Scaling a SaaS business is a craft that many entrepreneurs can easily take for granted. When one is focused on their initial idea for a SaaS, understanding the SaaS business model, how to develop a product to be product-market fit, and calculating how to onboard their early customers, it is natural to put off the topic of scaling to a later date. Why worry about scaling when you haven’t even proven your product is viable?
The problem is that many SaaS companies will enjoy some early success but will ultimately fail when they need to prove to investors that they can onboard customers en masse. Many entrepreneurs have to go through a rapid learning curve, shifting their skillset from product development and marketing to investor relations and people management. Consider the transition that Mark Zuckerberg went through, starting out as a student coder and rapidly having to steer the fortunes of a Fortune 500 company. With this in mind, we spoke with Andy Dao, the Founder of Pixel True, and asked him about what it takes to scale a SaaS business and the key lessons he learned along the way.
How Pixel True was Born
Andy was working full-time as a product manager when he came up with the idea for Pixel True. He had previously studied programming, and he had always wanted to start his own company. He had worked on a couple of entrepreneurial projects before, but with Pixel True he had a fresh approach. “I approached Pixel True by asking what problems I was currently experiencing and seeing if there was a way to make money of them.” He had noticed that people often posted illustration packs on Product Hunt that people could buy to utilize across their websites or apps, and that the quality of these illustrations were usually low. After checking out competitor websites, he hired a designer off Upwork to create his own illustration pack which he uploaded to Product Hunt, charging $19 for the license, and he made around $1,000 in profit.
“So that was my early validation. I hired more people and built out this library of illustrations and as it grew, I had to think about the business model. Was selling illustration packs individually the right way to progress the business?” Soon he was developing a SaaS-Agency hybrid to better cater to people’s needs. By providing a subscription service that provided access to his library of illustrations, and selling lifetime access for $99, he saw his turnover start to increase. This led to enquiries for custom illustrations, and the setting up of the agency side of the business.
“As the team got bigger, I had to review their pay and the business’s culture. Do we have weekly calls, for example, and how do I increase the chance of people staying on as well? Because replacing people was hard. How do I make sure that, when more clients come in, that I have the staff on hand to meet the demands? Those issues I just solved one at a time. In hindsight, there wasn’t really a grand plan.”
Soon the company was ranked first in Google for free illustrations. The site would get 10,000 monthly visits mostly from organic traffic, and backlinks from platforms that shared free resources, which was a deliberate strategy.
“Our other strategy was creating side projects. Things like a mock-up generator where one could see mock-up devices and put their marketing images on them. This required some custom software, which made the process extremely simple, and soon this generated extra traffic as well as social media shares.”
Their process was mainly SEO-focused, but there was also an emphasis on word of mouth and the overall quality of the service as well. Their current clients would refer their friends, and Andy and his team knew this and doubled down on their customer care efforts. Andy understood how difficult marketing was and how easy it was to get distracted by new marketing channels. He also knew that having a good product was the best way to take the strain off your marketing resources. Both your customers and Google will reward a product that is worthwhile.
Setting Company Culture
Andy believed in the power of culture to shape the success of his business and to aid staff retention. He believed in his designers being challenged and setting personal growth goals, but he balanced this with a flexible work environment with a focus on project delivery rather than set work hours. This also suited the remote nature of much of the work. “The second thing was pay. Having above-average pay makes it harder for people to poach your staff. If your staff aren’t happy with the pay for what they’re doing, they’re more likely to look for another job.”
This plays into what we often hear at FE International, that it is impossible to build any company culture when there’s heavy staff turnover. Adequate pay must come hand-in-hand with an effective SaaS culture.
“We gave a bonus or a salary raise depending on their performance too. And that would happen every quarter. Every quarter can be a lot, especially if you have a team of sixteen people, so I would advise moving it to every half a year as your team grows.”
Knowing When You Need to Hire Staff
Andy explained how it was an intimidating experience hiring staff for Pixel True. He’d never worked closely with designers before and he was not from a design background, but as the number of clients grew, he knew he had to hire people full-time to continue filling orders.
“I think once you start to work in your business, you start to realize that you’re focusing on a hundred different things at the same time. And that’s why entrepreneurs are really busy, wearing so many hats. So, the way to grow your business is to start delegating those tasks. So, you can free up your time to do other important things.”
Andy explained that, as he hired more designers and clients, the management of these people started taking up the bulk of his time. He was intent on retaining control over these projects, but ultimately realized he needed to hire project managers to free up his time. To be able to spend time strategizing over the business, he had to remove himself from some of these day-to-day tasks, so his hiring plan was born from necessity rather than any pre-emptive strategy.
Delegating is key when scaling a SaaS business. Find out how this entrepreneur scaled through delegating, and his best tips for aspiring business owners in the startup phase.
Andy made the point that not all businesses need to expand and hire more staff. “Some people want to go that route where they want to make the business even bigger. For others, if they’re happy staying small, that’s totally fine. It just depends on your needs. As a business owner, the business is there to fulfill your needs. Scaling a business will almost always come with added responsibilities and time constraints”
Recruiting and Retaining the Right Talent
Paying your staff appropriately and having periodic raises and bonuses will go a long way towards staff retention, but there are other things Andy did to prevent turnover at Pixel True. “Though it will be a significant expense [taking staff out for dinners and drinks] saves a lot of cost in the long-term, you know, people are happier. You get to know the team, they stay longer. Because replacing people is hard and it takes a lot of time and there’s a lot of stress, it all costs you a lot of money. And training new staff, you know, it’s a lot better to just keep the people you have and keep them happy than to have to start from scratch and train people.”
Another thing Andy did was have a review with each team every six months, asking them questions about company culture, and what they would like to see improved. Everyone was encouraged to ask questions and he used this feedback to update his company policies. A regular, honest feedback loop can do a lot to improve working conditions and ensure members of staff feel heard. Many people will leave a company rather than try to push for policy changes.
Learn more about how you can utilize the SaaS business model to generate revenue from a tool you created.
Advice for Entrepreneurs Starting Out
Andy took some time to work from a location away from his home, specifically Bali when he was starting out. Due to a remote working model, and the cost-saving benefits of having remote teams, this lifestyle helped him to enjoy the early stages of entrepreneurship. Being around other digital nomads allowed Andy to feel like part of an entrepreneurial community, and much of the advice he received was invaluable.
“When you get into those communities where you have other entrepreneurs who are building really cool things and are super motivated, working every day to get it done, it is very inspiring and it humbles you a lot as well. You can get really good advice and you can contribute to the community as well. I would highly recommend, if someone is quitting their job, to travel and find a place that is far cheaper than if you were to live in your home country. In most countries, there will be a community of entrepreneurs. There are lots in Bali and Thailand.”
At the other end of the journey, Andy made the point that the sale of the business and the subsequent training one might have to help with [for the new buyers] can actually be a fun process. “Luckily I got on really well with the buyers. So even though I was training them, it was a lot of fun and it felt like we could be friends or run a business together.” He explained that the buyers of a business often have many of their own insights and experience that can be useful for an entrepreneur to understand for their future projects. “Also, during [the sales process with FE International] I really saw the value of a consultant. Even though you weren’t doing a ‘consultation’ consultation, ‘I was like, oh man, if I was running a business, it would be awesome to get a consultant in to look at what I’m doing.’”
Read our SaaS Exit Planning Overview to learn more about the key components to a successful exit and how you can prepare your business.
When it comes to choosing a new entrepreneurial project, Andy made a clear distinction between projects designed to make money quickly and ones that require more financial investment. “If I was looking to start something up again, I’d probably go down the SaaS route. I don’t want to hire someone else to build the product because there’s a lot of risks with building SaaS products. It’s very easy to sink in a ton of money only to fail. I would say having strong technical roots in programming helps. I have a background in programming, which helps, but I also enjoy doing it. If you want to make quick money, the easiest route would be to provide a service. So, go down the agency route and then find problems the clients are facing, and then use the money from the agency to pay for developers to build the products. That definitely the safer route for making money.”
Pixel True successfully sold through FE International and Andy Dao is now moving on to his next entrepreneurial project. To learn more about exiting a SaaS business, please view one of our case studies: Exiting a growing SaaS: Lessons from MyShopManager and Daniel Ni on Founding, Exiting and Scaling a Successful SaaS Business. If you would like to learn more about Andy Dao and his journey you can follow him on Twitter.
Curious about how much your business could be worth and if now is the time to sell? FE International offers free valuations.