Whether you’re just starting your SaaS business or you’re in the process of growing your company, you’ll get lots of advice…whether you asked for it or not. Unfortunately, all advice isn’t good advice.
Which made us curious about bad SaaS advice. The worst.
So, we reached out to successful SaaS leaders who have an understanding of what it takes to be successful in this industry and who have also seen the common mistakes founders make. Specifically, we asked:
“What is the worst advice you’ve ever heard about starting or growing a SaaS company?”
The bad advice they shared runs the gamut from customer acquisition and product/market fit to when to hire or accept funding. The good news is that many of these leaders not only shared the worst advice they’ve heard, but also clarified how and why it was wrong.
We learned a lot and know you will to. A big “thank you!” to everyone who took the time to share their worst (and then some of their best) advice on starting or growing a SaaS company.
The worst advice I’ve heard for growing your SaaS startup: that you should bring on a veteran executive from a well-known, high-revenue company as soon as possible. Sure, it might get your company some headlines, but making that type of hire too soon can actually hurt the business. Culture fit is one concern. Moving a seasoned executive out of a corner office and into a shared office space can be a challenge.
But the more crucial issue is that most veteran executives from big companies don’t have the right skills or experience for growing early-stage startups — they’re used to growing companies with hundreds of millions in revenue. Ultimately, you need to hire executives/managers that have the skills and experience that match your company’s stage of growth.
(P.S. I wrote a full breakdown of when to bring on a management team at your startup on the Drift blog.)
SaaS Consultant & Customer Success Evangelist
I see SaaS founders make these same two mistakes over and over again:
- Not fully identifying their target customer
Knowing the demographics of your target SaaS customer is not enough. You need to understand what frustrates them, what their problems are, what they love, etc. Your product isn’t going to appeal to everyone so don’t be afraid to be very specific about who your target customer is.
- Not asking the right questions when talking with their target customers
Yes, you should be speaking with your customers. Ask your best customers for 20 minutes of their time to understand how you can better meet their needs. Take exact notes because your marketing team will want to use the exact language of your customers in their copy. Founders often tell me they don’t want to be seen as a bother to customers. Here’s what they’re missing: when the focus of your questions is to improve their customer experience, create a better solution, and make their lives easier — customers will be impressed you asked.
Co-Founder & General Partner
Worst advice? Go for volume of users and then revenue.
That is a consumer play and all wrong for SaaS. In B2B you need to build value and charge for it – from Day 1. And usually charge more than you think. Pricing right gets you talking to the right kind of customers – and if you are not meeting their needs, you will be hearing about how to do it.
SaaS Growth Marketer
The worst advice I’ve heard given to a SaaS company is to completely focus on customer acquisition. Many SaaS businesses I work with say they’ve been advised that completely focusing on customer acquisition is the only way to grow their business. That thinking is plain wrong.
Acquisition is actually the worse growth lever because it tricks you into thinking that you’re growing when you’re just limiting your growth.
Since SaaS is recurring, you need to work your ass off to get people to stay around for as long as possible. Working on retention, customer success & satisfaction (NPS, renewal rate), and revenue are much better levers than acquisition.
Of course, there is a time where you’ll need to focus on acquisition but most businesses don’t ever reach that point.
SaaS is a long-term game. It’s not about gaining customers all the time. It’s about keeping them.
Content & Growth
Have you ever received an email from a SaaS founder asking if ‘you’d buy X if it existed?’ As a marketer, I get at least 3 of these emails a day. I’m not sure who is advising SaaS startups to validate their product ideas this way, but it’s just plain bad advice.
I get it, you want to be sure your target audience is as excited about your idea as you are. But the best way to validate an idea is by getting actual money in the bank. A better question would be: ‘will you give me $X right now for Y?’ Pre-sales speak volumes, pre-sales equal validation.
If you can’t get pre-sales, you at least want some conversions on a smoke test.
I think I’d buy a lot of things, especially from my friends and colleagues. But would I actually? If I’m not willing to part with part of the retail price right now, probably not.
Co-Founder & General Partner
Some of the worst advice I’ve heard is around freemium and virality. If you have a freemium product, and you think viral user growth equates to revenue growth, you will quickly run out of money! If you can’t measure the revenue generated for each viral customer referral, it’s not a viable channel.
Some advisors seem to think user numbers (I’m talking specifically about B2B here) are a valuable and leading metric. The reality is that free users inviting more free users won’t help you if the pricing model doesn’t lend itself to paid conversions.
Founder & CEO
I would say that the worst advice I see given for starting a SaaS company is that it’s easy. The SaaS business model can be a vehicle for fast growth if you have the right disruptive product at the right time. If you are a SaaS trying to take market share from a saturated market on your industry, you are in for a challenge. A big challenge. Where you will be forced to innovate quickly, compete creatively and listen to your user more.
There are many different facets of a successful SaaS company:
- A company culture that encourages proactivity, listening, acting, reiterating without taking it personal, flexibility, positivity, customer centric attitudes and so much more
- Employees that have emotional intelligence, technical and soft skills, and insight into your industry or the willingness to immerse and learn quickly
- The right tools
- A scalable marketing strategy
- Efficient processes and management
- Customer success
- Accurate data with closed loop marketing analytics
It is not easy. Anyone thinking it is an easy way to make fast cash is in for a huge disappointment.
The worst SaaS advice I’ve heard is this: that looking at the data of how a customer goes from visitor to trial to customer is like looking out the back of your boat, rather than looking through the windshield. The implication is that data is old as soon as you have it, and that no two customers take the same path to finding you. My experience has been the opposite, and I’ve built many businesses based on building a great product, then analyzing and optimizing conversion funnels.
Founder & CEO
When seeking advice about securing investors, someone told me to take the biggest check offered. I’ve learned that this isn’t the best route. It’s more important that your investors come with the right connections and advice, and less about the money. If you are a new entrepreneur, it seems like common sense to take the largest amount offered at all cost, but those relationships prove far more valuable than any amount of money.
Founder & CEO
The worst advice I’ve ever received on how to grow my SaaS business was ironically from a well-known venture capitalist, who most people would consider an expert on SaaS businesses. They told me that I should optimize and prioritize growth over everything else, including profitability. However in my opinion, if you prioritize profitability over everything else, you don’t have a sustainable business and you can run out of money if you don’t bring in outside capital. At a bootstrapped business like I have, if you don’t watch your bottom line, you may not have a business because you can run out of money.
Now the person who gave me this advice isn’t actually crazy or stupid. Quite the contrary, in fact. The advice makes sense for the majority of their investments that they have given millions of dollars to, keeping in mind that their investments are often valued based on a multiple of revenue.
But, it’s potentially business killing advice for someone in my position. I believe that one of the keys to sustainability is to treat every infusion of capital like it might be your last, because you don’t know market conditions in the future. So, even if you take a large infusion of venture capital, you need to manage the business in a way that when that money runs out, you don’t need it anymore.
Co-Founder & President
If you build it they will come. They won’t – and who is ‘they’ anyway? SaaS is just like any other business, you need to have a relentless focus on defining your target customer and figuring out exactly what they need and why SaaS is the better delivery channel. If you don’t do that, not only will customers not show up, they won’t care that you exist. Too often SaaS companies focus entirely on the product without putting any consideration into marketing. In order to achieve substantial growth you need to balance your product and marketing focus.
Now it’s your turn: “What is the worst advice you’ve ever heard about starting or growing a SaaS company?” Let us know in the comments below.
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