Avoid These BIG Risks When Building SaaS (Wish I Knew This Sooner)

our ecosystem of SAS startups is littered with failures there are so many mistakes that are easy to make and that are very commonly made by people who haven't been listening to those of us who have gone before them you know there were Pioneers that have the arrows in their back so to speak and you don't have to learn all these hard lessons on your own that's why in this video I'm going to talk about major mistakes that I see Killing most SAS efforts these are things I wish I knew years ago I'm Rob Walling I'm a Serial entrepreneur with multiple exits I've written four books on building startups and I've invested in almost 150 companies so the traditional wisdom around Silicon Valley about the risks of tech startups is that there are three risks Market technology and execution so Market is whether there are enough people or businesses that want to use your product to make it financially viable technology is whether you are able to build this technology you can imagine trying to build Google in 1998 you can imagine trying to to build open AI or chat GPT five years ago there's a real question of do we have the ability to build this is it even possible or trying to build Tesla a purely electric car that actually has great performance and decent range back in whatever 2010 or 2005 before it was done there's a real question in those startups of whether those things can be built at all and the third risk is execution can you build an amazing team that can build it and then can Market it can get it out there market sell it go to market all the things we talk about on this channel but if we narrow our Focus to mostly bootstrap SAS and software companies the technology risk pretty much goes out the window there are probably a handful of the thousands and thousands of B2B SAS companies that I've seen over the past several years that actually have technology risk because building B2B SAS is a solved problem now I'm not saying it's not difficult to do I'm not saying it's not complicated but the question of can I build this project management software for car dealerships can I build this invoicing software for construction managers the answer is inevitably yes you can the risk of you being able to build it is not something we should even be discussing by far the two major risks when you're talking about mostly bootstrap SAS companies is market and the ability to sell it I'll say it's marketing slash sales so let's start by looking at the market the real question is do enough people have the problem that you're trying to solve and then are they willing to pay for that and that's why on this channel and on my podcast startups for the rest of us and at microconf a lot of discussion is given to are you building something that people want and are willing to pay for answering that question is a lot harder than you might think one reason is that as Founders we often get a little too clever and we don't just want to build an incremental Improvement on an existing SAS app or an existing startup we want to build something completely new completely novel something no one's ever used before no other product is in this category we want to build our own category because then we'll have no competition I've done this I've seen Founders do it unless you have years and years and millions of dollars to educate an entire Market on a brand new category don't do it many of the most successful bootstrapped and mostly bootstrap SAS companies that I encounter through microcomp tinyseed this YouTube channel and my podcast are folks who either take an idea and improve upon it enough to make it unique and then they market and sell the hell out of it or it's folks who enter a crowded space against big competitors and they figure out what everyone hates about those competitors and they carve out their positioning their corner of the market where they have competition in the broader space but they don't have competition in their little corner of the market they are the best and what they do now that's for multi-million dollar SAS companies obviously there are step one businesses where you can find your little corner of an ecosystem an existing App Store so to speak with Shopify Heroku or WordPress and in those you don't necessarily need to have the best positioning you can often just rank number one in the App Store but I'm talking about being an ambitious bootstrapper and wanting to grow into the millions But to answer this question of if I build this will people want it and will they pay for it we go back to validation right and that's why we have more than one video on how to validate SAS ideas whether you're doing High touch or low touch there are ways using landing pages I've talked about as well as having one-on-one conversations and trying to figure that out this will never get you to 100 certainty don't expect that you'll have 100 confidence because being a startup founder is doing hard things and making hard decisions with incomplete information it's inevitable at best you will get to 40 50 maybe 60 validation but no matter how many people tell you yes and how many email subscribers you get to your landing page you can still fail so this part is difficult but I think it's something that the most people struggle with because they come up with an idea and they build it without validating therefore this huge Market risk is just looming over them the entire time so I mentioned our two risks are Market which I just discussed test and then marketing slash sales which I think will summarize as can you sell it based on this great tweet from Ruben Gomez the founder of sign well in his tweet Reuben says when starting a new SAS everyone tries to answer the question will people buy this that's really what I was talking about in the first part of this video then Reuben says not enough people are asking can I sell this which is number one can I sell in the ways it's most likely to be bought by ideal customers and number two can I sell enough at the price point it will be sold at and he goes on in a later tweet to say these things are not binary and there's always an element of having to figure it out this is why although I love the sentiment and the Simplicity of Paul Graham's quote he's the founder of Y combinator and his quote is build something people want and they have it on a T-shirt and I love it but I've always added and are willing to pay for build something people want and are willing to pay for because for us in our B2B SAS world we need companies willing to pay for our solution we don't make money money based on daily active users or running advertising in our SAS apps if no one is willing to pay for it even if you solve a problem that they need solved but they're not willing to Fork over enough money to keep you financially viable you don't have a business and that's where this selling risk or this marketing risk comes into play it is completely possible to build something that solves a real problem and you clear the first hurdle of the race but then as a Founder you can't actually get in front of enough prospects or find a sales channel to make this work and a big part of this is stages of awareness so I'm gonna go into this amazing concept that was introduced by Eugene Schwartz in his book breakthrough advertising Schwartz was an advertising exec in the 1960s and he came up with these stages of awareness there are five of them and depending on where your Market is in terms of your solution your product that you've built the climb up that mountain pushing the boulder getting people to use your product and pay for it will be harder or easier depending on which stage people are at and the further along they get the easier it gets so the first stage is being unaware people don't know they even have this problem so I like to think about podcasting for example these days a lot of businesses have podcasts even as recent as 2015 2016 did businesses know that they should start a podcast to promote their business most didn't they were completely unaware that they had this quote-unquote problem right or that they had this need or this marketing channel that they could potentially take advantage of and in this case if they're unaware education is very expensive just to get them to believe that they have a problem is a huge uphill battle but if your prospects your leads your Market is already aware of the problem it gets a little easier because then all you have to do is educate them on the solutions that exist so people and businesses and markets often move independently but kind of as a group from unaware to being problem aware then to being solution aware and this is where they know they have a problem maybe it's I need more customers or I need to communicate or we want to communicate our mission or you know communicate our product to more people and then they start realizing oh one solution is to start a podcast and so in 2020 as the pandemic descended upon all of our lives and put us into quarantine suddenly there's became this need I need to start a podcast for my business now I'm aware that's the solution and a lot of people and businesses move from that third step of solution aware to product aware right that's stage four which is going to Google or going these days to chat TPT typing in what software do I need to start a podcast right they had search intent and if you think about someone who doesn't even know that there are podcasts they're completely aware they have a problem they aren't aware of any solutions and then they get to the point where oh I'm now searching how do I host a podcast what software do I need what equipment do I need that intent is huge and this is one reason why Google has made one of the most incredible money printing machines in the world and in the history of of humankind Google is an incredible product because once people start to become solution aware and product aware often go to a search engine and this is where you want to get in front of them this is where people need much less education you just need to educate them on how they need to get from y to Z rather than a to z because they're already so close to taking action they're way further down the purchase funnel and then just to cap it off most aware which is stage five is where you become kind of an expert in the space maybe you're a consultant in the podcast hosting space or you are the founder of a company in the space such as let's say Craig Hewitt who runs castos which is podcast hosting or the founders of Squad cast which is studio quality podcast recording it's the software that I use to record all of my podcasts so with all of this in mind this question of Can You Reach enough of your Market in a way that makes your business financially viable and the question is often difficult to answer but envisioning your Market as a certain percentage being unaware certain percentage being problem aware solution aware product aware can be really helpful and if you look at a super early space let's say the internet or the world wide web in the 1990s a lot of people just on aware that they had a problem right so they weren't out looking for Solutions I'm going to go to a website and buy books for example but Amazon raised a bunch of money got in first and then they were there once enough people realized that they needed a solution same can be said for crypto web 3 AI even drones electric cars you know there's all these waves of technology that start with people being unaware that they need it and frankly if you're gonna build for the unaware or maybe the problem aware you tend to need a lot of money because you need a lot of education and one way to tell that hey people are solution aware and product aware is to go look at Google search volumes for Solutions in the space if no one is searching for the type of software you're building or the numbers are very low it's going to be a lot more expensive and it's going to be a lot riskier to build your product and if you've enjoyed what I've said in this video so far you're going to want to watch another video on this channel called Eight myths SAS Founders should never fall for hope you enjoy it

Channel: MicroConf

Views: 21,380

Keywords: MicroConf, Saas, startups, software developer, saas developer, saas business, saas startup, app developer, saas founder, building saas, developing an app, saas product, Business tips, business advice, business failure, business startup tips, why startups fail, business mistakes, startup mistakes, startup mistakes to avoid, saas dev, saas development, saas growth, saas business ideas, saas risks, saas mistakes, entrepreneurship

Id: r8G6Rwk10IM

Length: 10min 56sec (656 seconds)

Published: Sun May 14 2023