Selling SaaS is not like a one night stand - it’s like a long term relationship. Getting to US$ 1M in annual recurring revenue (ARR) is like a ten year anniversary for most founders :)...
From choosing the right geography and customer fit to pricing and SaaS marketing, here are key learnings from 55 Upekkha ValueSaaS startups that got their revenue flywheel spinning fast. These lessons are designed to help early-stage SaaS founders leapfrog towards their revenue milestones.
#1 Sell to global customers. It is easier to earn a dollar than a rupee.
The EnrichVideo & GaragePlug story
So, what makes selling in India difficult? And relatively easy in countries like the US? Upekkha startups EnrichVideo and GaragePlug learnt it the hard way.
EnrichVideo, formerly Amigobulls, was a B2C startup that provided stock analysis information to consumers. As long-form analysis content did not appeal to the audience, Amigobulls moved to building short videos.
At this point, a large US brokerage firm approached co-founders Poorna and Chandu to develop personalized video reports for their HNI (High Networth Individual) clients.
Since this product didn't find traction with Indian banks, EnrichVideo shifted their markets to the US and Southeast Asia and its Annual Recurring Revenue (ARR) grew by 4x.
GaragePlug provides software for automobile workshops and garages. They hit their product-market fit and won a few Indian customers early on but their ticket size remained small. Then they hit a wall.
GaragePlug changed their market and Ideal Customer Persona (ICP) choice after going through Upekkha's Value SaaS flywheel framework exercise. They focused on selling to large multi-brand workshops in the Middle East region and found their Annual Recurring Revenue (ARR) grew by 8x.
Coming back to the question, what makes selling in India difficult?
- The Indian market is price sensitive, and the US market is quality sensitive: In a price-sensitive market, Indian companies are reluctant to incur monthly or annual expenditure on software products.
- Indian companies need product customization to suit their business needs. US buyers are more used to buying and using off-the-shelf products.
- Purchase decision-making is slow & recurring payments for software products are difficult. India is a great place to build SaaS companies but not sell SaaS products because the adoption of software in Indian enterprises and SMBs is still low compared to the US.
- They are yet to live the subscription product lifestyle. Buyers are happier with one-time payments for enterprise software licenses.
And what makes it relatively easy in countries like the US?
US businesses buy your product for the value it can add to their business and customers. If your product solves a high-value problem, they are ready to spend more with you.
During their early stage in the product-market fit, some SaaS founders regularly interacted with US customers about the problems they faced. If they solved a high-value problem, their product was bought. The size and age of the company didn't matter.
Their consultative decision-making structure makes it easier to sell your products than the conservative structure among Indian buyers.
#2 Learn the problem better than your customers - Talk to them every week
You must understand the problem faced by your customer segment, not just one customer
'When you talk to so many customers, you become an expert advisor, and your product becomes a category leader,' says Amit D. Mishra, co-founder, and CEO of iMocha, world's leading skill assessment platform. iMocha is one of Upekkha's first cohort startups.
We at Upekkha, encourage all our founders to talk to their customers weekly, depending on their stage.
Understand the problem well before you write the first line of code
Talk to customers continuously to get deep insights on the problem you solve. Understand what value they gain or lose using your product? How does it help to make their lives easy? The insights will help you improve your product and build a great one.
Compliance and regulatory mandates keep changing in every industry, so it is essential to speak to your customers regularly.
Staying in touch with your customers will also help you manage churn. When you lend your ears, your customers are happy and readily share their problems with you.
Once Tejas spoke to more than 50 customers, he realized that their best paying customers were agencies and they needed a different on boarding than small business owners. Tejas focused on improving the on boarding experience for agency users - resulting in great NPS from them, more usage, and more revenue soon thereafter.
#3 Start with one mother problem for a focused customer segment
iMocha's co-founder, Amit says, "There are no two main problems one product can solve. There can be 100 subsets of one mother problem. Are you clear about the mother problem of your customer persona?"
What is the mother problem you solve for your customers? What is your Ideal Customer Profile (ICP)?
Talk to your customers regularly to understand the subset of problems associated with the mother problem your product solves. A better understanding of the mother problem makes your product strong, and you become an expert in solving the problem.
When you focus on more than one problem, your product will be all over the place, not adding value to one homogenous customer segment. "We solve problems for hiring managers and recruiters who are different stakeholders of one mother problem - skill assessment. When the mother problem changes to upskilling, the segment changes and the product changes. You need a new product for a new mother problem," Amit adds.
#4 Talk about the problem openly online - build a conversation around the problem before you solve it
What should you do first? Do you build a product or start talking about it online? If you start building a product before having multiple conversations online, you might end up missing some crucial features that you should include in your product roadmap. So it is inevitable to do content marketing for your product before you build it.
Do not build a website after developing your product. Build the website first, at least six months before you release the product. Write blog posts, LinkedIn posts about the problem you solve and discuss with your ideal customers and other industry experts. Share your learning journey and your perspective on the domain - you will get more customer conversations going in your pre-product-market fit stage.
#5 Can you make your product a habit among your customers?
If you are uncertain about something, then you Google. It's like muscle memory. "We often turn to the products we use to satiate discomfort," writes Nir Eyal in his book, Hooked: How to Build Habit-Forming Products
What is the problem that keeps your customers awake at night? Do they trust your product to solve that problem? If a salesperson feels some nerves about the status of all her potential clients in the sales pipeline, does she land up on your CRM? Is a recruiter confident of using your skill assessment tool to hire the best talent?
Use product analytics tools to understand product consumption. How often does your customer use your product? Which are the most important features they use often?
Upekkha startup SocialPilot, a social media scheduling and publishing tool, used Mixpanel and Google Data Studio to analyze how many people have not used their product in the last five days, seven days, fifteen days, thirty days.
#6 Follow value-based pricing - When customers get more value, you should earn more
Pricing is the most critical decision a founder has to make. Unfortunately, many founders do not spend time getting it right. Pricing is considered a negotiable term with customers.
Instead, the value your customer gets out of the product should determine the price. Quantify in terms of dollars the value of every feature in your product. Ask your customer, "If this problem doesn't exist, how much would you save? If this problem is solved, how much more revenue would you make?"
How many people are using the product and how often they use it are a few questions a founder should ask to determine its price.
Almabase, an Upekkha startup, helps universities manage alumni relations,. For an alumni relations team - one KPI is how much they raise in donations from their alumni. So Almabase changed their pricing model to charge its customers for every donation raised through it. Almabase automatically earns more as its clients get more value out of the product.
#7 Churn - It's okay to lose customers who don't contribute to your ARR
What is your ICP choice? Whom are you solving the problem for? Is it the right customer that you are targeting?
Find a niche target audience who can extract value from your product and contribute to your revenue growth. If it provides no value to your customer, you lose revenue.
Before you know the market deeply, you can't build a fabulous product for a niche audience.
Build a product that solves a problem for a broad segment of your Ideal Customer Profile (ICP).
The narrow down your ICP by building more value for a homogenous customer segment so that wrong customers do not sign up and right customers stick around longer.
Doing content marketing, building online thought leadership, and having the right customer conversations before building the product are vital to attracting a homogenous customer segment.
"We started with a broad segment of ICPs and narrowed it down. The ICP choice changed several times. We spoke to dozens of our customers for 20 to 30 minutes every month. We focused on one or two of our ICPs and progress did not happen overnight. It took 6 to 8 months after joining Upekkha to experiment and identify the right ICP whom we should solve the problem for.” -Tejas Mehta, co-founder, SocialPilot
#8 Get referral customers - Build a product your customers love
Referral customers are essential to building a revenue flywheel. You found your first customer and all their team members - your users - love your product.
They share it with their friends who work for their competition. The idea is to get your customers talking about your product and share some love online - as a G2 Crowd review or as a video testimonial that you can share.
Your first customer should be the primary source of your second customer; rinse & repeat. They are also your source to build your brand's credibility online to fuel your inbound marketing engine.
Today customers do their due diligence by researching all products available in the market. You don't force-sell your products. Instead, you facilitate assisted buying by making relevant information available on the internet.
Customer testimonials on platforms like G2 Crowd are trustworthy to build your credibility among potential customers who don't know your product exists.
Marketers tend to believe that getting customer testimonials is not their job. They think, “If a customer loves the product, she will leave a review online.” If your customer is using your product regularly for over a month, get a testimonial. One KPI for marketers should be the number of testimonials collected from happy customers.
#9 Burn your equity wisely
The most valuable currency for a founder is her equity. Keep your long-term goals in mind while splitting equity with co-founders and key employees.
If you spend too much money before you have a high-value problem and identify your Ideal Customer Persona (ICP), capital invested might be burnt chasing phantoms.
Also, equity is a non-renewable resource — don't burn too much of it on perishable goods.
If you burn too much equity to get fickle customers - the MRR won’t last, but the equity dilution is forever.