This is an article about lessons I learned after creating 2 startups. As you know, I am a co-founder of Aworker and Kepler Leads. I definitely like SaaS companies in the B2B industry. That’s why I created two of them in this area. Also, I participated on hackathons as an expert and have the opportunity to talk with many teams. 

This is a short summary of my SaaS entrepreneur experience. I hope it helps you to avoid mistakes which others startups already made.

1. Are you sure that anyone really wants your product?

You will be confused by knowing how many people create the product that no need anybody. They are building the magic tool that nobody buys it. It’s like a matrix. They live in an imaginary world. They have hallucinations. Yeah, old entrepreneurial illusions. One time they decided that this Tool is so amazing and fantastic that everyone will want to buy it. They created this Tool and started selling it without any validation. But after they start understanding that the real world is tough. Nobody wants to buy this fantastic Tool. Who could expect it?!  Sometimes entrepreneurial hallucinations can be successful. But chances to be successful without idea validation is less than 1%.

In Aworker we had conducted 40 interviews with recruiters before we started. Also, we had organized business breakfast for recruiters where we discuss issues in their work. In Kepler Leads, my first startup, we had designed a landing page where people could fill the form for using our product after the product release. Then we have launched a Facebook advertising campaign and got approximately 200 leads. This method is worse than a direct conversation with the target audience, but it worked for us in 2015. We had thought that it worked, but it wasn’t. In the next lesson, I will explain it in details. 

How can you avoid this mistake?
1. Read «The Lean Startup» by Eric Ries.
2. Read about customer development.
3. Read the great book about customer development «The Mom Test» by Rob Fitzpatrick
4. Think about how you can validate your idea
5. Prepare right questions for the target audience
6. Write or call your potential customers and talk with them
7. Ask right questions (remember about the book «The Mom Test»)

2. Build high demand & frequency product

Don’t sell fridges or cars. People buy a car or a fridge one time in 7 years. Create a company when you can build constant and frequency relationships with customers. Recurring sales are a crucial source for the company’s profit. Don’t avoid it. Build something that you can sell each month.

3. Sell MVP as soon as possible

Try to sell your MVP to first users. It’s an excellent exam for you. How strong your users want using it? Are they ready to pay for your solution? Are you deciding solid problem for your target audience or not? The best answer to this questions is money. Money gives your understanding that people really want your product.

We spent 6 months to get first money in Kepler Leads after MVP’s launch. We made many mistakes at that time. We didn’t understand why nobody bought it. In 4 months after the start, we have decided to go to users and talk with them. Finally! After these conversations, we have understood what users really wanted. We had improved the product and marketing materials, including website and advertising. It took several months. Only after it, we got our first sales. That’s why lesson #1 is so important. Talking with customers has not killed any startup yet. But lack of conversations with users can do it.

4. Find people who can’t live without your MVP

Looking for people who care about your solution. Friends and relatives are bad users of MVP (minimum viable product) because they won’t cry that they need your product. Find people who really have this problem. These users will be ready to use your MVP with limited features. Find people who will cry that they can’t use your MVP. They are the best users you can imagine. Don’t pay your attention to friend’s feedback. Listen to users who really have this problem and will be able to shout that they need your MVP.

5. Selling with a high price

High price gives you two huge advantages. Firstly, you will get more money 🙂 Yeah, it’s obvious. But secondly, you can define real customers across the other user who may pay little money only for trying. It helps you to improve your product based on their feedback, not random users. 

Charging $9/mo usually is not a good strategy for SaaS startup. It’s mean that you always close to redline. It can be the reason for negative cash flow. A customer on the $9/mo plan often costs just as much to acquire and support as a customer on the $500. Think about it.

6. Set up event-based analytics with Google Analytics

Google Analytics is a great tool you can use for free. But Google Analytics is focusing on traffic traction. It gives you understanding where users are coming to your website from, and how long they read your site.

At the same time, Google Analytics can not help to understand behavior signed-up users. What do they do in the application? Why did they finish using your app? What features do they like more and what they don’t use? You don’t know answers if you use only Google Analytics. For these questions (and even more) you should implement the event-based analytical tool.

Tools like Mixpanel, Amplitude, Heap, and other will help you understand user’s behavior. You will be able to find usability bottlenecks in your app, finding “aha” moment for your users, improve retention. You can see more details on how to do it in this article.

7. Finding Product-Market Fit

I don’t recommend you to invest in growth until you find product-market fit. If you haven’t achieved product-market fit, you spend your money faster you can imagine.

How to understand do you achieve Product-Market Fit or not?

The critical points for you on this stage are retention and “aha” moment. Strong retention of users over time is an excellent indicator of product-market fit.

How to improve retention? You should represent the value your users get from your product as soon as possible. It’s about “aha” moment for your users when they understand the real value of your product. For example, in Facebook one thing they were able to determine on early stages was a key link between the number of friends a user had in a given time and his/her probability to churn. Knowing that allowed them to do a lot to get new users to their “aha” moment quickly.

That’s why event-based analytics is so crucial for SaaS company. There you will be able to find how people using your product and what you can improve. Here you want to figure out more about retention and growth.

Conclusion

I hope that my lessons will help you avoid mistakes and build your successful company. Here is a short list of them:

1. Are you sure that anyone really wants your product?
2. Build high demand & frequency product
3. Sell MVP as soon as possible
4. Find people who can’t live without your MVP
5. Selling with a high price
6. Set up event-based analytics with Google Analytics
7. Finding Product-Market Fit