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
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:
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.
How much time do you want to spend working on this business in one year, three years, and 5 years?
How much money do you want to make each month?
How many people do you expect to be required to maintain this business?
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:
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:
Don’t care what people think about them.
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.
Don’t believe that patients care about or read online reviews.
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.
Are super cheap.
Are getting ready to retire and don’t care about their reputation at all.
Don’t have a clue how to use a computer.
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.
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.