 5. Do they want the product? 6. How much are they willing to pay? 10. Cost vs Revenue 1. Looking for hidden costs 1. Example MedRev HIPAA costs 2. Example The Lead Button 2. Getting real about costs 1. People 2. Insurance 3. Certifications 4. Software 3. How most companies grow 1. slow to start 2. then start making money in a couple of years 3. then, sometimes, have a hockey stick growth 11. Distribution channels 1. SEO 2. Direct 3. List the rest here. 12. Key partners 13. We solve \_\_\_\_ for \_\_\_\_ - come back again after validation 14. What is the unique selling proposition (USP)? - come back again after validation 15. What is your unfair advantage? - come back again after validation ### Example Case - David had gone through several of the aspects of the validation process, but he didn't reach out to his target market and talk to them first. It's that simple. If David had asked a few questions he would have realized that this wasn't going to work the way he expected. There are several ways this could have been accomplished. #### 1. Go to the tradeshow as an attendee and just ask people if they would buy the system. So many people I have spoken to when I recommend something like this say "I can't afford to spend 2k on a tradeshow where I'm not going to make any money!" My answer is simple. Would you rather spend 2k figuring out if this will work or 100k building something you'll never make a dollar from? #### 2. Send a survey If you don't know your audience, you probably shouldn't be doing this in the first place. So, get started with taking a list of people in the industry and asking them all to take a quick survey. You'll want to have some aspects of what you're building ready to view before you do this, but even if you don't you can still ask questions. Even if you are entering a new market that you don't know that much about, you could take the following methods to find the people to ask: 1. Join an association and get their members list 2. Do market research and hire a VA (virtual assistant) to find email addresses 3. Run some ads on Facebook targeted towards your users and ask them to fill out your survey. You can also offer to compensate them. Just make sure to set up only a limit to the number of people you're going to pay. Here are some of the questions that David may have used for his target audience: 1. How do you currently collect local wage and benefits information from the largest local employers? 1. We don't collect or distribute this data 2. We have a consultant do this for us 3. We use state-wide data 4. We have an in-house person do this for us 2. How often do you collect this data? 1. More than once a year 2. Once a year 3. Every other year 4. Every three years 5. Whenever we have time, but more than every 3 years 3. What is the cost of collecting this data? 1. Free 2. 1k - 5k 3. 5k - 10k 4. 10k - 20k 5. 20k - 30k 6. 30k+ 4. What are your top frustrations with collecting this information? 1. Text answer 5. For groups using consultants or in-house staff, what is your process for getting this data? 6. If there was a software system that just required you to send out a pre-built survey and make some followup calls to your industries, would you use it? 7. How much would you pay for this system? 1. I wouldn't pay for it 2. Less than 1k per year 3. 1k - 2.5k per year 4. 2.5k - 5k per year 5. 5k - 10k per year 6. 10k+ per year 8. What system features would you find most valuable? (put in order of importance) 1. The form would auto-fill last years' answers for industries (link to video showing how this would work) 2. The system would anonymously collect all data and auto-compile it for you. 3. Integrate with HRI systems to import industry compensation data automatically. 4. Advanced web-based dashboard specifically built to help industries understand this data. 9. Would you buy this software if I built it? 1. Yes 2. No 3. Maybe (if maybe, why?) 10. If yes: if I were to give you 50% off for the first year, knowing the system would be done a year from now, would you be willing to pay for the system now? 1. Yes 2. No 11. If yes, would you be willing to do a phone call with me to talk more about this? 1. Yes - links to calendar scheduling system 2. No # Why are you doing this? ## Why are you doing this? In my experience, there are only a handful of reasons why someone builds a new SaaS product. These are: 1. I am building a tool that I want for myself or need for my company 2. It’s a good idea and people need it. 3. I want to make money 4. I have access to knowledge that others do not and I can make money selling it 5. I already have a system built or someone is paying me to build a system that I will own rights to use or own completely and think people will buy it. 6. There is a similar system on the market and I think I can do it cheaper or better or there is room for competition. 7. I have a market already that needs this tool and can sell it as soon as it is done. 8. I was hired to build it. All of these reasons are good, but some require more research than others. If you have access to knowledge or information that other people are seeking and can sell it to a market you know, then you’re in a great position. But if you’re building a tool that you need for yourself, then there is a good chance that A) someone has already done this and B) someone has done this better already. Neither of these reasons take you out of the market, but it poses certain complications for you. Let’s start our validation journey with understanding why you’re thinking about investing a substantial amount of time and money and your chances of success for each scenario. ### I need this system for myself or my company So often I speak to new SaaS entrepreneurs that say that they built their product because they needed it at their company and couldn't find anything else that did the job in the way they needed it done. The catch here is that if you're building a product for your company, which is built around your processes. This means that you are not often building a broad tool, you are building a specific tool around a specific set of processes. The odds that everyone else is going to adopt your process is not good, even if your way is actually better. Additionally, building a specific tool means you are not building a broad tool. This can sometimes work in your favor if you are building a very specific tool, not a platform, that does just one main thing. But often if a company is building a tool for themselves it is to manage their processes, not just to fulfill one function. The next issue you will encounter is that if you are building a process management tool that is specific to your process you will often end up competing against tools that are very broad and robust, such as Excel or Slack. If those are your competitors, then you need to have a very specific niche and an overwhelming reason why buyers need your project not those projects. I am not suggesting that you can’t get traction with a niche tool, people do it all the time. But you need to do a substantial amount of competitor research before going any further. ### It's a good idea and people need it. Uber is a good idea, and people needed it. In fact, it was a great idea and people all over the world needed it badly. Having a great idea that solves a problem that people need to be solved is great. If you're going into an industry or an area that you're not familiar with, you're going to have to learn an entirely new career. So you're going to make a lot of mistakes and it's going to take a long time. If you already have experience in the industry, you know the idea is good, and you know people need the system, then all you have to do is query them to make sure you're correct and they're willing to pay the amount you need them to pay to support the system. ### I want to make money If your only reason for doing this is to make money, and you are a leader in the business, then I would recommend no doing this and investing in more tested businesses. There is nothing wrong with wanting to make money at all, and it’s a completely legitimate reason for going into business. But this path is going to be hard and it’s probably going to take a long time to make money. So my recommendation is to invest in real estate or the stock market. ### I have access to knowledge that others do not and I can make money selling it. Since you’re selling knowledge, your SaaS falls into the “filling a knowledge gap” SaaS and is usually something that may take a substantial effort to take from your mind into the system. Since you have special knowledge, you probably also know people in the industry and or have some influence on the market. ### I already have a system built or someone is paying me to build a system that I will own the rights to use or own completely and think people will buy it. This happens A LOT with developers and development teams. This has happened to me a number of times. Here’s the deal with this, you must go through the process of validation and especially the process of fully understanding your costs. Very often a SaaS will have ongoing operational costs as well as hard costs, that can wrack up fast. You’ll have developers, integrations that change regularly that you have to keep up with, compliance to laws, insurance, the cost of support, legal fees, and much more. Even if you have the system built, you need to remember that you have costs that you will incur on a monthly basis just to keep things moving, so you’re going to need sales. So you still need to do a full validation process. ### There is a similar system on the market and I think I can do it cheaper or better or there is room for competition. This is one of my favorite reasons. If there is already a competitor and it is is not a monster business like Google or Facebook, you know the market, and you know that the current system has major failings that could be done better, then you have a unique selling proposition, a market that you can approach that probably already has issues with the current system, and you know they are buying it. You have everything you need to get started validating your business! ### I have a market already that needs this tool and can sell it as soon as it is done. If you have a market, built the market, and understand what goes into selling to this market, then you are already well on your way to success. In so many SaaS businesses what people are missing is an audience, not a tool. People build tools thinking that people will come, when the reality is that you often build an audience, then the tool will sell. This is a great reason to build or buy a tool to sell to your audience. ### I want to start a business This is probably the worst reason on the list to build a SaaS business. If you have money to blow and your primary reason for doing this is that you want to start a business, my advice is to invest in real estate. It is a lot more secure, has a substantially higher chance of returning a profit, and is one of the most secure investments you can make. Building and running a successful SaaS takes a tremendous amount of time and money, and very often a good bit of luck. If you just like businesses and think this could be fun, my question is “Why don’t you start a shipping company?” Probably because you don’t know much about shipping and the barrier to entry seems pretty high. If you’re not already in this industry or the industry you’re selling to, the same things apply. ### I have some money put away and I thought this might be a good place to put it to use. I added this item for all those investors out there that are wondering if they should invest in a SaaS or if they are considering taking over an investment they’ve already made. The same thing applies here as above. Not to be redundant, but remember that the number one indicator of success in a SaaS business is the number of times the person starting the system has done it in the past. If the system is already in place and you’re stepping in to manage the business side of things, make sure you have a competent CTO already in place. If you don’t and aren’t familiar with the systems, technology, or acumen used in this industry and you think it’s going to be the same as running any other business, to some extent you’re right, but my experience is that you have a lower chance of success in this kind of venture than more traditional ventures. ### I was hired to build it Good for you! I am so impressed that you are reading this book! I wish so much I had taken the time when I started to be more forward thinking and read books like this. If you’ve been hired to build a SaaS or PaaS my highest recommendation is that you ensure that your client has gone through a thorough validation process. Without taking your client through the validation process thoroughly, you are going to get blamed for the failure of the product. If you’re being paid to do this, then skipping this step is almost certainly going to lead you down a path that you will regret. If you’ve already started on the system, that’s fine. Tell your client that you think this is a good next step. If you’re pretty far along already, then taking this step now rather than later will help save on any future losses. It will also help your client understand what they need to do next. The truth about validation is that you’re going to do it one way or another. It’s now or later, but either way your validation will come in the way of upfront planning, mid-build pain, or go to market failure. Either way, it will come to you, so do the right thing and make sure it happens sooner than later. # Should you do this? There are a few questions that immediately tell me if someone should or should not start a new SaaS business. The way these questions are answered can tell me within a couple of minutes if the business unit manager or entrepreneur understands: * What they’re embarking on * If they’re doing it for the right reasons * If they know the market * What challenges they will face * How much time and money it will take * If they understand the problem, their proposed solution, and the need for this solution * The competition, what they’re doing, who they are selling to, and how much they cost * Why people will buy from them instead of their competitors * The different buyer personas, what features they value, and how much they will pay * How they are going to distribute the product * If they have any unfair advantages If they understand or have good ideas about at least two thirds of these, then they probably have a good idea about where to go with the rest of it and are on the right track. If not, my recommendation is to take a hard look at your plans. Below is a list of what I look for in each of these statements, the followup questions I ask, and my recommendations. ## What are your goals? Goals are measurable, so a good way to think about your goals is in a two step process. Think about the ‘measurement’, what success looks like in the way of revenue, number of employees, personal income, and the impact you’re making as well as the way you’re making that impact. The think about the picture of this business in more qualitative terms. How would you feel about the business if it were as successful as you want? What would your day to day job look like? How would you treat the people you work with? How would they treat you? Some of the aspects of these goals you may want to consider include the ways you: * Change the world * Make things better * Fix a problem * Make money * Have a particular lifestyle * Or maybe just afford a flight (my reason for starting a few different businesses) Start off with your measurements. Here are some metrics to consider: 1. How much money do you foresee your business making each year? You can back into this solution by calculating the number of potential customers, the amount they will pay each month, then the amount of the total market size you can reasonably take. 2. How much time do you want to spend working on this business in one year, three years, and 5 years? 3. How much money do you want to make each month? 4. How many people do you expect to be required to maintain this business? 5. How long do you expect it will take to gain market share and why? Next, the ‘picture’ of the business should be explained in more qualitative terms, although quantitative measurements are fine as well. I am a very analytical person, so almost all of my goals are qualitative and I usually have just one or two quantitative measurements. The goal here is to paint a picture of what this business will look like in the associated time frames so that you know where you’re going and can set goals that will actually get you there. ## Can you fill in the blanks in the following sentence: “My SaaS or PaaS solves \_\_\_\_\_\_\_\_\_\_\_\_ problem for \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ audience or audiences?” It has to be that simple, and starting out with this problem, solution, and audience is the best way to start because you can easily test to be sure your target audiences actually need the solution you’re providing. Your system must solve a clear problem for a group of people that can be defined as an audience or set of audiences. You’ve probably heard of the “elevator pitch.” This is how you explain to someone what you do in the time you’re on an elevator. I don’t know about you, but in the elevator at my last office it had to be more of a seven second pitch, and I got pretty good at it. After maybe the 20th time I saw someone on the elevator, they would usually start asking things like “so what do you do,” or “what does your company do?” It wasn’t an overnight thing because we lots of things. It took a while before I could say “We help startups and mid-market companies build software as a service businesses and offerings.” Sounds so simple, right? As you probably know if you’ve ever tried to do this for a business that hadn’t previously had a strong focus, it isn’t. But if you have the chance from the very beginning to set your targets and test them, then you don’t have to squander years like I did trying to figure out what you actually want to do. So solve it up front. After all, what are you going to tell everyone on the elevator when they ask? ## What is the problem, solution, and need? So often you have a problem and a solution, but what about the need? To sell a product, you must have all three. What very often happens is that the entrepreneur sees the problem and can contemplate a great solution, but if they don’t take the time to identify the need, they build a product that will never sell because people don’t need it badly enough to pay for it. It happens fairly frequently that a system is built, but that no one was asked if and how much they would pay for the system. It turns out that the user base is already using a system like Excel or Word to do the job, which they are already paying for, and they don’t have a strong enough need to move to the new system. So the SaaS fails because the need just isn’t there. The way to overcome this is multifold. Start off by Querying your users up front, before you have started developing a system. Make sure you show potential users what you are building as you build it and ask them what they would need to make a purchase. If users are already using a system such as excel, word, or other normal business tools to solve the problem, identify where those tools fail AND what aspects of those tools you will need to reproduce. ‘Normal’ business tools such as Google Sheets, Microsoft Word, and Salesforce are extremely robust systems, and many people take for granted the power of these tools. If your users are leveraging aspects of these kinds of tools in their day to day process and your system is just one addition or solution that will take them away from those tools, the user will have extra time they will need to come away from their normal tools to work with yours. So you must ensure it is A) worth their extra time and B) worth their extra money. These and other steps are a part of the full validation process outlined later in this chapter. ## How well do you know this market? If you’ve read this far, you probably already know where this is going. If you don’t know the market, then to get into it, you’re going to need to learn all about it. That doesn’t mean just learning your one part of the market, it means learning the entire market, including things like: * Market lingo * How the market works * Players in the market * How different players in the market interact * How sales are done and what is and is not important in those sales * How your target market operates as well as how their competitors, vendors, partners, etc. operate. * The processes involved in delivering the product or service * What constitutes a good or bad product or service in this industry * Contacts at different levels and areas in the industry * So much more When you enter a new market, you are committing to learning a new career. Let’s say you’re currently a developer, designer, or accountant. How long did it take for you to get good at your job? Probably a long time, because almost nothing worth doing is easy. If it was simple to become a millionaire, or just to make a livable wage in many places, I guarantee more people would be doing it. So why do you think you can enter a new market you’ve never worked in and suddenly be successful? The fact is, you probably won’t. So stick to something you already know a lot about if you’re thinking about building a product. Or, take some serious time and work in your target industry for a little while before starting to build a tool that may or may not work in that industry. ### Storytime with Jason: Selling to doctors You’ve probably been a patient at one time or another, I certainly had. Not only that, I have a sister and a father who are both doctors and my team was engaged to build an enterprise Radiology Information System at one point. I felt like this gave me a pretty good understanding of the business of medicine. So when I started MedRev to help healthcare providers better understand and improve the experiences of their patients, I thought for sure this was going to be a slam dunk. What doctor wouldn’t want to improve their patients’ experiences so that they could improve their businesses and their practices? What doctor doesn’t value their reputation enough to make a simple choice and take a little extra time and spend a little extra money? What doctor doesn’t want their Google and Facebook reviews to be improved? What doctor doesn’t want to be better? It turns out, a lot. I had known for years that selling to doctors has hard, but this was a simple sale, or so I thought. The problem is clear and present, the solution is simple and cheap, and of course the need is overwhelming given the importance of customer reviews. Well, actually, it seems that a lot of doctors: 1. Don’t care what people think about them. 2. Have such a full book of business and don’t ever worry about more people coming because they are and have been booked for months out for the last several years. 3. Don’t believe that patients care about or read online reviews. 4. Have offices that are now owned by hospitals and no longer worry about much more than their day to day jobs since they are getting a paycheck no matter their outcomes. 5. Are super cheap. 6. Are getting ready to retire and don’t care about their reputation at all. 7. Don’t have a clue how to use a computer. 8. Rely on their office manger to make business decisions, but then don’t allow them to make any actual decisions or spend any money. The list goes on, and the lesson remains. I didn’t understand what goes into selling to doctors, who to sell to, how to distribute or how the system was never going to sell if the doctors had to do so much as lift a finger to make it work. The only solution that would work for this industry was to build and maintain an integration into every major Electronic Medical Records (EMR) system so that as each patient left the office, the system would work automatically. I also had to learn a ton about how to sell enmasse to doctors, which is a big problem for someone looking to just get a few sales to start. It all seemed so simple in the beginning, and a few weeks of validation would have gone a very, very long way. The company didn’t fail, but sure cost a lot more to build than I expected, and we haven’t even talked about HIPAA compliance yet. ## Onward! So what do you think? Are you the right fit for this job? Do you know what you’re doing well enough to take it to the next step? If you’re still onboard, let’s tear this project apart and start putting together some numbers, timelines, structure, and more. The rest of this section is going to dig into the details of time, money, competition, buyers, and understanding if this project is going to be worth it or not. Get out the pen and paper and boot up the computer because you’re going to be looking at some spreadsheets, entering some information, and putting your idea under the microscope. If you’ve already started and are realizing that maybe it’s time to take a hard look at what you’re doing and where you’re going, as I have more times than I would like to admit, then this is a great place to start. # Competition Analysis If you think you’re the first person to come up with this idea, you’re probably wrong. In fact, you’re almost definitely wrong. Maybe no one else has taken this idea to market, if you’re building something truly unique, but I doubt it. You probably just haven’t looked hard enough. In this section, we are going step by step through all the tricks to: 1. Find your competition 2. Understand their features 3. Understand their buyers 4. Understand their pricing 5. Know if you can compete with them This step will help you realize if this project is worth it, if you can be successful, and maybe even realize if there is a market before you even start. If you competitors aren’t doing something or doing it in some particular way, there’s probably a reason, and for the most part, it’s not that they’re uninformed. So if you think you have a great new idea that no one is doing, it's important to remember that there may be a reason for that. Knowing your competition also means knowing your competitors buyers and buyer groups. This helps you find holes in the market and understand ways to reach out to people that are not being served, or serve them in a different way. We’re going to take a much deeper look at your buyers in the next section, and this initial competitor research will give us a great start there. So be sure to keep your notes on buyers from this chapter, we’re going to be using them next! ## Finding Your Competition In this section we are going walk through the steps to finding your competition. You have two major types of competitors, direct competitors and indirect competitors. Direct competitors are competitors that are doing very close to or the same thing you are doing and are competing for the same buyers and thus the same dollars as you. Whereas indirect competitors are companies or tools that do something similar or are used to accomplish the same tasks. For example, an indirect competitor for Slack might be Google Hangouts or Skype. It allows people to talk to chat with one another online. Since Hangouts and Skype are both free, buyers aren't paying to use those tools, but they have the option at any time. Just the option to use something, especially for free, is a big pull from a paid system. So whatever that is for you, it is also your indirect competitor. Start by opening the competition spreadsheet and entering the competitors you know. If your answer is that you don't have any competitors, you're probably not looking hard enough. If you're not knee deep in an industry to start you may not know where to look. This was my process recently for trying to validate a lead generation system for a particular industry. When I first did a search, I didn't find much. So I got all excited that maybe I was the first person to ever think about scraping the web and cross-referencing information to find leads. Not smart, I know. Here was my process for learning how truly wrong I was. ### Step 1: Search Google As any enterprising person would do, the first step I took was to search Google. The search term I used was "lead generation system." That seems like something that would work, right? Well, it doesn't really. Google, and most other search engines have this problem with people trying to figure out how they work and tricking the system. This pushes up a bunch of articles that are built to rank, but don't actually have any particularly useful information on them. Coincidentally, bit later in the book we're going to delve into the specifics of how to do this as well. So if you're good, you too can waste people's time as they're trying to validate their product as well! So your first few pages may not have exactly what you're looking for. This is what they look like at the moment: ![](/files/-LoTclQbBFFXv0OcK5hT) Mostly ads, a definition, and a bunch of pages that lead you nowhere useful. So let's move on to the next page: ![](/files/-LoTd9_MB4MzC04pdWTr) Huh... not much more here. Maybe my idea for a lead generation system is looking better! Or maybe lead generation companies just haven't figured out the SEO game yet? Either way, it's looking exciting from my 2-page search so far. So let's take it a step further and clarify our search terms some. This time we're going to use the search term "lead generation system for web developers". I scrolled past the ads and now it's looking even more exciting. Really, not a single SaaS system that creates leads for web-developers. I guess this is my lucky day! ![](/files/-LoTeL70sK_VUsXM7pMJ) Three whole searches and I've only see the one ad for Cognism from the first search. When we take a look at the site, there's no on-page pricing, which means it's expensive. It also means that it's going to be on my list of companies to trial. But so what? Right now it looks like just Cognism and I are sitting on a gold mine, minus the buck fifty they paid when I clicked on their ad. ### Step 2: Social Media Requests Social media goes next because it can take a few days to get responses back from people. If you're entering a crowded market, you may want to consider skipping ahead. But if you think you're going to need to ask the audience, start here and then go on. #### Ask Facebook I need to ask some people who really know their stuff, so how about other SaaS entrepreneurs? It's their business, so they probably know. My first stop, my good friend Sampath's group, [SaaS Mantra](https://www.facebook.com/groups/saasmantra/). Here was my post: ![](/files/-LoTgxzzIvci3JzOf9Y1) From this first post I did on a SaaS owners Facebook group, I got some super valuable, and bubble bursting, feedback. First, there are tons of companies doing this. Second, it's really, really hard and takes a lot of work. But at least now I have a list of competitors. Here's what I found from this post: * GoPinLeads * ScopeLeads * Crunchbase - should have thought about that one up front. * Clearbit * Zoominfo * Apollo * Leadgenius * Mattermark * Zirra * Predict Leads * Findthatlead * Leadcandy * Soleadify Probably the most valuable thing I found from this post was that I had a connection in the industry who had already been a part of a build team doing exactly this work who was willing to chat with me for an hour. That was probably the most valuable conversation I could have had since he was kind enough to tell me exactly how to do the project. The catch here as he put is "This stuff is really, really complicated and you're going to need a 4 or 8 man team working for a year to do what you want to do, and you still may not be able to get it all figured out." So he told me how wrong I was about my first assumptions about the project, the industry, and how long it was going to take to get it all done. At the same time as posting that first post, I had also posted into the SaaS Growth Hacks Facebook group. ![](/files/-LoTjDaVFUCgKOltT3Bz) I didn't get as much here, but I did realize that I forgot to add to my indirect competitors list a few items: * Snov * Sales Navigator * Ahrefs * SEMRush It also told me that either people don't care and won't answer in this group or that there is a general lack of knowledge about what is going on in the industry. Useful, but I already had what I was looking for from the other group. However, a few days after the post, I got another message from a contact from this group that informed me that there are literally hundreds of companies doing this exact same thing and that it is a really difficult thing to do, exactly like the last guys said. #### Ask LinkedIn Next up, ask the pros at LinkedIn. I went ahead and posted the same question, but with a new image on LinkedIn. From this post, I got a few answers, but nothing really helpful. LinkedIn recently has been a lot about viral videos and a lot less about real questions and answers. But if you have a knowledgeable network, it could still be helpful. ![](/files/-LoX-sHTJybv6etlMcMI) ### Step 4: Seach ProductHunt.com If you're looking for a SaaS application or app, Producthunt.com is the spot to go. There are thousands of systems there there can be easily searched. Start off with just a basic search: ![](/files/-Loct7np-e-0k5WavXQv) You'll probably find what you're looking for right in the search console, but if not start scrolling through the results. ![](/files/-LoctLPAlMce8PU0dKvn) If that doesn't work, then take it up a notch and post onto the makers discussion board. I would probably ask if anyone knows about your particular niche and try to find keywords or phrases that you're not familiar with to search for. From there, you can start again here, go back to Google, go back to Facebook, or move onto the next step. ![](/files/-LoctjAEaAmijEnFtoEm) ### Step 5: Search review sites and similar websites Now that we've got some insight and a list of competitors, let's do another search. This time though, let's not search Google, let's search a few review & comparison websites: #### G2: ![](/files/-LoWzZMFjL-4hkSzmvC3) #### Owler: ![](/files/-LoWzlrNYAecUD0dcRDM) #### SimilarWeb ![](/files/-LoWzy6LfleFqkiUjf6K) ### Step 6: Check with SEO tools If you still don't have what you're looking for with your search engine, social, and review/similar site searches, then it's time to open up some tools to do the search. My favorite for this is Ahrefs.com. Sign up for the $7 trial, enter one competitor and search for their competing websites. From here, you can see the websites that they are competing with. Most of the time, this list will give you insight into where else to look and what else to look for. ![](/files/-LoXAHSx508CWZKjO_Q4) The view here just has some top level items, but you can use this as a start to dig in and find even more competitors. ### The Competitors List Our list is pretty extensive now, and it just keeps getting bigger now that we know what to search for and where to look. Here are our contenders: * GoPinLeads.com * ScopeLeads.io * Crunchbase.com * Clearbit.com * Zoominfo.com * Apollo.io * Leadgenius.com * Mattermark.com * Zirra.com * PredictLeads.com * Findthatlead.com * Leadcandy.com * Soleadify.com * GetProspect.io * RightHello.com * Growlabs.com * Inbox25.com * Bant.io * DefinitiveHQ As you can see, there are a ton more in this than what we found in our first searches. It's also looking like that conversation with the developer who said that there are hundreds of competitors is proving to be true. This is the point where I put the brakes on the project and decided that I did not in-fact want to pursue this project. But let's say that this list wasn't overwhelming or I thought that my system could compete against these players. Then it would be time to move on to... ## No Competition? It's not impossible that there is no competition, but it is fairly unlikely. The things to know if you can't find any competition are that: 1. It may not be a viable market 2. They already went out of business 3. There is a monopoly 4. There is already a solution that does not require a SaaS 5. Maybe you just stumbled onto a good idea that no one has come up with yet? Probably not though. It's not impossible, it happens every day. But it happens less and less every day. ### You probably haven't looked hard enough In the example above, I was able to pull from a group where I had great connections already and people know me. But in two out of three areas I didn't get much back. So my recommendation is to take the process I noted above and keep at it until you find your competitors. Google may not have all the answers, but just finding a few and then using G2 and sites like similarweb ### It may not be a viable market If no one is already doing this, then there is a good chance that it's not worth doing. It could be that the indirect competitors are too strong or robust to deal with, the market size is too small or unreachable, or that they just don't have much money to spend. Either way, it's important to remember that if no one else is doing this, that there is more than likely a good reason for that. ### There is a monopoly Especially if you're competing in a regulated industry like healthcare, you have to watch out for monopolies. Groups with monopolies don't want everyone to know they have a monopoly, so sometimes you'll take a look at an industry that seems overripe for competition, but on a deeper look you'll realize that it's impossible to compete. For example, one of my companies was interested in competing with Health Grades for certain Centers for Medicare & Medicade Services data. It turns out there is a congress-mandated order that gives Health Grades a monopoly there. Unless you have some pretty high up friends, that one is untouchable. ### You stumbled onto a great idea with no competition The odds are low, but improbably things happen all the time. If you've done all your homework, talked to all the right people, searched and searched and search, and still haven't found any competition, then maybe you're on to something new. It could also be that you're applying a known system to a new industry or niche, which does happen all the time with a good probability of success. If this is the case, then fantastic! But you still have to do the rest of the validation process. Just because there aren't any competitors to be found doesn't mean that people will buy the thing. In fact, it makes your validation process a bit harder because you don't have anything to compare this idea to. ## Competitor Feature & Buyer Analysis Before we look at competitors, let's take a look inward first. You probably already know a bit about what major features you want to provide, how you want to provide them, and to who. So start off by [opening up this spreadsheet](https://docs.google.com/spreadsheets/d/11J-HBYVhaOXyrQpR3S7fTP8JMNhjvS9IYOlVUTVhBDw/edit?usp=sharing), making a copy and listing your company first. The spreadsheet has four worksheets. These are Competitors, Buyers, Competitor Features, Buyer Feature Interest, and setup. ### Competitors Worksheet Start by opening the Competitors worksheet and entering your business at the top, then your competitors. ![](/files/-LoauaoxGnc4AG8G4ftN) If you can't see the spreadsheet, the competitor worksheet fields are: * Business or Competitor name * URL * Pricing page URL * Trialed - have you taken a trial of their system yet * Similarity to your product - 1 - 5 scale * Competitor type - direct or indirect * Value Metric * Buyer type 1 - general demographic information * Buyer type 2 * Buyer type 3 * Add more buyer types as needed * Major feature 1 * Major feature 2 * Major feature 3 * Add more major features as needed For each business, start filling in the fields. It's not necessary to get every single competitor listed, especially if they're really not a competitor. But I recommend getting as many as you can. ### Demo Competitors Systems Once you have each competitor necessary listed, then it's time for the time-consuming task of testing out each of their systems. If they have a freemium version, go trial their system. If not, then request a demo let them walk you through it. As you go through each competitor's system, be sure to dig for as much information as you can. After the sales-person gets into the system, the following questions are great ways to learn more about the company, their success, and their customers: * How long have you been with this company? * What do you think is the best feature in the system? * Where are people having a hard time using the system and why? * What are some examples of your biggest customers? * What's the difference between you and \[choose a competitor]? * What's on your development roadmap? OR What features do you have upcoming? * How did the business get started? * How did you guys get your first customers? * Where do most of your customers come from? * Which feature is the most used? I like to really dig into questions about the specifics of customer demographics, features, usage, and customer support. Sales people love talking about their company, so ask open ended questions and let them talk. Also, you may find that the person you're talking to knows a little bit about how the system is developed. Make sure to ask a bit about that as well, you never know what valuable tidbits of information you'll find! {% hint style="info" %} Make sure to record the audio and screens during your recordings! You will really need this later. If you can't get recordings, take screenshots and have someone else watch and take notes as you do the demo. {% endhint %} Make sure you take note of every major feature for each competitor during or shortly after the demo. You're going to need to remember these features for the next step, and you're especially going to want to remember how the UX is organized if your system passes validation and gets into the design phase. ### Features, Plans, & Pricing Now that you have a list of your top competitors and have looked over all of their features, you should know which companies are your primary competitors, if they have similar features, what systems you will and will not compete with them on, and if you really do have a unique selling proposition. Now, take the top three to five and line them up side in the competitor features worksheet. ![](/files/-Loc10R_d6i6bbKT2ITX) Start off by naming each competitor at the top, then for each plan enter their: * Value Metric * Plans per competitor * Cost * Target buyer per plan * Features available for each plan * Highlighted features for each plan shown in your competitors pricing pages - these are generally the features at the top of the page that each user group is most interested in. For example, here is a the pricing page for Mattermark, not the highlighted areas: ![](/files/-Loc3gThofxIv1jeV7-R) And here is ZoomInfo: ![](/files/-Loc3l_UHZQa3NM3BbC_) These highlighted features are generally the features that are most important to each user group. Not only do these items give you insight on how to price your SaaS, they also show you what these companies have figured out that their customers value most. Please take a look at the [Appraisement chapter in this book for more on pricing](/appraisement-pricing-your-saas/appraisement-saas-pricing). Now that you have your top competitors lined up, their general buyer groups worked out, and your competitors features examined, you can now really start asking yourself the following things: 1. Do I have a unique selling proposition? 2. Can I produce a competitive advantage? 3. Is there a hole in the market? 4. Could I twist this product to enter the market in a new way to be competitive? 5. Do I need to produce the same features as my competition to be competitive? {% hint style="info" %} Just about all SaaS businesses have great margins, so if your competitive advantage is price, your competitors who are already in the market can probably change their prices to match yours. Be careful about listing price as a competitive advantage in SaaS! {% endhint %} Competitors are just one part of the equation though. You must also thoroughly understand your buyers, their markets, and more. Later in the book, in the chapter on [Appraisement](/appraisement-pricing-your-saas/appraisement-saas-pricing), you will need to have a thorough understanding of buyers and competition to competitive price your product. # Buyer Analysis ## Buyers * Who are your buyers? 1. Did you ask people with the problem you are solving? 1. What did they say? 2. What is the current market size? 3. Is it worth selling to them? 4. Ask current distributors 1. Influencers 2. Competitors 3. Podcasts 4. Youtube channels 5. Facebook groups 6. Consultants 5. Creating a list: 1. Ask the distributors 2. Li, Tw, Fb groups, Ads, Socal Ads, Forums, Podcasts, tradeshows 6. Survey your buyers - get a list of 10 - 1000 people from either your distributors or your lists 1. Who are they? 1. Role 2. How long in business 3. Do they have the problem? 2. Do they have the need? 3. Do they know they have a need? 4. If not, why? 5. Do they want the product? 6. How much are they willing to pay? 7. If you can’t create a list at the beginning of the project, how will you do it later? 7. Do you know already? Are you sure? 8. Can you make a list of buyers to call today? Most of the time, the answer is no. 9. If yes, then can you break them apart into the different buyer types? 10. If you can’t identify all of them, here is how to do it: 1. Fake it up process 1. Fake business 2. Fake website 3. Fake ads to drive ideas 4. Figure out who they are 1. Facebook customer validation process 2. Test your messaging 5. How do you identify them? 11. Do they want what you’re selling? 1. Test your messaging 2. See if they will buy it 3. Get their contact info 12. Now that you have a set of people to reach out to, let’s talk… literally. 1. Get on the phone and CALL THEM 2. Ask about who they are, what they want, how you can help them 3. Understand their issues 1. You will learn things you never realized about your product and offering 2. You may realize that what you’re doing is going to be a huge success, or that it is not going to work 3. You have to do things that don’t scale to enable things that do. 4. Don’t underestimate the value of this. # Sales & Distribution ## Sales & Distribution * How will you be distributing this system? * Do you need a sales team? # Time & Money ## What is your timeline to get to market? People that are new to the industry rarely realize the amount of time and energy it actually takes to get a product to market. From ideation to market penetration, my experience is that most companies come in at around two years. Many of these businesses will have sales and/or market testing revenue prior to that time. But by the time they find their niche, their messaging, have the system set up for their users, and are able to start growing is very often around 2 years. ### Why two years? For whatever it is that you’re building, unless it is exceedingly simple, plan on it taking at least a year to get the product right and understand your market fit. Then plan on another year of iterating on the product, getting to know your customers, building systems that match their needs, and starting to really take off.
I’m not suggesting you can’t do it faster, I’m just giving you a good idea of what to plan for. Plenty of companies do this a lot faster, but plenty of companies also thought they could do it a lot faster and it ended up taking a lot longer or never evening getting to market. So as you’re planning your project, if you are racing to beat a competitor and they’re already a year ahead of you, you’re probably not going to beat them. If that’s the case, just remember that it’s a big world and there are a lot of buyers out there. ## Do you understand your costs? Understanding costs and revenue can quickly be the difference between being in and out of business. For the most part, SaaS businesses have fairly high margins, which is one of the biggest draws to this sector. It’s easy to think that because your margins are so high that you can withstand a few more costs, but that kind of thinking can quickly sink your business.
Personally, I had this happen with my business MedRev. It is a patient experience analysis SaaS that works by sending out satisfaction surveys to patients from clinics, offices, and hospitals and returning back to them actionable information on how to improve their companies and processes. When we were getting started, I didn’t put much thought into the cost of systems operations outside of support because “How much could it possibly cost to send a few emails and texts?” It turns out it’s a lot if you’re going to be in compliance with all the US healthcare regulations, also known as HIPAA. To get all of our training, insurance, other legal issues, and security within the system, the costs turned out to be exceptionally high. The difference between sending out surveys while complying with HIPAA regulations versus just sending out business surveys turns out to be SIX TIMES more expensive! If we hadn’t already been so far into the system when I realized how low the margins were actually going to be, I may not have pursued it in the first place.
But that’s a company that didn’t crash from unrealized costs, and there are plenty that did. In particular, one interview with a friend who wished to go nameless to protect the identities of his investors described a business that went totally bust from unconsidered costs.
In his words “I didn’t need the full-time staff, I didn’t need the warehouse space, I didn’t need the office, and I certainly didn’t need all the perks we gave ourselves. But we got it because we thought we did. In the end, I could have done the whole thing working from home with no employees at all. Even though we made almost 200k at launch, the cost ended up killing us. Had I taken a step back at so many different points leading up to the end, maybe I could have made the hard decisions and cut the bleed, but I just didn’t realize it.”
It’s the same story I’ve heard so very often, and have said myself. You have to take the time to do the math, and as my Mom says “Run the numbers,” or you’ll be out of business.
This is not a simple table of data that you can just fill out a couple of fields and understand if this is going to work or not. We also need to do this in a spreadsheet so you can make complex modifications.
Worksheet 1
## How long will it take until you are cash flow positive and do you need investment? Whether you’re bootstrapping it or getting some big dollars, unless you’re Uber you’re going to need to know when to expect to be cash flow positive and profitable. Building this expectation into your plan is a necessary part of any business plan.
Most experienced business owners would say “Of course you have to do this!” So I only bring it up because I have seen so many SaaS businesses that think they will somehow just make money at some point and that will be fine, without giving any thought toward checking to be sure their income or investment will support the timeline of business development and their go to market strategy.
So let’s figure out how long it’s going to take before your business starts making money. The spreadsheet here will take you through some example costs and timelines so you can get a good idea of how things will look for you.
What is the cost to build the system? - choose a round number, then double it. What are your monthly costs? * People * Software * Marketing * Advertising * Operations How long will it take to gain market share? - pick an estimated time of at least 1 year and double it.
What is your growth rate - start at 1% for AT LEAST the first 4 months, then you can go up to 2% to 5%. Aim for 20% within 6 months. In this first part, we are just going to add some estimates, but in the future, we’re going to dig deep into these numbers so you can get a good idea of actual costs. The concept to grasp here is that your costs and revenue will grow over time. The goal is that your revenue grows faster than your costs and your end up making a profit that can also offset the initial capital outlay you put into the business. # The Secret Sauce ## The Secret Sauce Sauces are made up of a lot of different components and they all have to come together to make something amazing. Without one ingredient, the sauce is missing something and doesn’t have the bang that it used to. This is the place where you’ll find some of those hard to find ingredients, but if you don’t have all the ingredients, it’s still not going to be very impressive.
* Do you have pre-sales? Can you get presales? * What is your unique selling proposition? * What is your unfair advantage? # Buyer Categorization By Sales Method ## Self-serve vs direct sales If you're building a tool that is going to be sold to a relatively small audience and you're going to reach directly out to someone in that business to do the sale, that's a direct sale. Whereas if you're building a tool that could be used by a larger audience, and they will probably find you by looking for you on an internet search or some kind of advertisement, then that is a self service sale. A direct sale is sometimes also known as an 'Enterprise' sale, whether people are selling to an enterprise or not. Very often, the enterprise or direct sale is sold at a much higher cost and has a longer sales cycle. As we'll see later in the book, this means that there is a high cost of acquisition, but also a high lifetime value. An example of a direct sale from earlier in the book is the case of our Dr. Paul who was selling to hospitals. Sales to hospitals can go through sales channels, but very often it is going to be done on a personal level, even if there is an intermediary sales channel. In the words of so many enterprise salespeople I have met over time, "You have to have boots on the ground." When it comes to a self-serve sale, an example would be something like Slack. If you don't use it already, you probably heard about it through some article, or a friend, or an ad somewhere online. The reason for this is because the problem it solves applies to you and so they make sure it's on your radar. When the Slack team was working on their marketing campaign, they could easily create a list of a ton of companies that would be buyers of their system. But when comes to Dr. Paul, getting in front of a ton of hospital CEOs to ask questions was much more difficult, and he couldn't query them in the same ways. ## Validation Process Because of the difference in accessibility, time availability, interest, and sales channels to the different kinds of customers, there are a couple different methods of validation that you can use. The more validation you do, the better, so doing BOTH validation processes is best, but sometimes only one or the other is really feasible. Whether you are doing an enterprise software sale for hospitals or building another marketing app, if you don't get the validation you need in so far as: * # The Advisory Approach ## **Step 1: My SaaS solves \[STATE PROBLEM HERE] for \[STATE AS SPECIFIC OF A GROUP AS POSSIBLE HERE]** The easier it is for your SaaS to answer this question, the easier it will be to sell, and thus the better chance you’ll have at success. On the flip side of this, the broader the statement and the group, the bigger the budget you’ll need to build and market the product. Something I’ve seen so many times is an entrepreneur trying to do something that directly competes with monster companies like Facebook or Google. They try to explain how this is different, but inevitably they get crushed by this. So, take an objective look at your system, if you’re trying to do something that could compete with Facebook or Google, you probably are. That said, you can definitely compete with the big players as long as you have the budget to do it. Facebook brought in about 40 billion dollars in 2017. That is about 3.3 billion dollars per month. Do you have that kind of budget? If so, call me and I will be so happy to help you build your platform. If not, think about specifying your target market or offering a bit more. Remember that specificity is key in your target market. So many new entrepreneurs I’ve met are hesitant to focus on a particular market because they feel like they are going to lose business. In reality, specifying your market enables you to sell a lot more. When you know exactly who your target is, you know exactly who to call. Besides, after you open this market up, you can always look at an adjacent or similar market. ## Step 2: Reach out to your personal network of people and find a group of advisers who work in this industry or are your target market. Convince them to be on your board. You’re going to need this group for a few different things. 1. Get feedback on your system. 2. They are your first customers. If you can’t sell them on your product, it’s going to fail. 3. Each person is going to give you a testimonial for your website and marketing. 4. They are going to tell their friends about your product and will jumpstart your sales. 5. They are going to tell you if your idea is any good and if other people are going to buy it. At a certain point, you’re going to be in a spot where you can confidently say “I know better than this group does about their own market.” But when you’re first starting out, you need this group to guide you. Remember, you’re going to mess things up initially, so make sure that your idea is a hot winner and everyone agrees with you and is clamoring to get your product. My Grandfather had a great saying about business that directly relates to this. He said “Don’t fall in love with your businesses.” I see this happening all the time where new entrepreneurs fall in love with their idea and are willing to live and die by them. Unfortunately, it is usually more of the latter. Your business is there to make your life better ## Step 3: Make a list of competitors and sign up for their systems. Pretend you’re a buyer and have them give you demos on their systems, learn how they pitch you on their products, and record the conversation. Throughout the calls you do with your competitors, ask them questions about different scenarios, how they handle different kinds of clients, and why they charge what they charge. ## Step 4: Now that you know your competitors, figure out how you’re different. What are you offering that they are not, or to what people? It could be that there is just room in the market for someone who does exactly the same thing. It’s fine either way, as long as you know where you stand. My recommendation is to make a spreadsheet of all your competitors and their products. For each product make a row, and for each feature, a column. Now you can go through and make a list of features and services your competition offers and how you are different. It is a simple exercise, but if you do it, you will see the differences in black and white. Maybe you're a lot different, or maybe you need to think more about what you're building. ## Step 5: Figure out your pricing model & determine if you can make money running this business. Plan on spending some time figuring out your pricing model. Since you already signed up for your competitors’ systems, you know how they are pricing. So figuring yours shouldn’t be a big stretch, but it’s still going to take more time than you expect. [There is a whole chapter on pricing](/appraisement-pricing-your-saas/appraisement-saas-pricing)[ (Appraisement)](/appraisement-pricing-your-saas/appraisement-saas-pricing). I highly recommend you read this section. As you can tell from the section title, this comes in two parts; knowing how much to charge and determining if you can actually make money. When you figure out how much you can charge and for what, you're looking at what the market will accept for your system. But you also need to ensure you will make money doing all of this. For more on this aspect, I recommend the [chapter on Lifetime Value of a customer verses the Cost of Acquisition.](/appraisement-pricing-your-saas/saas-pricing-metrics#saas-growth-is-based-on-customer-lifetime-value-being-greater-than-customer-acquisition-cost) ## Step 6: Hire a designer to do some basic designs for you so you can pitch it to your advisers and potential customers. Plan on spending between $1200 and $5000 for a first round of designs. But don’t spend too much, these are going to change a lot once you get feedback. Just get enough design work done to get to the next step. If you’re not used to working with a designer, remember to hire a UX designer who has done this before, and expect for it to take a number of revisions! ## Step 7: Get your advisory group into a room (physical or virtual) and ask them all if your solution is going to solve their problems and if the cost is worth it. If the answer is yes, ask them to buy it during the meeting. If your product is what they need, they know they need it, and the price matches their budget, you’re in the money. But if you designed something that you can’t sell to your group of advisers, you’re going to have a hell of a time selling it to anyone else. The rubber meets the road where people open up their pocketbooks and give you money. If that is happening, then you are all set. ## Step 8: Double check by asking more questions to more people By the time you're at this point, you have a list of people who want to make a purchase, a system concept that generally works, and hopefully a lot of enthusiasm. But if the only people that buy your system are sitting in the room with you, then you're probably still not going to make it. So what do you do to be sure? **This is critical:** Ask as many people in your target market as possible. What you find may still surprise you. ## Step 9: Distribution channels ### Enterprise vs. Self-Serve SaaS Sales #### Self-Serve SaaS The first thing to understand is that your overall process is dependent on what you're selling and to whom. If you're selling what I would call a 'Self-Serve SaaS', meaning a SaaS that is marketed to you target audience primarily through the web, affiliate marketing, or other further reaching marketing methods and sells for what starts out as a fairly small amount of money on a monthly basis. This amount can grow tremendously based on your value metric for the right customer, but most users are going to spend somewhere between $10 and $1000 per month on your project. #### Enterprise SaaS This is a SaaS that is sold first at the enterprise level, then maybe at a smaller scale. It is what is known as an Enterprise Sale. Most enterprise sales have a much longer sales cycle, as well as a much higher price. Enterprise sales come with their own set of problems but very often a hefty price tag. A friend of mine sells his Enterprise SaaS to some of the worlds largest consulting companies for what amounts to $200,000 per year per business, and they are happy to pay him. A lot of SaaS businesses sell both self-serve and enterprise, but when you're launching, you need to know the difference because it is very difficult to do both sales at the same time. Thus this launch and sales difference affects your overall process. If you're building a system that is sold via an enterprise sale, most of your sales are going to be in person or virtual in person via a video call. But if you don't know who those people are, or how they will find you, then you can't get these people on the phone. If you can't get the decision makers on the line, how will you make the sale? Or, if you're selling a more mass marketed system, even to a specific targeted audience, you need know if you can be competitive insofar as marketing is concerned. #### Some things are always the same No matter what who you're selling to, if you can't get the message out there about your product, you're not going to be able to sell it. So you need to validate your distribution methods before you get started. So you need to validate your distribution and marketing models, at least to the extent you know they are available, and preferably to where you know they will work. Since there are a large number of different distribution channels in different industries, we are going to take a look at a few key aspects of distribution. ### SaaS Distribution Questions #### Do you have a list? I don't mean "can you buy a list," I mean do you already have one. Do you have easy access to a list of the majority or a large number of businesses in your target industry with the names, email addresses, and phone numbers of the people who would use your system? #### Will people respond to ads and how much does it cost to get one person from your target market to click on an ad? My recommendation on this item is to run a set of Facebook ads, if your users are on Facebook, and see if they will click on your ads and how much it costs. [Check out the chapter on Acquisition for more information on how to do this](/acquisition-gaining-saas-users/acquisition-getting-saas-users#social-media-marketing). #### Can you compete in organic traffic? So many SaaS CEO's I know compete heavily on SEO, myself included. The questions you need to answer here are: 1. What keywords am I competing for? 2. Can I rank on the first page of Google, or preferably as number one on the search engines, for this keyword? 3. How long will it take to do this, and how much will it cost? In the chapter on [Organic Search Marketing](/acquisition-gaining-saas-users/organic-search-marketing), there is a formula for how to determine what keywords you can rank for and how to do it. If your SaaS is going to depend on SEO, I would not start unless I knew I could rank. #### Who are your distributors? In the beginning, you're going to need people to help you get your SaaS out there. Unless you've got a monster sized marketing budget, and even if you do, you're going to need distributors. So who will they be? Take a look at [the chapter on influencer and affiliate marketing](/acquisition-gaining-saas-users/affiliates-and-partnerships-for-saas-businesses) to learn how to find and grow these channels. The more of these distribution channels you have, the better. If you can't find or don't have any or any good ones, then this may not be an idea worth pursuing. ## Step 10: Validation Success You've got the list above, but what really constitutes validation? For each item, enter a 1 for "Yes" and a 0 for "No" in the list below. I can or have: | Statement | Yes =1 No = 0 | | -------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | | Fill in the blanks in the statement "My SaaS solves \[SOLUTION] for \[SPECIFIC AUDIENCE]." | | | Thoroughly reviewed all your major competitors products and understand the features of those systems as well as how they sell their systems and to whom. | | | A unique selling proposition, a reason for your customers to buy my product instead of my competitor's product. | | | Some designs that walk your advisers or potential customers through your system, and those designs and ideas are easy to understand. | | | Advisers that think this is a good idea and have given me money for my product. | | | Sent a survey to my potential buyers and they have told me that they will buy my product and have given me a good idea of how to price it. | | | At least a few users are willing to talk to me about buying my system before it is built. | | | A identified and tested several different methods of distribution and determined that these systems will definitely work. | | | A pricing structure that my customers accept and will make me money. | | | A budget to work with in order to build the system and distribute it. | | | The enthusiasm to do this project and the time to devote to it. | | Add up all the items from the list above. If your score is less than 11, then you're not done validating your system and are in danger of losing all your money and wasting all of your time. So go back and finish your homework before you get started! Don't be put off by the work it will take to plan out this project. The more work you do now, the less money it will cost in the long-run and the faster you will get to market. The biggest mistake you can do is to jump head-first into the deep end and drown in a sea of debt and sadness. If you're questioning this, just think about what you're going to tell your investors when they ask you why your product isn't selling or why you're not making money. It's going to be a pretty hard conversation, and it can be resolved before you ever get to it if you'll follow these steps before you start. Remember what Sun Tzu taught in "The Art of War." He said "Every battle is won before it is fought." This is how to win. {% hint style="info" %} ### **Sometimes this process does**n’t apply **But most of the time it does,** or at least some variation of this applies. So don’t skimp on it, go through it, take the time, and know your business, or you are going to end up throwing away your time and money. An example of how this may not apply is if you’re already in the market and fulfilling requested needs of existing customers, or have some inside knowledge about the market. While these situations may mitigate the need to go through this whole process, you will still almost definitely want to go through some aspects of it. {% endhint %} # Validation Success ## The Validation Checklist You've got the list above, but what really constitutes validation? For each item, enter a 1 for "Yes" and a 0 for "No" in the list below. I can or have: | Statement | Yes =1 No = 0 | | -------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | | Fill in the blanks in the statement "My SaaS solves \[SOLUTION] for \[SPECIFIC AUDIENCE]." | | | Thoroughly reviewed all your major competitors products and understand the features of those systems as well as how they sell their systems and to whom. | | | A unique selling proposition, a reason for your customers to buy my product instead of my competitor's product. | | | Some designs that walk your advisers or potential customers through your system, and those designs and ideas are easy to understand. | | | Advisers that think this is a good idea and have given me money for my product. | | | Sent a survey to my potential buyers and they have told me that they will buy my product and have given me a good idea of how to price it. | | | At least a few users are willing to talk to me about buying my system before it is built. | | | A identified and tested several different methods of distribution and determined that these systems will definitely work. | | | A pricing structure that my customers accept and will make me money. | | | A budget to work with in order to build the system and distribute it. | | | The enthusiasm to do this project and the time to devote to it. | | Add up all the items from the list above. If your score is less than 11, then you're not done validating your system and are in danger of losing all your money and wasting all of your time. So go back and finish your homework before you get started! Don't be put off by the work it will take to plan out this project. The more work you do now, the less money it will cost in the long-run and the faster you will get to market. The biggest mistake you can do is to jump head-first into the deep end and drown in a sea of debt and sadness. If you're questioning this, just think about what you're going to tell your investors when they ask you why your product isn't selling or why you're not making money. It's going to be a pretty hard conversation, and it can be resolved before you ever get to it if you'll follow these steps before you start. Remember what Sun Tzu taught in "The Art of War." He said "Every battle is won before it is fought." This is how to win. # SaaS Build Lessons Congratulations! You were able to successfully pre-sell your new SaaS idea and you’ve got validation that this business is going to work. I’m so proud of you! Now, we need to build the thing. This part gets a little technical, but since you’re a SaaS business owner now, that’s fine because you know you’re going to have to understand this stuff to make the business work, right? ## Build Process Lessons: I’ve made a lot of mistakes since 2007 when I started my first SaaS. These are the most important lessons I wish someone had told me about or made me do starting back then. Check out the webinar: {% embed url="" %} ## 1. No one is going to guide this better than you. You need to understand what is happening, what the process should be, what is going on, when to listen to people, when to not listen to people, and how to guide the build of the system. You cannot expect anyone to guide this process better than you. ## 2. This is a construction project. Just like building a house, office building, high rise, or factory, this project has very similar major steps and labor costs but not the materials costs, except perhaps software costs. You need to understand the process to be able to guide it. ## 3. The more you plan up front, the less your team will work and the less the project will cost. It sounds right, but when you get into it, it starts to not feel right when you’re spending thousands and thousands of dollars on a plan and can’t see any revenue being produced. This comes back to the construction project analogy above. When you build a house, you don’t just worry about how many bedrooms and bathrooms you’ve got. You have to think about the color of the door knobs, the paint on every wall, the color of the bricks, the type of cement being used, what kind of carpet you’re adding, and a thousand more things. Every time you don’t consider those things, the builder is going to have to stop and ask you what you want. Every time they have to stop it costs you money. There will be people that you’re paying just waiting around to do things. You will have to take time out of your schedule, and it will generally just take longer to do. For one or two items, it is no problem, but these issues compound on top of one another. Because you changed the position of the toilet, now the electrician has to come back in and move the wires for the switches on the wall, the plumber has to drill another hole in the foundation, the framers have to come back in and move a wall, and your price didn’t go up by the cost of moving a toilet, it went up exponentially, as did the duration of the project.This is the exact same thing that happens in SaaS build and why **scope creep** can become so devastating. So, spend the money up front and know what you are going to build. Your cost savings will be huge. ## 4. SaaS systems live and die on User Experience (UX) If a system is not easy to use, people won’t use it. A little frustration a couple of times will drive users away from the system, and the likelihood of them returning is not good. The best way to avoid this, is to pay a UX designer who has done this before. That doesn’t mean that they need to know your industry in and out, it just means they need to have been doing UX design for a while and have had the time to make the mistakes on other projects so they get yours right. ## 5. Choosing the right technology can make the SaaS build process more or less expensive and successful. There is so much to be said on what systems to use, and they change regularly. What’s important here is that you choose a system that is community-supported, has a lot of people building on that system, and is built on a platform that isn’t going to go away anytime soon. What’s right for your project in many ways depends on the project as well as on the team that is building it. If you choose the right team, then they will help you choose the right platform. ## 6. Adding new features during the build of the MVP can crush your business. This is called scope creep, and it can kill your business before it ever starts. There are a lot of reasons that adding more features in the middle of a SaaS project are a bad idea, but the main one is that it keeps you from truly testing and validating your idea and bringing in revenue. People tell you what they want with their money, not their words. So if you have a system that is taking forever to get to market, it means you are spending money on something that may or may not cash flow. Also, if you have revenue coming in, you can fund your operations. If not, it’s coming out of your capital outlay, which is limited. ## 7. As soon as you have project validation, start building in unit tests. If you are just validating your MVP, I would say don’t worry about building tests to right away. However, if you are 95% or more sure that the system is going to fly, and you already have buyers waiting, then you should consider building tests to start. A unit test is a tool process that confirms if a system is working or not. It generally gives a pass or fail response to a very specific set of variables. For example, if you try to log in and enter the correct username and password, you should be taken to the dashboard of your system. If the system tries to log in and isn’t being taken there, then the test failed. Tests can be broad or very specific, but they always measure one thing, one step, or one process per test. A specific example is in our BrainLeaf system where if a user enters a number of hours for a task, the task items should update, the total number of hours should update, the top level task should update, and the total price should update. This should also be reflected in our payments to contractors, milestones for receivables to clients, in our reporting areas, in the client listing where it shows total spend per client, and on the main projects listing. To write this one test, to show that updating a single change in a single form works takes days to implement. But on the flip side, and this is important, if you have to manually test every variation of changes to a system, the change in testing time grows quadratically or exponentially, depending on the system. The testing time alone, if done manually, can and will very quickly become more time intensive than the actual building of the system. ### Regression Testing Next, these unit tests also include regression testing. This means that as you build a new feature in the system, old features are going to break. An automated regression test will show you which current features broke, and how, when you implemented the new system. Tests generally take between 10% & 20% of the total build time to construct and implement -- however, the larger the system is, the more time the tests save. Furthermore, tests take longer to build after features have been completed than during the build, so adding them later is going to add time that you may not have until you have to implement them. {% hint style="info" %} **PROTIP:** Don’t skimp on your regression tests or you will regret it! {% endhint %} ### SaaS System Build & Continuous Integration No SaaS system is ‘done’. They are always changing, upgrading, pivoting, entering new markets, etc. When you first build a system, you need to get that MVP out the door and into your users’ hands as quickly as possible. This first step is referred to here as the ‘SaaS System Build.’ After the system is built, you are going to enter an ongoing phase called “continuous integration”. This is the process of continually adding to your SaaS platform. This step is going to start as soon as your MVP is done, and potentially before then. As long as you have a successful SaaS, you are going to be in a continuous integration phase where you are always adding to the system. Take this into account in your operations costing! Aspects of continuous integration are discussed throughout this document. # Planning & Costing ## Planning will save or lose you more money than anything in the project, so don’t rush it. Developers want to develop, designers want to design, project managers want to manage, and entrepreneurs want cash flow. But for the most part, very few people are really interested in planning all this stuff out in super fine detail. If you’re reading this, you probably fall into one of those categories as well, so listen up, plan like it is your job; plan like your bank account and the success of your project depends on it, because it does. Plan everything -- as much as possible -- and know you are going to change what you are planning and some of that time is going to be wasted, and that is fine. This chapter outlines the general steps to be completed, *AFTER* you have completed your validation and competition analysis. ## Your most important document The full Scope of Work (SOW) is blueprint to the factory you're planning on building, the message you're delivering to your customers, the process of building the system, and the drawings that show what it will look and and how all the machines will fit together. It's easy to see why you need this document. But understanding the process to building it is as much an art as it is a science. The full scope of work consists of the following documents: * The Creative Brief * Estimate * Project Contract and/or Worker Contracts * The Information Architecture * Project Flows & Wireframes * The Project Plan ## **Creative Brief** A creative brief will help you understand the project objectives and help guide your planning of the project in the right direction. This document answers the following questions: * What are the goals of the project? * What problem or problems does the SaaS solve for your target markets? * Does your SaaS solve a knowledge gap, time gap, or both? * What value does the SaaS bring your target market or markets? * Why do *you* want to build this system? * Who will be using your SaaS? This will be paired with an in-depth description of each user profile. * Why and how will each user type use your system? * What are recommended methods of reaching your target market and why? * What is the tone and message of the project? * If the project is ongoing, what Key Performance Indicators (KPIs) will determine success of the project? * What are benchmark competitors that also deliver a similar message or provide a similar service? * What are benchmark designs from other companies or projects that you will be aiming to match in this project? ### Who develops the creative brief? **A marketer or marketing team in lockstep with the SaaS stakeholders (you)** are usually responsible for developing the creative brief. This MUST be done to a large part before moving forward with the project. ## **Contract or Contracts** You need this to make sure everyone is one the same page and to protect yourself legally in case something goes wrong. If you are hiring a team to build this or if you are paying people you hire to build this system, you still need a contract that covers the questions noted below. ### The contract answers the following questions: * What are both parties agreeing to? * Who is responsible for what on both the build team and client sides? * How much is being paid? * When are payments due? * What are specific project deliverables? * What happens if project deliverables are not met? * Who are the decision makers? * What is required of the decision makers for each company? * What is each group responsible for? * What information can and cannot be shared with other people outside of the company? ### Who is responsible for the contracts? The **SaaS system leadership in tandem with an attorney** will create the contracts necessary for the project. Very often, experienced development teams will have extensive contracts that cover the build of these systems. ## Information architecture This is your blueprint. You need this to make sure everyone knows what is being built as well as how each part should function, look**,** and interact with other areas. This will serve as a way to sort out all the pieces to the puzzle. [Here is a great article on how to build a Scope of Work document for a project.](https://www.brainleaf.com/blog/contracts/building-scope-work-sow-document-website-project/) ### The information architecture includes: * Features * Subfeatures * APIs * Integrated systems and future integrations * Pages * Sections * Subsections * Views * How each feature, page, section, etc. should work. * Non-functional aspects (ie. load time) * Plugins or widgets * Development platforms * Development environments * Design frameworks * Content Management System(s) * Section by section, page by page, and feature by feature times estimated by the team members building the system, double checked by other team members, discussed with all team members, and approved by the department lead. These times should be as GRANULAR AS POSSIBLE. {% hint style="info" %} **PROTIP:** When we estimate large projects, we try to take tasks down to as little as 15-minute increments and as large as 4-hour increments, but never longer than 4 hours. {% endhint %} ### Who builds the information architecture? **The Information Architect** will write up the initial Information Architecture with help from the project stakeholders, developers, and designers. ## Project Flows & Wireframes This set of designs show you how the system works by demonstrating how a user flows from one place to the next in the system you’re building. An intuitive UX and ease of use is key for any SaaS and mapping out how all the moving part interact is a critical step in planning. ### Project flows and wireframes should include: * Designs for each page in the system. * The connections between interactive objects on pages and views and how a user will flow from one to another. * The different states of pages and views of the project. ### Who builds the project flows and wireframes? **A UX designer or design team** will create the project flows and wireframes for the project. {% hint style="info" %} Remember, the more experienced your designer, the more they have messed up in the past, the more they know how not to mess it up in the future. {% endhint %} ## Project Plan The project plan sets expectations for the timeline of the project as well as who is doing what when. It tells everyone their tasks, deadlines, milestones, dependencies, etc. You need this to make sure the project gets done on time and within the budget. Without a thorough project plan, your team will not know who is doing what when and what they are responsible or not responsible for. ### What questions does the project plan answer? The project plan answers the following questions: * Who is doing the work / on the project team? * What task or tasks is each person doing? * What are the deadlines for each person? * What are the milestones for the project (also covered in the contract)? * When will payments be due (also covered in the contract)? * What systems are being used to manage the project? * How often will regular team meetings occur? * What is expected of each person or group for the project? * What tasks have to get done before other tasks can start? * What items must get done in order to determine the project is complete? The lack of a thorough scope of work is probably the number one reason, outside of completing the validation process that projects fail. It is also the primary reason that projects run over budget, [scope creeps](https://www.brainleaf.com/blog/scopinig/what-is-scope-creep/), and projects fail. ### Who builds the project plan? **The Project Manager (PM)** will build a [project plan](https://www.teamgantt.com/guide-to-project-management/how-to-plan-a-project) before your team can being developing, and preferably designing the project. This is often confused with an information architecture by clients, but is a completely different document. A SaaS project plan is a general set of timelines, tasks, responsibilities, deadlines, and expectations for all team members and stakeholders. The project manager will meet with everyone to discuss this project plan and get everyone’s consensus on it before getting started. # The Costing Process ## Breaking Down the Costing Process Costing is far from simple. Personally, I feel like it is the most tedious part of the entire project, but also the most important. Properly costing your build process will prove essential in mapping out the project and then keeping it on time and on budget. There are countless examples of projects going sideways and issues popping up due to a lack of planning in this book, and across the business environment. I would guess that outside of a lack of validation, a lack of understanding in planning is the number one reason for the failure of SaaS businesses. Small changes in the system infrastructure can lead to huge changes in cost down the road and this can often be discovered during the system costing process. There are four phases to costing your project: 1. Estimate 2. Information Architecture & Flows 3. Operation Costs 4. Working Numbers We'll review each step briefly here, but there will also be a more thorough breakdown below. ### Estimate Your estimation is, essentially, going to serve as a rough draft of your scope of work. That means you're looking in-depth at estimates for multiple areas of work then estimating minimum and maximum times for each. Even with a substantial amount of time put towards your estimation, it is still just that, an estimate. It's not final, and it's certainly not exact, but it should give a firm idea of what the project *may* cost. The more work you put towards you estimate process, the less time your actual scope of work will be to write out and the less time it will take to do plan the rest of your project build. The estimate should be based on 3-point pricing. This is a pricing system that takes into account the minimum number of hours, maximum hours, the architect's estimation on the most likely number of hours, and an average of all three of these items. With this method, you can accurately balance expectations with reality. ### Information Architecture & Flows Your estimate will then be fleshed out further into a full Information Architecture (IA). If you're not familiar with project scoping, you may want to take a look at [this comprehensive guide to scoping at BrainLeaf](https://brainleaf.com/learn-project-scoping). Paired together, you information architecture and flows will serve as the primary planning documents for the project, much like a set of blueprints acts as the primary planning document for a construction project. These documents keep everybody, at all levels of the project, on the same page and pre-empt issues. #### The Information Architecture The Information Architecture (IA) is a written document that describes each page, feature, view, state, and functionality of the system. As you are writing this document, I recommend to describe the features by structure as well as to note the functionality of each area. Every element and it's functionality envisioned on every view should be described insofar as what components make it up as well as how it works. In the best case scenario, this document will also describe every page, every view, every element, every function, and the purposes of all these things within the system. The more time you take to plan this aspect of your project, the faster and smoother the rest of the project will go. #### Flows The flows are page by page designs that incorporate the elements noted in the information architecture. As you can imagine, it is substantially easier for a designer to start working with a complete information architecture than to start from scratch on any complex SaaS project. With a fully described system, a designer can plan their design processes or a team can plan resource utilization. The flows are also very important because while an architect may plan a particular feature or system into a page, the flow and user experience for the ideated system may not actually come together as envisioned. So having a viewable, even if basic, design is critical to a well-planned system. ### Operational Costs It is important to remember throughout the planning phase that you are not just building a website or a SaaS tool - you're also building a *business*. You have to begin planning for not only the creation and utilization of the tool, but also for continued operation of the tool, implementation of new features, and support for your customers. You'll have staff that needs to be paid, overhead to track, advertising to purchase, taxes to pay, and much more. And if you don't begin calculating these costs now, they'll catch you off guard later, and you'll potentially have under-priced your services, leaving you scrambling to make up the difference after launch. ### Working Numbers Once your information architecture, flows, and operational cost planning is finalized, then you will have a great starting point to understand the true costs of the system and be able to make a determination as to the success of the system. Please also remember that the total you come up with here still isn't quite "final". These working numbers might still fluctuate a bit over the course of the project. ### The Cost of Costing As you prepare to cost your system, you may need to have some idea as to how much it costs to do this. Generally, you can expect to spend somewhere in the range of 1.5k to 20k to cost out the entire system. Even if you're doing this yourself, the cost is going to be substantial. When we I work to do this kind of project, the overall cost of using my team usually comes in at ranges like this: | Size of Project | Cost Range to Plan | | --------------------- | ------------------ | | $35,000 - $50,000 | $3,000 - $10,000 | | $50,000 - $100,000 | $8,000 - $25,000 | | $100,000 - $250,000 | $15,000 - $50,000 | | $250,000 - $500,000 | $40,000 - $100,000 | | $500,000 - $1,000,000 | $50,000 - $250,000 | As the size of the project goes up, the costing range becomes harder to predict. It is possible that even a very large project could be easy to plan, but for the most part as [project builds go up the complexity of planning goes up quadratically](/saas-build-process/things-to-know-and-expect/development-time-increases-as-complexity-increases#development-time-increases-as-complexity-increases). # The Estimate ## Start With Our Estimate Template This book comes with a template to get you started in your planning process. [Get started with the SaaS planning spreadsheet.](https://docs.google.com/spreadsheets/d/1qC2h5e_YFvCAAoWA4Vaj1U7k7XPjsUMuqVoLKLAZh0I/edit?usp=sharing) *Start off by making a copy of this spreadsheet for your project and putting it into your Google Drive account.* ![](/files/-LcxBRrGI1VwDmrDMbCr) #### Who should work on this? The following team members should review this document together before proceeding. * The Information Architect * Lead Developer * Lead Designer * Lead Stakeholder ### Spreadsheet organization The spreadsheet is broken into five sections: * Costs Breakdown * Standard SaaS System Features * System-Specific Features * Marketing Website * Operational Costs The Costs Breakdown worksheet is a dashboard that shows sums from all other areas in one, centralized place. With the exception of the overall costs page, each worksheet has a list of items, modifier column that is used to add a modifying value to the other hours, a minimum, maximum, average, and notes column. ### Three-Point Cost Estimation As noted above, this method of price estimation utilizes 3-point cost estimation, a standard Project Management Professional (PMP) estimation process. With this process, each item is given three different estimates with which a fourth item is derived. These metrics are: * Maximum Hours * Minimum Hours * Most Likely Hours * Average Hours - the average of the three items noted above In development, hours can be vastly different based on small changes to scope of work, so having a range of hours is almost always a necessity in order to set appropriate client expectations. Some items in the spreadsheet additionally have a modifier. This is often used to create a calculation. For example, the hours estimate for Project Management is estimated by adding up all labor hours then multiplying that number times a percentage, most often 20%. ## Pricing Standard SaaS Features Click on the second worksheet in the spreadsheet entitled "Standard SaaS System Features" ![](/files/-LcxDykUfIGBQyq9VGXE) The first element of our project estimation focuses on is a listing of “standard features”. In this area, we start off with the general systems that most SaaS systems need. {% hint style="warning" %} **IMPORTANT NOTE:** The item entitled "UX deisgn / flows, client revisions, & design meetings can balloon quickly! This item must be planned by a professional designer. It can easily go from 40 hours to 400 hours, so do NOT underestimate this item! {% endhint %} Your MVP may or may not require a full list of features often included in a standard SaaS. So review this worksheet and determine what features can be removed first. Remember as you proceed through this worksheet that this area covers items that almost all SaaS systems has, but probably none of the system-specific features from your SaaS. That will be covered on the next page. ## System-Specific Features Now that you have removed anything not necessary from the general SaaS features, move on to the System-Specific Features. ![System Specific Features Worksheet](/files/-LcxEk4XXyTrjm1geMcS) #### Break down the estimate by major features This worksheet is where you will put the majority of your time for the estimate. In this worksheet, consider the major features, outside of standard SaaS features, that your system contains. Create a header for each major area, then name and describe each major feature. Name the feature or sub-feature under the feature or area title and describe it in the notes column. Just as in the Standard SaaS Features worksheet, for each item give a min, max, most likely, and calculate the average. {% hint style="info" %} You will probably need to modify the total, plus 20% and minus 20% cells to calculate the total for the column as you are probably going to increase the number of rows. {% endhint %} ## Marketing Website If you need a marketing website for this project, the marketing website worksheet has a basic set of hours for this project. Technically speaking, a marketing website could be estimated in very much the same fashion as the application. However, in this situation, the marketing website is not heavily broken down. This is a round number estimate on the marketing website, not a deep dive. Open up the Marketing Website worksheet and have a web-designer start entering estimates based on competitor or benchmark websites for each of the pages you need added to this website. ![Marketing Website Worksheet](/files/-LcxHnRoq_4Xl6NnjCcv) The goal here is to get an hours range for each major area, not to have a a complete explanation of every item. However, each item should be at least understood enough so that the person building that system can give an estimate. ## Operational Costs The operational costs worksheet briefly covers items that most SaaS platforms will want to consider insofar as software systems and people. Since this is just an estimate, a basic review of these numbers is acceptable. ![](/files/-LcxIOydSJnP5nC8Bo8D) Not all SaaS systems need every item in the list, but most will need some version or aspect of the system and costs represented here. Go through this worksheet and enter numbers and systems that are required for your system. ## Breaking down the costs {% hint style="info" %} **PROTIP:** My team of experienced information architects, developers, UX designers, & project managers can take as little as four hours and as many as sixty hours to put together an estimate after all the research, conversations with clients, internal discussion, etc. If you've never done this before, plan on spending at least 20 hours doing this aspect of the project. {% endhint %} Despite having read through this whole document fairly quickly, actually producing a spreadsheet with accurate numbers and clear descriptions can be very time-consuming. Now that you have everything worked out, just jump over to the Costs Breakdown worksheet where you can see your final estimates on the project. ![](/files/-LcxK4Ex5Sh55TVF5qzx) #### Now for the most difficult part of the entire process. The most difficult part of this process is BEING HONEST WITH YOURSELF AND YOUR TEAM ABOUT THE ACTUAL COST. So many entrepreneurs, teams, and especially developers take a look at that final number and say something like "We can just do this for the minimum number of hours." It's a lie that people tell themselves. Don't lie to yourself. Don't get yourself into trouble. Be honest with yourself and plan for what you're actually going to be spending to build this thing, because that's what it's going to cost. You can cut things out to take your system down to an MVP, but if you're going to market you need to be prepared or you are going to end up like the countless other SaaS bodies that litter the internet. Creating your initial estimate isn't going to be easy. There are a lot of considerations, as the list above should have highlighted. We're going to go a bit more into that now, though. # The Scope of Work ## Your most important document The full Scope of Work (SOW) is blueprint to the factory you're planning on building, the message you're delivering to your customers, the process of building the system, and the drawings that show what it will look and and how all the machines will fit together. It's easy to see why you need this document. But understanding the process to building it is as much an art as it is a science. The full scope of work consists of the following documents: * The Creative Brief * Project Contract and/or Worker Contracts * The Information Architecture * Project Flows & Wireframes * The Project Plan ## **Creative Brief** A creative brief will help you understand the project objectives and help guide your planning of the project in the right direction. This document answers the following questions: * What are the goals of the project? * What problem or problems does the SaaS solve for your target markets? * Does your SaaS solve a knowledge gap, time gap, or both? * What value does the SaaS bring your target market or markets? * Why do *you* want to build this system? * Who will be using your SaaS? This will be paired with an in-depth description of each user profile. * Why and how will each user type use your system? * What are recommended methods of reaching your target market and why? * What is the tone and message of the project? * If the project is ongoing, what Key Performance Indicators (KPIs) will determine success of the project? * What are benchmark competitors that also deliver a similar message or provide a similar service? * What are benchmark designs from other companies or projects that you will be aiming to match in this project? ### Who develops the creative brief? **A marketer or marketing team in lockstep with the SaaS stakeholders (you)** are usually responsible for developing the creative brief. This MUST be done to a large part before moving forward with the project. ## **Contract or Contracts** You need this to make sure everyone is one the same page and to protect yourself legally in case something goes wrong. If you are hiring a team to build this or if you are paying people you hire to build this system, you still need a contract that covers the questions noted below. ### The contract answers the following questions: * What are both parties agreeing to? * Who is responsible for what on both the build team and client sides? * How much is being paid? * When are payments due? * What are specific project deliverables? * What happens if project deliverables are not met? * Who are the decision makers? * What is required of the decision makers for each company? * What is each group responsible for? * What information can and cannot be shared with other people outside of the company? ### Who is responsible for the contracts? The **SaaS system leadership in tandem with an attorney** will create the contracts necessary for the project. Very often, experienced development teams will have extensive contracts that cover the build of these systems. ## Information architecture This is your blueprint. You need this to make sure everyone knows what is being built as well as how each part should function, look**,** and interact with other areas. This will serve as a way to sort out all the pieces to the puzzle. [Here is a great article on how to build a Scope of Work document for a project.](https://www.brainleaf.com/blog/contracts/building-scope-work-sow-document-website-project/) ### The information architecture includes: * Features * Subfeatures * APIs * Integrated systems and future integrations * Pages * Sections * Subsections * Views * How each feature, page, section, etc. should work. * Non-functional aspects (ie. load time) * Plugins or widgets * Development platforms * Development environments * Design frameworks * Content Management System(s) * Section by section, page by page, and feature by feature times estimated by the team members building the system, double checked by other team members, discussed with all team members, and approved by the department lead. These times should be as GRANULAR AS POSSIBLE. {% hint style="info" %} **PROTIP:** When we estimate large projects, we try to take tasks down to as little as 15-minute increments and as large as 4-hour increments, but never longer than 4 hours. {% endhint %} ### Who builds the information architecture? **The Information Architect** will write up the initial Information Architecture with help from the project stakeholders, developers, and designers. ## Project Flows & Wireframes This set of designs show you how the system works by demonstrating how a user flows from one place to the next in the system you’re building. An intuitive UX and ease of use is key for any SaaS and mapping out how all the moving part interact is a critical step in planning. ### Project flows and wireframes should include: * Designs for each page in the system. * The connections between interactive objects on pages and views and how a user will flow from one to another. * The different states of pages and views of the project. ### Who builds the project flows and wireframes? **A UX designer or design team** will create the project flows and wireframes for the project. {% hint style="info" %} Remember, the more experienced your designer, the more they have messed up in the past, the more they know how not to mess it up in the future. {% endhint %} ## Project Plan The project plan sets expectations for the timeline of the project as well as who is doing what when. It tells everyone their tasks, deadlines, milestones, dependencies, etc. You need this to make sure the project gets done on time and within the budget. Without a thorough project plan, your team will not know who is doing what when and what they are responsible or not responsible for. ### What questions does the project plan answer? The project plan answers the following questions: * Who is doing the work / on the project team? * What task or tasks is each person doing? * What are the deadlines for each person? * What are the milestones for the project (also covered in the contract)? * When will payments be due (also covered in the contract)? * What systems are being used to manage the project? * How often will regular team meetings occur? * What is expected of each person or group for the project? * What tasks have to get done before other tasks can start? * What items must get done in order to determine the project is complete? The lack of a thorough scope of work is probably the number one reason, outside of completing the validation process that projects fail. It is also the primary reason that projects run over budget, [scope creeps](https://www.brainleaf.com/blog/scopinig/what-is-scope-creep/), and projects fail. ### Who builds the project plan? **The Project Manager (PM)** will build a [project plan](https://www.teamgantt.com/guide-to-project-management/how-to-plan-a-project) before your team can being developing, and preferably designing the project. This is often confused with an information architecture by clients, but is a completely different document. A SaaS project plan is a general set of timelines, tasks, responsibilities, deadlines, and expectations for all team members and stakeholders. The project manager will meet with everyone to discuss this project plan and get everyone’s consensus on it before getting started. # Information Architecture Development Once you have a validated idea and an estimate that makes business sense, it's time to dive into the deeper aspects of your system. Just like planning any complex machine, you will need to think through every aspect of use as you work out your information architecture. This chapter takes you, in-depth through what goes into building an information architecture. Even though it is just one of the first steps in building your SaaS business, it is the step that is so often glossed over, causing huge losses in time and money. The more you have considered exactly what will and will not go into your system at each phase, how each feature will work, and how you will optimize revenue at every step, then you will know what it takes to be successful in your SaaS business. {% hint style="warning" %} I cannot stress the important of being as thorough as possible in the Information Architecture portion of your project. {% endhint %} ## What is an information architecture and why is it important? An information architecture is a written description of your system. It describes every section, every page, every feature, how people use the system and very often why. It outlines the goals of each system and subsystem and describes them in a way that both a lay-person and a developer can understand. More importantly, the description of the architecture is granular extensive so that a designer or developer working on the system can understand what it is that is to be created. ### A work in process An information architecture is a work it progress, it is rarely ever 'done'. Every change to the system, every modification that someone makes should be described as best as possible within this document. As the system progresses, it's a smart idea to add the new features and new systems into this document and keep an up to date description of what you're doing an why. ### Enterprise Agile vs. Agile or XP Methods Some people may say that this is a 'waterfall' method and that it goes against the grain of contemporary Agile or XP methods. To some extent this is true, but when developing a new system from scratch. Having this document well thought out from the beginning will save you countless hours of work and time. If your team is working on an existing system and adding to it, then perhaps there are other methods as well that would be just as good if not better. But if you're going from the ground up, this is the blueprint for your house. It is the survey, the plans, the electrical and plumbing, and it's where your concrete is being poured. {% hint style="success" %} The information architecture is the central document of your planning methods and the linchpin of a fast and affordable product launch. It is what enables you and your team to understand what you're building, cost your system ahead of time, and visualize what you're building before it is built. {% endhint %} ### Costing, Build, & Getting To Market When building a SaaS, or any application, times and thus costs and deadlines can swing wildly with seemingly small changes to features. Knowing what you're building, how much time it will take, what changes impact different areas, and granularly breaking down cost and time estimates on your system are key to creating an a workable budget, building systems that can be rendered usable in a timely fashion, and therefore getting to market with enough budget left to market a working system. The lack of understanding about the cost and time it will take to build a system from start to beta is one of the primary factors that keep many, many digital entrepreneurs from getting to market with their tools. Having a well defined and well thought-out information architecture prior to beginning development on a system is critical to all of these things. ## Parts of an information architecture Withing a SaaS platform, the information architecture generally consists of the following major areas: * System goals, user types, & user flows * Project-wide tasks & notes * Public-facing views * User type specific views and notes * Admin panel Each of these items are described below: ### System goals, user types, & user flows Before you begin any journey, you need to know where you're going. System explanations lack clarity without an understanding of what the system solves for users, whether the system if solving a knowledge gap, time gap, or both, how different user types are defined and what aspects of the system they do and do not have access to, and what the major flow of a user is within the system. #### System Goals System goals are not monetary goals, but usage goals. The system goals are descriptions of how the system helps users solve a problem. Preferably, this section states in-depth the step-by-step flow of a user from start to finish. Sometimes just writing out these goals help an entrepreneur or product manager realize things about their system that were hidden previously. In addition to the broad steps a user will take and what the system does, the system goals area may also include competitor benchmarks, product usage goals, and non-functional requirements like speed or load times. #### User Types Without an understanding of who will use the system and what is important to their role, system features or requirements may not make sense. It may also be unclear as to the best ways to price systems or restrict access to certain features for certain user types if user goals are not understood. So a clear explanation of each user type, the user type's job role and reason for using the system, their permissions to different areas in the system, why they have been assigned those permissions, and the flow of each user through the system is necessary for your team to conceive system features and for team members to develop the system. {% hint style="info" %} If you can't explain it, how do you expect someone to build it? {% endhint %} #### User flows Very often, different user types have very different areas of your system they use or use them in very different areas. For example in a CRM system, a Sales Manager may be much more interested in the performance reports for their team than actually inputting anything into a CRM system, but may also need to delve deep into the call logs or emails for different sales people to assist them in increasing their conversion rates. The sales person is going to be entering data about the people they called and getting back reminders on who to call and what they talked about last. Finally, the CEO is primarily interested in the success of the group as a whole and forecasts on incoming sales which may simply be delivered to his enterprise business intelligence system via an API call. All of these different user types are interested in different aspects of the system and may have different access to the different areas. Understanding how each user type uses the system and flows through it to meet their goals is an important first step for anyone reading the document, so it should ideally be at or near the top of the page. ## Considerations ### Features, pages, & views Developers think in terms of features, or sets of functionality, whereas designers think in terms of pages or views. The reason for this is that the developer has sets of data that carry over and interconnect, whereas designers are often designing one page or view at a time. It doesn't really matter how you describe it, applications with GUIs are made of features built around pages and views. ### Project Size As your project size increases, the more important your architecture becomes for the initial build because small changes in the architecture can have large impacts on the cost and time to market. ### Team Size & Experience No matter your team size or level of experience, the more clearly your team can understand the vision of the project in beginning, the better they can bring it to life. This may break down at larger size projects, but this is almost always after there is a base system in place. If there is no foundation to begin with, just building the foundation will take a more surgical approach and cannot be done with a very large group anyway. ### Security Understanding system security requirements in the initial phases of the project can help influence progress of the system and should be considered. 1. Features, pages, & views 2. Project size 3. Team 4. Security 5. What is and is not necessary 6. Order of areas 7. Waterfall plan, Agile build 8. Granularity & Meticulosity ### Project-Wide Tasks & Notes Now that you have identified who uses your system, what their primary goals are, and how each user type uses the system, we start working on the architecture portion of the system. There are several top-level tasks that apply to all areas of the system or that must be done prior to starting work on features or pages. Later in this chapter we will dive into exactly what these top-level tasks include. ## Chapter Outline 1. What is an information architecture and why is it important in a SaaS? 2. Parts of a SaaS architecture 3. How to write an information architecture for a SaaS 1. Considerations 1. Features, pages, & views 2. Project size 3. Team 4. Security 5. What is and is not necessary 6. Order of areas 7. Waterfall plan, Agile build 8. Granularity & Meticulosity 2. Description & Structure 1. Designer, developer, and stakeholder should understand what is to be built 3. Notes 4. Tags 5. Costs and assignments 6. Document reviews 1. All team leads 2. Stakeholders 3. The document review meeting 7. Finalizing your document for MVP ## User Areas 1. Project-Wide tasks and notes 1. Planning 2. Team setup 3. Kickoff 4. Systems Setup 5. Project management 6. QA 7. Launch 2. Creative 1. Determining Style 1. Mood boards 2. Creative Brief 3. Flows & Wireframes 4. Style Guide - examples 5. Mockups 3. User Areas & Systems 1. Header & Footer 2. Onboarding 1. Choosing a plan 2. Credit card info 3. User and/or company account setup 4. Email Verification 5. User education 1. "Requiring" watching a video 6. Onboarding emails 7. Onboarding revisions 3. Authentication 1. Log in and Log out 2. Secure passwords 3. Forgot your password 4. Two-Factor Authentication (TFA) 4. Dashboard 1. Considerations 5. Account Management 1. Permissions management 1. Standard features 1. Account owner 2. Account manager 3. Team member 4. Other user types 5. Teams 6. Editing plans 7. Change passwords 8. Change username - note on emails not being id's 6. Transactional Emails 1. Setup 1. Standard Design & Build 2. Account Creation 1. Account created 2. Email Verification 3. Payments / Billing 1. Initial payment upcoming x2 2. Receipt of payment made / thank you 3. Receipt of payment made for app addition / upsell / thank you 4. Credit card expiring 5. Credit card expired 6. Credit card payment failed 7. Access removed due to expired card 8. Refund made 9. Renewal 4. Notifications 1. Invitation for new users 2. Message received 3. New account created or installed 4. Likes or shares 5. Notification of use 6. Task completed 5. Alerts 1. Password reset 2. Privacy Policy Update 3. Account Safety Alert 4. Membership or benefits update 5. Event Reminder 6. Subscriptions 1. Free trial ending 2. Plan cancellation 7. Notifications 1. In-system notification system 8. Subscriptions 1. Taking money (billing) 2. Invoices 3. Team billing 4. Pricing 5. Value metric 6. Discount codes 9. Localization 10. Chatbot Setup 11. Analytics Setup 12. Affiliate Sales 13. Support Requests 14. System Specific features ## Admin Panel 1. Authentication 1. Protecting your system 2. Dashboard 3. Add / Remove users 4. Add / Remove Teams 5. Change user roles 6. Edit plans and pricing 7. User impersonation 8. General system statistics ## Marketing Website # Working Numbers # The Project Plan # Build Team Roles # What To Expect From Your SaaS Development Team Project management is an entire profession, and we can’t cover that body of knowledge in this book. However, as noted previously multiple times, I highly recommend taking a course on Project Management with a focus on [Agile Development Methodology](https://www.atlassian.com/agile) if you are going to be a part of the management team or if you are an entrepreneur wanting to build a SaaS. If you go forward on this, you will have to learn it one way or another. Better to learn it up front than to waste money making mistakes. All that said, there are some things that you should know about SaaS development and development in general. ## Developers are optimists They just are. Even the ones who say they aren’t. So make it easy on yourself and your team. Whatever time they give you, at the very minimum, increase it by 20% in your head and on your projections at the very minimum. If you can, take whatever they gave you and double it in your projections. If you do this, you will almost always make your deadlines. Never go below a 20% increase in your projects, ever. Don’t tell them that you’re doing this, just do it and keep it to yourself, then smile when they make the deadline you thought they would make in the first place or beat your expectations. ## Communication So much is going to change in the build of your system. Hopefully, I have hammered into you by this point how important it is to plan as much up front as possible. But things are still going to change. There will be things you didn’t consider. The landscape will change, you may pivot, you will learn things you didn’t know previously, and the system will change. It always happens.
So a key aspect of this entire process is making sure that everyone knows what’s going on as it changes. ### Team meetings I recommend doing meetings with your team at least three times per week, and potentially much more than that. For SaaS systems I am managing, I generally meet with each team lead DAILY. A study of [Agile Methodology](https://www.atlassian.com/agile) will help you streamline this tremendously. ## Brooks’s Law This is another area of the [Mythical Man Month](https://www.amazon.com/Mythical-Man-Month-Software-Engineering-Anniversary/dp/0201835959) by Brooks. What this says is that adding another developer to any substantially complicated project (as SaaS systems often are) halfway or later in the build of that project does not decrease the build time, it increases it. This is because the amount of time it takes to gain the ‘tribal knowledge’ gathered in the first portion of the build of a system is greater than the amount of time it takes to build the rest of the system. This applies more or less to different systems in different ways. Sometimes it doesn’t apply these days at all. But the important thing to remember is that very often, just throwing more people and money at something won’t make it go any faster, especially after a certain point. This is very similar to the [“Law of Diminishing Returns”](https://en.wikipedia.org/wiki/Diminishing_returns) you may recall from your Economics class in college or high school. Here is what the [Wikipedia](https://en.wikipedia.org/wiki/Brooks%27s_law) has to say about Brooks’s Law: > “According to Brooks himself, the law is an "outrageous oversimplification", but it captures the general rule. Brooks points to the main factors that explain why it works this way: ### **It takes some time for the people added to a project to become productive.** Brooks calls this the "ramp up" time. Software projects are complex engineering endeavors, and new workers on the project must first become educated about the work that has preceded them; this education requires diverting resources already working on the project, temporarily diminishing their productivity while the new workers are not yet contributing meaningfully. Each new worker also needs to integrate with a team composed of several engineers who must educate the new worker in their area of expertise in the code base, day by day. In addition to reducing the contribution of experienced workers (because of the need to train), new workers may even make negative contributions, for example, if they introduce bugs that move the project further from completion. ### **Communication overheads increase as the number of people increases.** Due to combinatorial explosion, the number of different communication channels increases rapidly with the number of people.\[3] Everyone working on the same task needs to keep in sync, so as more people are added they spend more time trying to find out what everyone else is doing. ### **Limited divisibility of tasks.** Adding more people to a highly divisible task, such as cleaning rooms in a hotel, decreases the overall task duration (up to the point where additional workers get in each other's way). Some tasks are less divisible; Brooks points out that while it takes one woman nine months to make one baby, "nine women can't make a baby in one month".” Please keep this in mind as you build your SaaS as it applies in most cases. ## # Build Teams There are a few different ways you can go about building your SaaS development team. Different methods of building your team depend on your resources, skills, and what kind of system you are building. ## 1. Build part or the whole thing yourself If you are building a tool, not a platform, have plenty of time and not much money, and have development skills before you start, then this may be a good solution for you. The only time you would really want to do this though is during the MVP build process. After you have validation on the system, it is usually a good idea to lead the company and hire people to do this job for you. ## 2. Find an agency or development team to do the project This is a good solution for building a more complex MVP and starting the process of marketing. Also, if you are building a fairly simple tool, then keeping with an agency for the long-term may be a good solution. But if you are building a SaaS platform or are doing continuous integration, you should consider hiring your own team after you have validation and are cash flowing. Some agencies also specialize in certain technologies, and this can be a great place to start if you are looking for specialists. ## 3. Hire one or more freelancers and manage them This is where I see people failing the most. If you are not a professional project manager, don’t have a fair amount of development experience, or don’t understand the technologies behind what you are building then don’t just hire people to build this system, hire a team as explained above. I’m not saying it’s impossible to do this and be successful, but what happens is that you need multiple types of people on a SaaS development team, and when you hire just one or two people they don’t have all the skills needed and often don’t know what people they do need or how to utilize them. I have seen people hire ‘a guy’ so many times and end up losing all their money. ## 4. Build a team of full time people Finally, if you are building a big system or are well funded, and have product validation, you’re going to want to hire out a full-time team. The more funding you have, the more best-in-class employees you’re probably going to want or need, and be able to afford. If this is you, and you’re reading this book and you don’t already know almost everything I’m telling you, I highly recommend you go find a CTO to take care of this part for you. # The Project Manager You wouldn’t build a factory, skyscraper, road, bridge, or probably even a house without a foreman would you? There would just be too much going on, and someone who has done this before needs to organize all those people, plan out timelines, make sure deliveries are being made on time, check the overall quality of things, make adjustments if things get behind, and keep you informed so you can plan out the marketing, moving your people, getting other systems ready, etc. right? …. Right? …. RIGHT?! ### SaaS is Complicated. So get someone to manage the details. So if you want to be successful in this endeavor, don’t plan on building your SaaS without a Project Manager (PM). Don’t think of them as a cost center, think of this role as your primary money saving role. Without an effective PM, the wheels are going to come off before you even get out of the driveway. With an experienced PM leading your development team, your project can run so smoothly. I really can’t stress enough the importance of a good PM. If your developers don’t know what they’re doing, a good PM will fire them and get new ones. If your project gets behind, a good PM will kick some butt and get it back on track. Really, with a good PM, projects don’t get behind. They will make sure that things are planned, that everyone knows what everyone else is doing, that everyone knows what they are supposed to be doing, that documentation is being kept, that people meet deadlines, and that you are informed throughout. This is once again another reason why you need a team in SaaS development, not an individual. No one person can do it all. {% hint style="info" %} My experience is that very often the things that make good project managers good are the same things that make them weak, and great project managers have overcome these weaknesses. {% endhint %} ### So what makes a PM good? In my humble opinion, it is a heightened level of neuroticism. I’m referring to the internal need of a person to have things just the way they feel they need to be to do a job and a lack of ability to be flexible from that standpoint, not the other aspects of neuroticism. What this means to the SaaS project is that the PM knows how things need to be done and what timelines need to be met, and have an internal need, higher than the average person, to keep things on track. They also cannot deal with things being out of place, disorganized, late, etc. When this happens, they will work as much as it takes to get things in order, because they cannot deal with it being out of order. # Information Architect ## What does an Information Architect do? The information architect is very much like an architect in home or commercial real estate building. They have experience in various aspects of the build of the structure. From design & UX to development and project management, the architect will be able to take your ideas and envision what should be built to accomplish your goals. After they have an understanding what you're building, the architect, very often along with the assistance of a team of developers and designers can help you plan an information architecture. Keeping with our analogy to a physical structure, the information architecture is the blueprint for your building. It outlines every section, subsection, feature, functionality, and anticipates issues in growth or change to the systems. Without this document, your build team would try to build a house without a blueprint, and that is a terrible idea. ## Experience Counts Just like in life, there is no substitute for experience. The best Information Architects have been doing this job for a long time. When hiring an information architect, be sure that your architect has worked on similar systems, is familiar with the technologies you need to use or can consult you on those technologies. The best architects I have worked with have experience as a designer, developer, and project manager. They may not have been great at all of those roles, but they certainly worked long enough in the industry to have the experience. If you choose a less experience architect, remember that you learn by making mistakes. Don't be someone's mistake. # UX Designer ## What Do UX Designers Do? UX designers take systems that are complicated and make them seem easy. They make processes with many variables easy to understand and flow through. They deliver systems that make sense. When users see these final deliverables and use those systems, they often think “of course it would be that way, how else could it possibly be?” Users and, very often, teammates don’t see the many, many revisions the hundreds of hours that went into that design, or the thousands of hours it took to become a person or team that could deliver a system that couldn’t be simpler to use. ### **UX designers are problem solvers.** They use strong critical thinking skills paired with the ability to look at systems from multiple angles to ask the right question and determine how to deliver the best possible product. They don’t deliver what’s easy, they deliver what’s best for the user. Since business is at the core of most software systems, UX designers must think about the impact on business. They consider the bottom line and the impact of actions by users towards the goals of the company. ## Great UX There is a difference between being a UX designer and being a great UX designer. Being great at UX doesn’t mean looking at systems and intuiting ways to do things or creating pretty pictures. It means having a study how users navigate programs, having read volumes on usability, it means examining and re-examining datasets and using that data to make decisions, then analyzing implementations to determine success. Then oftentimes, starting over to implement an even better system. People that are great at this profession have failed, sometimes at great cost, and learned from those failures. As in every profession, there is no substitute for experience. Great UX designers have spent many years honing their skills in order to know the right questions to ask, how to ask, when to ask, and why to ask. They have also spent time becoming great at applying the answers as designs to make systems as usable as possible. This includes years of practice mastering design tools, different styles, different systems, and becoming a great designer, developer, businessperson, manager, artist, and critical thinker. {% hint style="warning" %} **PROTIP:** It doesn’t matter great your tool is, if your users can use it you’re probably going to fail. So we must build a system with great UX. {% endhint %} ## Non-UX Designers vs UX Designers Somethings that non-UX designers (ie. graphic designers, print designers, product designers, etc.) often don’t think about that UX designers must consider is that they are not building just pages, they are building ‘views’ and ‘states’. The difference between a page and a state is that a page may have many states. For example, when your mouse is over a button (known as the rollover state), someone has to show what this is going to look like. But it also gets a lot more complex because some pages have multiple actions that happen during a click, rollover, after a click. These can be things like notifications to the user, modal boxes (popups), and other changes to the ‘view’ of the page based on actions of users. This list is just the a small subset of the number of states that have to be considered by UX designers. They must consider these same states on every device type, screen size, input system (mouse, keyboard, screen reader, gesture, touch-system, etc.), and all of this paired with accessibility compliance. ## Your SaaS UX Designer Should: [See the full section on SaaS UX here.](/saas-build-process/steps-to-developing-a-saas/saas-user-experience-ux) 1. Ask you a lot of questions about your users. 2. Ask you a lot of questions about what elements are more or less important (priority) on each page. 3. Take the time to thoroughly understand system users, what the system does, what the system provides users, and why users will use the system. 4. Ensure you have a well thought out information architecture. 5. Create a list of flows for your system. These are usually simple wireframes that show the steps a user will take to get through different processes in the system. 6. Get the feedback of everyone on the team as to how users will flow through the system. 7. Be very upset if everyone on the development team doesn’t look over what they’re putting together, and so should you. 8. Once they have consensus from the team, build out basic or more than basic designs for each page and view that show the main interaction aspects of each page, view, and feature (like the ones shown in the case study). 9. A senior-level SaaS UX designer almost always has design skills as well and will often be able to put together the design for most of the pages and views in the system. But if not, you may also need an additional web or graphic designer to do some of the more intricate designs. Just makes sure that your front-end developer reviews any work a graphic designer does before it is approved to be included in the system. Graphic designers are notorious for designing things that can’t be coded! 10. Your SaaS UX designer should also help you write the content for the pages they are working on. UX is all about explaining how things work, and if they can’t write up the text that explains what a user should be doing or how they should be using a tool of feature in the system, you should strongly consider getting a different UX designer. Don’t think for a second that it is a simple job to write up all the on-page instructions. It is very time-consuming, and the best person to do that work is the person designing the flow the users are going to take or should be taking. While the designs are being implemented, the UX designer should review the process flows. Even the best planned designs get changed, and you are GOING to change their work as the developers get into it. So they need to plan on being in meetings with developers as they are building the tool so UX design considerations can be taken into account. # Developers ## Brain surgeons (neurosurgeons) and skin doctors (dermatologists) Doctors make for a good analogy for developers. Doctors get an in-depth study of medicine in medical school, then do a deep dive study for several years known as a residency, in their specialty. In day-to-day work most doctors practice only their practice their specialty. They understand what other doctors are doing, but since they don’t do it all the time, and only studied it superficially, they don’t know the in’s and out’s of other specialties. In an emergency, could they get by? Probably? Maybe? How about ‘most of the time’? ### Would you want your dermatologist operating on your brain? But I certainly wouldn’t want my dermatologist operating on my brain. That would be a terrible idea! The dermatologist has never done brain surgery. She might have an idea where to start or where to go, but there is a big difference between a brain surgeon and a dermatologist. On the flip side, you probably don’t want your brain surgeon working on your face. He might know all the nerves in your face really, really well, but what medication is the right one for your acne given all the variables in your life? That is in a totally different realm than what she deals with every day. ## Types of Developers The world of software development is similar to this. Different developers focus on different things. There is overlap, but there is always going to be a relative advantage in one area vs. another. Generally, developers can be broken up into two different major areas or specialties when it comes to cloud SaaS development. If you are a developer reading this list, please remember this is an overview, not an in-depth study. The goal is to help people understand what kind of variety there is in development, not to delve into the aspects of these systems or to define any overlap. These are the areas of development and some of what they encompass. ### Frontend Development - Make things look and work well for users across the spectrum of devices. * HTML * CSS * JS ### Backend Development - Make things function and build logic. * PHP * ASP * PYTHON * NODE.JS * Angular.JS * Java * Lots and lots of other languages ### Mobile App Development - Focuses on the development of Android, iOS, and hybrid apps. * React.js * Ionic * Phonegap * Swift * Objective C * C# * C++ * Java ### Database Development - Store the data, retrieve the data, make the storage and retrieval as efficient as possible. * SQL * MsSQL * MySQL * PostgreSQL * Mongo DB * Loads of other database systems ### DevOps / SysAdmin - Sets up and manages your hosting environments and troubleshoots issues as they pop up. * AWS * DO * Apache * Nginx * SQS * Lambda * Ansible ### AI * R * Python * Lisp * Prolog * Java Think of each of these systems as a language that you could speak. If you know English, you could probably learn Spanish easier than Russian or Thai. The alphabet is the same, the verbs have similar kinds of conjugations, etc. But it is still a different language and you’d need time to learn it. Also, to be conversational is necessary to have a conversation, but if you want to write a book in it, you’ll need to be fluent. The same is basically true for computer languages. ### The Lead Developer In most SaaS platforms, you will want to have a 'Lead Developer'. This team member has specific jobs that other developers do not. Your lead developer will: * Review code being submitted by other developers * Accept 'Pull Requests' which pull developers code into the project * Lead and manage the development team * Understand when developers are and are not doing their jobs * Help you find new developers that are a good fit for the project A great lead developer is a huge asset to the project. The converse also holds true, a poorly chosen or incompetent lead developer can destroy your project. ## The myth of the ‘Full Stack Developer’ You may have heard of the ‘Full Stack Developer’. This is someone who has knowledge of all the layers in a system. A lot of people call themselves Full Stack Developers, and some really are, but most are not. No matter how good you are at the different areas, you are still going to have a specialty in one over the over. You simply cannot devote your life to learning two things and, all other things being equal, be as good as someone who has devoted their life to learning one thing. There is ALWAYS a relative advantage in one place or another. In this book we break developers into just front-end and back-end developers, since very often, this is how developers think of themselves and where their specialties lie. # Quality Assurance ## Testing never stops Quality Assurance (QA) team members are the aspect of development teams that probably the least staffed. That said, I have seen teams crushed by QA and the addition of a single person would have saved the project and the company. At every step of a system, testing is required. QA is a part of development, and anyone who tells you otherwise is either incompetent, inexperienced, or lying to you. Small systems don't always *need* a QA team member, but as soon as you get to a point where you are consistently improving the system, you need this team member. ### What normally happens This is the way it goes: 1. The primary stakeholder or stakeholders (the entrepreneur building or funding the system), hires a developer or development team to build the project. 2. If they didn't hire a team and just hired people, they just figure that their developers can test themselves. This is the first mistake. 3. As the system starts to form the team is focused on build, not testing, so no one is building tests. 4. The system launches, but is not yet breaking even. 5. As soon as the system launches users start uncovering bugs. But now the team is focused on delivering the next set of features, not fixing bugs. The system starts losing users due to bugs. It's acceptable at this point, but annoying. 6. The team realizes that the amount of time it is taking to test is GREATER than the amount of time it takes to build new features, so less and less testing gets done. 7. Now there are big issues in the system, and the team realizes that the have to start building automated tests and bring on a QA team member. But now, it is going to take months to build all these tests. They can't easily add new systems without testing, so they are stuck. 8. Users are getting frustrated with the speed of issues being resolved and new issues popping up every time the team makes changes, so the system churn goes up and revenue goes down. 9. Now things are getting bad and the team realizes how much money they're losing due to not having a QA team member and automated tests. 10. If they had just had that QA person to begin with, they would have been able to pay for them with just the losses from churn, but now they have an image problem as well as a development problem. 11. They start with a QA person, but it takes them months to get familiar with the system and tons of money has been lost. ## What does a QA team member do? They test and build tests. "Of course" you're probably saying to yourself, anything else? Actually, yes. In the beginning, when there isn't as much testing to do or tests to build, your QA team member can also double as a documentation or knowledge base builder. They are going to know every aspect of the system inside and out, so they can help the development team with documentation initially. The QA team member is also going to be a developer. Very often, they are a front-end developer who LOVES finding bugs and writing automated tests to keep them from happening. ### Can't developers just test their own work? **No. They can't.** I would love to say that developers will check their work and catch all the issues they create, but having been a developer, designer, and project manager it just doesn't work that way. When you're 'in the zone,' you're so focused on the task at hand that simple issues can easily fly by you. It is just the way that most people are wired. Even great developers still miss simple issues. However, this is often the difference between an experienced developer and a less experienced one. The experience whispers in the back of your mind "you always miss stuff, you NEED to go back and check everything." Greener developers haven't missed enough issues to realize they must check everything all the time. I wish we could just plug developers into the Matrix and load the 'Issue Checking' program, but we're not there... yet. # Standard Tools # Project Management Tools in SaaS Development People have groups of tasks, timelines, commentary on tasks, the need for other people to do things so they can do their tasks, and many, many interactions between tasks and the results of those tasks in SaaS development. You need to have an effective system to manage all those tasks and the documentation that comes along with them. Your Project Manager will have their suggestions on what to use and how to use it. {% hint style="info" %} Personally I recommend using [JIRA by Atlassian](https://www.atlassian.com/software/jira) for development projects, but there are a variety of different systems available. {% endhint %} Other systems I’ve seen used effectively for SaaS development are: * [JIRA](https://www.atlassian.com/software/jira) * [Asana](http://asana.com/) * [Wrike](https://www.wrike.com/) * [Teamwork](https://www.teamwork.com/)
{% hint style="success" %} **PROTIP** Your SaaS system is going to end up having literally thousands of tickets over time and tens of thousands of comments. If you don’t have a Project Management tool for your SaaS system development, you will quickly start losing things and waste a huge amount of time or the project will fall apart. So spend the money & get the right tools to do the job. It will be a huge cost savings in the long run. {% endhint %} # Development Environment & Dependencies The ‘development environment’ refers to the place the system is hosted. A lot of developers at the time of writing are using [Digital Ocean](https://www.digitalocean.com/) and [Amazon Web Services](https://aws.amazon.com/) for their SaaS deployments, however there are plenty of other systems out there, and at the time of writing, Serverless is gaining traction. Whether you go with serverless or traditional framework systems such as Digital Ocean and AWS are used because it is cost effective and fairly easy to scale up their system resources as your systems scales up. ## Development Environment & Scaling When you’re building or deploying a SaaS business, scaling is very important. Think about scaling like a water supply system for a village vs a metropolis. The village gets its water from a well system that has a limited depth and a limited amount of water than can be pulled from the ground at any given time. Whereas a large city has multiple reservoirs, backup reservoirs, water reclamation systems, etc. If a city were to need to run on the water systems that work for a village, it would fail immediately. The same is true of a SaaS deployment. What works for five users or fifty users, is not the same as what works for five thousand users or five hundred thousand users. Imagine if your village was growing to a town, and rather than replace and supplement your water sources, you could just press a button and your well just produced more water and your filtration systems just filtered more water. That is the power of using a scalable system like AWS or Digital Ocean versus using your own hardware. ## What are dependencies in software development? Dependencies are software systems that depend on other software systems to operate. Software development is the process of standing on the shoulders of giants, standing on the shoulders of other giants, standing on… well it’s giants all the way down. These days, in software development, developers are ALWAYS using other people’s work. So it is a requirement that developers use other pre-built systems in their development. In fact, there is no modern SaaS system that exists that is not built on top of another piece of software. ## Concrete & Code Analogy A good analogy for a software dependency is the use of concrete in the building of a house. The home builders don’t create the chemical formulas for concrete, mine the minerals, or mix the chemicals. They buy their foundation concrete from a concrete company, who often just comes out and pours it for them. Most of the time, the workers laying the concrete know a bit about it, but they are very rarely chemical engineers who formulated and tested it. They know how to use it, not create it. The exact same thing applies in software development. When your developer ‘pulls a dependency’ they basically know how it works, what it is supposed to do, what should and shouldn’t happen when it is used, and how to work with it. But if you needed them to rebuild a dependency, that could be the equivalent request of reformulating a concrete mixture for a bricklayer or house framer. With enough time they could figure it out, but it’s probably a better idea to just buy a different concrete mixture that meets your needs. On the flip side, don’t use the wrong concrete for your house or [you’re going to have to tear it all down and start over.](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.mddbqp1j54uq) # Remote Development Environments ## What is a remote development environment? A remote development environment usually refers to a developer working on their desktop machine and running software that enables them to replicate the running environment of the server so they can test code without uploading it to a server. ## Why is a remote environment necessary? Very often to test the full functionality of the SaaS system, especially to test how the system is affected by the load of many users, the developers have to test on the main server. But it is substantially faster to write code locally (meaning on your desktop or laptop) than it is to upload every time a line of code needs to be seen operating. Setting up a remote development environment can be a time consuming task, especially if the developers initially setting everything up didn’t document their work. However, there are systems available that make this task a lot faster such as [Docker](https://www.docker.com/) and [Vagrant](https://www.vagrantup.com/). Your lead developer will determine [which remote development deployment system to use](https://www.vagrantup.com/intro/vs/docker.html). # Code Repositories in SaaS Development One of the first things your developers are going to do is set up a code repository, often known as a "code repo." ## What is a code repo? A code repo is a versioning system that enables you to see and work with every version of every piece of code that has been written for your project. It enables code to be worked on simultaneously by multiple people around the world. A code repo is a key factor in distributed teams development. ## Code repos are amazing What a lot of non-developers don’t realize is that a codebase is like a living thing, constantly changing, constantly being added to and deleted from. This isn’t just when you see the changes on the system you’re using or testing, but there are also versions on top of versions that just apply to each developer. So each developer has their versions of the code which are always changing as they make changes, but then the main system has it’s own versions within versions within versions. I think that the modern code repo is one of the coolest tools out there that so many people don’t know about or understand. It keeps things in order, it keeps your team together, it enables teams across the world to work together in ways they never could before. It is one of the ingredients in the glue that enables your team to operate. {% hint style="info" %} **PROTIP:** If you’re interviewing developers, ALWAYS ask them what repo they use and what their experience is with a code repo. If they don’t use one, or don’t really know it that well, THEY DON’T KNOW WHAT THEY’RE DOING, SO DON’T HIRE THEM. {% endhint %} A few commonly used repos: * [**Git**](https://git-scm.com/) (this is the repo software - it can be run from your own server if needs be) * [**Github**](https://github.com/) (online place that runs the repo software) * [**Bitbucket**](https://bitbucket.org/product) (another online system that runs the repo software - this is what my team uses) # Monitoring Your SaaS Now that your SaaS is up and running you’re going to need to look out for issues popping up -- and they will pop up. Implementing a networking monitoring tool will enable you and your development team to know when the site goes down, when the database fails, if you are overtaxing your environment, and in what ways. ## Systems A couple monitoring systems I have used or team members have used include: * [New Relic](https://newrelic.com/) * [App Optics](https://www.appoptics.com/) * [Traceview](https://traceview.solarwinds.com/) This will help you in two major ways, understand costs and being alerted to problems. If the site goes down or exceeds certain limits, you’ll get an automated alert and can check in with developers. As the system begins to grow, you’ll be able to see what aspects of the serving environment need to be upgraded. If you are on an environment like [Amazon Web Services (AWS)](https://aws.amazon.com/) or [Digital Ocean](https://www.digitalocean.com/), you or a developer will be able to log in and upgrade your server specs before users starts seeing degradation of operations or the systems fails altogether. My team normally uses Digital Ocean, and from here we setup our monitoring. Each one of the items below will send an email and a notice to our Slack dev channel notifying the team of issues. ### Digital Ocean Monitoring ![](https://lh3.googleusercontent.com/EquL4MCk_AfmkOoQoPLv92e5H4kR911UowP2BgMNMg7uEbPV4hdaWl36z0OtQ6ilgUa_zfe0RlzyYCoYC1oyEgNpoBa0nOK5oPJG6799m19jQVBhpXP1m2njtuBzqmya6niCJSfG) ### New Relic Email ![](/files/-L_8y0qhU1cBguGscq63) # Steps to Developing a SaaS ## SaaS Application Development Steps For MVP The first thing to note here is that books are written linearly and the production of SaaS systems are not. Your development team should have started around the same time your UX designer was wrapping up the first three quarters of their work or so, give or take some. They would have had enough information at that point to at least get going on a number of systems and depending on what your SaaS system/business does, they may have gotten started before your designer ever started asking their questions. These are steps for the SaaS application build, not the public facing website. **Several of these items are run in parallel, but noted linearly in the list below.** ![SaaS Development Flow](/files/-L_5RtTtiRGk031C37So) [See the full image of the SaaS Development Flow Here.](https://www.brainleaf.com/img/brainleaf-process-flow-chart-with-steps.png) 1. Planning (also referred to as “scoping”) * Information Architecture (IA) development * Determine technologies to be used * SaaS development costs * SaaS development team
2. Wireframing & experience design * What is UX in SaaS * When a SaaS isn’t easy to use * SaaS design case study * Flows, processes, and planning 1. A SaaS UX designer should help you... * Concept design
3. Platform setup * Repo setup * Development environment and dependencies setup * Remote development environments setup * Hosting environment setup
4. SaaS application development * Frontend development * Backend development
5. Alpha testing * User testing
6. Content review 7. Beta testing * User testing
8. SaaS release candidate review 9. Release 10. Continuous Integration ### # What to expect in SaaS development These are some lessons that I’ve learned from years of SaaS development that don’t apply to any one thing, but are good to know. ### 1. Deadlines If you’re working with a good team, expect for people to make their deadlines most of the time, but definitely not all the time. People will get sick, get hurt, have bad days, and sometimes just not be able to work that day because they can't focus. It's just the way people are, so don't expect to meet all your deadlines all the time. It just doesn't happen that way. Keep your eyes on the timelines and don't let them start slipping, but don't expect to meet every deadline either. ### 2. Questions Expect to be asked a lot of questions, a lot more than you expect. You will spend a lot of time answering questions. You may end up budgeting time every day just to answer questions that you thought everyone should have known but didn't. ### 3. Understanding That no one will understand the business side like you do. When you’re working with developers, designers, and project managers, most of the time you are working with people who are paid to do a job, not think about how the business will operate. So don’t expect them to. You and the other stakeholders are the business people, the build team is the build team. Direct them well and they will serve your purpose, but don't expect a cat to be a bird, you'll just be let down. ### 4. Work time If you are paying a full time team, they will actually get between 4 and 6 hours of good time in any given day. Or you will have workers that work in sprints for a week or two at 8 to 15 hours per day, but then need a week off. Either way, don’t expect your team to get a full eight hours per day of concentrated effort. Generally, developers just can’t concentrate for that long every day, day in and day out. Additionally, there is a difference between work time and duration. [Duration is how long it takes to do the project, whereas work time is the amount of hours actually worked.](https://www.brainleaf.com/blog/management/work-time-vs-duration-in-project-management/) These two things are never the same on any large project. ### 5. Unknowns [There will be things you didn’t plan on.](/saas-build-process/things-to-know-and-expect/things-you-do-and-do-not-know) Questions you didn’t realize were going to be questions, and problems you never thought would be problems. This happens all the time, and it is the nature of the system. There are a lot of things to figure out in a SaaS system that you never realized you would ever need to consider. ### 6. Timelines Your timeline will be between 1.2 to 3 times as long as you initially planned, very often more. In your head, just plan for it, and tell everyone else that you're on board with their timelines. But internally, always just expect these longer timelines and you'll never be let down. ### 7. Resources If you are building your own team, you will almost definitely not get all the right people the first time. If you do, please let me know how you did this. ### 8. Money You will spend more money than you thought you were going to. ### 9. Features You are going to need more features than you initially planned to build. It is just the way it goes. No matter how experienced the build team or CEO of a system is, there are **ALWAYS** more features that get realized once the system gets underway than were initially planned. If you think you are, you're lying to yourself. ### 10. Use Cases Expect to learn things about your customers that you never expected. It doesn’t matter how you use the system or how you think people will use the system. They are going to find a way to use it in a way that you never expected. # Systems Setup * Confluence * JIRA * Documentation * Time Tracking * Daily meeting planning * Daily 'blog' article per person # Creative # Project Planning ## Are you wondering if the Project Planning chapter was misplaced? It seems like it should be, right? But since I'm asking the question, you've probably already realized that something is up. Project planning, from a Project Planning perspective comes *after* the Information Architecture, wireframes and flows are done. This is because you can't plan a project if you don't know what goes into it. How would a Project Manager accurately plan out a system if it was impossible to determine who will be doing what? Of course, it would be impossible. ## What is the project plan? A project plan is a set of tasks with assigned people, set times - usually in hours, priorities and types that guide the team in the build of the project. These tasks can be placed into groups, often called Epics, that compromise a specific feature or set of functionalities. These groups and tasks can then be processed through linearly (also known as [Waterfall Method](https://en.wikipedia.org/wiki/Waterfall_model)) or in time-boxed, flexible sets of work that are planned based on the last set of work completed ([Agile Method](https://en.wikipedia.org/wiki/Agile_software_development)). Both have their advantages and disadvantages, but more often than not, Agile Method, with some Waterfall Method aspects is used. This is colloquially known as a Mixed or Hybrid Method. There are several other development methodologies out there, but these are two of the most commonly used. The project plan can be displayed visually as a Gantt chart for a smaller section of the project, or as part of the Product Roadmap, which shows how the project will evolve over time. This is a visual of the tasks, assignments, and order of work. It also shows the [Critical Path](https://en.wikipedia.org/wiki/Critical_path_method), which is the set of work that must be completed in order to meet minimum operating standards. {% hint style="info" %} Project plans always looks so set in stone when you take a look at the Gantt chart, but make no mistake, as soon as you get started things are going to change. {% endhint %} ### Aspects of a SaaS Project Plan: The SaaS Project Plan has the following: * List of the stakeholders * List of team members and their roles * List of user types and what they can and cannot do. This is also an important aspect of the [information architecture.](/saas-build-process/planning/scope-of-work#information-architecture) * The product roadmap. This shows how the product will evolve over time. * List of tasks with * Assigned person per task * [Estimated work hours](https://www.brainleaf.com/blog/management/work-time-vs-duration-in-project-management/) to completion * [Estimated duration](https://www.brainleaf.com/blog/management/work-time-vs-duration-in-project-management/) * [User Stories](https://en.wikipedia.org/wiki/User_story) * [Tasks](https://en.wikipedia.org/wiki/Task_management) * [Epics](https://www.atlassian.com/agile/project-management/epics) * A Gantt chart, based on the tasks, stories, and epics that shows the general process to completion. This *will change* as you go forward, but you need to have something to start with. * You may also have Initiatives and Themes as part of the project. Initiatives are groups of epics and Themes are larger groups of initiatives that span the entire company. It is rare to see Themes and Initiatives in a SaaS build projects, but it does occasionally happen. * Estimated start and end dates for the different phases of the project. * If you are using Agile Development Method, then a list of [Sprints](https://www.atlassian.com/agile/scrum/sprints) is often provided, but not required. The goal of this book is not to educate you on the intricacies of Project Management, only to give you what you need to know to build a SaaS project. A SaaS Development Project Manager would probably say that the intricacies of Agile development are in fact a prerequisite. Personally, I think it's a great idea as well. [Please consider a look at the Atlassian Agile Guide for the deep dive.](https://www.atlassian.com/agile/project-management) # SaaS User Experience (UX) ## What is UX? Before getting started setting up UX processes, it is important to know what UX is, how it works, what processes are used, and what the end result aims to be. {% hint style="warning" %} **PROTIP:** It doesn’t matter great your tool is, if your users can use it you’re probably going to fail. So we must build a system with great UX. {% endhint %} ### UX is a value delivery system Software systems do one or both of two things. They either save time, provide knowledge, or both and UX is the process of delivering that value. The value of a product, especially when compared to its competitors, is dependent upon its ability to deliver this knowledge or time savings, and the delivery of this information encapsulated within the user experience. {% hint style="info" %} Like a well-built yacht, nothing in great software is extraneous. Everything has function and is crafted meticulously. Through the combination of function, craft, and art, paired with the experience of use, beauty is created. {% endhint %} A strong focus on UX is core to the success of any digital product with a user interface that is used on a regular basis. ### Implementing UX The process of implementing great UX is the **process of questioning every aspect of a system.** This includes every button, every line of text, every shape, every size, every color, every space, every action, every state of every element, every process, and action a user takes for every kind of user within a system. This is done by analyzing every step critically, understanding the priority order of every element and every feature, and having a deep understanding of how people use software systems and processes. The knowledge of how users flow through systems is not based just based on intuition, it is based on evidence and a study of usability. UX designers go through the process of understanding the needs of users more than those users understand it themselves and delivering a system that meets these needs in ways that customers often cannot express. Product deliverables are based on the specifications, data-driven decisions, critical thinking, intuition, education, focused training, and experience. ## Statistics on the impact of UX The list below was mostly pulled from [this blog article](https://www.intechnic.com/blog/100-ux-statistics-every-user-experience-professional-needs-to-know/). ### ROI of Good UX * Research shows that, on average, every **$1 invested in UX brings $100 in return.** That’s an ROI of a whopping 9,900%. * The top companies **leading in user experience outperformed the S\&P** index by 35%. * A well-designed user interface could raise your website’s conversion rate by up to a 200%, and a **better UX design could yield conversion rates up to 400%**. * If you utilize UX design to satisfy enough people to boost your customer retention by as little as 5%, you will be rewarded with a profit increase of at least 25%. * A 2016 design study of 408 different companies found that the more a company **invested in and focused on design, the more sales they saw.** * **23% of customers who had a positive experience told 10 or more people** about it. * When UX improves the customer experience, it raises a company’s KPIs up to 83% in conversion lift. * **8 in 10 customers are willing to pay more for better customer experience.** * Walker’s ‘Customers 2020’ report revealed that, by 2020, **customer experience will overtake price and product as the key brand differentiator.** * According to a report by Forrester, sites with a “superior user experience” can see visit-to-lead conversions up to 400% higher than those without. * A study by leading research and consulting firm Temkin Group revealed that 84% of companies expect to increase their focus on customer experience measurements and metrics. ### Cost of Bad UX * 70% of customers **abandon purchases** because of bad user experience. * 67% of customers claim unpleasant experiences as a **reason for churn**. * **91% of non-complainers just leave** and **13% of them tell 15 more people** about their bad experience. * Slow-loading websites cost retailers more than $2B in lost sales each year * **62% of customers say they share bad experiences with others.** * 79% of people who don't like what they find on 1 site, will go search for another site. ### UX Business Cases Stats * Jeff Bezos invested 100X more into customer experience than advertising during the first year of Amazon. * **AirBnB’s Mike Gebbia credits UX with taking the company to $10 billion.** * MacAfee **saved 90% in expenses after integrating usability testing** to learn more about its customers and their needs. * 8% was the drop in sales incurred by Marks & Spencer after spending $220 million on their website redesign ### User Testing Stats * **85% of UX problems can be solved by testing 5 users** * Only 55% of companies are currently conducting any UX testing. * There was a success rate of 80% when people used the navigation scheme structured according to most users’ mental model. * There was a success rate of 9% when people used the navigation scheme structured according to the company’s internal thinking ### UX Design & Development * Fixing an error after development is up to **100x as expensive** as it would have been before development. * **94% of the factors that affect a user’s 1st impression of your product are design-related.** These 1st impressions are extremely important, and unimpressed users are often unforgiving. * Investing in UX during a project’s concept phase **reduces product development cycles by 33 - 50%.** * Developers spend **50% of their time reworking projects because of poor UX.** * Judgments on website credibility are 75% based on a website's overall aesthetics * 83% of people say a 'seamless experience across all devices' is very important * **Almost 40% of users will stop engaging if they find the content or layout of a website or application shabby** * Video helps persuade 73% of people to buy a product or service * Visit-to-lead conversions can be 400% higher on sites with a “superior user experience”. ## When a SaaS isn’t easy to use **If a SaaS system isn’t intuitive to use, for the most part, people won’t use it.** Even worse, a lot of times when SaaS users leave, they don’t tell you why they’re leaving. They just don’t renew their subscription, bow out, and disappear into the anonymous gray of the internet. That’s not altogether terrible, seeing as how you don’t have to actually deal with them when they’re upset. But when they don’t tell you why they left, what they got frustrated about, or what they didn’t like it means you don’t know how to fix it for other users. Sometimes it’s price, sometimes it’s that they’re not using the system anymore, and very often it’s that they got frustrated about the use of some system because they couldn’t figure it out or it took too long to load and just decided not to use it anymore and left. ## What do UX designers do? In addition to actually creating designs, designers do a lot of things and bring a lot to a product team. Below is a list of some of the duties of a UX designer and the things they must consider when building a product: * Views and functionality differences on mobile, tablet, and desktop not just in the use of the system, but in the use of the device. * Competitor analysis * User interviews * Behavioral data analysis * Heatmap and usage analysis * Product market fit & product validation * Benchmarking * Heuristic evaluation * Cognitive walkthroughs * Conversion oriented evaluation * Content audits * UX reviews * User testing * A/B testing * Qualitative and quantitative interviews * User surveys * Card sorting * Eye-tracking * Lean product experiments * User onboarding and user activation * Navigation. Navigation. Navigation. * Multi-channeling * Animations * Spacing * Aesthetic-usability effect * Gestalt law of proximity * Performance and non-functional specifications * Content * Content distribution * Content readability * Typography * Content structure * UX copywriting * Information architecture * ZMOT - Zero Moment of Truth * Accessibility Compliance * **AND SO** **MUCH MORE** ## UX designer information requirements When working within an agile process to create an Iterative design process, a UX designer generally relies on the following data points: * User types * System architecture * Goals for the system and features * User flows * System elements * System usage analytics * User stories * Team and user feedback for iterative design ### What to expect working with a UX designer * A lot of questions * To have ideas challenged * Feature ideas to be generated unexpectedly * To produce a great user experience and have happy customers ### Information requirements for UX These are the questions that a UX designer will often ask. 1. **User types** 1. Who are the users? 2. How are different user types different? 3. Why are different users using the system? 4. What are the primary uses of the system for each user type? 5. What are the different user types trying to accomplish? 2. **System architecture** 1. What are the variables used in the system? 2. What data points need to be viewed, entered, and/or extracted from the system? 3. What is the priority of each data point and why? 4. How do data points fit together with other system features and what is the priority of those data points in other features? 3. **Improvement goals** 1. What is the goal of what we’re doing? 2. Why are we improving this system? 3. What user type or types does the improvement apply to? 4. How will their experience be improved? 5. What are the quantitative and qualitative measures of success in this project? 4. **User flows** 1. How does a user flow through the existing process? 2. In what ways can this process be improved? 3. What data is available to examine existing user flows? 5. **System elements** 1. Are all elements necessary? 2. Can any elements be simplified? 3. Can any elements be removed? 4. Are system elements in ordered correctly? 5. Do top priority elements have the appropriate visual signaling to impress their importance? 6. Are elements easy to see and understand? UX Designers need to know as much as possible about how the entire system works to make the best decisions, so at the beginning of a project, there are very often more questions than answers. But this is in order to make the best system possible. ## Notes on Working with UX designers within development teams ### User stories for designers vs developers This may be one of the biggest differences that are not clear for Product Owners (POs) not used to working with designers. Designers are the problem solvers, not just the implementers. So stories should often be substantially broader and state the problem and expected solution, not necessarily the method of delivering the solution. #### Story writing for designers When writing stories for designers, the following items should be written: * User types involved in the story * Goal for the users * Save time * Easier usage * More intuitive design * More or different information * Etc. * Expected solution for users * Success metrics - very often the same measure as goals with the addition of clear measurements. * Information architecture * When writing architecture for designers, it is recommended not to explain the location of elements, just what will be on the page. * Elements should be clearly explained with the expectation that the designer may recommend through their design other methods of accomplishing the goal. * When development specifications should not be modified, it is important to note to the design that this is the case and not to stray from the architecture. Although, if this is the case, very often a designer is not necessary. * Benchmarks * These are examples from other applications that can be used to show what the story writer is trying to accomplish. Having a benchmark is an easy way to create a point of reference without actually designing anything. * Often times, the designer can be asked to help find benchmarks ahead of designing the system and present these back to the stakeholders or story writer. However, benchmarking is a time-intensive process and should not be overused if resources are constrained. ### Design process timing in relation to the development Very often, these broad user stories will be delivered to the designer months or weeks ahead of development and the designer will create variations of potential solutions to the problem which will then be reviewed by product owners, customers, and other stakeholders. These solutions will often go through multiple iterations before they are ready for development, where the product owner will write a set of stories that accompany designs. {% hint style="warning" %} **PROTIP:** Very often, the velocity of the team is elevated further by implementing a front-end development team that takes the UX design team’s work and develops only the interfaces while the ‘back end developers’ build the logic and database systems to implement the solution. {% endhint %} ### UX Design may be timeboxed If you're not familiar with the term "Time Boxing" this just means that the activity is done within a certain amount of time, for example, a two-week sprint. Designers don’t like being timeboxed any more than other production team members, but design too may be timeboxed. As long as incomplete stories are noted and forthcoming changes are checked with product owners and developers, timeboxing may be applied. It may seem apparent, but it is also very important to inform your designer that they have a set time to complete the task and to ask them if the allotted time is enough to complete the task. ### Copywriting is part of UX Explanation text should be built into the system that simply and concisely explains how to use systems, what features do, and what the outcome of an action will be. This can be a surprisingly large amount of text, and subject matter experts will be required to deliver this text clearly. ### Product delivery delays due to UX team Very often, UX designers will implement ideas into their designs that stakeholders, including customers, get attached to. This can cause friction in the product team because the ideas are good, but the team cannot implement the functionality due to time or money constraints. Product owners must be vigilant about this issue and balance the wants and needs of users. ## Stakeholders Stakeholders are often the product owner, company leadership, sometimes customers, and other team members. Within substantially complex products, it is important to have subject matter experts who clearly understand the customer needs to be involved at every step of the UX process, especially during the planning and iteration on designs. Like any other build team member, a UX designer benefits from being a subject matter expert, but they don't need to be one, so long as a subject matter expert is available to assist. ### Stakeholders Meetings Stakeholders in the design process should meet at least twice a week to review designs. These meetings generally follow this agenda: 1. Review the previous meeting’s action items 2. State and review the goal of the meeting 3. Designer to present the most recent designs and ask questions 4. Identify what questions must be answered by the team to move forward 5. Answer questions and create action items 6. Review new timeline and ensure it will meet goals 7. Wrap meeting Design meetings are notorious for creating scope creep. It is important to have a decision-making process to quickly overcome disagreements. My recommendation for this company is a tie-breaking person between the team leaders. ## UX Design Process The design process is iterative, meaning that the designer will go through multiple reviews before finalizing their designs. The process of designing features comes BEFORE the development of said features in most cases. Adding a designer into the middle of a development process with the expectation they can iterate very quickly on designs and meet with stakeholders within that time is a recipe for failure. This process often takes the following steps: 1. **System discovery** - Gathering all the information required to build a system or feature. Very often, this is the process of understanding users, roles, requirements, the problem, and researching potential solutions. Common deliverables include benchmarks via a mood board. 1. This also can involve multiple meetings to review benchmarks and prepare for the project. 2. **Initial Draft** - Take information noted in the section “Information requirements for UX” and build an initial draft or draft. 1. When a designer is getting started on a complex project, it is very helpful to have a senior designer review project specifications with the designer to ensure they have a thorough understanding of the project. Whether it is with a senior designer or a peer, this is a process that does and should happen often. 2. As expected, after the UX designer has been working for a substantial amount of time on the project, they will be able to operate with a design user story instead of all questions all the time. 3. **Review drafts & ideas with peer designer** - Just like developers, designers miss things and almost always need to ‘polish’ designs. This peer-review process is equivalent to a code review and QA for developers. Sometimes this means stepping away for a while and reviewing the work again the next day. But a better system is to have another designer review work. I cannot stress enough the importance of this practice. 4. **Present initial designs to stakeholders** - Depending on the project and complexity, this could be the first of many or the last presentation. Most often, it is the first of multiple presentations. 1. See the section entitled “Stakeholder Meetings” on how to run this meeting. 5. **Iterate on designs** - After the initial review of designs, secondary and tertiary reviews are often necessary to get to a final product. 1. Working with this process is very different than working with a development team. 2. During iteration, very often designers need to either step away and review a few days later or have a second designer review work if at all possible. This has a dramatic effect on the quality of work. 6. **Customer review & user testing** - After designs have been mostly completed, these designs should sometimes be presented to select customers for feedback and users should be put through at least basic user testing. If needs be, we can invest in a more extensive user testing system, but in the very least basic user testing should be done. 7. **Finalize designs** - Once stakeholders are satisfied with designs, they can be prepared in stories for developers by the product owner. 8. **Story implementation oversight** - While stories are being implemented into the code, the designer should give feedback on the success of this implementation. This is a critical step since very often the design, and thus the intent of the design is lost in development. Moving a page element from one area on a page to another can drastically decrease the usability of a system. Therefore the designer should be involved in daily standups and ask to see systems as they are implemented. 9. **UX QA** - Because the implementation of stories can change during QA, a final UX QA process must be done before a product can be signed off by the UX designer. Most often, these are changes that will be done by front end developers. 10. **Success measurement** - Understanding clearly if goals were met in the delivery of stories is key to continuous improvement. So each success measurement must be able to be tracked as best as possible and followed up on in the time after the implementation of new UX. ## Product Owner and Team Education To effectively implement great user experience into a product, lead team members should have at least some training in user experience design. Leadership comes from the top and product owners need to be driving user experience. To accomplish this, it is my recommendation that team leaders take a course in UX. This could be a course designers take to learn UX design and would give team membres knowledge on processes expectations, methods, and much more. ## Recommended Reading 1. Here is more information on doing user/usability testing: 2. Google Material Design: [https://material.io/design/introduction#components ](https://material.io/design/introduction#components) 3. This is a great article I found during my research for this document on improving the user experience of an application: [https://www.netguru.com/blog/how-to-improve-the-ux-of-your-application-extensive-guide ](https://www.netguru.com/blog/how-to-improve-the-ux-of-your-application-extensive-guide) 4. [https://www.appcues.com/blog/examples-really-good-ux ](https://www.appcues.com/blog/examples-really-good-ux) 5. [https://medium.muz.li/gestalt-principles-in-ui-design-6b75a41e9965 ]() 6. 7. # Concept Design ## You Got Style Now that you’ve got all your flows worked out, who is doing what and how they are doing it, consensus on what is being built, your basic designs, and some of the content for the pages, it’s time to start working on the creative aspects of the SaaS system design. Take note as to where this step is integrated throughout the process. It’s in the middle, not at the beginning. It’s ok to start out thinking about the systems graphics, but if you’re really digging into anything other than branding before this step, you’re doing it wrong. The system is all about saving time and getting through everything quickly and easily. Pretty pictures don’t make a difference -- ease of use, system speed, and functionality do. All that said, now it’s time to talk about getting your messaging across and the pretty pictures that go along with that. ## HiFi If your UX designer hasn’t provided high fidelity designs that meet your branding needs prior to the front-end coder starting to work, now you need a web-designer or concept designer. This is often a different set of skills from your UX designer, although there is a lot of overlap and many UX designers started off as web designers or graphic designers before becoming UX designers. But as the field grows, more and more people start off with UX and don’t have the graphic design skills. You’ll just want to be sure to understand what the skill set of each person on your team is, how much that is worth, and in what ways they are best utilized. Once again, a great example of why a group is better at building a SaaS system than an individual. # SaaS UX Design Case Study Let’s do a quick teardown of a SaaS system process and see how it was improved to illustrate the importance of UX in SaaS. MedRev is a SaaS system focused on reputation management in the healthcare industry. Users of the system are office managers, doctors, and administrators of healthcare providers offices, outpatient care, and hospitals. The system is built on Angular.io with a themed Foundation-based CSS framework and a Laravel back-end. At a certain point, the front-end coder was asked to put together a set of pages and forms for showing a list of locations and adding new locations. The initial pages looked like this: ## Initial System Views: ![](https://via.placeholder.com/800x300/09f/fff.png?text=medrev) ## Initial Locations List Page: ![](http://via.placeholder.com/600x300?text=Image%20Goes%20Here) ## Initial Editing Location Information ![](http://via.placeholder.com/600x300?text=Image%20Goes%20Here) Initial Edit Location Information Continued ## Notes on the initial design As you can see, the designs: * look fairly easy to use * Utilize the system theme fully * Are straightforward The front-end developer did their job exactly as requested. ## UX Review However, once the UX designer reviews the system, we take a different approach. The following questions start being asked: * Who is using this process? * What level of information management skills to they have? * Do they understand social media platforms? * At what point in the system are they using this process? * Are they using this process all the time or infrequently? * What is the goal of this process? After these questions are asked and examined, it becomes clear that the process as it stands is not viable. Take a look at the answers: * **Who is using this process?** - Healthcare providers such as doctors, nurses, PAs, dentists, chiropractors, and other healthcare providers, office managers, hospital administrators, healthcare marketing staff, and most often front-desk staff at healthcare offices. * **What level of information management skills to they have?** - Most often, very little. * **Do they understand social media platforms?** - Most of the time, only as users in the system. * **At what point in the system are they using this process?** - The very beginning of their use of the system. This process is critical to the onboarding of new users and the setup of new customers. * **Are they using this process all the time or infrequently?** - Infrequently. This system is used at the very beginning, then not much (sometimes never) afterwards. * **What is the goal of this process?** - To create a new location so that the business can start using the system. With these answers, it should be clear that a very, very simple process of flowing through this tool, with very clear instructions, is critical to the success of the business. Because this tool is just used once or rarely, the users have no way or reason to know ahead of time how to use the system and it becomes more valuable to have it clearly explained than to have it all grouped together (which could be useful if the users used this process all the time). After the UX designer reviewed the system, a new design for each location was created as well as an entire process to help users quickly add new locations. The new process explained the critical aspects of each item while linking to help files where needed. ## Post UX Designs ### Post UX Design: Locations List Page ### Post UX Design: Change Location Information ### Post UX Design: Set Minimum Survey Score ### Post UX Design: Add Location Process (selected pages) ## Front-end Coder vs. UX Designer Comparison The designs shown above were only the first draft of the UX designers work, and final drafts are still in progress at the time of this writing. However, you can see from these designs that there is now a process with step by step instructions. This process figuratively ‘holds the user’s hand’ through the process of creating a new location and editing location information. The difference from a user’s perspective is that with the UX designers work, they can now understand what they are doing and move through a complex process while seeing only the information they need at any given time. Whereas before, all data was available but not well described which made it somewhat overwhelming and fairly unintuitive. The users described would not have been capable of using the system as it was initially designed. **ProTip:** This comparison highlights why it you need a UX designer in almost any SaaS system development process, and also why a single developer working on a SaaS project isn’t a good idea. The UX designer could not have coded this page, the front-end developer could not have efficiently created the logic to run the system, and the back-end developer could not have efficiently created front-end that elegantly transitions from mobile to desktop or created the process flows that the UX designer provided. Additionally, it would have been a time-consuming and complex task for all of these team members to work together on the project and meet deadlines without a project manager. ## SaaS UX testing and optimization Once the initial processes are put in place and users are flowing through the system, the next step for the UX designer will be to review how users are using the system, check to make sure they are doing what the designer expected and help the product manager make changes that will enable users to better use the system. **This again shows how a SaaS system is never ‘done’.** ## # Content Development # FrontEnd Development ## Front-End Development Front-end development generally refers to the coding of the systems you see. This means the code that delivers the content from the back-end systems to the user. The front-end developer takes the designs that were done and turns them into views. Very often, especially nowadays, there is overlap between front-end and back-end for front-end developers because in order to see the data in a meaningful way the front-end developers benefit from being able to tap into the data to deliver information. ### Front-End Developer Tasks What this often means for SaaS development is that your front-end developer can take the designs your designer did and turn them into something you can click through and load as a web page, even if there is no functionality behind them. The front-end developer could make the view of a calculator, but when the user clicks on the buttons, nothing would happen. In reality, they could very often do more than this, but it's a good example. ## Starting up Front-End development When your designs are done, it’s time to give them to your front-end developer. This developer can work in parallel with back-end development, but since the book has to be written linearly, we’re starting here. ### What the front-end developer needs to do their job: * **The Information Architecture** - with explanations of features, pages, elements, etc. * **Content** - this is the text that goes on the page. Remember, web pages are built around content, not content around design! * **Wireframes and/or Flows** - so they can see what the page should look like * **Style guide** - so they know what different features should always look like and have consistency. * **Project Plan** - This is a set of deadlines and explanations of who will have what done when that the other team members need to progress. Remember, developers are optimists! Give them deadlines, but plan on them missing the deadlines by at least 20%. Project deadlines are set up as part of the Project Plan. More on this in the [Managing your team section](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.xm6ncpqqem9h). * **Management** - With multiple team members doing different kinds of jobs and relying on one another, even the most experienced and responsible developer benefits greatly from help getting what they need from other team members and coordinating timelines so they are not waiting. * **Regular Meetings & Communication** - Even if everything is planned perfectly, there will be questions and things will change. ### Saving Time The more information a front-end developer has, the less they will come back to you with questions. This is where the flows, designs, and information architecture come in. The front-end developer will take these pieces of information and develop pages and views from this information and deliver them to you for review and revisions. {% hint style="success" %} **PROTIP:** At each step down the process, the cost of making changes goes up. So get as much as possible finalized before coding begins. Changes during coding can crush an MVP build budget! {% endhint %} To make a front-end code change often takes a lot longer than making a change in a graphics editing system, like the one your UX designer is working with. So do all your designs there before getting into coding. In addition, making logic changes have far reaching effects, so make sure you’re happy with the system the front-end developer is doing BEFORE you hand it over to the back-end developer. # BackEnd Development ## What the Back-End Developer Does In a SaaS build, especially for an MVP, the back-end developer will generally figure your best setup for a serving platform, get the environment setup, and code the system. If your SaaS requires different kinds of developers, different back-end developers will have different responsibilities. If your system is an app or has an app portion, you may need additional developers with specialties in those technologies as well as developers with web-app building specialities. Or, if you have an AI component, you may need an AI specialist who just focuses on that portion of the project. {% hint style="info" %} PROTIP: If your SaaS has an app component, most of the time you will also have a web-app component for managing users and data. {% endhint %} ## Starting Up the Back-End Development More than likely, actual back-end development got started well before you got to this point. The back-end developers had to set up the environments & platforms, pull in dependencies, figure out what systems would be used, plan the database, figure out what systems need to be integrated, and much more. All of this work takes time. Unless they have built the same or a very similar system in the past, they have days of work and research to do in order to get ready to do their primary jobs. Some of these tasks won’t be done until the team gets to the point where they are ready to check off that particular item on the list, but much of the work can be done ahead of time -- and the more that is done up front, the more accurate your time and financial estimates will be. {% hint style="info" %} **PROTIP:** The key to accurately estimating hours is to have your team break things apart as much as possible and estimate hours granularly. The more granularly, the more they have to think about each item, the more clear they will be about what needs to be done, the more accurate your estimates will be. {% endhint %} For more information on how to do this, take a look at the BrainLeaf.com website at [the book “The Comprehensive Guide to Website Design, Web-app & Development Project Scoping.”](https://www.brainleaf.com/learn-project-scoping) ## What the back-end developer needs to do their job: * **Information Architecture** - with explanations of features, pages, elements, etc. * **Wireframes and/or Flows** - so they can see what the page should look like * **Coded Style Guide** - so they know what different features should look like and they have the front-end code done before implementing. * **Coded pages, views, and states** - that are ready for development * **All back-end systems planning finalized** - remember, [there is no "should" in development](https://www.brainleaf.com/blog/running-a-business/project-scope-and-you/#should). It either does something or it does not. There is no in-between. * **Project Plan** - This is a set of deadlines and explanations of who will have what done when that the other team members need to progress. Remember, developers are optimists! Give them deadlines, but plan on them missing the deadlines by at least 20%. [Project deadlines are set up as part of the Project Plan. ](/saas-build-process/planning/scope-of-work#project-plan) * **Management** - With multiple team members doing different kinds of jobs and relying on one another, even the most experienced and responsible developer benefits greatly from help getting what they need from other team members and coordinating timelines so they are not waiting. * **Regular Meetings & Communication** - Even if everything is planned perfectly, there will be questions and things will change. This is a cornerstone aspect of [Agile Development Method.](https://atlassian.com/agile) # Quality Assurance (QA) ## QA is the place in the project that so many people falter. Entrepreneurs getting to this point often don’t realize what goes into it and thus underestimate the time it takes to do this, and both developers and project managers get to this point around the time they are getting tired on the project MVP or release. So understanding the amount of work and time it takes to get a project ready for release is critical to creating a solid user-ready system. Digging deep into the project from multiple perspectives is key to a good release, whether it is your MVP or a new feature in a mature system. When doing QA, especially for a new system, it is critical to have multiple people looking at the system from different perspectives. Designers will see issues with the user experience or flow, final system users will see different aspects of use that could be improved upon or sometimes need to be fixed before the system can be used, and of course developers will see development issues. ## QA Lessons: ### 1. Realize that QA is an ongoing process, not a one time project Entrepreneurs I’ve met so often think their QA will be ‘done’ at some point, despite the fact that they have more development coming. It doesn’t end. QA is a part of development and as long as you’re building complex systems that interact with each other, you’re going to have to do more QA to get a good product. In fact, there is a very clear correlation between the amount of QA time spent on a project and how well the launch goes. ### 2. Have a separate QA team or developer Having been a developer, a project manager, a tester, and a SaaS entrepreneur, I can tell you that when you’re building something, you just don’t see the bugs sometimes. You can go through the whole thing and test it yourself and not find any issues only to have one outsider look for five minutes and a see major issues right away. Even the best developers don’t see the issues in front of them when their heads are in the project. So, always, always, always have someone other than the lead dev or dev team doing QA on your project or you are going to have things slip by. ### 3. QA from different perspectives On my projects, I like to have a QA engineer, UX designer, developer, and project manager run through a set of tests before the project is ready to launch. It is time consuming and often very frustrating, but it is worth every second. Each user type sees things that the others don’t, and having them review the system can give you feedback that you would otherwise never have had. That being said, have the lead QA person do the review first and fix the first round of bugs before having everyone else go through the system or a lot of time will be wasted. ### 4. Writing descriptions of bugs technically and thoroughly saves a lot of time Everyone on the development team, entrepreneurs, designers, and other stakeholders especially should have at least some amount of training on how to technically explain bugs in the system. {% hint style="info" %} **PROTIP:** A lot of time can be wasted by developers searching for bugs that either don’t exist, aren’t bugs, or are not relevant. Well written bugs can probably save 7% - 20% of time in debugging. {% endhint %} ### 5. Write specs and tests Specs and tests are a part of Agile Methodology. When writing a specification for work, if you write out how to test that specification it will streamline how QA team members test the system. This can be more challenging on an MVP, but as the system progresses, it becomes critical. ### 6. Use an industrial strength PM system when doing technical QA Using a sub-par system to track and manage bugs is can be a point of failure for the development of a system. My personal preference is JIRA with their integration into BitBucket and Confluence, but there are of course other systems out there. If you don’t have an industry standard system in place for this, you and your team will start losing bugs, or prioritizing issues incorrectly. So get the right tools and know how to use them! ### 7. Spend the time now or triple the time later Technically speaking, you don’t have to do a round of QA. If you don’t though, you’re going to have a product that doesn’t work and people get upset about. If you do a halfway job of QA prior to launch, you’re going to have half-way or less happy users. This is invariably going to lead to you or your team fixing the issues later and now having to deal with a bunch of upset people and a failing product. ### 8. Assessing QA time Quality Assurance in a SaaS business generally takes anywhere between 10% and 25% of the time to build the system. It never, ever takes less than 10%, so make sure to account for that in your timelines! ### 9. Padding your Expectations When building SaaS systems, as an entrepreneur it is important to pad your expectations when it comes to the QA process. Really, you should pad your expectations throughout the entire project and you’ll be much happier, but, at the very least, do it here. If the team tells you it is going to take 2 weeks to QA the product, just plan on 4 weeks of work. It may sound outrageous, but that’s almost exactly the way it goes almost every time. If you’re working with an agency that is already taking this padding into account, then I would suggestion you still pad this timeline, just not by as much. # Alpha Testing ## What is Alpha? Alpha is the phase where the thing kinda works, but not well enough to share with anyone other than people that know that it doesn’t work. In other words, if you’re at an alpha phase, that means you and anyone else looking at the SaaS knows that it doesn’t work or that some major features are pretty buggy. The alpha testing portion is technically part of acceptance testing. This phase is the first milestone in testing. What this means is that, in this phase, the team is going to generally test internally to see where the major problem areas are located. At this stage, the development team will review the system with you and will need to get it out to people to help test the system. If you have been doing a good job with your advisory board or community building, now is a great time to walk select members through the system to get feedback. Important note here, if you decide to share this with people outside of the company, they really do need to be selected people who understand there are going to be big issues in the system. For the most part, alpha testing will be done by internal developers and by you. ## Improvements at Alpha You’re going to find all sorts of things you want to improve upon at this stage. But you need to remember what you’re doing and why you’re doing it at this point. Your goal is to GET TO MARKET, not build out every phase in the system.
So take all those things you want to add, change, and generally improve, and put them into a bucket (it’s called the Backlog) to be done after you get to market. Your number one, most important, goal is to get validation that your system is going to sell, and you get this by getting people to pay you. If your system at its core functionality doesn’t sell then you have other problems to deal with, and adding things that are not core features now won’t help. ## Content review at Alpha Testing At the alpha testing phase, you should also be reviewing all the content on the system. This means every word, every rollover, every tooltip, everything. You’re going to have a lot of things that need to be done, and this is probably the easiest thing to do that is most often overlooked. If you add a step here to review everything, it will be a lot easier when you get to future phases if you have all the content taken care of here. ## Iteration and fixing issues The way this book reads, it seems like you might get to this point, make some suggestions, then move on. It won’t go that way. By the time you get to the point where you’re doing this alpha test, you will know your product inside and out, and be steeped in development lingo. While this step has a fancy name and is a milestone, it’s just another iteration in the development process. # Beta Testing ## This is the next major milestone to getting to launch. Sometimes, this step comes right on the heels of the alpha test phase. Other times it’s weeks, months, or even years after the alpha test. Once again, even though this milestone has a fancy name, it is just another iteration in the process. This step is important though because it represents your product being ready for testing by your users. Now it really is time to share your new contraption with the world! Since you’ve done an outstanding job of maintaining your relationship with the [advisory board](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.amc9hmutfksq) and building a community, it’s time to put that relationship to use! In this step, choose a select few of these people and walk them through your product one at a time and get their feedback. Don’t just send it over to them and expect them to use it, actually meet with them in person or virtually and take them through the system. Get their feedback, understand their problems, listen to them, and most importantly make sure that they are going to pay for what you’re selling! The more people that test your system, the more bugs you will find and user issues you will overcome. When you get into beta testing, people are going to ask for new features, you’re going to want to add stuff, and you’re going to be tempted to build more things. ## Testing & Selling My recommendation is to beta test and sell at the same time. Paying customers behave much differently than non-paying customers. They ask for different things and they see different things in the system. A paying customer is going to use a system to further their business, whereas a non-paying customer is not going to value the system as much, if at all. These are two completely different views on a product and you need the former, not the latter. Next, doing your testing is a great opportunity to sell your product. Users know where the product is in it’s development cycle, so if you give them a cut price for a set amount of time, or even forever, they are still paying while mentally buying into the value of the product. {% hint style="info" %} **PROTIP:** The SaaS build and launch process should be used as part of your marketing plan. {% endhint %} # Launching Your SaaS ## After everything else is done, launching is simple. The act of launching is as easy as making your marketing website connect the signup page to the credit card processing system so that when users try to sign up, they have to put their credit card into the system. Now, you can charge them when they have finished their trial or start using their value metric or whatever what it is that you determine how they are getting charged. That’s it. Technically speaking, you launched your SaaS. Anyone who wants to pay you for your SaaS services can do it now. There are of course a number of marketing related tasks that could and should be done, but from a development perspective, this SaaS is launched. ## Your job is just starting now As you probably figured out already, it’s a good thing you didn’t buy that ticket to Aruba to spend your millions just yet. You really just finished the very first step in the process. Now it’s time for the hard part, getting the thing out there and selling the thing. # Continuous Integration ## Change is a part of life The [concept of continuous integration](https://en.wikipedia.org/wiki/Continuous_integration) in SaaS includes the precept that your system is always changing and is the process of dealing with this continuous change. This is an iterative, looping process of: 1. Release 2. Operate 3. Measure 4. Plan 5. Code 6. Build 7. Test 8. Release (back to top) Beyond the simple concept that continuous integrations happens in SaaS, there are also tools that enable the flow of this process. Fortunately, a lot of these tools were built for developers, by developers and are open sourced and free to use for your project. These systems integrate other tools described in this document such as: * [Code repository](/saas-build-process/tools/code-repositories-in-saas-development#what-is-a-code-repo) * Unit and regression testing systems * [Development environments](/saas-build-process/tools/development-environment-and-dependencies#development-environment-and-scaling) * [Project management tools](/saas-build-process/tools/project-management-tools-in-saas-development) * Documentation systems When a release candidate is ready for release and the lead developer pushes the button, an [automations server such as Jenkins](https://jenkins.io/) (also an open source/free system) automatically pulls the right code, runs unit and regression tests, deploys to the development environments, updates documentation, and makes entries into the project management system. The automation of this process can save you countless hours of time. ## Continuous Integration (CI) in SaaS But wait, there’s more! I see you looking at the next section on marketing. I see your eyes slithering down the page to that section that is calling out to you. But resist, friend! In the words of Yoda: “Luke! You must complete the training!” “But why?” you ask. “I want to read the chapter on growing the business!” Because remember all those things you wanted to change and improve in your SaaS? Remember how you didn’t like the way that feature worked, but you took my word for it and just went to market? Remember how long your backlog of features got to be before you got to this point? Remember those nice developers that you were paying to build this thing? They’re probably going to leave and get another job if they don’t have work to do here; and this is how you’re going to be doling out that work. **Continuous Integration** started as a part of what was termed [Extreme Programming (XP)](https://en.wikipedia.org/wiki/Extreme_programming). Developers love to sound impressive (and if you’re a developer, you know I’m right). Really, though, it was a pretty radical thought at the time. ## What is Continuous Integration (CI)? CI came about because lots of different people were working at the same time on large sets of code and they ran into what was termed “Integration Hell” when multiple people were working on multiple features at the same time using systems that did not allow for the same levels of integration as today’s systems, and basically they couldn’t get all the code to work together. It would take hours and hours or even days or weeks to get different groups’ features unravelled to the point where they could integrate these things together. So they created the concept of Continuous Integration, which basically means doing the integration continuously in smaller chunks instead of in gigantic blocks that will take forever to figure out how to fit together. Good idea, right? It started out as a process to make things fit together faster and stop wasting time, but as programmers do, they iterated on the idea over and over, and now we have this very impressive concept of CI with all sorts of steps to keep everything together.\
![](https://lh5.googleusercontent.com/RT5a3DRibCvvUwaU7Oy9QxQhptvhLTq7IUBk2EiqZbatJXAOUCXhcHe-KOEEdGiZvKzRs1BQucjvKQ_ad2O165I5NB6zfgHt7E6nzYpA4x91R5o9ehdWIJ6uwa6yNtyGmXPBbemf) ## Why Does Continuous Integration Matter in SaaS? It matters because now that you’ve got that first release ready to go, you also have about a million new things you want to add to it. Remember, continuous integrations started out as a [programming concept](https://en.wikipedia.org/wiki/Continuous_integration), but it grew into more than that. This should be interesting to you because it gives you a method and process for monitoring what your customers want, planning features, coding, building, and testing features, then releasing them, deploying them to your system, operating and monitoring/monetizing them, and continuing on the infinite journey of improvement. These areas are going to be very important steps to keep your SaaS from falling apart down the line, so don’t let this go in one ear and out the other! # Things to know and expect # You MUST learn at least the basics of Project Management ## You can't run your business without proper management Starting a SaaS entails getting things built then marketing and selling the thing you built. Once you're done building the system, your users will be expecting the next feature, the next thing, the next integration, and for you to keep the system up and running. Throughout all of this, you must have a method of getting these things done or you are going to get completely lost in the sea of requests, promises, and the resulting very upset people. All of this requires a method, and this has turned into it's own industry. To become a pro takes years of practice and experience. But to understand the basics takes about an hour. If you are: * An entrepreneur starting a SaaS business * An executive getting a SaaS built for your company * A developer or designer building a tool system **THEN YOU MUST HAVE MORE THAN A RUDIMENTARY UNDERSTANDING OF AGILE DEVELOPMENT!** {% hint style="info" %} **PROTIP:** If you do nothing else, take an hour or two and read the [Atlassian guide to project management](https://www.atlassian.com/project-management). It will be worth it’s time in dollars tenfold, guaranteed. If you don’t have an understanding of project management before going into this process, you are setting yourself up for failure. {% endhint %} # Things you do and do not know In most projects we have things we know and things we do not know. But there are also variations of these. Before going into your development phase, or any business for that matter, it is good to have an understanding of this concept. ## Known knowns We know that we know this. This is usually something that you or someone on your team has done before, and they understand this item thoroughly. Think of this one as knowledge. ## Known unknowns These are things that you know you need to figure out, technology you haven’t used before and know you’ll need to use or integrate, or general challenges you know you will need to uncover. Think of these as known risks or challenges. ## Unknown knowns This may sound a little redundant or silly, but it isn’t. A lot of times, unknown knowns are answers you or someone on your team knows or has an answer to, but hasn’t realized it yet. A good example of this would be that you need to build some library or some tool and someone on your team realizes that the tool that needs to be built is very similar to a tool they already built. Suddenly, they know how to produce this system very quickly, whereas otherwise it would have taken a long time. Think of this as untapped knowledge. ## Unknown unknowns This is the stuff that really messes you up. It is the risk you haven’t realized yet, or potentially never do. In SaaS development, a good example of an unknown unknown is a technical issue that the team did not foresee. These kinds of technical issues can be anything from a mild annoyance to disastrous to the project. The thing is, you don’t know, and you’re not going to know. However, the more planning you do up front and the more experienced your team, the less unknown unknowns you will get. Think of this as unknowable risk. # How to tell if your development team is working This is a great question that so many entrepreneurs don’t know how to answer. With designers, you should be able to see the designs they are working on and see the changes they’ve made. But with developers, how do you know what’s going on? ## Here is the secret. Watch their commits in their code repository. Better yet, integrate them into your communications system, such as Slack. This way, you can see every time someone adds something to the code base. A commit is an addition of code to the system. It doesn’t get integrated into the testing or live server, just into the code repo. Bear in mind that the number of commits aren’t necessarily representative of the actual amount of work being done. But if you have good Code Repo Branch Management, your developers should be committing for every different ticket they are working on and you should be able to see the code commits flashing across your desktop. You don’t have to know how to code to take a look and see if commits are being made.
### What this looks like in the code repository: ![](https://lh4.googleusercontent.com/X6hjGV9qvgDULPmMZuvIGdOd4SUMTQOvEkNJWBXhIuHCkJrCP5rzKVI5JJmgBjTPnP4aq_9p-LD2Tcukxkv0rFVA-QJwjAmiXoOJ8B5gU5Ar-PElBg7ZGAQYSSCwB3Z1zRRdciop) ### This is what I see on Slack when things are being worked on: ![](https://lh4.googleusercontent.com/oNoxU3lmKWP-UQUcg3xs6uqeeW8mmz-gj7VcbCGMvuWbYdoIq-h8Bq7gQRgXqwJZ2nc3opU1AdSMj3nIe4uqO9fwlQtfa5XOE-OGaxYPluErUAp-sdIqGh1wMLJJFmon5BpEXh9U) If I know who is supposed to be working, when their deadlines are, and that they are doing development, I know that I should be seeing this kind of thing coming across my desk all the time. If I don’t see commits being made some particular day, I know that person is either not working or working on something really complicated where they are not making commits or taking a long time to make commits. # Good, Cheap, Fast. Choose Two. This is a fundamental concept to understand. [One of my first videos was on this concept.](https://www.youtube.com/watch?v=ERRz7Ju5EpE) It is simple, but powerful. {% embed url="" %} ## If it’s good and cheap, it won’t be fast. If something is good and you don’t spend much money on it it, the odds are whomever is building it, isn’t going to build it fast. That is because if you have someone who knows how to build something well, they are in demand from other organizations to build the same kinds of things. They are almost always going to prioritize the thing that is paying them more -- because they have to.
This is especially true in SaaS development because these systems are large, complex, and time consuming to build, and anyone who is worth their salt is in demand to build these kinds of systems right now. ## If it’s good and fast, it won’t be cheap. For exactly the same reason as the previous item, if something is done well and done quickly, it is going to cost more. You have a set amount of time it will take to build the system. The only way to decrease the amount of time is to decrease the functionality of the system in one way or another. So if you build it well, it costs more time, and to fit more hours into less days requires more people or longer days. Both of these increase your cost. ## If it’s fast and it’s cheap, it won’t be good. Think you’re getting a deal? One company is offering you something for a lot less than the others, so why not right? Let’s break it down one more time. It will take a set amount of time, with some variance but not that much, for any company to build the system. One company is cheaper and faster, that means they are using less expensive people and more of them. There is a bottom in pricing in this industry, no matter where you go in the world. Development is a worldwide business, so people in countries that have a lower cost of living that really know what they’re doing still know what they can charge, and it isn’t $10/hr.
So think about this, if there is a minimum rate for good developers, it will take a certain amount of time to do a project within a slim variance, and you have set number of features and thus time required. Then if someone is offering a cheaper price and to do something fast, they are either cutting time somewhere or don’t know what they’re doing. Unless they specifically show you that they have done the thing in the past, they almost certainly don’t know what they’re doing and you are going to have to start over. ## This applies to all types of teams What people don’t think about when they think about this rule is that this applies no matter what kind of team you’re working on. A SaaS project ALWAYS takes a certain amount of time, no matter who does it. Often times, more experienced, and thus more expensive people are faster. But the project still takes a certain amount of hours. So, if you have a team you put together, an agency, or your good friend Bill Gates doing this for you, if they are cutting or you think they are cutting you a deal these principles STILL APPLY. So remember, if someone is going to ‘cut you a deal’ and you value time or quality of your product, know what you’re getting into. Caveat emptor (buyer beware)! # Positivity is Key in Management ## Good people working hard Doing development work with good people and keeping them working is all about positivity. In development, you are dealing with tens, hundreds, hundreds of thousands, and very often literally millions of variables. People, especially entrepreneurs who want and need movement, see the mistakes. That one spelling error or broken image is all they can see, especially if they are in charge of the sales and marketing. But it is important to remember all the things that had to go right and all the work that had to get done to get to the point where you only see that ONE MISTAKE. ## It's easy to see mistakes Someone just missed one thing out of a million, so be careful how you address those issues. It is important to take into consideration what people did right as much as what was done wrong. When you see a mistake, think about all the other things that went right to get to that point, then think about the relative amount of work it will take to fix that one issue. Next think about the impact of an upset email vs. a positive one. It makes a big difference, so be careful with your words. Happy people work faster. If your team feels appreciated, they will work faster and harder. # Storytime: The Story of a Ton of Lost Users and Money! Story Time with Jason: The Story of a Ton of Lost Users and Money! This is the story of how not taking the time to investigate different technologies, seeking different opinions, and letting things go without oversight put me into a position of losing tons of money and time. We realized after a substantial amount of investment that the platform we were using as a fundamental piece of our system was not going to have the resource management systems necessary to support the amount of on-page data the system was creating. This was my my conversation with the lead developer over chat as we were preparing to rebuild this major aspect of our system. > “I started implementing a hybrid app with the two frameworks side-by-side and communicating both ways. The challenge here is to properly seal off the new app components from the old ones. This way I try to shed the architectural complexities of the angularJS app and create something new and clean” one of our lead developers said to me about BrainLeaf. > “How are you feeling about it?” I just replied. > “It’s a complicated system, with a lot of moving parts. We’re never going to make my initial time estimate.” He said. > “Yeah, I kinda figured. What do you think?” I asked. “Three times expected? Four times? More?” > “... probably 4x” he said after a long pause. “Sorry.” I had known when he gave me the first estimate that he was an optimist. I knew upfront it was going to take a lot longer, but I wanted to believe him so badly, so I did a little. But now the sun was rising on reality and I had to look at the facts while simultaneously keeping my team motivated. > “It’s alright.” I typed out, thinking about how this was going to affect my current users, how high my churn was going to be, and how many people I had worked so hard to get that were going to drop off. It was going to hurt pretty badly. > “We should have done this a long time ago. It’s my fault for waiting” I said. It was my fault. But the decisions made to that point were not wrong. Had I planned this out a little better, I wouldn’t be in this position. I just didn’t know I needed to plan so much at the time. > “We’ll get it done as fast as we can.” he said. > “I know you will. You always do. Talk soon.” I typed out. It hurt, and I could have avoided it so easily by planning a little harder instead of pushing forward to move on things. I had picked the wrong development platform because it was easy; I had listened to a previous developer and not done my homework myself. Now I had to redo a major part of the system that had become unusable because it didn’t scale well. The total cost in hours was in the hundreds. The total cost of a bad development decision that had to be rebuilt ended up in probably the tens, maybe even hundreds of thousands of dollars. {% hint style="info" %} **So how do you avoid choosing the wrong systems?** **Easy. Here are a few simple steps:** * **Do your homework** and understand what you are building. * **Choose the right team** that understands that language or platform. * **Ask lots of questions** by posting onto Stackoverflow\.com and other forums to ask tons of people what they think about your plan or your team’s plan. * **Ask other people who have done this before**. Join SaaS groups like the Facebook Group [SaaS Growth Hacks](https://www.facebook.com/groups/SaaSgrowthhacking/) and ask SaaS entrepreneurs. You can also reach out on [StackOverflow](https://stackoverflow.com/) to developers all over the world with your questions. * **Post onto private Facebook Groups** like the one noted above to SaaS entrepreneurs and developers and ask them for suggestions. * **Hire someone that has done this before successfully.** {% endhint %} # Development is iterative ## The path isn't curvy, it's circular. Development follows a path, but is, at the core, an iterative process. It almost never happens that a developer gets something perfectly right the first time they do it. Development is testing and testing is development. This is a misconception I’ve seen many times over the years. Clients think that testing can be skipped or skimped on, but it is a part of the development process and any cutting back on this means that the system will be incomplete. Additionally, the improvement of systems is iterative. The best set of features that can be built within the given amount of time is built, promoted, sold, and then reviewed for customer feedback and iterated on in the next release. For more information on the general process, [take a look at the chapter on Continuous Integration.](/saas-build-process/steps-to-developing-a-saas/continuous-integration) # Development Time Increases As Complexity Increases ## Development Time Increases As Complexity Increases When you think about it, it makes perfect sense. The problems are that: 1) most people don’t think about this; and 2) most people don’t consider by how much complexity increases in projects. These two issues can cause some serious issues in planning and build if they are not considered. ### A quadratic increase in time Sounds complicated, doesn’t it? It’s not really though. Let’s walk through this: 1. If you have 2 features that send data to and from each other, you have an in and out connection each way. So that is 4 connections of data. 2. If you have 3 features, then you have 12 connections. 3. At 4 features, if all features have to connect to one another, then you are at 24 connections. 4. If we skip 5 and move up to 6, now we are at 60 connections! ![Features to connections](/files/-LaOiBp6vtCu2G0pclBI) Each one of these different connections generally has some kind of graphical or interactive representation, but no matter, they all have to be checked. Let’s make it simple and say that each item takes 10 minutes to check and there is and issue with one in every 10 items that takes an hour to fix. If you had two features, the system would take you an easy 40 minutes to check and according to our formula, probably no issues to fix. But if we took it to a six feature project, now we are looking at 10 hours to check everything and 60 hours (you didn’t read that wrong, it is 60!) to fix the problems, and that is a very simple model! ![You can also just do the math on this as 2-way connections = n x (n-1)](/files/-LaOiJ_Z-H9vdvZS-dy6) If, when you are planning the build time of the system, you plan only the build of the features and not an extra level of time for a thorough debugging and review, you are going to underestimate your build, your costs, your time to market, and generally just be very upset. But now you know, and you won’t make this mistake, right? # Storytime: Don't Send Me Shit It was the first time I was looking over the system and within a minute I had already found a handful of critical bugs and was getting frustrated. “Why would you even send me this to review?!” I was fuming to myself. “This is shit work. Don’t send me shit or I will just send it back.” I started typing in an email to the developer who had sent it over. “I don’t mind taking a look and digging deep to find issues that aren’t apparent, but at least check your work before you send me something to review.” I said in the message. But before I sent it out I caught myself. This was my fault. We didn’t have a good process for debugging on this project, this was a good developer whom I had worked with a lot over the years. This was was clearly a process issue. Rather than hammering on a developer who was probably doing the best as he could, I decided to pull back and reset the process. The project was small, but it still needed a thorough QA process. Instead of sending out an angry email, this time I sent out an email to the PM on the project and asked her to implement a more complete QA process for the project and I opened up the resources she needed to get the work done. A week or two later, I received another email asking for a review. There were still issues, but they were hard to find and not what I would expect to see a developer catch. I was happy to go through and find every issue I could from that version of the system. {% hint style="info" %} **PROTIP:** It’s easy to blame a developer for not checking their code, but at the end of the day it’s your fault if the proper processes aren’t in place to support your developers. They work at your bidding, so do what you need to do to make them successful. {% endhint %} # Story Time: The Best of the Best People say they want the best of the best, but when it comes down to it, then want what they can afford. Over last many years in this industry, I’ve worked on a number projects large and small. The most experienced team I’ve worked with though has been from a quantum computing company building SaaS solutions for enterprise-level clients. This is a company that solves worldwide problems. They are a Silicon Valley funded company with a seed round of 20 million dollars and a Series A round at 45 million dollars. When they got their funding, they went out and found the best of the best of the best team members to take on leadership, operations, and development, and it shows in everything they do. I was so impressed the first time I met them and continue to be impressed every time I meet with them. They know what they’re doing inside and out, have experience in many different areas, understand development, marketing, sales, business, and personal interactions, and anyone of the team leads could (and probably has) run their own enterprises. So, if you want a team like that one that really, really knows what they’re doing, you need to consider the cost. Each one of those heavy hitters is probably being paid 120k and up, probably more like 175k and up, they have a swanky office in a nice part of an expensive city, full medical benefits, and all the things it takes to attract and keep a best-in-class team. Over the years, I’ve been told over and over, “I want the best of the best” by prospects. But when I explain what the best of the best really entails, it suddenly becomes a different story. If you’re looking for the best of the best, great, just know for what you’re really asking. {% hint style="success" %} **PROTIP** For most companies looking to build a SaaS system, for the MVP build if you’ve got some investment capital but not much more, I strongly recommend hiring a [SaaS development company](http://jhmediagroup.com/) (like [JH Media Group](http://jhmediagroup.com/)) that has a specialty in what you’re doing. They will know all the stuff you don’t know and be able to get you going fast. Companies like that already have the foundational systems prebuilt. This way they get you started a lot faster and will cost less to get going. {% endhint %} # Sunk Costs Before you get started, I think it’s an important time to discuss my projects that got to the point of being built and never got off the ground. More than anything, we need to talk about the concept of ‘Sunk Costs’. If you think back to your Accounting 101 class in high school or college, this may sound familiar to you. ## A ‘sunk cost’ is: A cost that an entity has incurred, and which it can no longer recover by any means. Sunk costs should not be considered when making the decision to continue investing in an ongoing project, since these costs cannot be recovered. (taken from: [AccountingTools.com](https://www.howtokicksaas.com/saas-build-process/things-to-know-and-expect/www.AccountingTools.com)) What this means to you is that just because you spent all this money and time getting this thing ready to go doesn’t mean doing it is the right choice. This is also known as the “Sunk Cost Fallacy”. The misconception is that you make rational decisions based on the future value of investments and experiences. The truth is that your decisions are tainted by the emotional investments you accumulate, and the more you invest in something the harder it becomes to abandon it. ## The status of my projects To illustrate this, let’s take a look at my personal projects that did and didn’t get started at or before this point: ### Started but didn’t finish * Incentivs - sales gamification, just like what is now Ambition.com * Dogwalkit - pretty much just like Rover.com. * Leadbutton - lead gen system ### Started and failed * RIS - practice management system for diagnostics imaging * The GuideFor Platform - ratings and reviews system for specific industries * Guide for Seniors - Content platform for seniors and the caretakers of US senior citizens ### Started and Growing * Map Dynamics - Web-based mapping, agenda management, and sales system for trade shows, focused on associations. * BrainLeaf - Project scoping, approval management, digital signatures, and financial reporting tool for digital agencies. We use this extensively at my agency, JHMG, so it is always growing. * Medrev - Reputation management for larger healthcare groups, outpatient care, and hospitals. Just getting started, but looking good so far. * Diagnostics Marketing - Marketing platform and productized services company for diagnostics imaging Right now, we’re running 4 for 10. Not great -- or so it seems. What is important to note here is that I got started, realized I didn’t have some aspect of something I needed to do the project, and abandoned it. In most of these cases, had I gone forward, I would have failed. But I didn’t realize it until I did some or most of my planning and actually got going on the project.
{% hint style="info" %} **PROTIP:** If you don’t feel good about it, don’t do it. You’ll probably just be throwing your money away anyway. {% endhint %} The application build process should only be started in you have done all of your planning. I want to say it again for you so you don’t waste your money and time: THE APPLICATION BUILD PROCESS SHOULD ONLY BE STARTED IF YOU HAVE DONE ALL OF YOUR PLANNING. So don’t stop here and start building; read the rest of the book first. # Your SaaS MVP Pre-Development Build Checklist Before you get started, you should have most or all of the following items completed. This list does NOT include any of the marketing tasks, just system build tasks. [Marketing and traction is covered in the marketing, sales, and traction chapter.](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.ihvpvx62eeam)\ \ TO DO | CHECK IF DONE | Done? | | ----------------------------------------------------------------------------------------------------------------------- | ----- | | Project is validated and you are 100% sure people want to buy it so much they have already pre-purchased it | | | Have researched major groups of users, know what features they want, and have determined what value metric you’re using | | | Different plans and their costs figured out | | | Pricing page is planned out | | | Team is selected | | | Tech stack decided | | | Project management system is selected and team has been informed on how to use the tool. | | | Project plan written, approved, and accepted by all team members and stakeholders | | | Information architecture written | | | Your documentation system is planned and prepared | | | Admin panel data-management needs outlined and planned | | | Payment system chosen, accounts set up, and bank accounts connected | | | Unit testing system chosen and integration planned | | | User processes generally planned | | | System transactional emails planned and designed | | | User flows designed | | | Page designs and views created and agreed upon | | | Integrations with other systems generally planned out | | | Initial user tagging and triggers planned | | | 3rd party systems to be built into your system considered and planned | | | Development environment is set up | | | Code repository system is selected and a repo is set up | | | Remote systems deployments prepared | | | Automations server for continuous integrations is selected and planned for deployment | | | Dependency and systems costs generally planned | | | 3rd party systems costs planned | | | System build labor costs estimated | | | Operational labor costs estimated | | | Initial marketing & advertising costs determined | | | All initial costs have been funded and ongoing costs planned or funded | | | You’re feeling good about this? | | #### # Appraisement: SaaS Pricing ## The Levers You Can Pull SaaS pricing is one of the most important aspects of building your system, and the one that most businesses spend the least amount of time focusing on. So many SaaS entrepreneurs I’ve worked with or spoken to put together their pricing over the course of a day and never change it afterward for fear that someone will get upset. ## How do you know? So my question to them is, “How do you know you got it right?!” It’s a super important question, and one that could lead to the growth or death of a SaaS company! Why spend all the time and money on a SaaS system if no one is going to buy it? Also, if you’re not able to scale because or are losing money because your prices are too low, then you can’t provide the best value to your customers. Finding the right pricing system is what enables you to live the best life and provide the best value to your customers. {% hint style="info" %} **PROTIP:** This area will walk you through the basics of what you need to know to price your SaaS, but what you really need to do is read the Price Intelligently SaaS Pricing Strategy book. This is one of the best and most important documents you can read before you start, during the build, or during the growth and scaling of your SaaS business. READ THE BOOK. {% endhint %} # SaaS Pricing Metrics ## Pricing is the foundational sales point of your SaaS Your pricing model is the difference between a thriving SaaS and a dead one. Understanding your people/markets, your presentation, and why you price the way you price is absolutely necessary to your success. If you’re looking at this now and thinking to yourself, I’m more interested in building the thing and marketing it, and I don’t really need to worry about how it’s priced, there is a good chance you’re going to fail. So don’t skip this chapter. Metrics are how you make decisions. And with the right information, decisions are easy. ## SaaS Growth is based on Customer Lifetime Value Being Greater Than Customer Acquisition Cost So let’s start out with the most basic aspect of your SaaS business: Revenue - Cost = Profit. Simple right? Now let’s take it a step further for your SaaS. In just about any business, including SaaS, you have the following major concepts: ### Lifetime Value (LTV) LTV is exactly what it sounds like, it is the lifetime value to you of a customer. This means that if the average customer pays you $10 per month and generally sticks around for three years, then their lifetime value is $10 x 36 months = $360. You will have different types of customers that pay more or less, get value out of different aspects of the system or use more or less resources in the system, and last more or less time. These are defined in-depth by the different customer personas a bit later in the book. ### Customer Acquisition Cost (CAC) This too is exactly what it sounds like. If you add up all the work you're doing to attract new customers, then divide this by the number of paying customers you brought in, then you have your CAC. ### LTV to CAC It stands to reason that if you're going to stay in business that the LTV has to be higher than the CAC, right? But by how much? According to [PriceIntelligently.com](http://priceintelligently.com/), it always needs to be higher than 3 to 1, preferably a lot more. That means that for every dollar you’re spending to acquire a customer, you’re making 3 dollars. According to the [same source](http://priceintelligently.com/), if you continually optimize your pricing, you can get this up to 11 to 1. Let’s examine this a bit more because it is **really important** that this part is clear. Let’s say your LTV to CAC is 3 to 1. That means that you made $3 for a spend of $1 and now have $2 left over to 1) improve the customer experience and 2) operate the business and 3) have some money remaining (profit) for growth. It would seem like if you made $3000 and spent $1000 to make that much, then having $2000 left over would be enough. But it isn't. When you actually do the numbers and add up all your costs outside of marketing you realize that it costs a lot of money to run a business. If your competitors are operating at say a 5 to 1 LTV to CAC, how long do you think you're going to be able to compete with them? So that's the name of the game. Maximize LTV & minimize CAC while keeping your customer experience optimized, system working, while growing and staying competitive. # SaaS Pricing Metrics Glossary ## Concepts & Acronyms Before we go any further, let’s break down the basic concepts and acronyms we’re using. This is not a complete glossary of Growth Metrics, just the ‘What you absolutely need to know’ list. For a full list, check out the reading in the [ProfitWell Learning Center](https://learn.profitwell.com/l/en). Also take a look at this article on [Medium to see how other SaaS systems pitched or presented their metrics](https://medium.com/collectops/saas-startup-average-monthly-revenue-and-growth-rate-82eab2109657). ### Annual Recurring Revenue (ARR) This is how much revenue you are generating on a recurring basis each year. This is not the same as your monthly recurring revenue because you may have customers who have purchased annual or lifetime memberships to your SaaS or discounts you offered during the year. These kinds of variations make it important to note ARR as well as MRR. ARR = Total revenue in a year that is expected to renew the following year. ### Average Revenue Per User (ARPU) This gives you the amount the average user is worth in revenue. This could be by any amount of time, but is often calculated per month. This is a [great article on ARPU](https://learn.profitwell.com/l/en/article/5p6WEspQR6-arpu) and how to use this metric. ARPU = Total revenue for time period / Total number for time period ### Churn Rate or Attrition This is also known as attrition, stated in the 3 A’s of SaaS. This is the annual rate at which your user stop using your service, or churn. Churn rate helps you determine the lifetime value (LTV) of a customer. Churn rate is an important factor for many reasons. Understanding what is causing a high churn rate and how to reduce that churn is very important to growing your SaaS. When churn rate is positive, it means you’re losing customers. However, churn can become negative as well. This essentially means you have a money machine since you aren’t losing any customers, but instead are just gaining them. That means that for every dollar you spend on your SaaS, you make much more. Churn rate = # of customers who left / total number of customers ### Customer Acquisition Cost (CAC): The cost of acquiring a new customer. This price is different for different kinds of customers. Very often, but not all the time, the cost of acquiring a customer that pays you more money or has a higher lifetime value (LTV) is higher. CAC = Total Cost of Marketing & Sales / # of Customers Acquired You can also break this down into channels by determining the number of customers acquired by, say, outbound campaigns, divided by the number of customers acquired with that method. ### Growth The total total amount of new subscription revenue from new and existing users in a given month. For growth, you also have to take into account your churn rate. Growth = New subscriptions + upgrades - churn ### Month over Month Growth Rate (MoM or M/M) This the growth of this month over the previous month. MoM = (Current month total revenue / Last month total revenue) - 1 ### Lifetime Value (LTV): This is how much money you will make from a customer from the time they signup and pay their first bill until the end of that customers lifecycle with your business. The problem with this metric can swing drastically based on retention. That means that if your retention drops quickly, your LTV can drop as well, even though they may come back the next month. So it’s important to understand that this metric is not always accurate. It will give you a good idea you can work with, but you need to understand how it swings. You could work a smoothing variable into this formula, but we’re going to keep it simple for this book. LTV = Average Revenue Per User (ARPU) / Churn Rate to date Or in other words: LTV = (Total revenue to date / Total number of users to date) / (# of customers who left / total number of customers) ### Marketing Qualified Lead (MQL) This is a customer that has been, generally via an automatic system, vetted as a potential customer. The MQL is a person that usually downloaded a lead magnet and followed up with some measured actions that put them into the MQL category. ### Monthly Recurring Revenue (MRR) How much total money you have coming in from subscriptions each month. This is measured per month, so if you are growing, your MRR this month should be higher than last month. MRR = Amount of recurring revenue from the most recent month ### Sales Qualified Lead (SQL) The SQL - not to be confused with Structured Query Language which is also abbreviated as SQL - is a lead that has been vetted by the SALES TEAM. This means that a sales person has usually talked to them and designated them as a sales lead. They are usually the closest to closing as a sale. ### Value Metric This is the item or items that you are selling that scale with your customer’s needs. The most common value metric is the number of users. So as the number of users in the system goes up, so does the price. The value metric needs to increase along with the value of the system to your target user. There can be multiple value metrics for a SaaS that scale with different kinds of users. # Science of Pricing ## SaaS pricing isn’t rocket science, but it is science In SaaS, pricing is part your marketing, your sales, your system, your upgrades, your conversations, your growth, and your happiness within the business. In some ways, it is the business. Your pricing model should be based on a [scientific model of evidence based decisions](https://en.wikipedia.org/wiki/Science), and the people that are going to give you the answers to those decisions are your customers. If you’re not talking to them, you’re not doing your job. ## Pricing Aspects in SaaS There are a number of techniques noted in the [SaaS Pricing Strategy](https://www.priceintelligently.com/developing-your-saas-pricing-strategy) book that outline what questions to ask your customers to determine their: * Willingness to pay * Interest in different features * Interest in different kinds of pricing models As well as what price points create the most sales vs. the most revenue. The SaaS Pricing Strategy book does rely exclusively on the the economist [Van Westendorp’s Price Sensitivity Meter](https://en.wikipedia.org/wiki/Van_Westendorp%27s_Price_Sensitivity_Meter), which is a great place to start. But there are also [counter-arguments to this method](http://mmrstrategy.com/why-you-should-almost-never-use-the-van-westendorp-pricing-model/), which I think are valid.
### Price Sensitivity Meter Questions There are four questions from Van Westendorp’s Price Sensitivity meter: * At what price would you consider the product to be so expensive it is not worth buying? (too expensive) * At what price would you consider the product starting to get expensive, so that it is not out of the question, but you would have to give some thought to buying it? (Expensive/high) * At what price would you consider the product to be priced so low that you would feel the quality couldn’t be very good (too cheap) * At what price would you consider the product to be a bargain - a great buy for the money? (cheap/good value) Rather than delving into how to ask these questions the right way, how to find the right price for your company, and why that price may or may not be right, it would be better if you just read the books I mentioned on SaaS pricing already. They do a great job of exploring this concept. Especially if you’re sell at the enterprise level, I highly recommend one of my favorite short reads on value-based selling [Breaking the Time Barrier](https://www.freshbooks.com/assets/other/Breaking-the-Time-Barrier.pdf), by Mike McDerment the founder and CEO of [Freshbooks](https://www.freshbooks.com/). He also happens to be a really nice guy who randomly took me out to lunch one day and schooled me hard on the differences between small business and enterprise accounting systems. But that’s another story. ### Methods of SaaS Pricing What [Breaking the Time Barrier](https://www.freshbooks.com/assets/other/Breaking-the-Time-Barrier.pdf) delves into is the difference between [value-based pricing vs. time-based pricing](https://www.brainleaf.com/blog/running-a-business/value-based-pricing-vs-cost-based-pricing-in-web-and-app-development/) for agencies. If I was going to wrap the book up into a few words it would be “If you are selling something in a market where the price can be based on the value you provide for your customers or clients, base your pricing on this.” This is also what is recommended in the book noted at the start of this chapter, [SaaS Pricing Strategy](https://www.priceintelligently.com/developing-your-saas-pricing-strategy) by Price Intelligently. What this means is that you are providing value to your customers, so your price should reflect the value you provide. There are other ways to price, noted in both of those books, such as cost-plus pricing (take your cost and add a margin to it) and competitor-based pricing (figure out what your competitors are charging and charge something close). The point is, if you are providing something that is exactly the same as what someone else is providing, they are probably going to just go with the other company. So figure out how you are different and set your price based on how much money you’re making or saving that client, not on how much it costs you or what your competition is doing. # What You Need To Know About Your Customers ## What you need to know to start: 1. Who you are selling to 2. Their needs and pain points 3. How you quantify their interests and needs When you’re selling a SaaS system, the more quantifiable data you have on each group, the more you can optimize their value, and your profits. ## What you need to know about people: * Who are they? * How would you describe each group? * What features are most important to them? * Why are they buying from you instead of your competitors? * What is the price point where each group thinks the system is valuable and worth buying? * What is your cost to acquire each different group? * What is the lifetime value of a user in each group? * What is the monthly recurring revenue from a user each different group? {% hint style="success" %} PROTIP: When you know how much it costs to acquire a new customer in a particular category, how much they’re going to spend with you & how often they churn, you have your formula for success. {% endhint %} # How To Price Your SaaS The process outlined here are the basic steps to optimizing your Average Revenue Per User (ARPU). ## Step 1: Who are you selling to? Remember lesson 1 in [validating your system](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.pml1kcfeyb5j)? Here is another place that lesson comes in. If you don’t know who you’re selling to, then you didn’t do your homework in the first place. Go directly to jail, do not pass go, do not collect $200. But I have a feeling if you’ve read this far, you probably know who you’re selling to, or at least have some idea. Now take all the groups you’ve got and segment them in three to five different major groups. ## Step 2: Identify the demographics of the groups that will pay the most and get the most value from your SaaS offering. **These are your highest value customers.** What you need to know for each group you’re selling to is: 1. Type of company 2. Company industry 3. Role, position, or title If possible, get as much info as you can. Information such as: 1. Age range 2. Income range 3. Male / Female ratio 4. Interests 5. Level of computer savviness 6. Education level 7. Anything else relevant to selling your SaaS Building a customer profile can be very quick or very difficult depending on your product. If you did your validation, you should have this already. But if you’re looking at this area with crossed eyes and thinking to yourself “How and I going to do that?” Then here are your steps: 1. **Start with who isn’t using your system.** This part is easier since there are a ton of people that aren’t ever going to use your system. For example, people that don’t use the internet are never going to use your system. Sounds silly, but I can’t tell you how many times I have brought up to clients that some of their potential customers will not benefit at all from their digital marketing efforts as they never use the internet. 2. **Next, work out your group’s expected professions.** In some cases this is simple, whereas in others it is really tough. After a number of Google queries and perhaps a bit of reading in some scholarly articles, you can usually identify some trends. 3. Now that you have a somewhat more narrowed field of users, i**dentify your expected male to female ratio and expected ages of your users as well as their income.** A lot of time this is a very telling item. You can often just enter your query into Google to figure this one out, but then sometimes you also need to do some deeper digging. 4. From here, you need to **infer some traits of these people**. If you suspect someone’s age, income, male to female ratio, and their profession, then you can probably figure out a lot more about them and will now have some ideas about their motivations, your real competition, and much more. ## Step 3: Determine Most Valued Features This is what you’re different customer groups are actually buying. For each group, there will be a different set of features people want. Of course there will be overlap, but different people’s roles in a business determine what aspects of your SaaS they are more or less interested in and value the most. For example, a CEO is going to be more interested in reporting than a caller at a call center. Conversely, the caller is going to be a lot more interested, relatively speaking, in the speed of the system than the CEO. So now list out which features you think each group is most interested in. That’s a great start, but the only person who is actually going to tell you what features they’re interested in are the users themselves. Now it’s time to actually ask them what they think! Put together a survey and send it out to everyone. Don’t have users yet? That’s what that [advisory board is going to help you understand](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.amc9hmutfksq). ## Step 4: What’s it worth to each group? Just like the last question, the only person who’s going to tell you how much they will actually pay is the customer. However, at least [we know what questions to ask them to get a good starting point](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.2l79hir37nrt) on each price point. So just like the last question, you’re either going to be sending out surveys to everyone, or asking that advisory board for some help with this. If you’re just getting started and using your advisory board, remember that this is a very, very small sample size and different regions around the country and around the world have very, very different values they place on systems. If you’re not using the advisory board, make sure the take a look at the [Van Westendorp’s Price Sensitivity Meter](https://en.wikipedia.org/wiki/Van_Westendorp%27s_Price_Sensitivity_Meter) for a list of questions to ask all your users. # Customer Types Case Study In your SaaS, there’s a very high chance that different customer types have different needs. For example, let’s take a look at our project scoping tool, BrainLeaf. This is a tool that enables users to find example templates of website information architectures (filling the knowledge gap), write out new website project information architectures quickly, and get digital signatures quickly and easily (filling the efficiency gap). ## User Types ### The Freelancer But let’s say that the buyer isn’t an agency, it’s a freelancer. What are they interested in? The reporting or the thoroughness of the document? The answer is, probably neither. They want speed and templates and a price on the system they can afford so they can do their job faster and make more money.
| Type of company or Industry | Marketing | | ------------------------------------------------- | ----------------------------------------------- | | Size of company | 1 - small business | | Title / Role | Creative Director | | Valued Features | Pre-built templates and contracts | |

Willingness to pay / acceptable price:

| Low, they don’t have much to spend. $0 - $10/mo | | Number of Customers | 125 | ### Small Agency Owner The owner of the digital agency is more interested in financial reporting on the profitability of the company as a whole, so reporting to them is a lot more important than the minutia of each project.
| Type of company or Industry | Development-focused digital agency | | ------------------------------------------------- | ---------------------------------------------------------------- | | Size of company | 11 - small business | | Title / Role | Founder & CEO | | Valued Features | Sales process management and per project profitability reporting | |

Willingness to pay / acceptable price:

| Medium willingness to pay. $75/mo | | Number of Customers | 255 | ### Mid-Sized Digital Agency COO The COO of a mid-sized agency is more interested in financial reporting on the profitability of the company as a whole, so reporting to them is a lot more important than the minutia of each project. | Type of company or Industry | Full-service digital agency | | ------------------------------------------------- | ---------------------------------------------------------------------------------------------- | | Size of company | 52 - small business | | Title / Role | COO | | Valued Features | Business operations streamlining, sales reporting, exporting data to spreadsheets for analysis | |

Willingness to pay / acceptable price:

| Medium willingness to pay. $250/mo | | Number of Customers | 90 | ### Large Agency Project Manager A project manager in a large digital agency using our system is a lot more interested in ensuring that their scope document is written correctly, their clients have given approval at every step, and that the people doing the work in a project understand what they are supposed to do. One slip-up could easily cost the company thousands of dollars, so the value of the system is high to this user. | Type of company or Industry | Digital Marketing / Web-design | | ------------------------------------------------- | ---------------------------------------------- | | Size of company | 500 - mid-sized business | | Title / Role | Project Manager / Account Manager | | Valued Features | Client approval management, team collaboration | |

Willingness to pay / acceptable price:

| High willingness to pay. $300+/mo | | Number of Customers | 25 | ### Enterprise CTO This buyer needs to better understand the cost of solving issues and needs better reporting and process management. | Type of company or Industry | Enterprise | | ------------------------------------------------- | ------------------------------------ | | Size of company | Enterprise - 14,000 | | Title / Role | CTO | | Valued Features | Cost per development task estimation | |

Willingness to pay / acceptable price:

| High willingness to pay. $8,000+/mo | | Number of Customers | 1 | As you can see, value is different for different groups, and so is the value they get from the system. {% hint style="success" %} **PROTIP:** Knowing your target markets = knowing how you deliver value. The more you know about each of these groups, insofar as what they want from your system, how much they are willing to pay, and what their buying style is, the faster you can test your hypothesis and implement more profitable pricing and optimize value for your customers. {% endhint %} ## Analysis on SaaS Groups Before we can figure out who is the most valuable and how we’re going to sell to them, we need a few more pieces of data for each type of customer. Per customer type, if we have ARPU, MRR, Churn Rate, CAC, and LTV, we can figure out who we should really be selling to. Let’s take a look: ![](https://lh4.googleusercontent.com/-UR_GzG8kAd4JnT5McliXCnEQusryCJ8bJedXomPRYPHBhDlqHdngAV5pJADzsRkPxzu_pe-9NKBY4tpsIFeybCNdTEXiK4gKgMA9V2-w0l8FcbDaZJpxPnfEmPdQYebQWL5-E2p) Now that we have the numbers and a little analysis, things look different. Please keep in mind that a ton of analysis could be done on this data along with other aspects of this data that are not shown here. The goal here is to give you a taste of what you could find, not go deep into this area. ### Freelancers Analysis This group has by far the most questions and the most problems, they require the most handholding, and call us the most. Because we deal with them the most, we thought that these were our biggest customer group. Turns out, we are wasting our time and money dealing with them!
They have a LTV:CAC of 1 to 1, so if we were to have focused on that group, which had certainly come up in discussions, we would have been in a really bad spot and the business would have failed. #### Our ideas to change this LTV to CAC were: **Increase price:** By increasing the price, we will increase our LTV. We would fit a smaller group of this segment, but they are losing us money anyway. **Cut Support:** Finding ways to cut support time for this group would cut our time working with them and thus our ongoing spend with a group that is not helping us grow. **Lower CAC:** First off, we could modify our PPC to come off of this group all together so we can lower our CAC. But then also cut our calls to users in this group. We were following up with phone calls to this group, which was a relatively large cost. But with this new data, it looks like a good idea to cut this expense. ### Small Agency Owner Analysis This group provides our highest MRR, but we can see now that the churn on this group is higher than we would like. So our immediate issue is to figure out how to lower that churn. This group falls partially into the value proposition of the previous group in that they are looking for templates as well as their main value which is more on the sales and management systems. So what do we do? #### Decrease Churn We are at a 5 to 1 LTV to CAC, but it could be so much better if we could lower the churn rate. By creating a new onboarding process for this group we could probably decrease churn right away. This group and the freelancers were getting basically the same onboarding process starting from a phone call, but if we were to improve users’ education as to how the system helps them at the beginning of the process and then follow it up with more specific onboarding emails, we could potentially decrease churn. Let’s look at what the impact would be for this: * Right now, we have a LTV of $937 for this group. That is ARPU / Churn, so $75/.08 = $937. * For this group as a whole that means a group LTV of: * 56% (this is the percentage of customers) of 500 = 280 users in this group * Times the LTV for this group of $937 equals $262,369 But what if we could take the churn down to 6%? That would be a new LTV of $1,250. So by doing this, our outcome could look something like this: * Old group LTV: $262,369 * New group LTV: $350,000 (with LTV of $1,250) That is a difference of $87,631 or roughly an increase in group revenue by A THIRD! ### Mid-Sized Digital Agency COO Analysis These sales are brought in by a professional salesperson that approaches these companies and pitches them on the system, thus the substantially higher CAC. We are at a 5 to 1 ratio for this group, and after an analysis, and especially compared to the next group, it looks like a lot could be done to improve here.
The churn rate here isn’t bad compared to other churn rates for this company, but what would happen if we brought it down by one point? Well, since it is a 3% churn, a decrease of 1% would thus bring our LTV from $8,333 up to $12,500! This group also values the data analysis and operations streamlining, which is a powerful aspect of the system, but like all powerful tools incurs a learning curve and substantial change costs from existing systems. So we have to find companies that are at the right spot for this system to be implemented. We could also improve some aspects of this portion of the system to better compete with enterprise systems that do similar things. This is probably the one of the top items that could be improved to garner more sales in this area. #### Decreasing Churn & Improve Feature Development Given the CAC and the overall LTV on these customers, the consideration is to add a new role to cater to this group and improve overall customer success. This role will focus on this group’s success by: * Forming an advisory board and private Facebook Group of top users in this segment. * Gathering specific user needs. * Pitching new features to this group * Providing personal tutorials for this group on how best to use the system. Additionally, the idea was pitched to do a “Done For You” option for select users in this group; we provide an analysis of their data for them in order to help their businesses while simultaneously providing ourselves a deeper understanding of their needs. #### Large Agency Project Manager Analysis Turns out, this is our best customer! Before we did our analysis, we had no idea! This one is, once again, a sales issue. Due to circumstances, this group is being catered to very well, and their pricing is looking pretty good. All we feel we need here is more customers. All these customers were acquired at the same time at one event. We did a really great talk at a project management conference that was heavily attended by larger companies. We had one user who had been a believer in the system from the very beginning who is well known in the industry and came up on stage after our talk and personally endorsed us. That day, we took a huge step forward with this group and focused on them heavily.
But, moving forward, we had a lot of irons in the fire and started getting a lot of freelance and marketing customers. Also, the conference moved to the other side of the country the following year, so we didn’t go back. Dumb, right? The second year, we were super busy and thought that we were doing so well that it didn’t matter. Well, after this analysis, we can see it really did matter. #### Increase Sales As you would expect, the answer to this one is ‘smack-you-in-the-face simple’: just go back to the conference and give more talks. We’ve already bought our tickets and are applying to speak again. In addition, we are looking for more conferences that would fit into this strategy. ### Enterprise CTO Analysis As you can probably tell from the numbers, we only have one client like this. This client is a friend, someone we’ve known for a long time who saw the value in what we’re doing. We worked a lot with his company to make sure they were happy, and put a lot of energy into keeping him happy. We have some attrition counted on this account because we have had different departments come off of the system and others come on, but the company as a whole is the only enterprise company we’ve got. {% hint style="info" %} PROTIP: Enterprise sales, from my experience, is very, very different from small business sales. Being effective at enterprise sales means that you have someone who knows the people in the industry and can just make a phone call to get in touch with them. When you’re selling enterprise products, if you are selling at the right price, it is worth every penny to get someone who knows everyone, despite their high price. {% endhint %} Because we don’t have much experience in enterprise sales, and because our sales were growing in other areas, we didn’t dig into this area at all. However, now that we see the LTV’s of every group, we see that this group has an LTV greater than the next highest group by a factor of more than 5! That is a huge jump! Given what goes into getting these kinds of customers, this is a sales problem. We just have to figure out if we have enough revenue to bring on an enterprise sales person and support them through their longer sales cycles. At this point, we are a bit nervous to redirect energy in that direction, but given the LTV on this kind of customer it looks like it may be a good choice. ### Who is the most valuable customer? This was the question we initially sought answer, but as you can see there is no one most valuable group. They all impact our bottom lines in different ways and all contribute in one way or another to the end goal of providing the best value. This analysis also highlights the importance of continuous testing and shows how the system is never ‘done’. As soon as we make the changes noted above, we’re going to have to redo the analysis again and make more changes based on that. You can see now how this kind of system is never going to be a truly ‘passive’ income system as some people would have you believe, if you want to optimize your earnings. It’s a journey and every step is always followed by another step. # Storytime With Brennan At a certain point, I had the opportunity to meet with [Brennan Dunn](https://doubleyourfreelancing.com/) after he gave a great lecture on where the internet was going next in digital marketing. I had chosen that lecture at the conference because I wanted to know what he had to say, but also because I wanted to talk to him about his previous venture, Planscope.io, and what happened to it. What he told me was right in line with our findings here. I approached him after his talk and introduced myself. I told him that my SaaS was a competitor of his and asked why he had sold Planscope. The lessons he gave in that five-minute chat were critical to the success of the system moving forward. He said: 1. With that system, I built a tool that solved a problem the way I solved it. But that doesn’t mean that everyone out there solves the problem like that. So I had to help people understand why they needed to solve the problem like this. 2. Next, because we were focusing on the freelancer market, we were dealing with people that didn’t know they had the problem until it burned them, and then they were out of the market. 3. The freelancer market has a ton of churn. You have a high cost of acquisition, then people leave the market for full-time jobs all the time. So as soon as you get someone, they are gone. 4. Finally, I built a tool when I should have built an audience. Had I done a better job of building a following that focuses on why scoping is important, it would have been more effective than building a tool. The tool should have been the last thing I did, not the first. Somewhere in the middle of that conversation, I found myself wishing that I had reached out to him so long ago. I might not have ever gone down the path of building the thing had I realized the issues. But there I was, and now I understood more about what I needed to do to get this thing going. Unfortunately, it was still quite a while until I could understand what metrics I needed to monitor and how to analyze them. # Pricing Page: The Most Valuable Page On Your Website So often, people think of their home page or features page, or sometimes their onboarding process as their most valuable page. But make no mistake about it, your PRICING PAGE is the most valuable page on your entire marketing website. The pricing page is where people decide if your product is 'worth it' or not. Your messaging on this page is what determines the buying decision. If it's too expensive, they're going to walk away. If its too cheap, your users aren't going to see the value. If there isn't a plan that speaks to them, then they won't identify their needs with the system. Understanding your customers, who they are, what they want, what price they will accept, and how your value metric or value metrics affect these users is CRITICAL to growing your business. The place where all this comes together is on your pricing page. So make sure your pricing page is well researched, well planned, and you know your customers! # Pricing Page Examples ## Put it to use in your pricing page Now that you know how to determine who you’re selling to, organize them up, what each group is willing to pay, and how your metrics all work together, now it’s time to present them with your pricing! {% hint style="success" %} PROTIP: So often, the pricing page is an afterthought to SaaS founders. But don’t be fooled, this is the most important page on your marketing website. {% endhint %} Now with all your knowledge on how these companies put together their pricing, let’s take a look at some examples and see how it looks now. In the examples below, you can see how each pricing page uses the following items: * Name of their target group * Amount the group is willing to pay * Value metric * Features most valuable to that group ## Sumo.com ![](https://lh3.googleusercontent.com/q2o8nsA1wQST3eMpMmU24eYSxitObjgRA0qd6eiw_1o0r1FhJ-styoG0peg7yhjmI0H_epwamlTQxeQdu53x4EAfxLJJoBPmWzKoDekLxKjQ6I4x-VXd-Om_y2ucmRZPQhe4Q7BH) ## Trello.com ![](https://lh3.googleusercontent.com/HPmjTaeC82jjCtzkRvosne0-ZHVyAb2YqYW4zI8kw6uf8buS-RTEusH3miAlPu01NVMO2MAxxRqkbQU3mtqbtsmApLuJoTkzgwwnqbJS6Lz_OB0vpN0e9f9FmOUNhRNkOZHmbz_n) ## Freshbooks.com ![](https://lh6.googleusercontent.com/BLJzBP4HWYgG7ECDOTyNJpNXF6sRuem1H1KkSiPmXFS-K6mCx1JhOEwI3SQIeSmmV2Vm3RcS4o94eLP3y3kh0zfTgNDsODLik-80QW614A2sCM6qii8D5VQb-pbbuXTM2L55WFOT) ## GitHub.com ![](https://lh4.googleusercontent.com/rXXXCZEt8881Y_Jsh00Bmz4fMXfXQKW7EYq4h1cS_LsD8GwuzdhEMdDYfMNYUHOln982QDtX_09LMWtTkH--JylBujtZsb2htAkZYGjO56x0TwbXG4hRhm89l5OUvtYc3wxjgF7n) ## Calendly.com ![](https://lh6.googleusercontent.com/u5wbJ6w-QNO5frWZQVXOnXjcx8frBEjxoDbtzJoAPGSkD-5_j_0dOqg4p_ON-POCPJGo3epGXj9CdZD76lS-p0ccs5NFvtNACSLoPrSjku394tL2Cs_J6gEqPyV0cHH-8TmhrJGa) ## Leadpages.net ![](https://lh3.googleusercontent.com/81MgSybG8xeXIA1bqKl-T6GvT0S3bjPfFdlkRiPldn7eHeuPvyfVSewGDDCOiVYdIYw0q7Rn9ZS42jUcG4xko-Oc36A94Wo7B_arbcGIY7Y8XMJdauUXfYLVHRjhjGSTn627DFbR) ## SaaS Monthly vs. Annual Pricing Now that you see the different aspects of pricing and the strategies different companies use to value their systems, you can also see when it becomes beneficial to price annually instead of monthly. It is all a part of the overall Acquisition, Appraisement, and Attrition/Retention strategy for that particular company and their customers. Very often, it is more valuable to drive a particular group or all users towards an annual plan. This does a lot of things, but on in particular is that it cuts attrition. If all you sell is an annual plan for a particular group, they cannot churn for at least a year. There are a lot of reasons why you may want to consider going towards annual pricing in your SaaS. # Acquisition: Getting SaaS Users When you’re first starting a SaaS, if you don’t have an audience initially, you are probably wondering where all these paying customers are going to come from. Right away, you probably did some simple math and realized that if you just had 200 or 300 users you’d be doing fine. Well, if you are solving a problem worth solving (validation) and pricing the system at prices where your different groups of users are willing to pay (appraisement) and you can make money, then it’s just a matter of informing people why your system is available and better than the competition or whatever system they are already using. Simple, right? Actually, it is. Like anything else, it's easy if you know how to do it! ## A SaaS is a sales and marketing company As we discussed at the [very beginning](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.20a57b33e84t) and throughout this book, when you run a SaaS business, you are running a sales and marketing company. That means that, if your SaaS is to succeed, you are either very well-versed in digital marketing and sales or that you are about to be. Since the advantage of a SaaS system is the scalability and growth via the internet, I am assuming you are not growing this business by door-to-door sales. Thus, you are planning on marketing on the internet, known as digital marketing, to grow your business. #### Digital marketing for SaaS falls into the following categories: ### Organic Search Marketing Organic search marketing refers to the process of people searching for a problem, solution, business, or search term and finding your business. ### Marketing Automation Marketing Automation is the strategic automation of repetitive tasks in digital communications to produce new leads or upsells from existing users from platforms and systems including nurture emails, social media posts, direct emails, and even texts. These systems grow usership and keep current users engaged. Aspects of automated marketing often include: * Teaching users as to how to use the system * Educating users on how to grow their businesses with or without your system * Educating your user base about industry trends that apply to them. * Improving user engagement with your company * Supporting users by answering questions and responding to their issues ### SaaS Lifetime Deals A one time or limited offer deal where you provide a certain level of access, generally unlimited, to your SaaS system to users for a one-time flat fee. This kind of marketing system is most often used to get the system started and gain initial users. ### Community Building Community building is the act of growing online communities that come together to support one-another or who have a common issue or set of issues. This engagement involves active and non-invasive communication. ### Affiliate Marketing This is a method of sales by which other people sell your products for a commission. ### Outbound Campaigns ### Conversion Rate Optimization ### Social Media Marketing ### Pay Per Click Advertising
## Before you start trying to build, you should have a solid foundation. Just like building a house, you need a solid foundation before you start putting up your frame or laying bricks, or the whole thing is going to fall apart and you’re going to have to start over anyway. So let’s recap before we jump in head first! By now you should in the very least have: 1. An understanding of what you’re getting into. 2. An idea that is validated. 3. A specified market that you know how to reach. 4. A SaaS system that is basically working. 5. A few key users who are giving you feedback and paying. 6. An onboarding system that makes it easy and intuitive to use the system. 7. Emails ready to go for new users coming into the system to explain to them how to use the system. 8. A tagging system, or at least the start of it, and triggers in your system that enable you to understand who is doing what and what level they are at. 9. Some of your users’ initial requests for changes and upgrades to the system. 10. A system that is starting to come together. The problem that most businesses have at this point is that they don’t have the list of things above, especially the first items, so they are stuck as to where to go next. But not you! You read this book before you started and are all planned up and ready to rock! So now, it’s time to grow this user base and add some revenue to your system! If you’ve got everything you need, just jump on down to the next chapter. ### But that’s not everyone, is it? If you already built your system and are thinking to yourself, “Well crud. I don’t have all that stuff. Where the heck was this book when I was just getting started? Why didn’t anyone tell me this stuff before I poured all this time and money into my SaaS? Jason, what do I do now!?” \ I had a feeling you’d be getting to this point and asking those questions. I asked similar questions when I got to this point the first time. Don’t worry, it’s going to work out alright. Take a look at [SaaS Lesson #2](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.gedzqlmoxd5p) and remember this happens to lots and lots of people. Also, keep on reading, you might be sitting on a goldmine and just not realize it yet. :-)
# SaaS Traction Lessons ## Lesson 1: In the beginning of a business, you have to do things that don’t scale to enable things that do. “Hey Jason, next time you’re in South Carolina, look me up, we’ll get some lunch” I was told by a very influential potential partner for one of our SaaS systems. “Of course, if I’m around, I’ll look you up. I don’t get up there very often.” I responded. “Just let me know.” he said as we said our goodbyes and closed the video conference. What’s the right move now intrepid SaaS adventurer? 1. Go on with work as usual building systems, working with team members, and selling through our general processes and making money the same way you have been. 2. Find a reason to be in South Carolina to meet in person with your new friend. If you chose B, you chose correctly. Find a reason to be there, spend the money, take the time because it’s worth it. Let’s say it’s going to take me two days of time and $500 to get there and back, but with the potential to access a huge market, of course it’s worth it! In the beginning you have to do things that you know won’t scale in order to access things that do. This applies to most businesses, but especially SaaS businesses because they can scale so much. ## Lesson 2: Know your competitors inside and out I can’t tell you how many SaaS companies I’ve met with where in the first meeting we showed a list of competitors and asked how the product compared and the leadership team or entrepreneur didn’t even know some of their competitors existed. In fact, I am guilty of this myself. When we were first getting BrainLeaf launched, there were a few competitors out there that were brought to my attention by different people at our business.
It’s hard to be on top of everything all the time, especially once you’re in the middle of building or launching a new product. That’s why it is so important you do your homework first and don’t wait for the system to be built before you start researching what could crush your business. Next, make sure sign up for your competitors’ products! They are already doing this and have already learned a lot of lessons. Don’t be afraid to do a demo with them, see how their system works, analyze their onboarding systems, etc. The first step in beating them at their own game is to know where they are strong and where they are weak. It may sound cliche, but I think this is a great time for some Sun Tzu. In his classic book [The Art of War](http://classics.mit.edu/Tzu/artwar.html) it is written “If you know others and know yourself, you will not be imperiled in a hundred battles; if you do not know others but know yourself, you win one and lose one; if you do not know others and do not know yourself, you will be imperiled in every single battle.” So know your product, your team, your strategy, and your direction. But also be sure to know your competition, what they offer, how they charge; understand their customer service, where they are going with their company, where they focus and why. Most of all, know where you are strong and they are weak and where your competition is strong and you are weak. With this understanding you will be able to put together an advantageous strategy. ## Lesson 3: SEO is critical in SaaS If you are running a SaaS business, you are going to NEED to understand Search Engine Optimization (SEO). Every single SaaS CEO I know that does not directly sell via trade shows and personal relationships utilizes SEO. The corollary is that, a lack of understanding in SEO is the beginning of a lot of wasted money. Make no mistake and have no misconceptions, if you are going into a SaaS business, you are going to become a digital marketer. I recommend starting off by reading the [Learn SEO](https://moz.com/learn/seo) portion of the [Moz.org](http://moz.org) website. It is a great place to start. But it’s just a start. Next, get out your credit card, put on those reading glasses, and sign up for the [SEMrush.com Digital Marketing Pro academy](https://www.semrush.com/academy/). If you take this course, you will know how to get ranked. Which brings me to my last note on SEO in SaaS: pick your keywords up front. You need to know what keywords you are going to ‘own’ before you start. After you’ve read through the SEO guides above, understanding what you’re going to be able to own, compete on, or let go of will be much more clear. ## Lesson 4: Building a community is key to insight The more you know your buyers, the more know you what to do to make their lives easier and what they will pay for that convenience. If you don’t have a community, in one way or another, your time to figure out what people want is going to take a lot more time. Also, your community is made up of people that want your project to work, so they are a lot more likely to tell you what they like and don’t like. Read [more on community building in that chapter](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.v2flreeisau3) later in the book. ## Lesson 5: Affiliates won’t do anything unless you incentivize them This lesson is echoed in the section on affiliate marketing, but it is important enough to bring up here as well. This is the secret to affiliate marketing. Affiliates, for the most part, will do basically nothing unless you make them or incentivize them heavily. They are already running their own businesses, and while selling your product may be an easy way for them to make more money, they are busy running their own businesses. Don’t expect for them to do anything unless you lay it out for them in a way that is so easy no one can mess it up. ## Lesson 6: Sales is not marketing and marketing is not sales Very basically, marketing is getting someone to sign up for your SaaS. Sales is getting someone to pay for it. Sometimes these overlap, other times they don’t. A lot of SaaS companies start off marketing and don’t follow it up with sales. Getting on the phone with your users makes a huge difference and helps you learn what they need. So take it a step further, get to know your people first hand, and SELL them on using your system! ## Lesson 7: Making people put in a credit card up front gets you better customers in the beginning. We were doing a launch for one of our SaaS businesses and had a number of people get upset that they couldn’t look around without putting in a credit card. They wrote us, they wrote the people helping us put on the launch, they posted negative things on Facebook and other forums, they complained, they moaned, and they were generally not nice. Now that I think about it, not a single person who was upset enough to write about it was nice about it. And that is exactly why we didn’t want them. People not willing to invest at least enough time to risk putting a credit card, without even a charge, are not the kinds of people you need when you’re first launching your product. If you’re interested in more on this, [I even wrote an article going deep into this here.](http://jhmediagroup.com/blog/2018/04/21/saas-paywall-to-get-the-right-customers/) If you’re wondering if you need to start off with a freemium model, make sure to take a look at this one. Not to say that the freemium model shouldn’t be used or isn’t a good idea. Sometimes it is the way to go. But when you’re first starting, start with the people you want to be using your system. # Acquiring your first users The process below outlines how to get those first users, after your advisory board, into your system. ## Step 1: Friends, Coercion, & Testimonials At this point, you: * Have been using your advisory board to review and give feedback on your system. * Have sold the first units to the people on your advisory board. * Know that people value the system enough to pay for it. Now it’s time for some good old-fashioned cajoling and coercion! What you’re looking for here is testimonials from people in the industry. You don’t need people to actually use the system, just to go on record saying it’s exciting and that they are excited about it. The higher up and better known they are, the better. Reach out to people in your network, people you know online, or just people that are associated with the industry. The further they are away from a personal relationship with you they are, the harder the testimonial will be to come by, so figure out who you know and take them out to lunch. Tell them that you are looking for their feedback and take the good feedback and ask them if they can quote them on what they said. Most of the time, face to face, they will say yes. Take their testimonials and put them up on your website along with their name, title, company, and photo. You’re looking for things like: * “This is the most exciting system I’ve seen in a long time for FILL IN THE BLANK in INDUSTRY NAME!” - John Doe, CEO Supertechnology Company * “This system is going to change the way we do business.” - Ronny Headhoncho, CTO, NAME OF COMPANY. While you’re at that meeting, move on to step 2: ## Step 2: Ask for referrals You’re at lunch with your buddy, or maybe just some guy you just met, the CEO of a company that could use your system that was referred to you probably by someone on your advisory board. You’ve got their testimonial and their permission to use their words, now it’s time to ask them who else they know who would be interested. When you do this, don’t make it salesy, just ask who might be interested in giving you advice on the system or using the system. The key is to ask for names of people who can give advice, not sales (unless the meeting is going really well and your lead is already talking about who else you need to talk to -- otherwise, just ask for people to help you out). ## Step 3: Close some deals If you’ve repeated the step above a few times, you’ll have some people interested in your system. If your system is easy to use, easy to sign up for, useful, and all the other things you need to make a sale and you’re sitting in front of someone who’s interested, all you need to do is ask for the deal. ### Here is how you do it: You: “Yeah, your friend John Doe at Supertechnology Company gave us this great testimonial. So what do you think? Want to get started with the system now?” Them: “Yeah, I think this is something my team would really use.” You: “Great, let’s get you signed up! You can cancel at any time.” Pull up the signup page and enter their info and ask for their credit card to add them to the system. Them: “Sounds good, here you go.” Sale closed. If the answer is ‘no’, reassess your product and appraisement. ## Step 4: Rinse, Repeat, & Reassess. Before you start selling this thing all over the web, you’re probably going to need to work with these initial users at least for a little bit. So plan on getting a few paying users, checking in with them regularly, asking them a lot of questions, and making changes in your system. For systems I’ve worked on so far, this process can last anywhere from a few weeks to more than a year. The larger and more complex your SaaS system is, the more iterations you’ll want and need in your system. Remember, you don’t need to be perfect, just good enough to get money coming in while keeping people mostly happy.
# Getting ready for growth Now that you’ve got some users, some revenue, some feedback, and are planning your empire, it’s time to get going on some things that are going to make a big difference to your long-term growth. There are a lot of different paths you can take at this point. It really depends on what problems you’re solving, your target marketing, and much more. So rather than dissecting all the different types of SaaS companies, we are just going to outline the general areas that are reviewed at this point and some features and ideas that are usually implemented. ## Onboarding Once you’ve got a few users you probably realize that the way you had people starting needs to be improved. This can be anything from additional work on the development side, to just additional education in the system. Optimizing your onboarding system can be the thing that makes the difference between people using your system and not. Other than the system actually working, this is one of the biggest areas of retainment that can be adjusted. Your onboarding system should teach people what the system does, get the necessary information, and enable users to implement the SaaS into their systems as quickly as possible. [Much of onboarding involves marketing automation. Take a look at that chapter for more!](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.acuxz7ut2uye) ## Letting people think they have a choice One trick that was recommended to me, and really works well, is to give people an option prior to or during onboarding to either watch a video on the system or sign up for a personalized demo before they can start using the system. What this does is let people think there is a choice, when in reality everyone always chooses the video. Because to set up a meeting is always going to take longer and no one wants to wait to just look around.
![](https://lh6.googleusercontent.com/-n3FcLqL-Xl1GXyF_pBRYPt4mhLMsRs3odrt169LHQtGIB8Uc0ELMYRmkud83kpxFFH-npD_gU_3hwZgHkC8A5_fkAxQj8gSHtgIFbT_YbeQnIq9j9nRiXQ-exqwsiQgc-KvCE9w) This way, rather than people feeling like you are forcing them into watching a 2 or 3 minute video, they are CHOOSING to watch the video. This system increases user understanding of the system dramatically, thus increasing retention rates, while making people feel good about what they’re doing. ## Make it simple (but not too simple) We’ve changed onboarding systems in SaaS systems so many times now. It is most often because the system initially implemented was good, but too complicated. I wish I could say it has to be as simple as possible, but it’s a balance. More often than not, SaaS systems start with too much information and have to cut back after the first version. ### ‘How to use the system’ onboarding emails One of the best things you can do to ensure users are using your system while decreasing attrition is to prepare a series of onboarding emails that go out to a new user when they sign up for your SaaS. These emails will go out every day for a few days in a row and will clearly state that there are only a few that will be sent as well as explain the use of a different system each day. These kinds of emails keep a user engaged in that critical first few days of considering the use of a new system. Scenarios for use and how the system was used to grow a company or accomplish a goal can be used as well in these emails to connect with your users. ### User tagging for better tracking and action When a user signs up they are tagged in one way. When they start a project, add a friend, add a teammate, implement a system, or use a feature, they can be tagged as such and given different information based on what they have done and how they have done it.
Since the different uses of different aspects of your system imply how likely or unlikely a user is to continue using the system, tagging users as such during their onboarding process can be an important aspect of the process that enables follow-up with users via email campaigns, direct campaigns, chatbots, and even phone calls. This is covered more thoroughly in the [marketing automation section](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.acuxz7ut2uye) below. ### Keep users involved with ongoing emails and outreach Sounds so simple doesn’t it? Just keep people informed. Keep giving them good information. Make sure they know the lights are on and that somebody is there taking care of them. The position responsible for doing this can be anywhere from an 8th of someone’s time up to easily a full time position or multiple full time positions; it is a lot of work to keep people abreast of everything that’s going on. For more on this, take a look at the [content marketing section](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.kor983y3blm7)! ## The Upsell Getting ready for a sale means having something to sell. Before you start onboarding people, at least for most SaaS systems, you should have an upsell waiting. Having the upsell can be the difference between getting by and thriving, or getting by and not getting by. This is a part of your overall pricing structure, so by the time you’re getting to this point, you’re probably already set on this. But if you’re not these are some examples of what your upsell might include: * The next level up in the system * Addons for the system * A done-for-you approach For many SaaS systems, the upsell is critical because it offsets churn. The people upgrading upgrade at a higher rate than the people churning, and that can make a huge difference to the business. # Organic Search Marketing ## Search Engines, your new best friends. Organic search marketing for a SaaS means that people search the internet for a need they have and your solution is shown. This is one of the most valuable aspects of marketing for most SaaS businesses because you can rank at the top of the search engines for the need your target market has and you don’t have to pay advertising costs to be there. **Make no mistake**, you will end up paying to rank due to the time it takes to get your content produced and distributed online. But if you pay the money to rank organically, very often the cost of maintaining a top ranked position is substantially less than paying for advertising. Additionally, when you rank at the top for one keyword, you are very often ranking at the top of search engines for multiple other keywords as well. ## It takes time to rank, so start early This section is placed at the top of the growth methods for two reasons. First, it is one of the most effective and second, it takes the longest, and so it needs to be started early. Even if you do all of your keyword research, planning, and writing up front and all your shiny new articles are live on day one, it will take several months to rank. There is often the question “Why does it take so long to rank?” Ever heard of the [Google Sandbox](https://www.brainleaf.com/blog/seo/what-is-the-google-sandbox-and-what-does-it-mean/)? Basically, when you launch a new website, Google and most of the other search engines don’t trust you. The search engine doesn’t know the difference between you and a scam or other predatory website. Just like any relationship, it takes time to build trust. In this case it takes somewhere between 3 and 6 months. But the easier you make it for search engines to search your site, the more likely they are to trust you sonner, so follow those technical SEO best practices and you’ll have a shorter wait. **Impatient? I get it, but I’m telling you it’s worth the wait.** ## Story Storytime: A dozen articles My team had a big push for content on a brand new business at the beginning of this year. We did our research and planning and then we wrote about a dozen articles of around 1,000-1,200 words a piece and posted them onto our blog all at once. Then we waited; well, actually, we worked our butts off on all the other marketing tasks on the list, but as far as content was concerned, we just kind of let it marinate. Six months later we started getting a ton of phone calls and we realized our contact form had been blowing up, in both a good and a bad way. A lot of people had been filling it out, but it wasn’t notifying us (that’s an unfortunate side story -- so test your contact form regularly because the last thing you want is to do all this work to get customers, and then ignore them). Why was everyone suddenly reaching out to us in the middle of the summer? That’s when we ranked number one. [Here’s one of our articles that ranks particularly well](http://jhmediagroup.com/blog/2017/11/13/improve-diagnostic-imaging-marketing/). We are now the top search result for at least five of the keywords we were targeting. Surprise, surprise -- people are finding us now! The real point of the story is that we put a bunch of energy into content marketing before we did any other marketing. Because of that, we went from zero to number one in a matter of six months and had a ton of people wanting to buy our thing. And we never spent a dime on ads. Google’s magic mojo takes time, so don’t expect results right away. If you go through the steps in this chapter you will rank. But no matter how great your articles are, it won’t happen overnight. # Content Marketing Is An Investment ## Content marketing is an investment for your SaaS business Yes, it’s going to take a good chunk of time or money to get through your baseline content, but it’s really going to end up saving you a lot of money in the long run. Comparing content marketing to paid ads is like comparing buying an oven and a refrigerator to going for take-out. Getting your kitchen to the point that you’re able to store food and cook is going to cost a lot more than a to-go box of kung pao chicken, but once your appliances are up and running, you’re going to be saving money long-term. ### Paid ads are like ordering take-out. It’s relatively easy, it’s fast, and it keeps you from getting hangry. It’s a nice add on to the typical grocery store to refrigerator to oven method of keeping your belly full, but it’s not reasonable to rely on take-out alone unless you have a ton of money and aren’t too concerned about a healthy diet. Content marketing, search marketing, SEO, organic ranking -- whatever you want to call it -- is not only a worthwhile investment, it’s a necessary one. ## If you skip this, it's going to hurt. It’s a hard truth, but you don’t have much choice. I have met a lot of successful and not-so-successful SaaS business owners over the years and, with the exception of a few enterprise level systems, I have never met anyone who has been successful who has skipped or half-assed this step. Take the time to do this right and it will be so worth it. Remember, this is how your customers are going to be able to find out that the thing you’re building even exists. Search marketing is an entire industry, and this single book cannot teach you all that you need to know to effectively continue to rank at the top all the time. So instead, this book will show you the basic things you NEED to know, a few tricks that work very well for SaaS systems, and give you places to grow your knowledge. # Step 1: Keyword Research ## Step 1: Keyword Research Keyword research is the process of figuring out what keywords you should, can, and cannot rank for. This process also gives you a method for ranking for those keywords. If there was one single growth item that I would recommend, it is to do your keyword research before you ever write a single article. I made this mistake, I know tons of people who’ve made this mistake, and every time they realize the depth of the mistake, every one of them regrets it (including me). The total initial research time on this process is about a day, but the lost time from not doing it is weeks, months, or potentially more! So take the time on this one. #### Project goal: Find a list of keywords that your users are searching for and know how hard or easy it is to rank for each one. #### Follow-up goal: Create a list of articles that could be written that will rank you for those keywords.
## Search Volume and Google The first step to keyword research is learning what keywords people are searching for, aka search volume. You may think you’ve got that all figured out already, but even if you have some great ideas, you don’t know until you know. This is about variations in language as well as related topics of interest. If we just went for the keyword “scope of work” without doing our research, we wouldn’t have realized until stumbling upon it down the road that people are also searching for “statement of work”.
To find your search volume I recommend using [Google’s keyword planner](https://ads.google.com/home/tools/keyword-planner/). If you’re already spending money on PPC ads this will be easily accessible. If not, you can still use the tool, but you’ll get a range instead of an exact number. A lot of other keyword tools provide search volume too, but Google is the most reliable. There’s going to be a bunch of other info that Google gives you beyond search volume, I recommend you set that aside for later since it mostly relates to PPC.
## Negative keywords: Eliminating what you don’t want In Google’s keyword planner, enter your best guesses of what people would search for and you’ll get about 1,500 suggestions. Some of those might be way off base. For example, I was looking for keyword ideas related to improving doctor reviews. Google suggested several dozen terms related to headphone reviews, which seemed completely unrelated. Then I realized the connection they made: Doctors => Dr. Dre => Beats by Dre => Headphone reviews. Once I realized what was going on it didn’t seem so silly. Afterall, he is probably one of the most popular doctors around. Here’s where negative keywords come into play. As entertaining as Dr. Dre and his headphone reviews may be, they were cluttering up my keyword list. So I eliminated “Dre” and “headphones” by adding those as negative keywords on my search. If you’re running PPC ads, negative keywords will need to be revisited in that arena separately where they are even more important. For SEO you could always pick those negative keywords out one by one (though you wouldn’t want to). But for PPC you pay for each click an off target search produces, so don’t forget your negative keywords on PPC! ## Filters Exactly whose search you care about will depend on your specific SaaS endeavor. Is it only people in the US? Is it only searches in the past six months? By now you know who you’re looking for and adding filters will give you a better picture of searches that actually matter to your cause. ## Pruning your list Don’t bother reading every suggestion just yet. Once you have a decent list from Google, export it and go through them one by one deleting any that are too far off base. Ask yourself, who would be searching for each term. In my keyword research targeting terms doctors or hospitals would be searching for I realized that hundreds of suggested keywords would actually be things patients would search for. “How to leave a Yelp review for a doctor” is pretty clearly a patient’s search, but some of them required a little more thought. In any case you don’t need all 1,000+ keywords that Google listed, so weed them out. During this process and all of your future keyword research steps you will likely think of things to add to the list, which is a good thing. You might even want to go back to Google and get more suggestions, which is also a good thing. Even if your list is gigantic, don’t be afraid to add more. As you go through your suggestions you’ll get ideas and the terms you add yourself are often the most targeted and valuable.
{% hint style="info" %} Note: CRTL+F is your friend here and throughout your keyword research spreadsheet journey. {% endhint %} ## Keyword difficulty Once you have your list looking nice and relevant, you can move on to the next step which is difficulty. This is the most important data point for your keywords because it tells you whether a term is worth pursuing or you’re wasting your time. Keyword difficulty reflects how much effort you’ll need to put into that keyword to rank for it. Difficulty is scored between 0 and 100 with low scores being less difficult. If a keyword has a lot of people or really powerful sites vying for it, the difficulty will be higher.
![](https://lh5.googleusercontent.com/03TS2wlxXuYkQ2DoZLCvIlUr6NcRzPK5BI9gqoaKnwP3w3v4e2hMf1Ece3RfvFn-1tA3h99h64BRyuj4ZKabY_pd_cxz7uQSnWJq9M3IP12zNefwqBIyF3apns6SaSIyVmoDZmrC) There are several systems that you can use to find your keyword difficulty. I recommend [Moz.com](https://moz.com/explorer). It’s easy to use and has a ton of data that is very reliable. You can run a few searches each day for free, or you can set up an account, which will be necessary in order to provide depth to your research (and is free for 30 days). That way you can run a list (or several) and just drop your data into your spreadsheet. Once you get your data in one sheet, match up your volume and difficulty using a “Vlookup” spreadsheet formula. ## Assessing your most valuable keywords Now that you have all the data together you’ll have to turn on your brain to assess what keywords are actually best for you. If you’re just getting started with SEO then you want to go after the lowest difficulty keywords first. Ideally, that means keywords with difficulty of less than 20. If that’s just not an option for you then you can choose keywords that are in the low 20s and just work your ass off to rank for them. Pick out your favorite low difficulty keywords and highlight them so they don’t get lost in the mix. {% hint style="info" %} **PROTIP:** Sort out your difficulty, volume, and other factors by using conditional formatting in your spreadsheet to color code specific ranges of values. {% endhint %} ## Keyword groups Once you have picked over your keywords you probably still have a few hundred remaining. Now it’s time to sort them. How you group your keywords will depend on your business. Take this example. You launched a SaaS that helps people register for local dance classes. Your keyword groups might be something like this: * Latin dances * Ballroom dances * Tap dance * Line dance Or something like this: * Intro classes * Series classes * Kids classes * Private lessons Or a mixture of the two, or something else entirely, like location based terms. It really depends on what’s on your list. Basically, if you have a bunch of keywords related to a topic, make a new tab for it and copy/paste those babies over. ## Domain authority For those of you who are new to the keyword game, we need to discuss domain authority since yours is probably low. Domain authority is the strength of your domain. Higher is better and you can generally expect your domain authority to increase over time if you’re putting a decent amount of effort into your keyword strategy. Domain authority is basically brownie points that a site has earned with search engines, so their content is ranked higher than the same content would be on a site with low domain authority. You can check your domain authority on Moz or a number of other systems if you’re not sure where you stand. ![](https://lh4.googleusercontent.com/oe3rF32PdXD513vbGwoFRVKQVrvQxKF4LY8_-h0JWFyk5fFRsep93rU-G8_Cwl64OmjYmuyZ57_oo_ZB2zVBjdIiLxTZ39PlVn3IPzTSfygEwo_uQg_-6eCeWZ9kJGSQ9kdNmHvm) As a general rule, it’s a waste of time to try and rank for any keywords with a difficulty above 20 if your domain authority is below 20. If you want to compete on keywords with a higher difficulty, you need to boost your domain authority up first. ## Long-tail keywords: Your ticket to the top Alright, I know you just dumped a ton of stuff into your spreadsheet and then deleted most of it. But we are going to need to add more, and no matter how confident you are in what you’ve got so far, don’t skip this part. Long-tail keywords are more specific keyword phrases or complete thoughts. These are also often the kinds of requests that people ask verbally to Alexa, Google, and Siri (do people still talk to Siri?) They tend to have lower search volume, or may not even register on Google’s Keyword Planner. But don’t be deceived! Long-tail keywords account for 70% of all searches and they are far more targeted than short-tail keywords. On top of that, 15-20% of all searches have never been searched before, so new isn’t always bad. Let’s stick with the dance class registration system from our previous example. You’re working on your SEO and Google’s Keyword Planner gives you tons of suggestions with high search volume like: * Dance classes * Dance lessons * Summer dance classes * Sign up for dance classes * Dance classes near me These seem targeted, after all, the dance class thing is your thing. Then you go to Moz and find out that most of those have a fairly difficult rating. Bummer. Don’t worry, you didn’t want those any way. You want long-tail keywords. That means specific phrases that people are searching when they really know what they want and they are ready to take action. We’re talking things like: * Where can I take a 6 week waltz class in Nashville? * How much is a beginner’s hip hop class for teens? * Where can my fiance and I take private dance lessons before our wedding? These are the kind of things people are searching when they know what they want and they are looking for a specific solution. Those are the people who are ready to convert. So how do you know what long-tail keywords to go for? First, go after phrases are the most specific to the thing that you do. Then see what the top rankers for that phrase are. That’s your SERP analysis. ## SERP analysis SERP stands for Search Engine Results Page. Your SERP analysis is an assessment of the current top ranking results for a specific keyword search. Moz gives you some data on this, but really this one is going to take a bit of manual investigation. Let’s say you are trying to choose which of the long-tail keywords from the above example to try for. Start by plugging those into the Moz Keyword Explorer. That will show you the top ranking sites for the term and their domain authority. If the domain authority is high then search engines care less about their content. ![](https://lh3.googleusercontent.com/37HdA3Oa4Onl_ZQUDCdN4zzjXVT6K-hUMuO39jFznlX6KQbsEq7H-2EKRhTP4BBiVO_5amhNLKRh_8D9apZQ7ogsELXWU1jNIs9bKmeH5T4MjBZzLsQp2oyhV3BWGCnTulJc7rx8) Next, look at each of the top pages. Is the content, specific, lengthy, and well written? If the answer is not really then you might stand a chance. Often times I see pages ranking for keywords that aren’t even on the page. Google works in mysterious ways. How you rate your SERP is up to you. I usually assign a score ranging from one to five. ## What to do with that glorious spreadsheet Once you have all of these steps complete you should have a clear picture of what keywords are best for your business with a handful that really stand out. Maybe some these are the ones you had in mind before you started this process, maybe not. Either way the keyword research was worth it. There are two main ways to use your keywords, and you should use both. First you can sprinkle them around your homepage and other pages on your main site. These will likely be some of those short-tail keywords. What’s that look like? In my example, my tagline on my homepage might have been: “The easy way to find and register for dance classes in one place” Let’s imagine that from my keyword research I found that the keyword “Register for dance classes” had a difficulty of 52 which is just not going to work. But I also found that “sign up for dance classes online” had a difficulty of 33 (still hard but better than 52). So I change my tagline to: “The easy way to find and sign up for dance classes online” Easy right? Now do that for all of the content on your site. The second way to use your keywords is on your blog, which is more involved. So you need to start with a plan. # Step 2: Content Planning ## Step 2: Content Planning Throughout this entire process you’ve (hopefully) been getting ideas for some killer articles to write for your blog. **Hold up** -- what if you already have a bunch of articles you worked your hiney off on before you realized keywords were a thing? If that’s you, then take the time here to go back over those articles and sprinkle keywords in where they make sense. This should be a process similar to the way you sprinkled keywords into your site content. If they are not in your keyword spreadsheet, make sure you check the difficulty on the terms you’re currently using in your articles before you replace them with your new favorites. You don’t want to accidentally replace something that was helping your rank. If you’re starting from scratch or you finished sprucing up your old articles then it’s time to make a new spreadsheet to plan your content. That spreadsheet will have one article per row and columns for the title, keywords, links and other items. ## Let’s talk strategy There are a bunch of content strategies out there, but two main ideas: First you can write a bunch of small articles, around 1,500 words each. This is a good strategy for businesses that have a variety of keyword topics, multiple customer personas, or you just don’t have the time to write all your content at once. This is a good strategy for most people just starting out. ### The Skyscraper Method The other option is to use the Skyscraper Method. For this one you write one mammoth article of 10,000 words or more. This method is great for SaaS businesses that have the time to do a bunch of research up front and are focused on a single topic or idea. If after doing your keyword research you came to the conclusion that there was one clear article idea that was massively powerful like Jafar from Aladdin while all the others were basically just the sidekick parrot Iago without the annoying voice then this method is a good way to go. If you’re going this route, you’re going to be on a journey that lies outside the guidance for this book, but I will leave you with some tips to send you on your way. 1. Plan a backlink campaign. This method will set you up to generate great backlinks thus boosting your ranking. 2. Write smaller supporting articles and link them all to the main article. 3. Promote your main article all over the place. 4. Research the skyscraper SEO strategy. [This article is a good place to start.](https://blog.monitorbacklinks.com/seo/skyscraper-technique-seo/) If this is your mission, I do still recommend you read the next section as it will help you formulate a content plan, though it still needs to be tailored. Before we get started, a visual might be nice. Here’s an example of a real life content plan. ![](https://lh4.googleusercontent.com/fZ3aRf_QwN4gin6JJV7DDu4uFA0V6vbyaevssRGVfxbNAxpyGPyJzqFqAUlvrG4EP99Vy1kSQnaCFcgB1H_UU7GcLQI5skBFVMOo4QGqrCmnx6ebEXKwszlfJQvGcBea7H20CXSv) ## Adding keywords to your plan You might think titles come first, but..nope. Go back to your handy dandy keyword groups and pick out 3 keywords per article idea. They should all be high value (meaning low difficulty) and directly related to the main idea of the article. Make sure you put these in order of priority, with the keyword of the highest value or that is most directly related to the article topic first and the second and third keywords supporting that topic even if the wording is different. For our example I might plan an article with these keywords: 1. Wedding dance lessons 2. Private dance lessons for couples 3. Compare wedding dance lessons ## Article titles Turning your ideas into titles might be simple, but that doesn’t mean it’s always easy. The reason this wasn’t the first step is you will need to include your main keyword in your title. Not only does your title need to contain your main keyword, it needs to be catchy. For ideas on titles, run a Google search to see what other people are using for their titles. Here are a few that I saw: 1. Wedding Dance Lessons Atlanta, GA – Private Couples Lessons 2. Atlanta Dance Lessons & Wedding Dance Instruction - mywedding.com 3. The 5 Best Wedding Dance Lessons Near Me (with Free Estimates) Looks like most everyone is going with location specific content, yet upon further inspection most of those guys have written about a paragraph. ## My title is going to be either 1. How To Find Wedding Dance Lessons For A First Dance You’ll Never Forget 2. An Insider’s Guide to Choosing the Best Wedding Dance Lessons The first one is good because the keyword is closer to the beginning, but it’s a little long, so it will probably be cut off. The second one is good because it’s catchy, but I might change “An Insider’s” to something else. Remember, keywords get your article seen on search results, but your title is the thing that earns the clicks. So don’t be afraid to mull it over. ## LSI keywords This is the part of the infomercial where Billy Mays says “But wait there’s more!” As soon as your brain turns to mashed potatoes it’s time to find your LSI keywords. Those are Latent Search Index keywords and you’ve seen them before. They hang out at the bottom of the first page of a google search as “Searches related to…” Now that you have your three main keywords for your article you should pick out 2 or three LSI keywords to go along with them. There are a few systems you can use to grab these. I like [LSI Graph](https://lsigraph.com) (which is not a graph at all). Plug in your article’s main keyword and choose a few LSI keywords from the list to sprinkle into your writing. Add those to your content spreadsheet and of course check the difficulty if you’re torn between a few. ## Resources I add resources into my content plan, not because I am going to link to them, but for my writer (sometimes that’s me) to reference. Each article is going to require some research and resources will help you flesh out your outline and points to hit. I always add in the current site ranking at the top for my main keyword so I know what I need to beat. I also add any articles that my competitors wrote that were done well so I don’t miss any major talking points. ## Links Any good article should have links of two types, optimized and non-optimized. You should strive for a 50/50 balance as much as possible. Optimized links are links in which the anchor text (aka. The text that you’re linking to a URL) is the same or very close to one of your keywords. ### Here’s an example snippet from my pretend article: Your first dance as a married couple is one of the most memorable moments that you’ll share not only with your new spouse, but with friends and family. It can be tough to decide, but if you compare wedding dance lessons nearby, you can be sure you’re choosing the right instructor for your budget and schedule as well as your dance style. What would I link that to? Probably a page on my site that lets people compare dance lessons. If that’s not a thing, I could link this text to an third party article that explains how to compare wedding dance lessons. If your link leads to a third-party article you should make sure it’s not written by a competitor. Non-optimized links are those that use anchor text that is not one of your keywords. That could be anything from “learn more in this article” to “take the dance style quiz.” Like optimized links it’s awesome if you can link to another article or page on your site (internal link), but if not, linking to a third party source (external link) will do just fine. There is no secret ratio for internal vs external links, but try and have a good mix. {% hint style="info" %} **PROTIP:** The most important factor in linking is that the page you’re linking to is clearly and directly related to it’s anchor text and that everything is relevant to your overall article topic.
{% endhint %} ![Weighing importance: Cornerstone content](https://lh4.googleusercontent.com/c9ewgRY-vJq8eGAjBOIudu3Ufay43wKanWq6M6vGV3Q65K36BixdLlR3m0DMaVoEVikJNULY2C_zp24NahHtV7T1F0X0VKMwoRP75qCZnW2ktet1Wgxsts0RfLvD5g_ICAwHK9AZ) Some articles are going to be more important to your cause than others and that’s the way it should be. Your overall content plan should resemble a pyramid with the home page at the top, cornerstone content just below that, major articles below that, and long-tail keyword content at the bottom. Even if you don’t formally introduce the pyramid into your strategy, you should determine what articles will be your cornerstone content (ie. your most in depth articles on your most essential topics.) Your internal link structure should follow this pyramid patterns as well with links from the bottom upward and from the top downward. ## Putting it all together Once you have your articles planned out you’ll need to determine the order of the postings. Does one article build on the previous? Is there a topic you visit twice, but in different ways? Are there a few articles you know inside out and could get done with tomorrow? These are some of the things that will help you determine the best order to write and post your content in. You’ll also want to think about your schedule. Are you able to make a commitment to post one article a week? One a month? Or are you planning to write 10 articles before you launch and put them all up at once and take it from there? The point here is to figure out what you’re going to realistically be able to do and commit to it. You can always change your schedule later, but it kills your opportunity to build a returning reader base if you post 3 articles a month and then take a 6 month hiatus. # Step 3: Writing, Formatting, & Beyond ## Step 3: Writing, Formatting, and Beyond As with many SaaS marketing strategies, there was a lot of work to get to this point where the rubber meets the road. So, jump in the car, I hope you like road trips. One of the biggest mistakes I see businesses make with their content is that they look at all those articles they want to write and then hire someone overseas for $4.75 an hour to blaze through them. Sure you might get your 1,500 word article done for $20, but if the content isn’t worth reading, guess what: no one is going to read it. All that work to get top rankings and hard earned clicks, just to have a bounce rate through the roof is not going to get you the business you’re looking for. If you don’t have time to write the articles yourself, you’re in the same boat as just about everyone else starting a business. Don’t get me wrong, you can certainly hire a writer, but even the best writer will need training to understand your goals, your branding, your ideas, and how to utilize your content plan. If you think you’ve found one guy or gal that can take care of everything content related from this point forward, either you’re mistaken, you’re spending a fortune, or you’ve found a unicorn who is also a genie. There’s more than just writing to be done, there’s research, outlining and editing. Then there’s formatting, designing, and testing (not to mention analytics!). If you have a front-end developer and designer on your team, they will come in handy for the latter part. Otherwise a contractor or anyone on your team with HTML experience should get you by just fine. It’s so much! It’s not that much. Let’s go through it. ## Outlining and research Don’t skip it. It didn’t work out well on that college term paper and it won’t work out well here. Check out your competitors and other articles that go over similar topics and brainstorm those along with all those juicy ideas floating around in your brain. If my competition had an article about the “3 most popular dance styles in Chicago” I might not necessarily be writing about the “4 most popular dance styles in Chicago.” Or maybe I would be writing that article, but the point is that I would touch on those 3 dance styles and their popularity amongst Chicagoans if I am trying to beat out that article. When you’re outlining your article you should know that your formatting is going to matter in just a little while. What that means to you now is that the major sections of your article need to be about the three keywords you picked out earlier with an honorable mention for each of your LSI keywords. ## Keyword placement & article structure If you’re new to the game, or even if you’re not, I recommend starting out with some templates. You can find [free SEO templates online](https://offers.hubspot.com/blog-post-templates). If you’re more experienced you may consider writing your own template based on successful past articles. Whether you’re using a template or not, you ‘ll want your three keywords to be in corresponding headers as well as the body of the paragraph(s) beneath the header. So keyword 1 should be in your first \

tag and in the paragraph following it. Continue in that fashion with all 3 keywords. Here are a few tips on keyword placement and article structure: 1. The text beneath each header can contain additional headers, but make sure they are smaller than the three headers with your keywords if they are nested. 2. Add your main keyword to several places throughout the article. 3. Add your links to paragraphs that are focused on their specific topics. 4. Keep your paragraphs short. 5. Include formatting like bold text, italics, lists, etc where it naturally fits. 6. Include an introduction and a summary, both of which contain your main keyword. 7. Add a CTA after the introduction and after the summary. 8. Highlight each keyword and link so you can find them easily later. ## Reel them in with CTAs CTAs (aka. Calls to Action) are how you’re going to get people from your blog to your homepage, or whatever other page you need them to go to to take the next step toward becoming a customer. Some SaaS businesses use CTAs that really stand out from the article while others make them blend with the rest of the text to look less salesy. Only you, or A/B testing, know what CTA style is best for your business. A common CTA might be something like this: Looking for convenient and affordable dance classes near you? Click here to see how Dance Today helps you compare dance classes anywhere in the US for free! Hey, if that’s what I’m looking for, I’d click it! Here is a real life example of some good CTAs. ![](https://lh5.googleusercontent.com/Pxi99bS8CDYSiVFk15OZ9FeETgpMvupyGPzpShD71oUQGvswE2plTBPdpHMpZDZEWz8Oi6lZnomF-hLhXledwmf10LjE2Eezj4OByXKy57JZrTKKc-LX9nxRQSPwdOVMJrHvbSbK) ## The right way to write When you’re writing your articles the number one thing that makes people stick around to actually read it, or share it on social media, or remember you for more than 23 seconds after they leave your site is how much actionable information your article gives them to help them solve the problem they are searching for a solution to. Don’t throw up words on the screen just to get to a certain word count. In fact, don’t even look at the word count at all. It doesn’t matter if you write a million words. If it’s all fluff no one is going to read it. You are in charge of an entire SaaS system that is built around the topics you’re writing about.On top of that you have been doing research, on each and every article you write. You have a ton of knowledge and that’s what people want. So don’t hold back information. A lot of business owners don’t want to share their secrets, information they have collected, or lessons they learned the hard way for fear that their competition will get ahold of it and one-up them. Well, with the exception of stuff that should actually stay private, don’t hold back valuable information. The internet is big and mighty and people can and will find what they want if they look hard enough. They might as well find it easily with your article and bookmark it, or better yet, link to it. ## Formatting to your CMS Once you have your article written and edited you’ll be ready to put it up on your CMS. I’ve made the mistake of copying and pasting the whole thing in and expecting the formatting to come along with it. Unless you have some kind of magical Wordpress plugin that you should definitely tell me about immediately, the result is not great. It just won’t work like that. Whether you’re using a visual editor or HTML, please make sure to check out how it’s looking as you go. You don’t want to work for a half hour on this just to have to redo it. ### Images Blogs are just more fun with pictures. Not only do pictures make your articles more interesting and pretty, they help your SEO and decrease your bounce rate. But you can’t just grab any old image you’d like off the internet and put it up on your post. That’s stealing and it’s not allowed. Consider paying for something like Adobe Stock or Envato so you can get a ton of great pics. Or try a free image provider like Pixabay. Here are a few of my tips for adding images to a blog post: 1. Always rename your images and add Alt text. The description and Alt text should be in line with your keywords. 2. Make sure you resize your photos before uploading them to your blog or else they might affect your loading. 3. Have a designer create your featured images. ### Metadata The metadata or meta description is the preview text that Google shows below the article title in the search results. This should be attention grabbing, easy to read, and unique. Avoid all caps, incomplete sentences, or a ton of exclamation points. Use your main keyword in your description if you can and keep it around 160 characters. I like to throw in an attention grabbing statistic when I can. Here’s an example meta description: 76% of couples never learn to move to music together. Find and compare pre wedding dance lessons so you can have a dance to remember long after your wedding day. ### Pop Ups You see them all over the place, and I get it, they can be annoying. But I’m telling you, they work and they are the best way to coax readers over to your site or lure them onto your email list by offering valuable downloadable content. I use Sumo for my pop ups because it’s easy to use and versatile. There are all kinds of styles and I can’t tell you what works best for your audience. I have gotten a high click rate with a sticky top bar style as well as a slide in sidebar style, while other SaaS owners I know have found that the full screen doormat style converts best. {% hint style="success" %} PROTIP: A/B testing is crucial to find the sweet spot. Test your style, timing, imagery, wording, landing page, and anything else you can modify. {% endhint %} ## There’s more -- there’s always more This is the acceptance stage. There will always be more to learn. Once you get your process solidified, the internet will change and you’ll have to learn new stuff. There are big companies out there that do nothing but SEO and content marketing. And even they don’t know it all. Fortunately you now know more than most folks getting started and you can always read up on more specifics to beef up your rank faster. Here’s my recommended reading # Marketing Automation in SaaS Like search engine marketing, marketing automation is a huge subject and something that other texts can educate you more thoroughly on. This book aims to give you the basics, some tips and tricks, and get you started rather than fully deliver every aspect of this industry. Because of the scalability of SaaS businesses, if you don’t have a way to automatically to the following things regularly, it won't get done. * Reach * Engage * Educate * Converse This means you will lose out to other businesses who can and do. Marketing automation is *absolutely necessary* for almost all SaaS businesses, and the more your business can utilize marketing automation, the more you can grow. At first, it may seem like a simple set of tasks to create a few messages that go out to your people somewhat regularly, but when you start exploring the depths of what can and should be done, you realize the rabbit holes goes deep and may not have an end. ## The effects of marketing automation in SaaS ### Where you start: When you’re just getting going, you basically know who your users are and what they want. So you send them a set of welcome emails and then follow up with them every other week to tell them about how the product is progressing and what new tools have been added. Initial conversion rate: 3% - 5% ### Where you can go: 1. A new user sees a blog article or post on social media that they think they randomly stumbled upon (they didn’t). 2. The messaging happens to meet their needs perfectly and the system features are exactly what they are looking for (because it was tailored specifically to their demographic). 3. They click on the link and on the home page see someone exactly in their role accomplishing the goal they want to accomplish (because each user type has a different view that they now see). 4. The messaging on the page is exactly what they need to hear to get a trial started (because you formed it specifically for them), so they sign up. 5. The onboarding process hits their specific needs and focuses on their issues and the parts of the system they need (because you knew who they were and what issues they would have before they ever started). 6. After they sign up, the user receives a set of onboarding emails that match their role and and needs and explains how to integrate the system into their business (because you know exactly what this process is and how it works). 7. After getting into the system, a customer representative calls them to check in and seems to completely understand their business needs with a set of questions and answers that they clearly know fits the user. 8. Your potential customer decides that this company clearly understands their needs and solves their problems, so they are going to pay for the system. 9. After they start paying, they get ongoing educational information about their role and their industry with graphics that match exactly who they are (crazy huh?). 10. All of this is just the beginning. Want to guess on the conversion rates on this kind of user specified setup? New conversion rate: Would you believe 23%?! This is a REAL CASE STUDY. It actually happened. This business went from 3% - 5% up to an incredible 23% conversion rate. That’s a pretty solid increase. But there have been companies that brought their conversion rates as high as 50%. Now that is crazy. If you’re still wondering about the power of marketing automation, knowing your customers, connecting with them in ways they respond to, and solving their problems how they need them solved, now you know. ## What is and is not marketing automation in SaaS? Now that I’ve sold you on needing marketing automation, let’s talk about what exactly it is and is not. 1. Most people, when they first hear about it, think it is email marketing or a fancy way to spam people. It’s not. 2. People also think that it’s a ‘set it and forget it’ system. It’s not that either. 3. Finally, some people, once seeing what this kind of platform can do sometimes think of it as a magic bullet. It’s definitely not that. Marketing automation includes the following features or areas: * Campaign Management * Email Marketing * Landing Pages * Lead Scoring * Lead Management * Customer Relationship Management (CRM) Systems Integration * Social Media Marketing * Analytics ![](https://lh5.googleusercontent.com/C-cZBvW3CDScEHf80mTIdJVjpXWd4HSfLLoDrRgmazUoZ7Y4hLwwPVkyZFozdkdoPJv-hVy-AssZ8ABvemcL4D2EWmAkZofF5uu-Vjcf3VwteiCiCkdrX9DZR8AZWZbNya5gF0Vl) Just like everything else we’ve discussed in this book, marketing automation for SaaS systems is iterative. You have to constantly hypothesize, test, and retest to get to maximum efficiency, and no system is going to do that for you. Until the computers take over, it’s people that have to do this, and it is time consuming! # Marketing Automation Basics ## Marketing automation basics for SaaS Outside of explaining what Marketing Automation is for SaaS and why you need it, this chapter covers the things most SaaS businesses absolutely must have. The things that get you started and enable you to start analyzing data, iterating, and growing. ### The Customer Journey A customer goes from awareness to advocacy in the steps listed below. As we start looking at ways to give SaaS customers the right information, we need to start by understanding where they are along this path.
![](https://lh6.googleusercontent.com/7cUpQW1lqsUGKValk4d8NZhxXcJUNxWBQbPMwXdNsoUB8je2vZkaFlnjGqIXhukNLk3LjoKTI22kEdGFkw_eva_mPLDgamqFAeUYyZmjMJ1U5yBhy3HH_EJlbn8oFpMQv_uGGO-a) ![](https://lh4.googleusercontent.com/Ts_bFp2QVh5XfxO17DVSALEej8hAJa3PosNGlZUjjJsPMyVvxwASnvnNZ2cgfI-NTQnXO2hJTRizERQJ4rpjNjiGe9z1SUrN_LD264IRJ-ReNcEFqqAG6ccsS6K17UbfjfPyCFK6) ### 1. Unawareness * Do they know they have a problem? * If not, why not? This is a critical question for you! ### 2. Awareness They know they have a problem and are starting to look for solutions. ### 3. Consideration * The potential customer finds your solution among many possible solutions. * They educate themselves, review, read reviews and more. ### 4. Purchase They are ready to make a purchase and decide to do so. ### 5. Retention They are ready to make a purchase and decide to do so. ### 6. Advocacy * You did a great job and nurturing this customer. Now they have become an advocate for your product! * They become your most powerful sales tool and spread the word of your greatness! In order to know what to send to someone, you need to understand where they are in this journey as well as who they are as noted in [the chapter on Appraisement](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.y5okxgh434nx). Once you know those things, then you can build the right messaging for your soon-to-be raving fans and loyal customers. ### Let’s play a quick mental game to see why this is important. Let’s say someone comes to your website and gives you their email address to get the e-book on how to scope a SaaS project. You then send them a series of educational emails showing them how your system helps them scope SaaS projects. As they get these emails there are triggers in each one that help you decide who these people are. Depending on what they click on, you mark them as interested in one feature set over another, and slowing move them into one of your customer personas. Further down the journey, you have an avid customer that uses your system daily. Now you are sending them tips and tricks on how to use advanced features, templates you know apply to their needs, phone calls asking them how they would like to see the product improved, and an invite to the conference your company is putting on. All the while, the design of the emails they are getting and landing pages they get to are designed specifically for their persona, so they connect perfectly with it. They’re probably going to stay a loyal customer. Now, flip the communications. That doesn’t make sense, does it? Clearly, you need to know who is who and what their interests are in order to send them the right things. # Storytime: Learning about marketing automation the hard way ## Storytime: Learning about product awareness the hard way “Have you looked up the customer buying cycle? Maybe people don’t realize they have the problem you’re solving.” Pete told me as we were sitting on a bench in the Letna beer garden overlooking Prague. The garden has a single Pilsner Urquell stand with all the varieties of Pilsner Urquell and a little restaurant where you can get bratwursts. It fits snugly between the gardens in the trees and the edge of a high high hill overlooking the city center. From our picnic table, I could see the city and the castle off on the right in the distance. I sipped my beer and looked out over the city trying to figure out if all this time and money had been wasted. “Yeah,” I said. “Maybe you’re right.” I was in town for a digital entrepreneurs conference and Pete was in one of my mastermind groups. During the conference I learned about how Pete used to be a front-end developer who loved CrossFit and how he managed to move from being a services provider to running an fair-sized products company with a big following. He was now positioned as one of the world’s top sellers of Crossfit jump ropes. Having just started down the path of going from a digital marketer and developer to a SaaS founder, I was blown away by his stories. Sometime during the day I had asked the group about the SaaS I was working on at the time, BrainLeaf, and how to grow my sales. The group had immediately delved into the product, the problem, and much more. I got a lot of answers and a lot of ideas that day. After the conference was done for the day, a group of us all went out for drinks at the beer garden. Pete and I were the only two left as the night was falling and the temperature started to drop. “Can you expand on the customer buying cycle for me?” I asked as my skin started to bristle with the cool breeze. “Yeah, of course.” He responded, “Unawareness is that the person doesn’t know they have the problem. Awareness means they are aware of the issue, but may or may not be looking for a solution yet. If the problem is bad, then they might be looking. If not, then at least they know it’s a problem. Consideration means they are actively researching the issue and are looking for a solution. Purchase means, well, they’re making a purchase. Just like purchase, the next two steps, retention and advocacy, are pretty straight forward.” “I guess I just never really thought about it” I said. “From what you’re telling me, the problem is that the people you’re marketing to don’t know that they have a problem. It sounds like you need to either do a better job of marketing to the right people or form some kind of awareness building system.” he replied, looking at me, then looking down at his phone. “I think that is exactly the problem,” I said. “People who have the problem that my system solves are either experienced and already have a solution or they just entered the market, don’t realize they have an issue, get burned badly because they didn’t realize they had the issue and failed a project because of it, then leave the market. So that makes my pool of potential buyers a lot smaller than I had initially thought.” I said. “Well, maybe there are groups of people that are looking for a solution to this? Maybe check Facebook for private groups that are testing out solutions for this.” Pete said looking down at his phone again. I could tell that he was checking the time and, despite having half a beer remaining, probably needed to get going. “You could also maybe start a podcast or something that talks about how to solve this problem and create an audience around the issue. What I think you need is an audience before the product on this one.” he said looking at me this time. “You’re right” I said, “I wish I had talked to you about this probably three years ago.” “Don’t worry man. We all go through this. It happens to everyone, just keep on plugging away and you’ll get it. I went through the same kinds of things myself over and over till I got it figured out. Let’s talk again tomorrow at the conference about this, I have to get going to get back to my room for a call with the factory in China in about fifteen minutes.” he said before downing the other half of his beer and standing up. “I’ll see you tomorrow!” “Thanks Pete, that was super helpful. I’ll see you in the morning!” I replied, standing up to shake his hand. I turned back towards the city after saying goodbye and noticed that even more lights had come on and the sun set further. Prague was beautiful that night, but I was left trying to figure out if how I was going to deal with this awareness issue. It had me looking forward to the next day at the conference.
# Lead Scoring, Tagging, & Triggers I highly recommend reading [this Medium article by Myk Pono on Lead Scoring](https://medium.com/@myxys/how-to-design-lead-nurturing-lead-scoring-and-drip-email-campaigns-9961024f6605) as well as a great book on this, [The Definitive Guide to Lead Scoring by Marketo](https://www.marketo.com/definitive-guides/lead-scoring/). These texts will give you a deep dive into this area. In this chapter, I will try to distill both of those into a more simplified set of principles and actions for you.
![](https://lh5.googleusercontent.com/Dyd8RHamdkLdOk5MOGo35wQZdxbadOa_enwc0QpWrg4C45VMbjtl0L_8j-Ulz-s7yFDS2q4Al7CGOL8C7oXuY1HkyJIcdDekwUfUK5HRnAUxsFNU0rgsVFiMCldf3LM15aKnmyHo) ### What is Lead Scoring? Lead scoring helps you identify who you need to be talking to and what information they need to receive in an automated fashion. Lead scoring doesn’t specifically relate to emails, but in a lot of SaaS businesses, automated emails are a big part of the system. In many SaaS businesses, you have the following customer contact campaigns that should be in place. ## SaaS Customer Contact Campaigns First the email campaigns. They are the easiest to create: * Welcome campaign * Onboarding campaign * Nurture campaign * Product engagement campaign * Upsell campaign * Renewal campaigns In addition to email campaigns though, you also have things like: * Chatbot messages for different user types, flows, etc. * Different kinds of phone calls to be made to users * Direct mail * Actually visiting your customers (this really happens) Lead scoring is going to help you figure out who needs to get which campaign and when in an automated fashion. Before we can know what to send, we need to understand a few main indicators as well as the flow of the user lifecycle for a SaaS, then break them apart and put numbers to them: * What part of the buying process your user is in (described in previous section). * If the problem they have is what your SaaS solves * If their actions show them to be a valuable lead * Who they are or their customer persona, if that can be determined. Flow: 1. Visitor - someone that visited your website 2. Prospect - a user that downloaded a lead magnet 3. Activated User - a user that signed up for your system 4. Customer - a user that has paid for your system 5. Active Customer - a customer that paid for your system and is using your system 6. Loyal Customer - a customer who paid for your system and is increasing their use of the system. ## SaaS Email Campaigns Rather than building a complex formula, I like to think about this system in action or task focused process. In creating this system, we want to answer the question “at what point do I need to send what to who?” So let’s assign values and correlate those values to actions. How sure am I that I am talking to the right person for my product? First we need to know who they are. So let’s assign some simple values to what we know about them. Different SaaS businesses are different, but here is how we monitor people at BrainLeaf. These methods were built up over time and review of analytics. ### Visitor gets: * Educational information about their problem * Asked to sign up for the system or for more information so we can better qualify them. ### Prospect gets: * Product information * Case studies * Demos of the system * Sales presentation ### Activated User gets: * User onboarding * Tips and best practices * Offers for help * Regular Newsletter * Product updates * Educational content * Requests to become a paying customer * Unfinished flows ### Customer gets: * All items from activated user except for requests to become a paying customer * Customer onboarding ### Active Customer gets: * All items from activated user except for requests to become a paying customer * Upsell campaign * Notify user of usage limits * Feature benefits * New Releases * Promotions * Renewal campaign ### Loyal Customer gets: * All items from activated user except for requests to become a paying customer * Partnership campaign * Personal relationship/word of mouth building campaigns In addition to email campaigns there are a lot of other ways to reach out to your potential customers. These can be methods such as: * Chatbot messages when the user views your marketing site or accesses your SaaS * Social media messages or posts * Direct mail * An actual phone call * A follow-up phone call. {% hint style="info" %} **PROTIP:** When you’re first planning your SaaS business, make sure to plan plenty of time to work on all of these emails. For each email, you’re going to need design, copywriting, and some amount of development. It always takes longer than you expect to do these. Also, don’t think that you’re going to be done after you finish up the first version of these, you’re absolutely going to iterate on these as soon as they start going out. {% endhint %} When it comes down to it, for the most part the emails that users are going to get fall into the lists of items noted above. There may be some variation, but it usually goes this way. However, how do you know where to escalate the user to the point where your sales team takes over? ## Lead Scoring Lead scoring is based on two main things. The first is how much does the system solve their problems and how much does the user fit the profile to which you’re selling. ### Scoring Attributes The more we know about the user, the more we can determine where they fall in our list. The first things we can almost always get is their profile information. This includes the following fields: * Name * Email * Role * Company Size * Business Type For each of these items we can assign a score, the higher the better. In the points example below, the name and email are not taken into consideration in points, but we have to have these to process the user, so we require them. Depending on what your SaaS business does, you will need more or less information, but this is a good start. Next, we need to know if what the user is actually interested in what your system does or if they are just passing through. These kinds of actions are totally dependent on the system you’re building. Depending on your drip email and marketing automation system, you may have either simple or customizable lead scoring systems. If you can customize your lead scoring, my recommendation is to escalate to your sales teams based on a score you set up in the system. Below are some examples of how we initially set up our points system for BrainLeaf. It has since been changed, but it’s a good place to explore. ### Example Points System Remember, we are not looking for Freelancers. Our target personas are noted in the personas section in the appraisement section. * They got here by: * 10 points: * Referral from an ad * 5 points: * Our top blog article on how to scope a project, then they read the article for more than 5 minutes. * 1 point: * Everything else * Who are they? When a user signs up we usually know: * Their business name: no points assigned. However, we look at everyone that comes in and if the business is very large we will sometimes escalate that visitor directly to the sales team. * Their type of business: * 1 point: Freelancer - we like to know if someone is a freelancer or not * 5 points: Marketing - digital or traditional * 10 points: Development * Enterprise - business is escalated * The size of their business - with the use of a 3rd party system * 1 point: 1 person * 5 points: 2 - 10 people * 10 points: 11 - 25 people * 15 points: 25 - 100 people * More than 100: these groups get automatically sent to our sales team for follow-up every time * Their position within the business (CEO is marked in the middle because they are often freelancers and not really in our target market) * 1 point: Freelancer * 2 points: Founder * 2 points: CEO - this is often a freelancer, so it is scored lower. * 5 points: Project Manager * 5 points: Marketing Manager * 10 points: CMO * 15 points: CTO * Is their use of the system indicating that they need the system? * Did they start a new project? * 5 points: yes * More than one new project? * 5 points: yes * Did they use a template? * 5 points: small business template * 10 points: complex/development template * Did they add their teammates? * 1 point per teammate * Did they send a contract out to a customer? * 10 points: yes When we take a look at the totals, we can see the system groups itself. ### Scenario 1 | Action | Points | Running Total | | ------------------------------- | ------ | ------------- | | Got here from the blog | 5 | 5 | | Business Type: Freelancer | 1 | 6 | | Size of business: 1 | 1 | 7 | | Position: Founder | 3 | 10 | | Action: Started a new project | 5 | 15 | | Action: Small business template | 5 | 20 | | Total | | 20 | ### Scenario 2 | Action | Points | Running Total | | ------------------------------- | ------ | ------------- | | Came in from ad | 10 | 10 | | Business Type: Marketing | 5 | 15 | | Size of business: 7 | 5 | 20 | | Position: Project Manager | 3 | 23 | | Action: Started a new project | 5 | 28 | | Action: Small business template | 5 | 33 | | Action: Added 3 team members | 3 | 36 | | Action: Sent contract to user | 10 | 46 | | Total | | 46 | ### Scenario 3 | Action | Points | Running Total | | ----------------------------- | ------ | ------------- | | Came in from blog article | 5 | 5 | | Business Type: Development | 10 | 15 | | Size of business: 33 | 15 | 30 | | Position: Project Manager | 3 | 33 | | Action: Started a new project | 5 | 38 | | Action: Complex template | 10 | 48 | | Action: Sent contract to user | 10 | 58 | | Total | | 58 | ### Analysis: As you can see from these different scenarios, the groups we want get pushed up fast. Sales team members can work through top people first, then get to the lower level leads. If someone ranks very high, we can set up some custom notifications that they need to be contacted. Scenario 1 is definitely a freelancer and should be lower down the list to be contacted. Whereas scenario 3 is a mid-sized development company and should be contacted as soon as possible with a phone call. All we need to do is take a look at our leads list for the day or week, sort them by score start working those leads. The trick here is not to overcomplicate things. Just add the top indicators and actions, at least in the beginning. As time goes by and you have more data, add more indicators or play around with other triggers, but make it simple to start. ### Putting together Lead Scoring, SaaS email campaigns and sales In our scenarios, you can see that there is a pretty big jump between the first user, the Freelancer, and the second two groups. This jump makes it easy for sales team members to work the list. It also makes it easy to create other automations. For example, you could set an automatic action in your CRM for any user that comes in with a score over 60 to call or send a personal email. You could also set up automated emails to users that rank at a 30 or below that help them understand why they need the system as lower level users often fall into the first couple sections of the buying cycle. {% hint style="success" %} **PROTIP:** Lead scoring took me a long time to get figure out. It wasn’t that important when we first got started, but when we started to grow it became important fast. People need to know what to do first, what’s most important, and what their processes are for different scenarios. If you set up a good lead scoring system it can make a big difference in how well and fast you process users and make sales. {% endhint %} # Marketing Automation Systems ## Marketing Automation Systems At the time of writing, recommended systems used to set up these automated emails, manage lists, manage the automations and triggers, etc. are: * [Drip.com](https://www.howtokicksaas.com/acquisition-gaining-saas-users/marketing-automation-in-saas/www.Drip.com) * [Convertkit.com](https://www.howtokicksaas.com/acquisition-gaining-saas-users/marketing-automation-in-saas/www.Convertkit.com) * [Activecampaign.com](https://www.howtokicksaas.com/acquisition-gaining-saas-users/marketing-automation-in-saas/www.Activecampaign.com) * [Marketo.com](https://www.howtokicksaas.com/acquisition-gaining-saas-users/marketing-automation-in-saas/www.Marketo.com) These days, there are hundreds of great systems out there for this kind of thing, so pick your poison. I like Drip.com a lot right now, but my team is constantly working with new systems. It’s probably that I don’t like spend money if I don’t have to. What’s working well for us now is a mixture of Drip.com as the email automation system, paired with Pipedrive and a set of zaps from Zapier. We integrate all these systems into Slack so the team can see what’s going on all the time. ### A common systems that I would NOT recommend for new SaaS are: * [Infusionsoft.com](https://www.howtokicksaas.com/acquisition-gaining-saas-users/marketing-automation-in-saas/www.Infusionsoft.com) - Can be very, very effective. But if you are just getting started, it is often too expensive. * [Mailchimp.com](https://www.howtokicksaas.com/acquisition-gaining-saas-users/marketing-automation-in-saas/www.mailchimp.com) - This system is too simple for the kinds of marketing automation that you need in SaaS systems. Don’t get me wrong, I like Mailchimp and I used to be literally one floor above them in my old office, but outside of using Mandrill, a MailChimp service, for transactional emails, Mailchimp is a bit too simple for what you’ll need for a SaaS system. # Lifetime Deals ## Running a Lifetime Deal (LTD) When I got started with my first SaaS, I had no idea what a Lifetime Deal (LTD) was or how it worked. A LTD is an introductory offer for your product where the the customer pays up front for a perpetual license. This is something you can use to get your first set of users, but it comes at a cost that you need to be aware of! More on that below. I did a lifetime deal with one of my products, BrainLeaf. This section is going to take you through what I learned, the mistakes I made, and how I could have made twice as much money with some planning and a little more work. Lifetime deals can really help grow your business and help you gain traction, but it is important to realize that LTDs are not an A-Series funding round, they need to be done when the product is ready for market. If you try to use a LTD to take a product to market that really isn’t ready, your troubles are never going to end. The reason for this is that most LTD marketplaces have a no questions asked refund policy. If users don’t like what they’re getting, you’re going to have to refund them within a certain amount of time, so all that hard work you put in to get the system ready and sell it is going to be wasted. I’ve seen this happen a few times now where systems were rushing to market or at least to revenue and they fell flat on their faces when they did a LTD. {% hint style="success" %} **PROTIP:** Remember that little problems become big problems when you scale your business. A little issue for one user can suddenly become a business-crushing issue for a thousand people. So fix the little things and make sure your system and support systems are solid before starting an LTD! {% endhint %} ## Lesson 1: Enable users to buy as many licenses as they want. Most LTDs will tell you this upfront. But some systems are dependent on the user starting their signup process then paying. This isn’t going to work. If you’re doing a LTD, you need the user to be able to pay first for as many licenses as they want when they get to your payment landing page. A lot of people will want to buy several licences at one time, so make sure they know how many they can buy. ## Lesson 2: Be very specific about the rules People are going to want to know things like: * How many licenses can I buy? * Can I resell licenses? * What exactly does this cover? * What if I upgrade, will this still apply? * What happens if you change the system? Will I still get the same deal? * How many \[whatever your value metric is] does this cover? These are all reasonable questions, and several of these things I just didn’t consider when I did my LTD. Unless you’ve been buying LTDs for a while or have been through the sales process before, most people just wouldn’t think about this stuff. So make sure to have a page that clearly explains what the LTD covers, what it does not cover, how it works, what the value metric is and how this deal applies to that metric, etc. If you don’t have this page, you’re just going to end up having to answer these questions about a hundred times a day while the deal is running. ## Lesson 3: There is no rush, even if you think there is a rush. In a hurry to get to market? Need the extra cash? Thinking to yourself, “If I just had an extra 5k, I’d be all set” or something similar? Well my friend, doing a LTD is the wrong choice for you. If your product isn’t ready for market, find another way to raise your money. The system needs to work very well and be in a good spot for support and growth before you do your LTD. There is a reason that “LTDs” are sometimes called “Likely to Disappear”, and it’s not because the entrepreneurs doing these projects planned things well. On top of that, there are ALWAYS groups looking for a new LTD. There is a group out there somewhere with a following that will promote your LTD for you. If not, then maybe your system is too niche, isn’t useful, or doesn’t work. In which case, a LTD isn’t the right choice for you anyway. ## Lesson 4: Only certain SaaS systems can do LTDs You probably realized this already if your system works for a particularly niche market. Some systems just aren’t going to work out on the LTD markets. A lot of SaaS businesses focus on a niche that has a target market that is not aware of LTDs. If that’s the case, doing a LTD just isn’t going to work out for you. ## Lesson 5: Don’t plan to do anything but focus on this sale while it’s running for for 2 to 4 weeks afterwards. When I did my LTD, it took a lot longer than I had expected before my support queue settled down. I figured that maybe it would take a week or two, but it ended up taking full time for about three weeks then an additional half to three quarters time for the following week. In other words, it’s going to be a ton of work to get this going, so don’t plan on doing anything else while the deal is running and for a few weeks afterwards. ## Lesson 6: There are going to be more problems than you think there are. If you follow all the suggestions in this list, you’ll be in better shape, but there are still going to be issues the come with scaling. It could be that your team works on an American time zone and all of your buyers are in Europe, or that the system grinds down as the number of concurrent users increases, or your people just get tired. Either way, you’re going to run into problems that you don’t expect. So just plan extra time and money towards this endeavor. ## Lesson 7: If there is a small problem and you know it, fix it before you do the deal. This was a mistake I made. There were a few small issues in the system that weren’t pressing issues for us because we knew they were there. After a while of using our system with those tiny issues, we just didn’t think about them anymore and they slipped from our list. But with a thousand new users, none of which realize this is small and they can just move past it, those little issues become huge issues very fast. ## Lesson 8: Have an SOP for refunds. You’re not going to please everyone, and you will get requests for refunds. Whether the company marketing your LTD requires you to give a no questions asked refund or not, you are still going to need to be able to do it, and at least a few different people on your team need to know how to do it. My recommendation is that team members that man your in-app chats ## Lesson 9: Don’t wait till the last minute to test your ticketing system First off, make sure you have an email ticketing system in place. Without a method and system for handling these requests, your customer requests are going to get real confusing real fast and your team is going to start missing or dropping requests. This leads to quickly unhappy customers and refund requests. ## Lesson 10: Plan the upsell! The way I have seen a lot of groups do this is to sell their basic package or plan of their product in the LTD, but then have the pro plan or upsells ready to go. Make sure that the basic package is worth the money and that most people will be happy with that, but have features in the pro plan that everyone clearly wants or needs. This gets people in, but gives you the leverage to upsell them to the next level easily. I probably could have doubled my revenue by doing this. ## Lesson 11: Having a chatbot ready is critical. There are going to be questions. Lots of them. So having a chatbot ready and tested will make you and your support team’s life a lot better. Most users expect chatbots these days, so don’t feel like this is driving people away. It is in fact making things a lot easier. But you need to plan it out and do a good job setting it up, then test with existing users what they use the system for. In other words, iterate on your chatbot usage before doing your LTD. It will save countless hours of time and is well worth the upfront spend. ## Lesson 12: Support Team The week you do your LTD, you are going to have a huge influx of people coming to your system. So make sure that you have MORE than one support person. When we did ours, we had 3 support people and it wasn’t enough. Right away, each person had over 20 chats running at the same time. It became overwhelming very fast. Had we put in place a better chatbot up front, things may have been different. But I have a feeling that just having one or two people still would have been a mistake.
# Outbound Campaigns ## What is an outbound campaign? This is an email or outreach campaign that you send out to people that you may or may not have already spoken to. The way a lot of people think about an outbound campaign is as a way to reach out to tons of people at one time, much like trolling for fish. It is used this way, but in most cases for SaaS sales, you are more likely to drive away users than pull them in with this kind of system. In this chapter, we're going through the right ways of using outbound campaigns to grow your business. ### IMPORTANT LEGAL NOTE: In the US, we can send unsolicited emails, as long as they are in accordance with the CAN-SPAM act. But in many countries around the world, particularly German and Canada that I know of, this is ILLEGAL. If you do it, you're going to get into trouble. Be sure to check your regions laws before applying these principles. ## Running outbound campaigns can be powerful If you do it right. If you do it wrong, it can be a powerful way to keep users from signing up from your system in the first place. The important thing is to remember how your're using it, who you're targeting, and to what end. Are you: * Looking for general users * Reaching out to enterprise sales * Trying to drum up interest * Reaching out to investors * Growing your already Based on your goal, you will need a different email, but the approach is going to be similar. ## How not to do it Ever get one of those emails from some random guy that reads something like this: > Hey \[CUSTOMER NAME - YOU] > > I clearly want to sell you this thing that I am promoting to you in this email. Here are some reasons you should buy my thing or more than likely trash this email and never open another one from this email address or probably just mark me as spam. > > Yours Truly, > > The Guy Who Doesn’t Know How To Sell > > PS. I am going to email you 4 or 5 more times till you definitely mark this as spam. ### Sound familiar? I bet it does. You probably even marked this email as spam. I know I have marked SO MANY of these as spam. So many in fact, that these same guys are blowing up my LinkedIn now as well! The trick here is that it doesn’t have to be this way. There are great ways to reach out to someone directly without being annoying, salesly, or generally just get rejected before you even start. The trick is to do your homework and send an email that is genuine to people who you know have the problem you’re solving in a way that resonates with them. Also, don’t send a thousand at a time, send ten or twenty. Important disclaimer here! If you are in Canada, Germany, and a number of other countries outside of the US, you cannot do a true outbound campaign. It is against the law and they will come shut you down, fine you, and maybe even take you to jail. That’s not even [the worst of possible situations.](https://www.wired.com/2006/08/spamking/) However, if you are in the US, you can send a BUSINESS address an unsolicited email so long as you follow the [CAN-SPAM Act rules](https://en.wikipedia.org/wiki/CAN-SPAM_Act_of_2003). So long as you do that, you’re all set. ## How to run an outbound email campaign When you’re getting ready to send an outbound campaign, you need to think about what would make you open up an email from someone you’ve never met. If the answer is nothing, then either you shouldn’t be doing this or you’re perfect for doing this. The last time I opened an unsolicited email was when I: * Knew someone associated with the person that was sending me the email. * Knew the brand sending me the email. * Had a product that related to the email that I used regularly. * The email presented some piece of education that I needed at that moment to do my job. * There was something in the email that I thought was funny or interesting. * I was in some way connected to the person writing the message or they knew my friends, clients, or peers. The last time I actually read the email and responded to it was when I either needed something in the email or I actually did know the person sending it to me. I’m a pretty average guy, so if you can send me an email with all of this stuff, there is a pretty good chance I will at least glance at it.So what you need to know when you’re sending out these emails is as much as possible about who you are sending it to. ## A better email #### If I sent you a message that said: > Email Title: Richard from \[some business you know] recommended I give you a call > > Message: > > Hey John (I’m assuming your name is John), > > Richard from \[some business that you definitely know] mentioned that you and your team at \[the name of the business that YOU call the business] needed some help with \[a thing you definitely need help with right now] and recommended I give you a call about it. He didn’t have your number and just said I should shoot you an email and I was wondering if you wanted to grab a cup of coffee over at \[the coffee shop beside your house] on Tuesday or Wednesday for breakfast or after 3pm and chat about it. > > Thanks so much and have a good day! > > Jason You would definitely open that right? Assuming your name is John, you would probably write me back to chat about this thing you desperately need done. #### Besides, you’re even going to get a cup of coffee and maybe even a donut out of it! That email is about as personal as it gets. But believe it or not we’ve sent automated messages like this, and they convert like crazy. Although it does require a lot of early mornings and a donut expense account. Also, if you screw up these kinds of emails, it is going to kill your credibility with me. So you can’t afford to send a thousand at a time, just enough to keep your phone ringing. ## Breaking down the email This email above had the following items: ### Personalization Do you know Richard? I hope so. But if you don’t do you think maybe you do? Is there a chance that you do and you just didn’t remember meeting him? Either way, Richard believes in me, so you should as well. Also, if Richard didn’t actually recommend you, don’t add this part. Sales are relationships and starting off on a lie is the easiest way to trash any relationship. ### A Reference Can’t recall that Richard guy, but you definitely know that business. ### The Name YOUR LEAD Calls Their Own Business We refer to this as the business shortname. If I know the name that YOU use for the business, not what’s online or in some list somewhere, then you’re probably thinking “This Jason guy clearly knows who we are. I should at least give him the time of day.” ### The Thing You Need Help With It didn’t seem like I was guessing about that thing you needed help with did it? It didn’t say “Are you struggling with whatever?” No! I knew when I sent you the email that you had this problem and needed some help with it. How did I know? Because unlike my times in high school, I did my homework. ### Locality I know, it’s the internet. You’re on the other side of the world. How are we going to grab lunch in wherever you are if I’m busy sipping my pina colada in Bali? It’s an example ok. You can take that part out if you must, but you get the point. If I was right there, you would definitely want your free coffee and donuts. ### A Personal Invite Whether you get your Tuesday morning fix or not, a personal invite is still an invite. If I were to say something like “Actually, I can’t make that Tuesday thing, but how about a teleconference so we can take a look at those pressing issues you’ve got tomorrow morning? Oh, and I’ll have Uber deliver some pastries and a half-gallon of dark blend morning brew to your office. You’re still probably going to be interested in a chat. ## Make it a good first date Now that we’ve torn apart the most intimate of cold business emails, how can we take this and turn in into something more usable? The rule is, the more items on the list above, the better. This is where everyone screws it up. Everyone wants to take the easy way out and try to send out a thousand emails to people they don’t know who may or may not have the problem and they don’t even offer some one-on-one time! That’s no way to take someone out for the first date is it? Ok, so now that you know all the things that you need in an email, let’s pretend you don’t have all this information. Maybe I don’t have a reference, ok take that out. Let’s say I can’t actually meet with you for breakfast, alright we’ll make an offer for another kind of meeting, probably a phone call. Now let’s assume I don’t know any of the other items… it’s not going to work is it? Probably not. If that’s the case for you, don’t send the email! It’s a waste of your time because I probably wouldn’t open it, and neither would you. The lesson here is that if you can’t take the time to adequately research your list and aren’t actually doing sales, you’re just trying to get people to go to your website, it’s not really going to work out for you. Try something else. ### Will this work for a SaaS though? Since you have the time, resources, and gusto to get on the phone with all these great people, now we have something to talk about. This is a method of direct sales. It is automated, but you’re getting on the phone with people which means you’re spending some cash to get them going. To figure out the value of of this, we just need to take a look back at the chapter on [Appraisement](https://docs.google.com/document/d/1qLCH0YaNhxbutZeK9Oo87n9PhssDaHLkWLTPYW0UIMQ/edit#heading=h.g1705oqg0bpb) and remember that as long as your Lifetime Value (LTV) is at least 3 times your Cost of Acquisition (CAC), then you’re in the money.
For a simple example, let’s assume that this is your primary method of sales and that it costs you $100 for each call you make (including the donuts and coffee) and you close a deal every three calls. Then it costs you roughly $300 per sale. If your average client is paying $25 per month for one year, you’re not going to make it. But if your average customer is paying you $100 per month and on average stay with your system for 2 years, that is $2,400 and you just made a cool $2,100 from that $300 you spent. Of course in real life the math is more complicated, but you can often bring it down to something like this and it gets real simple real fast. ### Testing Your Messaging This is probably the most important thing you can do. The difference in a few words can be huge when sending out emails. We have had an open rate difference of as much as 27% from the titles “Are you taking more referrals” vs. “I want to send you some new patients.” That is a HUGE difference on what is essentially the same message. In email systems worth using, there is always an A/B testing system that allows you to test different email titles and messages against one another. If your system doesn’t have this, then get a new system because you need it. In every single campaign we send, we test our messaging with small word changes. We send a few different titles and messages out to a small sample size first to test it out, then grow it from there. Once we confirm or deny our hypothesis about our messaging, then we can get our our campaign started. Sometimes we will send out a few test samples before deciding on a set of titles and message, and even then we will keep testing. ### The Title That Always Works I want to send you more \[FILL IN THE BLANK WITH THE THING YOUR CLIENT NEEDS] It’s as simple as that. That is what works for us just about each time. For us, this worked great for sending out to medical practices when we used the title “I want to send you more patients.” It is simple, to the point, and fast to read. “I want to give you the thing that you want.” If someone has the thing you want, then you’re probably going to at least listen to what they have to say. ### Writing the message Keep it simple, make it fast, show off your accolades, don’t be afraid to say you’re selling something, and never lie. A good example of this is something like “We did this thing for someone else and they made a ton of money from it and we can do it for you as well.” Now the conversation is just about budget and time. ### The standard outbound campaign emails **Email 1: Ask for a meeting** - Make it very short, clear that you want a meeting and know their needs. **Email 2:** **Check in to see if they got the first email.** - This is essentially a check-in to make sure they’re still paying attention. **Email 3:** **The Case Study** - It’s ok to make this one a bit longer. The best case here is to use a case study of a project you already have. Or, if you don’t have one, use a competitor or peer’s case study. More often than not, just showing that what you are presenting will have positive results will make a huge difference. If they know the work or know the person you did the work for, then they are fairly likely to open it up and take a look, and maybe even get back to you. **Email 4: The Breakup** - You’ve had enough of these guys! It’s time for you to stop wasting your time on them and they need to know it. I wouldn’t be rude, but make sure they know that you are not contacting them again (at least as part of this campaign). Almost 50% of contacts back will come from this last email. Play around with this setup. Different kinds of people and personas respond to different messages and the standard 4-email process doesn’t work for everyone. It’s a good place to start though. ## Important Notes About Sending Outbound Emails. READ THIS! There are a few important notes here. All of them are important. ### 1. Don’t use your main domain! You can set up a domain like “yourdomain.com” that is isn’t quite the same. For example, how about “getyourdomain.com” or “yourdomain.net.” These all work. The reason for this is that if someone does mark you as spam, you don’t want them to hurt your main domain. ### 2. Authenticate your sending domain You will need to set up DKIM and SPF for your sending domain. If you don’t do this, you have a higher chance of getting blacklisted. ### 3. Don’t send links or images Makes it harder doesn’t it? In the first two emails, don’t ever send a link to anything that is built into your emails. You can add the full url to the email. For example, “Check out our website at [www.jhmediagroup.com”](http://www.jhmediagroup.com”). That is fine. But let their system add the link, don’t add the link yourself into the email, and definitely don’t send files in those first couple emails. Spam filters will pick that up in about a millisecond and mark you as spam. ### 4. Give Google some time to think about it Remember the section on the Google Sandbox for content marketing? This is pretty similar. Google doesn’t know if you’re a business that is planning on sending out regular ole emails to associates or if you’re planning on working as a world class spammer with their servers. They need some time to get acquainted with you and feel good about you using their servers. If you are using Quickmail, Woodpecker, or other system that interfaces with a Gmail account to send email, you need to set up a Gsuite account and pay at least the $5 per month, then let the system sit for a month. That’s right, a full 30 days! Just send a few emails to your friends or coworkers from that email address, but don’t start using it for business for at least 30 days. ### 5. The Tools of the Trade Personally, I like [Quickmail.io](http://quickmail.io). But recently [Woodpecker.co](http://woodpecker.co) has been growing on me. I like the UX on woodpecker.co more, but quickmail is more functional. They’re about the same really. Try them both! ### Final Note Knowing how to send people a ton of emails is both powerful and can be really, really annoying. So don’t be a pain. Do it right, follow the rules, use it for good, and remember that with power comes responsibility.
# Affiliates & Partnerships for SaaS Businesses “Affiliates won’t do anything without being pushed.” Nathan Barry, CEO ConvertKit
Nathan is right. Put yourself into an affiliates shoes, someone that you really want selling your tool. They probably already have a ton of people asking them to sell stuff, they already have a revenue stream, and they are already busy. So when you ask them to add a link or sell your stuff their answer is going to be something like this “Sure, give me an affiliate link and maybe I’ll mention it. If it sells, then we can push it some more.”
All things being equal, I would probably say and do the same thing. But there’s a secret to getting affiliate marketers to sell for you. If affiliates aren’t going to do anything without being pushed, then push them!
#### The process is simple. Here’s the trick: It’s all about the webinar.
The way this works is you make an offer to your potential affiliate partner that includes a webinar that they have to drive everyone towards. At that webinar you will make your special offer and give everyone the link to the deal. The deal should only stay live for a week or two at most though, then the affiliate needs to do an additional webinar to keep getting more people. This way, they are always actively pushing people towards your webinars.
#### Deal Structures Deals with affiliates can go anywhere from 20% of the first payment up to 50% or more of the lifetime value of the customer. Since most SaaS businesses have a very high margin, giving away 50% of LTV is often not an issue to open up a new market or access customers you wouldn’t otherwise have. Besides, you want your affiliates to sell as much as possible, so it’s worth it for you to make it worth it for them.
In your deal, you need to also take into account that you are going to be giving the affiliates audience some kind of deal. So if you are giving the affiliate 50% of LTV, you need to be sure to take into account how much you are going to also be giving their users off. Make sure it doesn’t cut too far into your margins before you get too excited and sign a deal!
#### The Webinar The webinar for an affiliate deal goes something like this:
1. Drop the carrot at the beginning 2. Do the pitch 3. Make the offer 4. Give the time limit 5. Repeat Dropping the Carrot At the beginning of your webinar, start out with something like “Thanks so much everyone. This is going to be a 1-hour webinar, and at the end I am going to give you the link to our special offer as well as the free \[something else here]. This keeps people listening till the end and engaged. The Pitch In this kind of webinar you are teaching as well as promoting. So make sure to give your users knowledge that they wouldn’t otherwise have and how this knowledge works with your system. Remember, a SaaS either fills a knowledge gap or an efficiency gap, so make sure you know where your’s lies and how much time and money it will save your users. Make the offer You’re coming up to the end, but before your questions and answers session, it’s time to make the offer they can’t refuse. Remember, not only does your host get a cut, but your users need some incentive as well. This offer needs to account for that price cut, additional value metric, or something else. Give the time limit Don’t forget that your deal has a time limit, and you need to tell everyone. If you don’t say it, and sometimes even if you do, people will get upset when the time expires. But if you say it in the webinar and you can show them, it will make your life easier. Repeat! Congratulations software merchant! If you have a good product, the right affiliate, the right price, the right message, and the right listeners you probably just made some sales. Now let’s start over and do it again!
# Narrowing Your Message With Adaptive Design Ever go to a website that just “Spoke” to you? You connected with the message because the wording on the page was written the way you write, the problems it addressed were the problems you have, the imagery on the page was a person like you, and the solution to the problem was what you needed.
But if you visited the site from your friend’s computer, the messaging was different, the imagery was different, even the way the solution was presented was different! What the heck is going on?!
This is a adaptive design.
It is a way of presenting information to users specifically based on their personas, aspects of their persona, and where they are in the buying cycle.
If they are at a point where they don’t realize they have a problem, the information on the page presents education about the problem, symptoms of the problem, and what happens if the problem isn’t addressed. If the user is at a consideration point, the information on the page is about what the system does for that persona to solve their specific problems in the way they need it solved. It focuses on the issues they have and the features that solve those problems.
The difference in conversion rates with an adaptive design can be huge. At the last conference I attended, Brennan Dunn from RightMessage.com presented an increased conversion rate from 5% to 23% based on a strong adaptive design implementation.
#### Got to know your personas! If you don’t know very specifically who you’re selling to, how will you provide the right message? Once you bring together pricing, sales, and now marketing, it becomes so clear that if you don’t understand exactly who you are reaching and how you’re reaching them, you won’t be able to get users. So really work on that system pricing and your personas, because you can’t build a landing page or design for everyone, you have to pick the your top marketing and market to them.
#### Landing Pages & Conditional Views Let’s take a look at some examples of how to do this. There are a number of ways to get your marketing platform to target the right users in the right ways, but some of my favorites are to use Leadpages.net and Unless.com or Rightmessage.com.
Like so many landing page builders, Leadpages.net allows you to build custom landing pages for particular campaigns or markets quickly and test your messaging. There are a lot of different systems out there for this, but I’ve used Leadpages a lot over the years and it’s always been solid.
Unless.com and Rightmessage.com are a bit different. They allows you to show different data based on conditions. Conditions can vary a lot and include everything from your local weather to market segments. This way, you can show different people coming from different places different messages on either landing pages or on your home page. If that last sentence didn’t quite sound right, you read it correctly. You can set up your home page, or other pages, to show different content to different people based on a number of different factors. So your home page will look different based on who, what, and where! This can be a super powerful tool for improving conversions throughout the buying cycle.
# Social Media Marketing The mistake people make when starting to use social media marketing is to just use one channel. The trick is to use everything together and reinforce with social media marketing. Just doing an ad on Facebook is equivalent to walking into a bar and asking a random girl (or guy) out. If you’re really good looking, they are single, you said the right things fast, etc. you might have a chance. Maybe. But probably not. However, if they had heard of you, knew you from highschool or college, you had friends that connected you, played the same sports, and like a number of the same things you would have a much better chance. It also helps to be good looking, so make sure you’ve got a good designer on your team!
## What you can do with social media Many things. This includes retweeting cat pics, getting schooled by Nassim Taleb, and, of course, being offensive towards people with different points of view. But none of these things are useful to your software business. What is useful for your software business, though, is this: using social media to build a brand, and filling your sales funnel. Build your brand to get customers to trust you, and use your followers’ attention to explain how you solve their problem. ### Build an image Think about what you do when you look at the social profiles of a software vendor you’re about to pay money to. You probably want their LinkedIn profile to mention the number of employees they have. You probably enjoy seeing that their most recent tweet was 6 hours ago and not multiple weeks ago. I’m sure you’d rather buy from a company that has some relevant recent Facebook posts rather than the one that has a Facebook profile but has never taken proper care of it. ### Fill your funnel With social media you can build a process to attract followers, then select the from them the people that have the problem you can solve, and convince them that your software is the solution. How do you do it? By sharing relevant information on the social networks. This can include: * Publishing the articles from your blog, as a one-off post or in a constant recurrence. * Providing technical support. * Announcing a launch of a new product. As a SaaS business you can do a few cool things that other kinds of businesses cannot do on social media: * Talk about releases and updates. Your product is constantly improving, and you can let the customers know that’s the case. * If you are offering a free tier in your software or if you have a free trial, you can show your followers where to find it. ## Why social media attention doesn’t always equal revenue Social media is not a place where people go to buy software. It’s more often a place where people read stuff to fill their time. The quality of attention your posts get on social media is quite bad. Each post will at best get a few seconds of distracted scanning before your follower moves on to the next item on their timeline. What you should do is use that distracted attention to pique the interest of your prospective customer base, remind them that your product exists, and maybe offer them something that will their day a little bit better. ## What social media is right and not right for? In my experience, you probably won’t sell anything significant on social media, as the attention is mediocre. However, you can get a lot out of social media ads and interactions if you focus on raising awareness and nudging potential customers into your funnel.
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