Jenny Rutherford(Amplifi’s Advisory Board Member) on SaaS opportunities for startups :
In 2018, the global SaaS market is projected to grow to $67B in 2018.* (IDC and Gartner*).
The time has never been better to start a SaaS company. As the demand continues to heighten for SaaS enterprise applications, Enterprises are turning to cloud solutions as a key strategy to accelerate growth.
- Growth more important than cost cutting. Mature, early adopter organizations and small-medium businesses prioritizing growth over cut reduction are moving to SaaS platforms to scale operations, expand sales, and grow customer demand.
- Global, SaaS revenue is forecasted to grow in 2015 at 17.6%**CAGR, exceeding the market demand for on-premise applications five times. Revenue growth for on-premise is forecasted at only 3.1*%. (**IDC)
- Increased spending. 42% of decision makers plan to increase spending on cloud computing. (companies with over 1,000 employees). ***(Computer World 2015)
- Cloud applications will account for 90% of mobile data traffic by 2019. Mobile cloud traffic will grow 11-fold from 2014 to 2019, attaining a compound annual growth rate (CAGR) of 60%. ****(Cisco 2015)
SaaS company is much more than just a paradigm shift to a new technologies. A cultural and business shift are needed to build a successful company that scales with high user adoption and usage, retention and growth.
- Build for performance. While short-cuts may seem helpful, often times it is at the risk of future performance.
- A SaaS company does not have the same business model as a traditional enterprise. The health of the company relies on recurring revenue. Make sure you understand and setup the financial model correctly. The business model is driven by recurring revenues rather than large upfront fees. It is important to invest in the right financial models, resources and metrics upfront. It can take time to regain the cost of acquiring a customer. Monthly tracking of recurring revenue will help the business understand how they are doing month by month.
- Pay attention to churn. At the beginning, a monthly churn rate of 8-10% might not seem terrible. However, the more customers you lose, the more money required to obtain new ones, makes it difficult for even the most amazing marketing teams to keep up.
- Build bare bones product and then iterate quickly. It doesn’t need to be perfect. In fact if it is, something is wrong. Ask for customer feedback and then iterate. User driven feedback should build the product. Don’t wait until the product has all the bells and whistles to get it in the hands of customers.
- One of the benefits of a SaaS product is agility and speed. Make sure your SaaS company is setup in a way to take advantage of those benefits and deliver those promises to both your customers and your company.
- Eat your own dog food. If you build it, you need to use it!
- Monitor your performance daily. Anticipate problems before they happen. Get customer feedback often.
- Don’t be afraid to charge customers money and don’t underestimate the value of your solution. If you have a clearly defined value proposition, add value, and can successfully deliver, people will pay. Often times not charging, can lower the perceived value of the solution.
- Focus on a few key metrics that matter. It’s easy to get caught up in tracking and reporting. Data is not helpful unless it is actionable.
- Qualitative feedback matters and may change depending on the stage of your business. Initially, validate key business assumptions and customer likelihood to continue using the product. Understand if customers would recommend the product to other. Answer the question of why and why not.
- Build the right product for the right market and make sure you minimize customer churn. Get a deep understanding of the customer’s problems. Define and understand the customer’s use-case. Understand pain points and potential areas of churn.