Is your SaaS business growing big or just growing?

Many people I speak with have the idea, and wish, to grow their company organic, slowly building their business up, adding customer to customer. Thereby they might be able to avoid the cold blooded investors.

I do agree, to a point. The dot.com company creators had ideas nobody wanted to buy, solutions nobody used. Still they collected oceans of fuel for their burn rate. But nothing was left when it all collapsed. People with great ideas should start organic. Build block by block. With blood, sweat and tears.

But the turning point should come when they have proof of concept, when it really works, when customers are lining up, when money starts coming in.Then they should consider their baby as an adult, and let it go to the market. Then it's the right time to start up a new project.By doing that you can fulfill yet another desire many entrepreneurs have; Keeping the company small, but rich.

Selling your SaaS products globally

US based producers of Software as a Service have a few problems when targeting the European markets with their products. There are two main reasons for this. The first is the language problem. Europeans in general understands English, but feel more confident speaking their own language. It's also true language localized products is more popular compared to English only. And unfortunately Italian, Spanish, French and German people don’t even want to speak English.

The second problem is the time zones.  When you are awake, we are sleeping. So to effectively market and sell in Europe you either need to run a 24/7 office with sales staff who speaks 4-5 European languages,  or you need to open up local branch offices in Europe. Both alternatives are expensive and highly risky.

You could also choose to work with Value Added Resellers, but experiences from many producers who have tried it, shows that most V.A.Rs  are not solely dedicated to your product, or they have another core business, where your product will always come in second place. 

There are many resellers of software-in-a-box on the market, but nearly no resellers of SaaS products. (That is why developers depends on their own ability to manage sales and professional services. But really, they should stick to their core business and develop software instead.) The reason why traditional software-in-a-box resellers does not understand the SaaS business model is that their skills is in catalogue services, phone order service and physical distribution. Whereas a SaaS resellers focus must be in branding, marketing, online presentations, sales engineering and professional services. Hello SaaS resellers! Where are you?

Salespeople or e-commerce?

Some SaaS developers have chosen not to support their sales with active personal sales work. They trust their ecommerce solutions and website self services solutions to do the sales job.

However, experiences shows that active marketing and personal selling makes a big difference, especially for complex software products and services. It’s also proven that online purchase of SaaS solutions often leads to high churn. Whereas supported implementation and training often leads to long term usage of the services.

After renting your product for years...

There might come a time when your customers, after paying for your services for years, think they should pay less. So maybe it's time to start thinking about ways to prevent the coming churn already now?. Churn might be new to many software developers, but all Telco's know everything there is to know about it. You need a plan for how to squeeze the last months out of a rental agreements.

Here is a model that might work:

First, investigate how many months your current customers have been renting your service. Then find out who you lost, and why. Then set a clear goal, e.g. "an average customers should rent for 36 months". Then make a contractual incentive, e.g. give them -10% off price if they sign up for a 36 months binding period. Then make a plan for how their rental cost will decrease after 36 months. By doing that, and if you make it attractive enough, you might be able to have them sign up for another 24 or 36 months?

Also, since you are getting to know your customers, you should also find out what other needs they have. It might be a start for you to build another service to continue the relation you already have. Remember, up-sale is the least expensive way to increase your profit margins.

How to thrive the long term relations with customers?

The really big difference about Software as a Service, compared to regular software-in-a-box sales, is that you enter a long term relation with your customers. You send a bill each month, or quarterly, and you constantly upgrade the product. You service, train and support them, month after month, year after year.

There is a need to form a strategy of how to maintain your customer relations. How to build it up. Another way of looking at long term customer relations is that you can start small and build big. Get in with one small, cheap product. Prove yourself as a supplier, build up confidence, and then slowly throw the customers old software out, and change it to your solutions.

SaaS developers can obviously also harvest on involving their customers into their development plans. One of the really great project management systems, Daptiv Inc. has a great concept. They work with something they call the greenhouse, a smart way of collecting views from users and rank them by need.