The Advisory Approach
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.
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
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.
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.
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). 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.
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!
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.
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.
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.
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.
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.
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?
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.
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, 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.
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 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.
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:
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.
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.