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Looking to build, secure, market, and sell software products? Then this show if for you. Each "TYB" episode will feature a topic from a key area of building a digital business including product development. product design, and marketing. Some episodes will be led by team of experts from Applied Visions, while other episodes will feature special guests with domain expertise relevant to building a digital business. Every episode will leave you something actionable you can carry over into your business—and it will be presented in a fresh, fun way.
[00:00:00] Welcome to Transform Your Business. The show created for companies that wanna build, market and sell differentiated digital products. And today I'm really excited to share the audio of a recent webinar we did to help services businesses add a SaaS product. Over the past year, we really started focusing on helping companies move from just being professional services to implementing a SaaS model.
We saw the benefits these businesses got from recurring revenue, increased scalability, more predictable revenue streams, reaching a new target audience, and maybe most importantly, going from a services valuation to a SaaS valuation. He, you'll sell your company for a lot more money as a SaaS business during this webinar.
We covered what a SaaS business is, the benefits of transitioning to a SaaS model and laid out a roadmap for you to follow. [00:01:00] We also talk about a cool case study that will shine a light in what we're talking about. So let's get started and explore how you too can make this transition from services to SaaS.
So let's start with the basics. What is SaaS? SaaS just simply stands for software as a service. It's a business model that allows you to provide software to customers on a subscription basis. So instead of just selling a product as a one-time service or fee, you're able to have an ongoing revenue component to the business.
So what's really good about it is it offers a more scalable and predictable revenue stream for a lot of companies. if you're a traditional software business, you might have a one-time licensing fee or download fee, and that's it. Or. As most of you have professional services businesses, you know, you're selling your time or expertise or your team's time or expertise, so you're somewhat limited by the amount of time and hours and work that you and your team can do.
It's a little tougher to predict cash flow and revenue as You know as well as we do projects come and go. [00:02:00] Clients don't always pay on time. You really can't turn the tap on and offer services like you can with SaaS if someone's not paying you. So transition to a SaaS model can help alleviate some of these problems.
you're offering more subscription based service, which helps you with scalability, revenue, cashflow, things like that. Of course, there are challenges as well. We'll cover some of, the things that you need to be aware of going into this, but that's just a quick overview of what a SaaS business is.
I wanna get into an example and kind of show you what this looks like with a quick case study. So Super Side is a company that turned a traditionally professional services business. And the creative industry into a SaaS business are what they call CaaS (Creative as a Service). But it's essentially the same thing.
What they believe is that, professional services model has limitations in terms of scalability and predictability of revenue as it relates to creative services. And so what they did was really cool. They pivoted the model to the SaaS or CaaS model by developing a platform [00:03:00] that really automates a lot of the design process and collaboration.
Between designers and clients and the shift has really allowed them to offer a more standardized and scalable solution to their clients, while also building that predictable and recurring revenue stream that businesses love. Also, instead of just charging, monthly retainers or things like that, they charge up upfront for the year, and so they know how much money they're gonna make on each client.
They know they're getting paid. They're not paid in arrears, so they don't have to have finance people going back all the time and asking people for payment and all sort of stuff. They get it up front, which is a really interesting model. And they've seen really, unbelievable growth since their inception.
So in 2020, they reported revenue of 25 million, and this is all according to PitchBook, up from 9 million 2018. So in two years, increased the revenue by 16 million. they basically tripled the revenue in two years. They've also raised over 32 million in funding from investors and have achieved evaluation of over a [00:04:00] hundred.
Million dollars, which is really amazing. And these numbers are just a testament to the success of their business model and their ability to scale and grow as a result of it. So they're a great success story of showing how , thinking outside the box instead of just thinking about traditional.
SaaS, or excuse me, services you think of more of a SaaS or in their case Cas business model. And, so their value prop, is a little bit different. typical design firm will say, Hey we have great designers, this and that. They're really pitching a better way to get design done through their, what's really a portal, it's an interesting way to do it and we'll walk through the portal here in a second, but right away if you're comparing them to a traditional creative agency, You're seeing something different here.
And so they have what's called a unique positioning wedge here versus a typical creative agency. When you log into your account, once you sign up, you get to what's called their homepage, right? And it's essentially just shows you all of the ongoing projects that you have going on with them. [00:05:00] They list all your hours here, so the hours that are in flight, the hours that you've spent.
What you have available, if there are any overages they have to charge you for, it's all there. there's no longer this murky thing of every week having to send your client's reports on what you did and all this sort of stuff. All right. Here. Within the homepage of the portal you can collaborate with other people on your team.
Right up here. You can create a project right from here. Everything that you need to do is basically right within this homepage of the portal, which is really cool in platform messaging. Instead of having to go back and forth by email or by text or by phone with your clients, everything's right here.
So even if you send an email to your rep from Super Side, everything's tied into this portal, so all of your messages and emails and everything can be found right within their portal, which is really neat. Within this, you can also add all your project files and all your attachments and everything like that.
It shows you with a particular project what the status is, what the deadline is, what type of work they're doing for you, who's [00:06:00] on the team. it's so again, everything is really streamlined and collaborative, which is much different than what with the typical creative agency.
same with submitting projects. if I think about how I work with creative agencies, you send 'em an email, You tell 'em what you need to have done. You go back and forth a lot on the scope of work and actually what's required, what you need. then Super Side is all done through their portal.
So you select,if you're looking to have a video produced or you need to have a website done, you go through these different submissions and all of your project requirements are done right here, which is again, really cool and different from what the typical experience is with a creative agency.
So what we see super side doing is really cool, and we've been working on projects like that for a lot of customers recently. So now let's step into the benefits of transitioning to that SaaS business. And I showed the example of Super Side before, so you could get a visualization of what that looked like for your business, even if you're in a totally different industry, all the benefits are the same.
If you're running a business, there's really nothing [00:07:00] more important than having a reliable revenue stream coming in. It's what allows you to make investments for the future, expand your team. Plan for your long-term success and your game plan. But if you're relying on one off products or sales revenue can be a little bit unpredictable and even unreliable sometimes.
And that's, so that's where the beauty of a subscription based business really comes in. You're offering a product service as a subscription. You can generate recurring revenue that's steady, predictable. You know exactly how much revenue you're bringing each month based on how many customers you have.
Currently versus how many you add and you can plan accordingly, really gives you a peace of mind, you know about making better informed decisions, perhaps even what would be considered riskier decisions because you can really track where your revenue is today. And where it'll be based on some pretty simple forecast modeling.
And so one of the best things about recurring revenue is that you're not tied down to individual projects, right? It means you don't have to consistently host to find new clients or sell new projects to keep your revenue stream flowing. [00:08:00] Instead, you can focus on providing value to your existing customers on the services side.
And if you're adding the SAS part, you can. Add new value to your subscribers and then, continue to add subscribers month over month and build a loyal customer base, right? And that really helps you find a balance between sustainability and long-term success. Another benefit we see is that recurring revenue can be a bit more stable.
Then just project-based revenue. Both projects you might have periods of months or even years of high revenue followed by periods of lower revenue, right? It's just how, it's the ebb and flow of a services business and how it works, and it can sometimes make things difficult to plan for the future.
But with recurring revenue, you have a stream of income that you can count on, which gives you more confidence in how you can invest in growth opportunities and whether you know the economic ups and downs that you've seen in services with a bit more stability. So overall, having a subscription based model can be a game changer for your [00:09:00] business.
It can provide you with that steady, predictable revenue that allows you to plan for the future, expand your team, and build a more sustainable, long-term business. And don't forget about growing that valuation from. Whatever services multiple is to a much higher multiple that SaaS typically gets. So what are the steps for doing this, right?
If you're interested, if you're saying to yourself, how could I do this? It's can seem a little bit daunting at first, , if you follow the steps here, it'll really help you. put a process around it and make it much easier for you to actually accomplish this if you take it just piece by piece.
And so the first thing you need to do is you need to know what we call your perfect customer, right? These are the people who need your solution the most, and are not being well serviced by the existing options on the market. And so knowing your target market or perfect customer will help you develop a product that meets a specific need, right?
It fills a really important, painful pain point for them. And, it's something that you can offer that other companies or other , solutions on the market might not be doing well. [00:10:00] So this means taking a lot of time to research and understand who potential perfect customers are, their demographics, their behaviors, their preferences.
And all that sort of stuff. And then once you've identified your target market, you can really start to think about how your staff's product can solve their problems. There was that number one pain point they're experiencing and how can you build an MVP, minimum viable product that helps solve that one particular pain point.
And you can always build out from there. But knowing exactly. The pain your customer's feeling and being able to alleviate that quickly and easily is the most important thing, right? And so once you've done that, you can really start to build your product roadmap, tailored it around your perfect customer's pain point, what they need first.
And that way you're not over building and building around that main pain point. You're just addressing it right away. And build that product roadmap that outlines your developed milestones and timelines and things like that. So building this roadmap around your perfect customer's needs really helps you stay on track, make sure you're delivering a product that meets the needs of your target market [00:11:00] on time.
Something that you're not building for years and pouring money into. You can build something, get into market, start to get some revenue in the door, and then incrementally build out more functionality. But that way you're at least getting some revenue in the door as you continue to build the product, the next thing you need to do is build your development team, right?
One of the most important things you have to do, quite honestly, so you'll need a team of skilled developers and designers who bring your product vision to life. And so whether you're hiring in-house or outsourcing, you need to make sure you can find the people who are experienced and passionate about doing this.
And As your product is being built, as the development team's working, you need to develop a go-to-market strategy that positions your product develops, your messaging, creates and captures demand. This involves understanding, your perfect customer's needs again, like you did at the beginning and their pain points.
And then creating organic, we think is best, is creating organic thought leadership content first, and then adding paid search and social campaigns that resonate with that, right? And so we believe that you can create demand for your product before it's even [00:12:00] ready. Which is really important because most companies don't do this.
So if you're able to create pre-and for your product or solution, you'll be way ahead of the game. It's all about getting your message in front of your audience in a compelling way. And because you've taken the time to know your perfect customer, you know exactly where they are. You know how to find them, you know how to message to them.
You're gonna set yourself up to capture that pre-and for your product, And what's nicer than having people lined up, raising their hand? Waiting in line to get your product before it's even ready. And so creating a go-to-market strategy that allows you to do that will set you apart from 95-98%% of businesses that wait until the product's developed to actually go ahead and start marketing it.
And then lastly, you need to develop a pricing model that's both profitable and attractive to customers. This can involve market research, competitive analysis, experimentation with different pricing strategies. Ultimately, you wanna find a pricing model that's sustainable for you and aligns with the value of the product that you provide.
So let's go through, each of these one [00:13:00] by one. And so the first step, as we talked about, is knowing your perfect customer. And there's nothing more important than this. The best way to do this is to start by researching and analyzing your potential customer base. Who are they? What are their pain points?
What challenges are they facing that your product can solve? And most importantly, who needs your product the most? There's always gonna be tons of people who you think can benefit your product. Don't fall into the trap of trying to build a product that serves all of them. Find the perfect customer who needs your product the most, is feeling the most pain that you can solve for.
And it's also important to consider the size of your target market in the level of the competition. Are there already, established players in the industry. If so, don't, you can't go head-to-head against them. You need to figure out what sets you apart, what we call a unique positioning, wedges to differentiate yourself from the competition.
And so then you're not just an, another me too solution that's going head-to-head against, someone that's been in business for 15 years that has a huge established book of business [00:14:00] and has the credibility to sell. So once you have a good understanding of your target market, you can create.
We call a positioning strategy to help you visualize and empathize with your perfect customer. And so this positioning strategy really guides the decision making when it comes to product development, sales, marketing, everything else. Positioning is not messaging. Positioning is more of an overarching business strategy that encompasses parts of messaging, but also a lot of other pieces of your business.
And so that's really important to make sure that you get done. And then, so overall, taking the necessary time to perfect that target market. Will really help ensure that the product that you're building matches what your customer has in mind and positions you for unique success in the market.
You're not doing the same thing everyone else is doing. You have something unique and different that you can sell. That's the most important thing. That's step one. Once you've done that, once you've identified your perfect customer or target market and their pain points, you're gonna need to develop that product roadmap to guide the development [00:15:00] process.
And so your product roadmap should outline the features and functionality your product will offer, and the timeline for each milestone. So it's essential to prioritize the features that are gonna have the most significant impact. To solve your perfect customer's pain points like we talked about. So this will make sure that your product addresses the specific needs, meets our expectations, and most importantly, you're not wasting money and time over building something.
At first, find what's most important, build for that, get it out to the market, start to generate revenue, and have that revenue continue to pay. For additional functionality and features, so you're not just digging out of pocket for constantly, as you mentioned on the previous slide, but it's worth reiterating here.
Make sure your product roadmap takes into account the level of competition and factor in your unique value, right? And that's why the position exercise is so important. You need to know what differentiates yourself in the competition and how you can use that to your advantage in product development.
This is what will help you from becoming a [00:16:00] commoditized solution. You hear commodity a lot in services. You're seeing it now a lot in SaaS too. There's products that are being built that don't have true unique differentiation, which leads to big problems down line as you try and build your customer base.
And so with your product roadmap and support to communicate the roadmap clearly to your development team, And any other stakeholders involved in the project, let's make sure everyone stays aligned and focused on delivering what the product is and how it meets the needs of your target audience, then you can tailor it.
Lastly, just tailor that roadmap for, to solve that private area pain point and deliver value like we talked about. So once you've identified that perfect customer and the pain points you need to develop a product roadmap to guide your development process. Your product roadmap should outline the features and functionality your product will offer and the timeline.
For each milestone, it's really important to prioritize the features that are gonna have the most significant impact to solve your perfect customer's pain points and provide the most value to them, like we talked about in the last slide. [00:17:00] This is gonna make sure that your product really addresses the specific needs and meets their expectations.
talked about on the last slide and the importance of the positioning strategy. Make sure the roadmap takes into account the level of competition and factor in your unique value, right? what makes you different from everyone else in the market? What sets you apart and how can you use that?
It's your advantage in the development of the product. This will help you from being a commoditized solution. commoditization a lot in services. You're also starting to see it a lot in SaaS in terms of companies just building a product because they think, someone needs it. Not specifically who, but they think they're, there's value for.
A solution in their industry. They build something, they're not different enough from another, more established competitor, and they never get the mind share. They never get the buy-in, they never get the flow going. They need to make it a successful business. Also, making sure you're communicating properly, right?
Make sure that you're clearly talking to your development team or any other stakeholders in the process. This helps, with alignment and making sure that you know the team [00:18:00] is working together. On delivering the product that your perfect customer needs. And so developing that product roadmap that's tailored to your perfect customer's needs is another crucial component.
We keep talking about this, making sure that you're building a product that solves the pain points, lowers value, sets you apart from the competition. We just can't emphasize that or not. The next step. So once you've done, once you've developed that product roadmap, and you've strategized, now is the time to really get the development team going, right?
And so you'll need a team of really good developers and designers who take your product and bring it to life. But how do you find the right people? When it comes to building a development team, there are a few options that you have to consider. So you can choose to hire in-house. so you can bring in developers and designers in-house and pay them a full-time seller and benefits lot, some companies do.
That can be a good option if you have the budget resources to do it. this really allows you to have complete control over everything in the development process, and you can work closely with your team to make sure that the products being built to your specifications. The other [00:19:00] option is to outsource the development and we decide to outsource.
There are really two main options you have that you need to consider. First one is to offshore development overseas or outsource development stateside or nearside. So offshoring or onshoring, or nearshoring are the three options, and each has its pros and cons. If you develop offshore, it can be more cost effective.
salaries are a lot lower. Overhead costs are lower in the countries where offshoring is done. It can also give you maybe a wider pool of people that you have to choose from in faster development times due to, around the clock development cycles. But there are some big challenges that you need to consider.
language and cultural barriers, time zone differences. If you're on the East coast in the US and you're working with someone in India, There's a lack of overlap sometimes between, your project lead and your team in the US or in North America, legal and regulatory issues, right?
it can be really tough to ensure the quality control issues are not as great and project management is not as great when you're working with a remote team, different country. And so [00:20:00] some of these companies are mills, right? Where they just work on mass volume, cheap rates. But you lack some of the things that you sometimes need to get the job done the right way.
On the other hand, outsourcing your development state side or near side can help provide more streamlined communication and easier management of the product project, right? There's no language or cultural barriers to navigate. You're working with a team in the same time are relatively sane time zone to make it easier with coordination and collaboration on the project.
This option is usually more expensive. salaries are higher, overhead costs are higher in the US and in countries in this part of the world. But you gotta weigh that out versus, the quality of the work. that's typically more reliable and in the long run, it might save you time and money to do it right the first time than having to go back and fix things that you did maybe at a cheaper rate overseas.
And so ultimately, the decision to build in house or outsource offshore stateside or nearshore, right? It's gonna depend on a variety of factors, right? Your budget, [00:21:00] your timeline, your project requirements. Just make sure you're carefully weighing the pros and cons of both, to make sure that you're choosing the one that can best support your project.
And so whether you choose higher in-house or outsource, Make sure the developers and designers have a track record of delivering high quality works. You're gonna see the references. They're excited about your project, and maybe they've done something like it before and they can see your vision for what you're trying to be.
You're gonna also wanna make sure that you have, super clear communication and collaboration processes to make sure that everyone's on the same page and working towards the same goals. You can, sure you have regular check-ins, project updates, feedback sessions can help make sure that your development team's aligned.
And focus on delivering the product that meets the needs of your perfect customer. And so that's what you need to consider as you work towards putting together your development team. The next one, which is a fun one for me, is creating that go to market or GTM strategy, right? And Once product development's underway, now's the time to start thinking about your go-to-market strategy.
Not once the product is [00:22:00] almost done, right? Once the product gets underway, because your product roadmap is super aligned with the needs of your perfect customer, that helps you build a go-to-market strategy that's also aligned with the product roadmap that's also aligned with the needs of your perfect customer.
And Go-to-market planning involves positioning a product, creating messaging, and generating demand for what you're building. And so to create a successful go-to-market strategy, you're gonna need to first understand your perfect customer and their needs. You've done that right through the positioning exercise.
You need to understand what problems they're facing. That your product helps solve. You've done that as well. You're gonna wanna talk the same way they talk, right? So what terminology, what language do they use to describe their problems? You wanna emulate that to show that you have commonality that show that you understand, empathize with what they're going through.
And so answering these questions will help you create messaging that resonates with your perfect customer. In addition to the messaging, you're gonna need to create a marketing plan. It's gonna involve both organic and paid channels. Depending upon your budget, if you don't have a lot of money, you're [00:23:00] gonna need to put more time and do it and go more organic.
Organic should be done either way. If you have a bigger budget, you can maybe start to work on some paid channels earlier on, so you can split the difference between time and money and put some effort into your paid channels. But if you don't have budget, you can be very successful. Initially, especially focusing only on, organic about leadership content, right?
And so creating good content that positions you and your company as real experts in the field is a great way to attract your perfect customers to your brand. Starting there is the first place we call us of budget, right? If have budget paid search and social campaigns can be effective in Korean demand, especially if you're able to target specific segments of your audience with tailored messaging.
We like to look at paid channels as just guaranteeing distribution to your audience. It's not about, expecting just to flood the market with ads and see things rolling in. Take your organic content, distribute it through paid channels to make sure that your target audience is seeing it. that's what we believe [00:24:00] paid channels are best for at first, and as you mentioned before, right at a api, we think that you can and need to start generating demand for your product before it's even ready.
By creating that demand ahead of time. You'll be ahead of the game and you'll be in a better position. To be successful, right? there's a few ways to do this. You can start by leveraging your existing network and customer base. If you have an established list of contacts from your professional services work, for example, you can start by reaching out to them and sharing your vision for your product in an organic thought leadership focused way.
Talking about a problem that you see and how you think you can address it and sharing that vision for your product. Ultimately, creating a successful go-to-market strategy is all about getting your message in front of your target audience in a compelling way. And so by taking the time to understand your customers and developing a tailored marketing plan for them, you'll be on your way, develop, developing that successful SA business once you have the go to market strategy down.
Now's really the final step in building the SaaS business, right? And that's [00:25:00] developing a pricing model. Pretty important, And it's important to find a pricing model that's profitable and attractive to your customers, right? You gotta have both. Just because it's profitable for you doesn't mean your customers are gonna be willing to pay it.
So you gotta find that balance between how you make money and how your customers see value and what they're willing to pay for it. And First thing they need to do, conduct market research, do competitor analysis. Understand how your competitors are pricing their product. That'll give you a baseline for what the customers are willing to pay.
And then you can experiment with different pricing strategies to see what resonates with your target audience. Some SaaS companies offer a free trial period to get customers hooked on the product, right? Make it sticky. We call it being sticky. Something. Once they start using it, they wanna keep using it.
So you can offer a free trial or a freemium where you get certain features for free for life, and then if you wanna upgrade to something else, you have to pay for it. Other companies just offer tiered pricing to help differentiate features by level. There's a number of ways you can go about it. You're gonna need to [00:26:00] test and see what the market is saying to you and what they'll be willing to pay for it.
Ultimately, just want to find the pricing. That aligns with the value, the perceived value of what your product provides. You don't wanna underprice your product and leave money on the table, but you also don't wanna be overpriced in price yourself out of the market. So one thing that you're gonna wanna keep in mind is that your price amount should be sustainable in the long term.
So you don't wanna price yourself too low and not be able to cover costs. It's always harder to raise prices for existing customers. Netflix tried to do it a couple years ago and. I had a hell of a time doing it. they're Netflix, they have so many users. People watch Netflix all day and all night, right?
And they still had trouble raising their prices. And at the same time, like you can't go so high that people are just like, I don't get the value out of this. So find that middle point can be a little tough, but finding it. It can be a little bit of a trial and error process, but you gotta make sure you get it right.
And so conduct market research, experiment with different pricing strategies, align the pricing or the value of the product, of what your product [00:27:00] provides, and that'll really help you get well in your way, developing the right pricing strategy. And we've talked about how to do this and how to build this SAS business, right?
And we've painted a relatively rosy picture so far. But there are some challenges and pitfalls that you wanna look out for, that we need to mention. So the first, and you might have picked up on this, in the inverse, at, early on talking about your perfect customer, but you wanna make sure we see, oftentimes companies are just too broad with their target audience when it comes to SaaS.
It's important to focus on a specific niche, right? In the smallest niche that you can find, that you can still make money on, right? To make sure your product resonates with your customers. By trying to appeal to everyone, you risk diluting your message and making it difficult to stand out in a crowded marketplace, right?
And so by homing in on a specific group of customers, you can better tell your product and messaging to their needs and increase your chances of being successful. The second common mistake is that new [00:28:00] SaaS companies, they sometimes wait too long to release their product. They wait for product perfection, right?
Perfection never exists, but. It can sometimes be a crutch of, oh, it's not ready yet, or, oh, we need to build in this feature, or whatever. If you're waiting for pro perfection, you're never gonna launch. Or by the time you launch, and we see this all the time, by the time you launch, one or two people have already gotten ahead of you, and now you're the third company in line right, or second company in line.
It's just never a good place to be, perfectionist, subjective. That's a never ending pursuit. Don't wait too long to launch your product. Once you have the mvp, the minimum viable product set up, and you have features built out that can solve that perfect customer's biggest pain point, get it out to the world, launch the product, and then you can iterate and grow it based on customer feedback and seeing what your customers need.
Another misstep we see is, and this ties into proc perfection, overbuilding the proc too soon. It's natural to wanna create a really feature rich product, right? When you see products that you [00:29:00] probably use on the market, they have a hundred features. But it took a while to get there, right? You didn't see the journey on getting there.
the best companies start by solving one thing and then they continue to build out features, or even over time, acquire other companies that have features that they want. And so the reality of it is that if you overbuild too soon, you're gonna build features that might not be necessary to your core audience and things they don't see as valuable.
and so build that MVP first and add the features as you grow. The last thing, and potentially the most important one is to really understand the true cost of building and scaling a SaaS business. It's not just the development cost, but you have hosting costs, you have infrastructure costs, you have ongoing maintenance costs.
You know a lot of. New SaaS companies underestimate these costs, which can lead to cash flow issues down the line. So by really understanding all the costs involved and building and scaling your product, you can ensure that your pricing strategy aligns with your business goals and that you're building a sustainable business model for the long term.[00:30:00]
So we're not talking about these pitfalls to scare anybody, but rather put you in a better position for success early on. So just keep these in mind as you fill out your product. How much fun was that? If you like what you heard and wanna learn more about adding a SaaS component to your services business, go to avi.com/contact and put a meeting on our calendar for a free strategy session.
And we'll be back next week with a new episode of The Transform Your Business Podcast. See you then.