7 Lessons Learned From 5 Years Operating and Growing SaaS Companies

The SaaS market has changed a lot in the last five years.

In fact, it’s more than doubled in size.

I’ve been operating multiple SaaS companies  – including Mailshake, Right Inbox, and Voila Norbert – throughout that period and, fortunately, I’ve learned a few things along the way.

In particular, my experiences have taught me that if you’ve got good operational efficiency, a company that’s working well, with a clear direction, and it’s growing and profitable, you’re going to get the maximum value for your business.

But how do you actually achieve all of those things?

These seven lessons have helped me a lot:

1. The Product is the Marketing

If people don’t love your product, then nothing else matters: you’re going to struggle growing your business.

When people do love your product, it has real marketing value – and that value far exceeds anything else you can do.

When I look at what we’ve done at our properties, we spend a relatively small amount on support and operations. Of the rest, roughly half of our revenue goes toward the business in product expansion or development, and the other half we spend on marketing (including sales).

But if you really think about it from a growth perspective, pretty much all of that spend goes toward marketing. Product development equals marketing budget.

2. It’s Harder to Fix the Marketing Than Fix the Product

I’ve been doing marketing since way before I started buying and selling SaaS companies, so trust me on this one: every marketing channel continues to get harder and more expensive.

It takes more time to get your marketing right, and there are more and more competitors, all trying to shout the loudest on the same channels.

Traditionally, buying SaaS companies was all about buying under-marketed, under-performing SaaS companies and growing them. In my opinion, fixing the marketing was a great economic model to create wealth.

But now it’s almost inverse, because software development is a little more binary compared to marketing. You could spend a ton of marketing dollars and still not see any results five years down the line, whereas you could invest in software development outsourcing and see results in three to six months.

It’s almost better to buy really good marketing sites that have bad products, and fix the product.

3. Churn Stems From Activation

Churn is ultimately all about user experience.

If you deliver a fantastic experience in terms of onboarding, training, and anything else you can do to reduce the friction points around your product, that’s going to reduce your churn and improve your customer acquisition costs.

Read about customer experience and you’ll see a lot of people talking about the importance of getting it right in the first 90 days. 

But I’ve learned it’s really all about the first week. The first time they ever log in to your product. The first experience they have with it.

If they haven’t figured it out by that point, they’re a lot less likely to log in or use it the second, third, or fourth time around. And if they do come back, their sentiment has changed.

4. You Can Still Beat the Big Hitters Without a Huge Budget

In a world where your competitors might be backed by millions of venture capital dollars, it can feel like an uneven playing field.

But I’m here to tell you that it’s still possible to grow and compete with the giants without having a huge budget.

To do it, you have to be very scrappy and concentrate your spending on specific growth levers. This is something I’ve been saying in approximately my last 100 speaking engagements and for the last seven years: you have to do the math on your ideas and rank them from biggest impact to lowest, and just focus on those few big ones.

Growth comes from three areas. I’ve looked at probably 200-300 SaaS companies over the last five years with a view to potentially acquiring them, and when I’m figuring out how I’d grow those businesses, I come back to the same things time and time again:

  • The website needs more traffic. So they need better SEO, better content, maybe some paid search. 
  • Or it’s some form of conversion improvement, whether it’s free trial to conversion or conversion to activation.
  • Or it’s product improvements to make that “aha” moment, that activation point, much better – which relates back to customer experience. 

If you can get somebody to have an amazing customer experience, they’re going to spread the word and you can even get word-of-mouth growth. People can leave you reviews and fall in love with the product before they even fully utilize it, because they see the potential of the pain point being solved, or they see the value of the product.

Frankly, most companies suck at that. They try to do too much, which dilutes their message and confuses the customer experience.

5. Less Is More

Want to know how to destroy your user experience? Quadruple the number of things your product does.

That’s right: having more products and more features doesn’t necessarily make your business “better.” 

The real value lies in using all the shiny new things you could be doing as a brainstorming exercise to figure out the one or two things that you should actually do.

At Voila Norbert, we expanded our feature set with three or four different product offerings. One of them took off. The rest did not – their business impact wasn’t meaningful.

So if you think about it, if we’d spent the time just thinking about it and talking to customers, getting their feedback, looking at the market, that might have taken 100 hours of research, but it could have saved us 1,000 hours of implementation.

But it’s not enough to just ask people what they want. Product market fit needs to be assessed for every expansion you’re planning, too. I think a lot of people forget that.

With Mailshake, people asked us for a dialer, so we built one. And guess what? It turns out like eight of our 38,000 users used the dialer in 2019, which was pretty pathetic.

We should have just launched an integration with other dialers, and that would have solved the problem. And then we would have figured out the right thing. Instead, we said, “I think we can knock this out pretty quickly,” so we did. And as a result, we added a lot of functionality to the product that only eight people use.

6. Healthy SaaS Businesses Are About Growth, Profit & Operational Efficiency

To have a healthy SaaS business, you need three key ingredients: growth, profit, and operational efficiency.

I’m able to manage between four and eight SaaS businesses on a day-to-day basis without wanting to shoot myself. All of those businesses are growing and profitable. People think you can’t do it, but you can – it’s just about being efficient with your time, being efficient with your team, and being efficient with what you actually do to improve your marketing and product.

Ask yourself: how often does your team meet, and what happens when you do? Does it actually add value? 

We use JIRA and Slack for the vast majority of internal communications, and for the most part, I know what the team is working on without ever having to talk to anybody. 

We also have these really good weekly updates, whereas before, we’d spend an hour or two a week on the phone. If you multiply an hour a week for each company, that’s a full day of my time, plus an hour or two less of productivity for my employees.

It also comes down to growth. We look at the three big things we can do this month to grow the company.  A lot of time, people will say “I’m going to go build a community. I’m going to go do a podcast. I’m going to go advertise at this trade show. I’m gonna do podcast advertising.”

Well, okay. Those could all be great ideas, but that’s going to cost a lot of money and take up a lot of time. There’s a lot of resources required to support those efforts. But does any of it actually grow the business? Because maybe one of those things would – but likely not all of them.

The other part is doing the right thing at the right time. I can give you a great example here.

Two years ago, we made the mistake of hiring a salesperson at Voila Norbert. That business gets about 20,000 leads a month, which is way too many for one person to handle. Our sales guy was completely flooded, so it was pretty much ineffective.

So we went back to the drawing board and created a lead-scoring system internally, using tools to turn those 20,000 leads into a few thousand that our salesperson should contact. Now all of a sudden it’s a manageable approach.

Basically, we hired them too early, when we didn’t have our stuff figured out. If I’d just done the hard work on lead scoring – which is a pretty difficult task, but definitely not three or four months worth of effort – it would have saved me a bunch of time and money down the line.

Now, every time we hire a salesperson, they know exactly what to do.

7. Don’t Skimp on Hiring Experts

It’s easy to see consultants as expensive. Just another cost to your business. But if you hire the right ones and work with them effectively, you’ll more than recoup what you spend on them.

We hire various coaches and mentors and experts. We pay them well, somewhere between $200 to $600 an hour.

That sounds like a lot, except for the fact that we just need one or two hours of their time a month, and the amount of things we learn from other people’s mistakes and the direction that we get saves us so much more in the long run.

We have a sales coach who’s paid $600 an hour, but he helps us deal with our objections. He figured out how to help us with our reporting. He helped us develop a model for how many leads a salesperson can handle before we need to expand the sales team, and it turned out that instead of three salespeople, we actually needed one and a good lead scoring software.

By now, you’ve probably noticed there’s a theme to my advice. If you spend your time figuring out the right thing to do, the amount of efficiency you create is worth far more than the time you put into doing all that background work.

Which of these lessons did you find most valuable? Or maybe you’ve got some other great learnings about how to run a lean, mean SaaS machine? Let me know in the comments below!

Entrepreneur & Digital Marketing Strategist

I build and grow SaaS companies.

“When it comes to marketing, Sujan is the best. I’ve never met someone with such creative tactics and deep domain knowledge not just in one channel, but in every flavor of marketing. From content, to scrappy guerrilla tactics, to PR, Sujan always blows my mind with what he comes up with.”

RYAN FARLEY Co-Founder of Lawn Starter

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Eniola Akinduyo 46 months ago

Hi Sujan,

It’s been a while I’ve been here. Great insights on running a Saas business.

Although I don’t run a Saas business, but having a knowledge of this will help in dealing with Saas businesses as a content marketer.

Thanks.

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