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A lot of early-stage founders have understood—mostly because more and more people are talking about their early-stage strategies—that you need to validate your ideas. You need to make an effort to figure out if the thing you're planning to do is actually reasonable to attempt. Validation is important and absolutely worth doing prior to building.
That much, many people have understood.
But here's where things get interesting. Often enough, validation looks like checking if people have the problem—checking if people have the challenge that your idea solves. And if you find people complaining about it, if you find people mentioning that they struggle with this, to some founders, that's a sufficient reason to build a software-as-a-service solution.
Then they bring it to market and realize something frustrating: even if they directly engage people in their market, even if they directly show this and onboard people into the product, they still don't get a sale.
People stick with what they're currently doing, even though it is something that, from your perspective as a founder, is much worse, much more expensive, much more complicated, much less scalable.
Why is that?
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What is The Bootstrapped Founder?
Arvid Kahl talks about starting and bootstrapping businesses, how to build an audience, and how to build in public.
Hey, it's Arvid and this is the Bootstrap Founder. Today, we will dive into the kinds of alternative solutions that most founders miss when they attempt to validate their ideas. A quick word from our sponsor before we get started, that's paddle.com. I use Paddle as my own merchant of record for all my SaaS businesses. They take care of all the taxes, currencies, and transactions, all that kind of stuff so I can focus on building my product.
Kitze:Now, Paddle released a new guide just a few days ago, and I think you should check it out. It's called the Grow Beyond Black Friday guide, and it contains very actionable strategies for payment conversion and billing tactics to maximize revenue and retention in the long term. But it's about seasonal sales and how to use them effectively. It's really interesting. So if you have anything to sell, check out paddle.com as your payment provider and the link to this guide is going to be in the show notes.
Kitze:A lot of early stage founders have understood, mostly because more and more people are talking about their early stage strategies now, that you need to validate your ideas. That's very important as a founder. You need to make an effort to figure out if the thing that you're planning to do is actually reasonable to attempt. Validation has become a very important step and is absolutely worth doing prior to starting to build. I know a lot of people love building, but you need to do some validation.
Kitze:That much many people have understood. Yet here's where things actually get interesting. Because often enough, validation looks like checking if people have this problem that you're trying to solve, checking if people have the challenge that your idea helps them overcome. And if you find people complaining about it somewhere, if you find people mentioning that they struggle with this, that usually is a sufficient reason to build a software as a service solution. That is validation.
Kitze:People then bring that so called validated thing to market and they realize that something frustrating is happening here. Even if they directly engage people in their market, even if they directly show this product and onboard people into it, they still don't get a sale. And people stick with what they're currently doing, even though you have something that from your perspective as a founder is much better. And the thing that they use is much worse, much more expensive, much more complicated, much less scalable. So why is that?
Kitze:What I have seen and I do see this a lot when I talk to my consulting clients who show me a view into their business and their strategies is that validation, their validation, is often missing a critical and a central step. They look for challenges, they look for proof of pain, that's good, but they do not investigate alternative solutions. They might look for existing Software as a Service solutions in that field and see those either as potential competitors or as an inspiration for solving problems. But what they absolutely don't do is investigate non SaaS alternative solutions. So let me walk you through the alternative solutions to software as a service businesses that I have found in the past for my own projects and the projects for my consulting clients.
Kitze:Because when you go through your idea validation stage, when you try to validate that there's a solid market and a solid group of prospects for your business you don't just need to understand what they lack you also need to understand what they make do with The most commonly overlooked alternative to your product, to a software product, and the alternative solution to the challenge that your prospects face is the extreme DIY, the pen and paper, the custom handcrafted Excel sheet. You would be surprised how far people get with just a single Excel sheet or a Google Docs sheet that tracks everything that they need to know and then it does all the math, all the data massaging. Excel or Google Sheets, I'm just going to use Excel as the collective term here, think I that's one of the most flexible tools when it comes to handling data. And people, through sheer necessity, have figured out how to use that particular tool. It's not a sexy tool, it's not a fun tool, but it's likely your actual biggest competitor in most fields and industries, more than you could imagine.
Kitze:I've seen Excel or a spreadsheet just like it, could be Airtable, Google Sheets or whatever, being used in the construction industry, by medical professionals, by authors, by writers, by hairdressers, by lifeguards. The nature of data that needs to be segmented, sorted, collated and graphed makes Excel the tool for almost anybody and it's so flexible that most business processes can at least be partially mapped into a spreadsheet to a certain degree. But for most businesses that is enough to get the job done. And that's something that we don't really think much about when we talk about product, The job to be done that your customer has. We talk about solutions.
Kitze:But jobs, yeah, they sometimes get the backseat. Everybody has a job. Everybody has some input data that needs to be transformed into output data. Everybody needs to apply some kind of process to a thing. So it would be interesting to look into this a little bit more to understand alternative solutions as well.
Kitze:So people get a request for a proposal maybe as an input and the output is either the project itself or some kind of artifact. It's just an example. And in between they do their job and some people get a list of invoices, the output is bookkeeping, other people get a script, the output is a fully realized podcast episode. That's just how products work, right? The job to be done exists and the product does that job.
Kitze:So to be able to do a job people have to have a mental model of the process. They have to know exactly which steps to take to get from this input whatever it might be to the output that is expected of them. And in almost all cases that mental model has to exist fully established in the mind of the person executing the work. This means that when an organization uses software tools they try to map as much of that internal mental model into the software tool as possible. The excel sheet that contains all this data that a company would use in their extreme DIY that does not just contain data it contains an attempt at mapping an internal mental model of a process and the flow of data between the input and the output into a very flexible but not very customizable tool like Excel or Google Sheets.
Kitze:Here's the thing with that: the act of mapping that model into a spreadsheet is extremely costly. A spreadsheet that has been in a company that's been tracking the internal process of that company that is extremely hard to replace. Not only does it contain all the historical data that's relevant for internal analysis that kind of stuff but it contains the probably very painfully learned lessons of trying to both establish a process and map that process into a software tool. You'll find that these DIY things are the best they could do. Really like a company is trying, right?
Kitze:They're trying to find the best solution and this has proven to be the best solution. It's a result of a long journey of tiny experiments to make it work. So we tend to forget the complexity that goes into configuring this simple spreadsheet. And that's what you're competing with. You're not competing with the spreadsheet, right?
Kitze:You're not competing with Google Docs. You're competing with the months and years that it took to get that spreadsheet to where it is. Unless your solution is significantly more maintainable and even more apt at mirroring this process that your prospect, your customer already have, the cost of switching and setting up again a mapping of the internal process into your tool is likely going to be too high for them. That's why they stick with their weird spreadsheet. The competitor here is the effort.
Kitze:The spreadsheet, the homegrown DIY solution is a massive competitor with a big moat around it. That's just time and pain that people spend to create it. Which is why when you look for alternative solutions you have to very much investigate if people have actually attempted this transition prior, if people have attempted to solve this transition from spreadsheet to software tool to homegrown tool or software project. And if that is the case, you have to figure out why they failed. And this really differs between industries.
Kitze:In some industries, the spreadsheet, as complicated as it might be, is still replaceable with the software business. There's still a chance that whatever you build is worth building because it does effectively improve on the existing solution for people. But if existing DIY solutions are very complex due to the complexity of the underlying process that they map onto, then a lot of businesses likely thought they could have solved it in the past and then failed. Right? It just depends on the complexity and that's something that you will likely not completely understand when you start a business because you kind of have this vision of, yeah, would be cool if software could do this, but you forget all the pain and all the suffering that went into establishing this process in the first place.
Kitze:So when I look for competing solutions, for alternative solutions in the space, I first look for the amount and intensity of DIY. Where do people share their weird self made solutions? Then I look for attempts at solving this problem where people have tried to build a business that have failed. And I try to find the founders for whom this failure occurred and learn from them about the failure and the specific reasons they failed. It's a pretty significant thing to do when you're building or trying to verify the potential future existence of a business, to look for people who have failed and then investigate why that's the case.
Kitze:Sometimes there are websites, like in our community, in the software community, there's like failery.com, where you can find interviews of people in this particular field. You can also find this in other places. Usually, it's the best idea here to ask experts in that field if there were any attempts, if they ever tried a solution for this and what that was called and it's not around anymore, you can kind of look into it. Just figure out the name of the founder, maybe reach out to them. Maybe they've heard of them.
Kitze:Maybe they're still connected to them in some way. Most importantly, don't assume that just because there is no current solution, you will find success with yours. Right? That's a validation error. A lot of people may already have tried and failed because they assumed that their solution would be enough.
Kitze:But the resistance to moving from DIY to hosted or software solution is too high and has been reliably too high in this industry. So let's maybe dive into a couple other alternative solutions to investigate here. I think there's a list of things that I always keep a lookout for. First thing is legacy software. People may have had some software that was built in the early two thousands that had their business process mapped custom into the software for them.
Kitze:It's installed on their Windows XP machines, and they will keep using it for the foreseeable future. It's just the way they're going to run their business. So only once that software breaks or that process changes in a way that the software doesn't help anymore will they ever think about finding a new solution? And since you can't control when that happens, these customers are not actually prospects of your business, at least not at this point. There's a strong external reason for them to either opt into or out of your sales process, and you have no control over that.
Kitze:Still, you should tell them that there is a solution on the way that they can look into should they ever need to. So that's a kind of customer education here that you can do. But I would not put too much effort into reaching out continuously. Like, they will come to you if they know about you once you've established that you exist for when their process changes. Now, there's always obviously direct SaaS competition in the field.
Kitze:Of course, you actively need to research the software as a service space for actual competitors. Now, you do this, one of the most important things that I would look at is not the specific feature set or UI or workflow, but what I think is even more important is understanding what their positioning is and who they are aiming at. Successful companies will have understood that they're best at serving a particular part of the market, like a niche within the niche with their software product. So look at how they talk and who they talk to and how that reflects on the product that they offer. What's the input data they work with, what's the output, what's the result that the product facilitates and what do they not offer, how easy or how hard is it to integrate this product with other solutions in this space.
Kitze:Is it simple or is it hard to export and import data? Do they try to lock people in or do they make it open? Do they have integrations into workflow systems? Do they try to keep all this data internally? That kind of positioning, both external and internal, gives you a lot of insight about what the expectations of the market are.
Kitze:Maybe also how expectations in that market differ from subgroup to subgroup. Important to realize, right? You can't go for the whole market. You always have to start somewhere. And most businesses make a pick and then they see it through.
Kitze:Now open source solutions are another thing to look into. When you're building software it is likely that somebody in the late 90s has tried to build a maybe less functional but still pretty well working version of that software before. Like the concept of solving your IT problem, solving your technical problems isn't new. And currently the thing that you want to build likely exists in several different varieties for JavaScript as an example project that people built upon somewhere. It's just in its first little iterations, the first steps, it is probably somewhere.
Kitze:So as much as operating open source things and maintaining them is costly in terms of time, they are free. And for a lot of people who struggle financially, who are not yet in a wonderful position to have a lot of budget, these free solutions are preferable to a paid solution. Even if the paid solution has a better workflow or integrations or interface and ends up being cheaper in terms of labor in the end, people will struggle through the weird, completely arbitrary interfaces of someone's pet software project if that is freely available to them. That's just the reality of a market, particularly if you're selling to people with a restricted budget. So consider that open source is a competitor too.
Kitze:It's hard to compete with something that is free, so you have to compete on a level that is not price. Agencies and services are the other side of the thing. Right? It's not very obvious, particularly because we think in the software as a service world in terms of products, but there's an actual agency or service or consultant that might be tasked with this job, and that's somebody you would replace with that software as a service offering. So you're kind of competing with them.
Kitze:It's generally a thing when you think of jobs to be done. Anybody could do this job. A person, an agency, a couple people, an intern, a software product, an AI. Doesn't matter who does the job that is to be done as long as it gets done. So if you think about your product in terms of a job to be done, you're placing a full job that somebody is executing with your software and that might already be somewhat outsourced to an agency who might then outsource it to a contractor.
Kitze:So think about that too. Right? An agency gets the input data. They're expected to provide the output data, and how they do this is up to them. Let me give you an example here because I think it's very interesting.
Kitze:In the writing world, like writing books, people are wildly creative and vision led. People wanna, you know, get their vision onto paper and then distribute it to people. They're very focused on the vision of the book, the stories, narratives, characters, or if it's a nonfiction book, like, the insights and all that. But somebody needs to proofread that. Somebody needs to edit this and make sure that consistency exists, spelling errors are removed, formatting is okay.
Kitze:And usually, that person is not the author themselves because they don't really concern themselves with that. It's too technical. They're creative people or experts. They're not book people. They might also just not be capable of looking at their pros from a neutral professional distance.
Kitze:So there are probably tools to do this at this point, and you could likely build one that's much faster and probably just as reliable as a person or an agency, but that's who you're competing with. The people who will read this book, not care about the contents, but only look at spelling. It's going to be the pay a $100 and get this in two days kind of agency you're competing with. So you will have to have an amazing offer that is much faster, much cheaper and more reliable to compete with the already pretty optimized processes that these agencies have. And that's a fairly saturated space as well.
Kitze:So think about this, like who might be doing this for people right now? And finally, let me bring up the most painful alternative to a problem that we as founders have to live with and that is doing nothing. Some people will just keep doing what they're doing and not buy any solution to their problem because to them living the pain is not a problem. Some people cannot handle the pain and will look for a solution but a lot of people will say yeah it's just part of the course, just part of the experience, you have to suffer through this so you can get to the final result. People will do nothing and that is an alternative solution to a problem.
Kitze:They're just going to suffer through it and that's something you cannot deal with. No amount of customer education will move people who have chosen to just deal with the pain and not deal with the problem. So which of these can you work with? Well, think the best ones to deal with are people who are using legacy and incumbent solutions where you can build something better, like tangibly better, for them if you understand that process perfectly and then are able to map it directly into your product. You can deal well with people who are using direct competitors.
Kitze:You just have to fight the right niche that is currently underserved or unserved or adjust your positioning or just serve them slightly better than competitors. That is usually a way. And you can also deal well with people who are just using general tools like spreadsheets for mapping processes that are not extremely complicated. The more complicated it gets, the harder it will be to get people to move away from the DIY solutions. Everybody else is really tough to deal with.
Kitze:Ultimately, understanding all of these alternative solutions gives you a lot of insight into who your actual competitors are. That's not often who you think it is. You'll see a lot of information about price anchors, willingness to pay, unwillingness to pay in the markets as well if you just analyze these other solutions. If everybody in your field uses open source stuff, there is no SaaS that could ever exist in this field even though people tried, well that might not be a good industry to be in right now with your really cool new thing. You will also see switching costs and friction, maybe even from stories of people who have done this in the past.
Kitze:And investigating all of this, you will find things like feature gaps and market gaps. So there's something positive about this too. A feature gap is something you can exploit to serve a market that's underserved, and a market gap is something where even with an existing feature set that other tools might have, you can replicate and serve them better than anybody else. Most importantly, you will understand why people stick with worse solutions instead of taking the obviously better one. Why do they stick with something that doesn't work as well as something that could?
Kitze:That's what you will understand. There are probably underlying reasons that you might not be aware of and you will figure all of this out by actually looking for this. Biggest mistake? Only looking at direct SaaS competitors while ignoring the 60% or so of your market that might just be using spreadsheets and Slack. So don't make that mistake.
Kitze:Investigate the alternatives, understand what you're really competing against, and you have a much clearer picture of whether your idea can actually succeed in that market. That's it for today. You can find me on Twitter at avid kahl, a r v a d k a h l. And if you wanna know what people are saying about your brand on over 4,000,000 podcasts, check out podscan.fm where we track mentions in near real time with a really powerful API that turns podcast conversations into actionable data. If you're hunting for your next business idea, you can get them delivered fresh from the podcast world at ideas.podscan.fm, where we find the best startup opportunities directly from hundreds of hours of expert conversations every day.
Kitze:Share this with anybody who needs to stay ahead of the conversation. Thanks so much for listening. Have a wonderful day