SaaS written on chalkboard

Written by: Olga Mykhoparkina, Chief Marketing Officer, Chanty

We’ve started working on our SaaS startup several months ago. After many days of hard work, and countless sleepless nights Chanty business messenger is finally at its beta stage.

Yes, building a startup isn’t easy. You have to be creative and analytical at the same time. We’ve come across a number of challenges and overcame some of them already. The knowledge and experience we’ve received during this startup journey are massive and truly priceless. Hopefully, the lessons we’ve learnt along our way will help you build your own successful software as a service (SaaS) startup.

1. Validate your business idea

Many entrepreneurs have no doubt that their business idea would work. “If I think it’s brilliant, how can anyone else think otherwise, right?” Wrong. In fact, a majority of startups didn’t succeed because they failed to find a market fit. In other words, they didn’t create a product that people wanted. If you don’t want to end up with your Mom and your best friend using your product, you should take validation seriously.

Validating a business idea is making sure customers not only need your product, but are ready to pay money for it. The money part is important as there are thousands of people out there who would use your product for free. Getting paid is a tricky part in a SaaS world. Getting paid for your work is only possible when the issue you are solving with a product is important enough for your customers to open their wallets.

How do you validate?

Talk to as many people as possible  – create surveys, discuss your idea with people on forums, social communities, ask your friends and colleagues. When I give this advice to early stage entrepreneurs, I often hear: “But what if they steal my idea?” Yes, if you ask people around and explain the business idea, you may face some competition in the future. But guess what, you’ll have to fight your rivals anyway. On the other hand, if you don’t validate, you may waste a few years of your life building an app people don’t want. By the way, don’t forget to do the Google search – it’s funny that 99% of “unique” business ideas that enlighten us have been already launched in the market.

2. Have a strong competitive advantage

There has to be a catch – something that makes your product stand out. Making an exact copy of a popular SaaS isn’t a good idea. The first question you’ll be asked on the forums is “How is your product different from competitor A?” You’ll have to talk to people and give them a decent explanation. At Chanty we’ve been asked this question so many times that eventually we’ve created a Slack alternative page explaining how Chanty is different.

Competing with multimillionaire companies is hard for a bootstrapped solopreneur. On the other hand, being small has its advantages – you don’t need all the money in the world, so you can go after a small niche. Becoming the best in this niche is a sure-fire way to success.

3. Don’t sell the price, sell the value instead

When it comes to competitive advantage, many startup owners choose the easy way out opting for a lower price. “Let’s make it more affordable and people will start pouring in”, you think. Well, this is a short-term strategy. While you may get some customers by adopting this lower price approach, be ready to lose them as soon as a new less expensive rival pops up in the market. Having a lower price is okay to attract customers, but there should be something else to keep them coming back. Think of the value you are selling with your product. To give you an example, the guys at Mercedes don’t sell cars, they sell status, just like at Nike they don’t sell sportswear, they sell motivation to courage and success. Add some value to your product to appeal to customers’ feelings and emotions.

4. Work on MLP, not MVP

If you are about to build a SaaS startup, you’ve probably heard about MVP. Minimum viable product is what tech startups are recommended to build these days in order to start testing out the software with a broad audience. The point is, you don’t have to work on your app for years before presenting it to your customers. The best practice is to get to a stage where your product solves at least one pain point that’s most important to your target audience.

It’s necessary to keep in mind that MVP isn’t for scaling or generating revenue. The real goal behind MVP is to learn about your target market to build the app together with your customers and drive your product development into the right direction.

Another concept introduced by Brian de Haaff is MLP or Minimum loveable product. It’s a product resulting in a maximum amount of love from your customers while spending the minimum effort of your team building it. It still solves that main pain point, but MLP also causes positive emotions towards your company and the product. Sometimes you can achieve this by adding one little loveable feature like enabling the use of emojis or going an extra mile by recording the personal video invitation or sending out a hand-written thank-you note.

5. Focus? Focus… Focus!

You can’t meet the needs of everyone from the broad audience. If you try to solve several issues with your product, you won’t create a solution strong enough for any of them. Therefore, it’s important to take one step at a time. It’d be much better to provide an in-depth solution for a single problem rather than chasing two rabbits at once.

This approach works for your marketing activities as well. Instead of spreading your efforts into multiple directions, concentrate on the one that works best for your business or that you or your team are good at. This can be content, affiliate, referral or other type of marketing. The sooner you find the channel that works, the more traction you will receive. Just make sure your hustle in this one direction is consistent. Remember, “Dripping water hollows out stone, not through force but through persistence”.

6. Start networking yesterday

It’s hard to overestimate the power of networking. The more people you know, the more traction you get. If you are a Silicon Valley resident, things are easier for you. Going to meetups and conferences every weekend isn’t a problem. Having lunch with another SaaS company CEO becomes simple.

What if you are far away from San Francisco and you don’t know the main players in this tough SaaS arena?

  • Think online communities. I’ve been  a member of a few and I would definitely recommend SaaS Growth Hacks in Facebook. You can ask questions, share useful tools, leave feedback, find cooperation opportunities with the fellow SaaS people. It’s very helpful and I’ve learnt a lot from the people out there. The only thing I regret – I wish I’d joined it earlier;
  • Make friends online. There is this principle of reciprocity. You don’t just approach a stranger on a street and ask him to do you a favor. Though you’d feel comfortable asking for a favor from a friend. Same rules apply online. If you are looking for a startup coverage from a journalist, make sure you get to know the person first and give away your time, effort or connections by providing value or helping out. Send a client his way, leave a set of meaningful comments under his posts, introduce to someone from your contact list he is interested to know. Only after you’ve contributed enough, you can ask for something in return. And the more important this person is, the more time you’ll spend making friends and providing value.

7. Choose your pricing strategy wisely

The pricing strategy shapes the future of your business. The well-known pricing models for SaaS startups are freemium and free trial. There are also different pricing strategies as well as their combinations. You may find more info in my article on different pricing models.

My research and experience shows that many new startups make a mistake of choosing freemium pricing for their startup. They also regret it with time, but it’s kind of late as they have already stuck with thousands of free users.

My advice would be NOT to choose freemium unless:

  • You have investors to back you up or enough funds to support a mass of freemium users;
  • Your non-paying users provide you with some value (e.g. feedback or virality);
  • Your product doesn’t bring instant value, instead its value increases over time.

The pricing strategy worth considering is “Pay to get started”. There are no free options in this pricing model and you charge each and every customer using your software. You should consider this model if:

  • You are inventing a new market with your product or you have a serious competitive advantage over existing market players;
  • Your product delivers instant value;
  • The issue your product solves is critical enough and people are ready to pay for the solution;
  • You are ready to explain everyone why you don’t give away anything for free.

Takeaways

No matter how tough the competition is on the market you are invading, 2017 is still a great year to start a SaaS startup. However, it’s important to think through your business idea before you begin to take actions. I believe you don’t want to end up having only your Mom and your best friend using your product. So here are the key takeaways:

  • No matter how inspired you are by the idea, make sure people need the product you are thinking of;
  • Get a clear understanding of the value your product will be delivering as well as a strong competitive advantage before building an MVP;
  • Focusing and solving one issue at a time result in a better product;
  • Don’t underestimate the power of networking – join communities and start making friends early;
  • Spend enough time thinking through your pricing strategy not to regret the choice in the future.

About Olga:
Olga Mykhoparkina is a Chief Marketing Officer at Chanty – a simple AI powered business messenger and a single notification center. This powerful and free Slack alternative is aimed to increase team productivity and improve communication at work. Having a 9-year experience in digital marketing field, Olga is responsible for Chanty’s online presence strategy, managing an amazing team of marketing experts and getting things done to change the way teams communicate and collaborate. Follow Olga on Twitter @olmykh or feel free to connect on LinkedIn.