5 Keys to Success: Advice from an Investor to SaaS Companies Coming of Age in 2017
With the rising trend of cloud-based SaaS solutions coming of age in 2017, I’ve been reflecting on the SaaS successes and failures I’ve seen as the industry came into its own during the last several years. By its very nature, SaaS best practices continually morph and evolve, but there are five keys to success that SaaS founders often overlook. From my perspective as an investor, here’s my advice for company founders as they seek out strategies to improve, grow and gain funding in the year ahead:
- Focus on a core group of customers
One of the biggest mistakes I see entrepreneurs make when they pitch SaaS business models is overstating their target markets. While capturing 85 percent of a market may look impressive as a pie chart in your slide deck, it’s much more effective to build a core group of dedicated customers you can use to demonstrate traction. By working with that core group of customers, you can hone in on their pain points, iterate and improve your product, and then go capture the billion-dollar market ― after you’ve truly identified your product market fit.
- Think outside the funnel
Too often, founders and their marketing teams focus all of their efforts on the top of the sales funnel. With the rise of automated marketing, the approach to growing adoption rates has become almost too process driven. It’s “get them in the funnel, get them signed up, get them using the product.” Wash, rinse, repeat. In this rat race to get more users, existing customers are largely neglected. Conventional sales wisdom rules here: It’s much cheaper to grow existing customers than it is to sell new ones. Which brings me to…
- Stay close to the customers you already have
The traditional SaaS sales model is geared toward recurring revenue. That revenue will only recur if your customers are satisfied. I know of one company, for example, that taps into this problem by helping companies not just get new customers, but also grow the customers they already have. By driving value through the entire customer journey, you will retain users and grow existing accounts. When customers are truly satisfied, they will turn into your strongest advocates, becoming a new sales tool for your business.
- Don’t be afraid of professional services
I’ve said it before and I’ll say it again: SaaS companies do not need to shy away from professional services. Offering professional services gets you close to the customer, which means you get great insight on how to iterate your product, ensuring that you are providing a product customers are willing to pay for. Not to mention, it can also be a welcomed revenue stream early in a company’s life. If you do it well, you will inherently make your product sticky within the market, and those customers will be highly inclined to refer you to others.
Remember no two companies are exactly alike
Certainly there are similarities among your customers. They most likely share an underlying problem; the very problem they have hired you to help solve. But each problem is nuanced and every company is vastly different in how they view data and how different SaaS applications can best apply to them. Your success will depend on your ability to stay close to customers, speak their language, and tweak your product to match their needs.
As a cloud-based SaaS business, how are you looking to grow in 2017?
About the Author
Cres Ferrell is Vice President at BIP Capital, a venture investor in the Southeast serving entrepreneurs, investors and operators. Cres currently focuses on SaaS businesses and how to apply their growth to new markets. A non-traditional VC, Cres began his career in engineering after graduating from Georgia Tech, and went on to spend 15 years working for corporations in manufacturing, retail, consumer products, business services and consulting. Cres established himself as a successful entrepreneur after building and selling two prior companies – COLDfire Technology and 4th Strand, with a greater than 50X return to investors. Follow Cres on Twitter @cresferrell.