Over the past 5 years, FE International has been privileged enough to work with a wide range of successful software as a service (SaaS) entrepreneurs who have built up and sold profitable businesses online. With an ever-growing list of success stories like those you are about to read, it’s no surprise that we are seeing a steady increase in buyers looking at SaaS businesses for sale.
We have asked some of the most successful SaaS business owners and industry experts to share with us their knowledge on one very interesting question:
“What Is Your Top Tip for Growing a SaaS Business?”
The responses that we received were varied but here are some brief highlights of our expert’s tips:
Truly understand your customer’s needs – Taking the time from the outset to talk to your customers directly (on the phone or in person) to gain an intimate understanding of their needs is essential before trying to scale. You’ll also be amazed at what useful information that you uncover.
Charge more, but still provide outstanding value – Experimenting with pricing plans can have a huge impact on how fast your business grows. Price your software in a way that enables you to provide insanely over the top customer support and service. Your early customers will love you for it and will tell other people in their industry.
Put yourself in your customer’s shoes – Take into account true user experiences and their journey with your service before making important decisions. Having empathy and a deep understanding of your target market will ensure that happy customers become evangelists of your service – this is essential free marketing during the start-up stages.
Outstanding service even before they are paying customers – By giving everyone (even your free trials) amazing support, you can really build trust in your brand and in turn convince more people to begin paying for your service.
Start your list-building as early as possible – Most people aren’t ready to commit to your product the first time they hit your home page, so if someone’s only option is to sign up, or even to start a free trial, you might be missing out on a lot of potential users. Plus, should you ever branch out and try launching another SaaS product – whether or not this one is a success – that list is a solid head start for your marketing efforts.
Read on for more detailed responses on how to grow a SaaS business from our panel of experts.
You can vote for your favorite tip at the bottom of the page!
Pat Flynn – Smart Passive Income
Have real conversations with your first customers. Talk to them on the phone or even take them out to coffee to get into exactly what they like and dislike about your product, to get a real account of a true user’s experience, and you’ll uncover some golden information (and perhaps potential feature-adds) that you wouldn’t have figured out otherwise. Email only scratches the surface, but when you can follow up with questions and dig deeper, that’s where the magic happens.
Make sure that your efforts actually add up to something by *starting your list-building as early as possible*. Most people aren’t ready to commit to your product the first time they hit your home page, so if someone’s only option is to sign up, or even to start a free trial, you might be missing out on a lot of potential users.
Offer something to the people who are interested enough to visit your homepage, but not necessarily interested enough to sign up just yet. A download, a webinar, a newsletter, an invitation, even just a promise that they’ll be first to hear a big announcement – give them something in return for their email address, and all of a sudden, your homepage isn’t this make-or-break place where you either get a customer or lose them forever. Plus, should you ever branch out and try launching *another* SaaS product – whether or not this one is a success – that list is a solid head start for your marketing efforts.
Laura Roeder is the founder of Edgar, a new social media automation tool designed to prevent updates from going to waste.
The smartest SaaS startups started out as crossing that border between consumer and business applications, but gradually, because of their success amongst consumers, became a Trojan horse, inserted into the Enterprise.
Mike Butcher is Editor At Large of TechCrunch. Mike has been named one of the most influential people in European technology by Wired UK (for 5 years running) and is a regular broadcaster. He founded the annual European Tech Startup Awards & Conference: TheEuropas.com and has been an advisor on startups to the British Prime Minister and the Mayor of London.
Like for any business, they key to growing a great SaaS business is an outstanding value proposition and a sound business model. The former requires deeply understanding your customer’s jobs, pains, and gains to design a value proposition they really care about. The latter requires a sound pricing and revenue model as well as a good acquisition and retention strategy with low churn.
Alexander Osterwalder is a best-selling author, inventor of the Business Model and Value Proposition Canvas, passionate entrepreneur and demanded speaker. He co-founded Strategyzer, a software company specializing in tools and content for strategic management, entrepreneurship, and innovation.
My tip for a growing SaaS business would be to position your sales and marketing team to work more for your customer than for your own business. Think less about email automation, auto dialing, list purchasing, and interruption advertising. Think more about educational content generation, understanding each customer’s unique context, and personalizing the sales experience to their context. Ask yourself, would you enjoy being marketed or sold to by your company and make the sure the answer is a resounding “YES”!
Churn is the death of SaaS. Find out why people are churning and fix those problems. It might be pricing. Might be a lack of features. Might be a lack of education. But pinpoint it, fix it, and repeat.
It’s so important to focus on systems and for the founder to remove themselves from the day-to-day operations in order to be ready to hand the business off to someone else.
Removing myself from the business and getting it to a point where it could run on “autopilot” was a goal from the start. So I focused a lot on writing detailed procedures and refining those over time with the help of my talented team. We also used software—both our own and other software tools—to streamline much of the processes in the service.
Most likely, you’re undercharging for your product. Charge more. Making real money as a business changes a lot of things. More revenue allows you to build a real business where you have the resources to invest in things like better support and new features. In addition, you can position yourself as a premium provider. Charging more also opens up new paid acquisition channels that could be profitable now that your customer lifetime value is higher.
You won’t obtain Growth in SaaS unless you find your product-market fit. Therefore, my advice would be to focus energy and resources into this, before spending funds in marketing or sales.
Finding a product-market fit doesn’t happen overnight – most of the times! – and truly is a tricky endeavor. Once you’ve built a product that solves a problem (which is already a huge step – unfortunately, it’s not enough), you need to:
– assess the extent of your target market: in the SaaS industry, you don’t want to build a product that solves the problem of a few, your product needs to be purchased by many.
– iterate on your product as many times as it needs to be adapted to your market. For this, you need to focus on metrics – and avoid “vanity metrics”.
– come up with scalable ways to make your product available to this target market – here again, test and learn.
The key in this goal is to understand your customers, in a genuine way (not desperately wanting to sell your product). Sean Ellis “40% rule” tells you that if you reach a 40% of your userbase that would be “very disappointed” if they lost access to your product, there’s a great chance you’re on the right path.
Most people are painfully aware that they should be doing content marketing. If they are anything like me, they’ve been beaten over the head with the notion that they must write & share! Blog! Tweet! Guest Post!
However, it’s important to be aware that inbound or content marketing is only one source of business. Depending on your market, and particularly if you have a B2B type business, then outbound sales or joint ventures/partnerships can be as effective if not more.
Particularly in the early days, when your marketing and advertising is limited, doing outbound can be a significant source of traction, validating the idea and extending your runway. Done right, it can also be significantly cheaper per acquired customer than advertising.
Focus on how your service fits into the narrative of your customer. Slip into their shoes and think through their journey.
What are they doing before they find you? How do they find you? How do they adopt you? What happens when they’ve adopted you? How do you enable them? What would they ideally tell other potential customers?
Walking through this journey will give you a few actionable next steps to grow your business but more importantly it will also make your customers more successful.
Do things that don’t scale. The biggest mistake I’ve made in previous SaaS businesses is to spend too much time thinking about software and not enough time deeply understanding user needs and user behavior.
Almost every very successful software business looks like a lot like a consultancy or service-based business in the early days. Brian Chesky of AirBnB used to walk around with a Bluetooth microphone answer customer calls like a travel agent. That intimate understanding of the customer is essential to have before you try to scale.
Every time you make a decision about a feature or marketing message, you can think back to that conversation you had with Elaine and ask yourself “would Elaine like this? What would Elaine want?”
That level of empathy and deep understanding of the market is the biggest factor I see between SaaS companies that successfully get into the 1mm+ stage from infancy.
First of all, a good market means it is B2B – not B2C. This is because businesses (as opposed to consumers) are more willing to spend money.
Secondly, you don’t want to have a product in a temporary (or point-in-time) market, but rather in a naturally recurring market. For example, an invoicing application is preferable to a “Done-For-You register an LLC” product.
Thirdly, it is better to be in a market where a (short-term) service disruption (e.g. your servers crashing, software bugs) does not adversely affect your customers. E.g. you can send invoices a day later, but a 24 hour outage as a hosting provider is unforgivable.
Furthermore, you should stay away from marketplaces (think eBay, AirBNB), because you have to acquire both sellers and buyers to your marketplace. You effectively end up with two businesses that each needs to succeed.
Additionally, you are well-advised to create after-market products (e.g. plugins/addons for WordPress, Shopify, or Heroku) as that offers you an easy way to reach your market.
Lastly, Aim for niches in a BIG market. This allows you to later branch out into different niches in the market – e.g. “invoicing for physiotherapist” becomes “invoicing for health professionals”. Ideally in a growing market as all ships rise with the tide.
Choose the product you build wisely and spend time on validating your product idea. Here’s the checklist for building the right product again:
good market (naturally recurring, niche in a big market, NOT realtime)
Read Christoph’s full response to our question here.
Christoph Engelhardt owns multiple profitable SaaS products. He is the host of a German business podcast and very easily tempted by unreasonably large amounts of money.
One of the most powerful and economic ways to grow any business is by using Facebook advertising in the right way. Wait! Don’t move on just yet…
Most people write Facebook off as ineffective – but this is usually down to how they’re using it, as opposed to the platform itself.
If your aim is ad -> click -> sale, then you’re lining yourself up for failure. Facebook allows us to tap into an unprecedented level of targeting, but it is still interruption advertising. Stopping someone from seeing the latest pictures of their Sister’s cats and getting them to sign up for your service isn’t going to happen.
But you can still interrupt them and sow your seeds.
The Sysadmin on Facebook probably isn’t working, but is still a Sysadmin. So even though they’re on Facebook to share photos of their 4 month old, they’re still interested in server monitoring.
If a Facebook ad pushes your free “The Holy Grail of Server Monitoring” eBook, you’re still likely to attract their attention.
And when they click on the ad and register for the eBook, they can then go back to Facebook. Even if they forget about the eBook they just downloaded, you won’t forget about them.
Follow-up the download with a series of well-written emails, and you’ve just managed to wedge your foot in the door to the sleep-deprived Sysadmin’s office.
Bonus tip –make sure your auto responders are every bit as slick as the eBook. If the content is no good they’ll either unsubscribe or ignore you. Get it right, however, and you just managed to get a very warm prospect for a fraction of the cost that you’d pay on AdWords.
So it’s ad -> click -> friendly follow-up -> useful info -> know you -> like you -> trust you -> buy from you.
Facebook is far cheaper than AdWords but has to be handled differently. Be warned though: Facebook costs are rising sharply month on month. Ride the wave while it lasts. But do ride it.
Dave Collins has been fighting search engines since 1997, and he’s starting to win! Dave’s quest is to Demystify SEO and restore honour to his industry. He’s also the founder of Software Promotions.
Your pricing dictates everything. The single biggest lever SaaS entrepreneurs have to impact the acceleration of growth is their pricing structure. Test price elasticity early and go up market sooner than you think you’re ready. If you get pushback from customers on prices; don’t lower them. Figure out what value is missing from your software to justify higher prices, then fill the gaps.
Price your software in a way that enables you to provide insanely over the top customer support and service. Your early customers will love you for it and will tell other people in their industry. These early referrals are so important to building a great foundation.
Mike Arsenault is the Co-founder and CEO of Rejoiner, a SaaS lifecycle email solution built for online retail & e-commerce companies.
A major tip for growing a SaaS business is knowing your numbers. Traffic, conversion, monthly recurring revenue, average revenue per customer cost to acquire a customer and churn. Compare your numbers against the top performers in SaaS and optimize via speaking to customers, developing your product and optimizing your marketing.
John Ndege is Founder & CEO of Pocket Risk an online investment risk questionnaire for financial advisors. Before Pocket Risk, John worked at Facebook in London and New York.
Focus first on collecting emails and then implementing an extended follow-up sequence to introduce your prospects to your approach to a solution to their challenge.
When people find your SaaS business they are looking to solve a problem. Teach them how to solve that problem and about why you’ve taken the approach that you have.
All of my new paid subscribers (trials) are email subscribers first. There are no links to any purchase pages that a user can find through site navigation. It might sound aggressive but it’s resulted in significantly higher optin rates site wide which means I lose fewer visitors and have more chances to educate the prospect and bring them back to the site via email.
After the prospect subscribes they will receive an educational series related to what they opted in for. After that they will automatically hear from us a minimum of once per week, typically twice per week, for 38 weeks all on autopilot.
This process is by far the most effective strategy I use and accounts for the vast majority of my revenue.
Brecht Palombo is the founder of Distressedpro.com offering training and sales intelligence software for the distressed assets industry. He is also the co-founder of RealtyMotor which offers done-for-you websites and marketing automation campaigns for real estate professionals.
Make sure the value of your SaaS product significantly exceeds the cost and complexity of acquiring new customers, or you will end up in the startup graveyard.
What’s your average selling price? I don’t know any single statistic that provides more insight on a SaaS startup, or any business for that matter, than average selling price (ASP). Average selling price is the intersection of supply and demand and as such it measures external factors like customer value and competitiveness, while it constrains operational metrics like costs, volume and risk.
Your ASP places a ceiling on your customer acquisition cost, which in turn limits your SaaS sales model options. If your ASP is $500 annual recurring revenue (ARR), then you are unlikely to be able to fund a direct sales force, because your sales rep would need to sell 1000 deals per year to come close to covering your customer acquisition costs. Whereas if your ASP is $500,000 ARR you only need to close a single deal, so you can afford to fly out and wine and dine your prospect to your hearts content.
You can find out more and read the rest of this article here.
Joel York is a SaaS marketing and sales executive, and the respected author of Chaotic Flow where he writes about SaaS strategy, marketing, and sales.
Focus. Staying focused has been what’s been the most helpful for us as a business.
Know Your Company is a 2-person company that supports 8,000+ people using our product – so focus is something we *have* to adopt. We pick one thing to focus for a month, and throw all of our energy behind it. For example, one month our focus might be to increase our conversion to our homepage. Another month, it might be to improve the employee onboarding process. By only choosing to focus on one thing at a time, we’re able to execute on that one thing much better.
Claire Lew is the CEO of Know Your Company, a software tool that helps business owners overcome company growing pains. The software was originally built by Basecamp (formerly 37signals). Since then, Know Your Company has helped over 8,000 people at companies like Airbnb and Kickstarter.
When it comes to growth, people too often overlook pricing. Increasing prices and price testing can have a huge impact on how fast you grow, and how much you can spend to acquire new customers (which also impacts growth). A while back I went through several months of price testing and sparked significant growth this way. You can read more about this here.
People tend to overthink price changes and let fear stop them from increasing their prices. Start off with a simple test and increase pricing by 50% to 100%. Let it run for a week or two, and if it’s not working, you can change it back. Most people will be surprised by what they learn from doing this.
When increasing prices focus on these three things:
Create multiple pricing tiers based on your main customer segments/types
Limit features on lower tiered plans by what higher paying customers truly value (look at usage data and do customer interviews to find those)
Keep pricing as simple as possible while trying the two above (this forces you to focus on the important stuff)
Ruben Gamez is the founder of Bidsketch, a web app that helps people create professional looking proposals in minutes.
The best thing I’ve found to keep people engaged, happy and ultimately, become my greatest supporters is to offer awesome support. Not just great or good, but really awesome. The kind that people talk about and rave to their friends about over cocktails.
Some other business owners would contend that you only provide this level of support when someone is actually a paying customer. I’ve found that by giving everyone amazing support (even your free trials), you really build trust. If a customer trusts you, they’re much more likely to plunk down that credit card and start paying for your service.
My tips on providing amazing support to foster this kind of trust include:
Be timely: If a user sends a request, respond as fast as you can, within 4 hours if possible, within a day at the very least. Forrester Research found that 41% of consumers expect an e-mail response within six hours. Only 36% of retailers responded that quickly.
Be personal: The tone of your email should be upbeat, friendly and helpful. Address the customer by their name—they love to hear it. Let your personality shine through, don’t be robotic! 70% of buying experiences are based on how the customer feels they are being treated. (McKinsey study) Make sure they feel like they matter to you!
Be thorough: Make sure you answer their questions right the first time. If they asked 3 questions, make sure you answer ALL 3 of them or at least indicate when you’ll get back to them. According to Zak Tambor, Internet Retailer, 27% of email inquiries are answered incorrectly. And Harris Interactive found that your customers experience a service agent failing to answer their questions 50% of the time. When they contact you again with the same unanswered question because you missed what they needed, customers get angrier over time. Give the customer the info they need when they need it and you’ll always win their heart.
Be valuable: There’s an old adage in engineering: Underpromise and over deliver. Customer service benefits from that same line. Promise what you know you can keep. And then deliver on it, in spades. Your customers will love you for it and reward you with years of continued support.
Be honest: If there’s a serious problem in your infrastructure, don’t hide it with weasel language. If you’re down, say so on Twitter and provide hourly updates until you’re back up. Include a post-mortem blog post your customers can understand. If you have a security breach, notify your clients immediately. You may be scared to say things like this, but your customers are used to being lied to and kept in the dark by other vendors. Your honesty is a breath of fresh air to them, and they will reward you with their loyalty.
Dave Rodenbaugh is the founder of the customer support tool Support Vine, and three popular WordPress plugins BusinessDirectoryPlugin, GreatRealEstatePlugin, and AWPCP. He also co-hosts the RogueStartups podcast talking about his journey as a single founder.
Focus on Support. Beyond just trying to keep your customers happy in an abstract sort of way there are some really positive bottom line reasons to focus your efforts on doing outstanding support.
Support is disproportionately used by new (potentially trial) users. Why go through all of the expense and effort to market, sell and signup a user only to fumble support and then lose them?
If you’re able to quickly solve a problem for a customer – they’ll often become an evangelist for you.The majority of the testimonials we have on our site have come post support.
You’re most likely going to be handling the majority of your support cases over email. So it makes sense to invest as much as possible in making that a solid experience. Since starting, we’ve done the following to improve things:
* Switched from Google Apps for Domains to a dedicated email provider. We found that this alone decreased the elapsed time from clicking “send” to the email showing up in our customers email box by minutes.
* Push all inbound support emails into our general Slack channel. This helps everyone in the organization buy into providing support and regularly elicits much better and quicker answers to problems.
While not every support encounter goes great (much to our chagrin) we’ve found that trying to hit most of the following elements in a response to a customer goes a long way:
* Put the cause of the issue squarely on us (“bad documentation, confusing UI, etc”)
* Try to convey that it’s an actual human helping them and considering their problem. We don’t use preset scripts for exactly this reason.
* Minimize examples in favor of tailored instructions, this means not referencing things like “set the dns cname to example.com” – but actually put their domains, names, servers, etc. into the instructions.
* If possible, let the user “behind the scenes” to know what was the cause of the error.
* Anticipate what they need to do after fixing the immediate problem so they can pick back up where they left off.