One of the most compelling argument to build a SaaS (Software-as-a-Service) business is that you can do it on a dime and be profitable within a few months - No Angel, no VC, fully bootstrapped.
A famous advocate of this model is David Heinemeier Hansson of 37signals and one of the strongest believer in focusing on revenue very early on is no other than Hasan Mirjan of spheremail, a friend and client of ours.
That is the magic key: "Focus on revenue from day one" If you do not take external investment, you most likely have a few thousands dollars saved up. They go really fast.
From no idea to revenue
As sure as the three "P"s of Integrated Circuit design are Power, Power, Power, the three "S"s of a rapid SaaS are Sales, Sales, Sales.
The premise of Dane Maxwell's approach is that many markets are still organized around ad-hoc solutions where software could bring 10x productivity increase. So the process goes something like this:
- Pick a market
- Find the major pain for someone in that market
- Sale a SaaS-based solution
- Build it
A lot of serendipity goes into picking a market, yet some indicators help size up the opportunity. A market with a lot of hiring going on is growing (you can look at job postings). A market that advertises a lot is competitive. There is also extra money to spare there. Finally the more a market is profit-oriented, the easier the sale.
Once you have market, you should identify the most painful day-to-day activities. That requires both: write down a thorough list of questions and talk to as many people as possible. Most would-be entrepreneurs do not pass that step. If you are either thinking to start a business:
- Write down a script to guide a phone conversation. You are looking to identify the challenges faced by your target market at this point.
- Gather a list of one hundred people in that market. With every services present on the web Today, this is relatively easy.
- Get on the phone
The number are pretty consistent: An introduction email to 100 people will lead to roughly 30 follow-up phone calls for about 10 leads. Cold calling is hard. You will have to go out of your comfort zone. You are thus better off knowing sooner than later if you can pass the bar before you invest much time and money in your project.
Out of the many fold advantages of talking early with people in the market:
- You get validation before investing significant resources
- You narrow down on the best buyers: his/her job title, day-to-day worries, emotional bias to make decision, etc.
Sales, Sales, Sales
A minute, that's about how long an average person can hold their breath. A few days, that's how long a business can survive without cash. It is the harsh reality. Sales are creating an inflow of fresh cash and, as inhaling, they are critical to the survival of the business.
The ultimate sales machine by Chet Holmes is one of the most thorough book on the subject of sales. If you are a trained engineer turned entrepreneur like me, start from this quote from the book:
"If you truly believe that your prospect should benefit from your product or service, it's your moral obligation to help them make a decision and get on with their lives."
Then think twice about the product you are building. Start selling or go home.
Nothing puts better the tension between both teams than the differences in the recruiting process sales and engineering. Yet a successful career in both fields require pig-head determination. Engineers respect a "it's not done until it's done" attitude. They also respect dedicated attention to details. Chet Holmes in The ultimate sales machine advocates that the best performers in sales are highly prepared and determined. They devise a process, write scripts, think ahead about all objections and prepare for it. Skills are acquired through repetition.
This is the common ground on which a business leader needs to build a synergy between both sales and engineering. Why? Because aligning your sales and development cycles is critical to your company cash flow. Cash is survival. Cash is true profits.
Engineering is very much looking inner-wards to solutions. In a sense engineers are perfect buyers. Software developers are always on the outlook for new technology, new programming languages, something to give them an edge to build better products. This is the mind-set to become a great salesman: Think through the eyes of your prospect. What would you do if you were task to solve his/her problem? Would the product you are working on help?
Benefits to the client drives sales and is the basis of value-pricing. Nothing puts it better than this recent article: what a dead squirrel taught me about value pricing.