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With companies such as Salesforce worth more than $ 100 billion and incumbents like Slack, six years old, worth more than $ 7 billion, it looks like there's no better time for become a SaaS business. While this is true in many ways, especially in the United States where venture capital is moving (allowing SaaS companies to rise quickly), the truth is that most SaaS companies do not even reach 1 million dollars of income.
That's right, only 4 percent of SaaS companies make $ 1 million in revenue, and only 0.04 percent reach $ 10 million. As income figures increase, this number decreases further. With such data, you will probably have as much chance of winning the lottery as having a multi-million dollar SaaS company.
Above: Source: Verne Harnish – https://scalingup.com
Reach $ 1 million. Everyone wants to be a SaaS company
According to an OpenView survey conducted in 2018, SaaS companies reported having an average of nine competitors, compared to two in 2013. Imagine being a customer and having to evaluate nine different products each time you want to make a purchase. While there is room on the market for some major players, it is unlikely that the other seven will succeed as significantly. This is why the market adjustment becomes so important, especially early, and that companies wishing to reach the million dollar should make it a priority.
So what is the right product for the market? In simple terms: your product meets a wide market need. You must be the first or second start of the table.
Marc Andreessen wrote in a blog post more than a decade and more: "The market must be filled and the market will be, by the first viable product that will come." But, "In a terrible market, you can to have the best product in the world and in an absolutely deadly team, whatever, you will fail. "To reach the first million, SaaS companies should not worry too much about the launch of the most robust and feature-driven product. On the contrary, they should provide a decent product quickly.
Before our foundation, our parent company had the same realization. He had his hands in all the stores: e-learning, multiple partnerships, information kiosks, etc. But in 2008, he realized he was doing too much. This general objective did not work and the company was forced to take a critical look at the company: what were our main badets; What trends have we seen in the market? How could we make our business model more predictable and scalable? From there, he gave up many activities and, more importantly, created the company we have today. We reached the million dollars four years later.
The state of mind of 10 million dollars
Each phase of growth has its challenges, and you can not grow if you have the same mindset at every step. If you are lucky enough to have found the right shape for the market, reach the million dollar mark and position yourself on the next metric, you are probably what Verne Harnish, author of "Mastering the Rockefeller Habits," calls a Gazelle: a small business is experiencing hyper growth. This will be the most focused phase of your growth and the most critical phase in establishing evaluation and decision-making processes.
Here is a good chance that you have hired a great team that brings good ideas to the table. But working on all these good ideas will slow you down. As a Gazelle, you must apply good ideas and refuse other good ideas that do not suit you at the moment. During this phase, successful SaaS leaders define their priorities and goals and strive to align them: people, money, and the execution process.
We have personally experienced that. In 2010, we were seeing momentum with our product and the industry was lining up, but so was the competition. We knew it was important for us not to lose our lead, so we took a big step forward to grow in the United States. It was the right moment. How did we know? We started with documentary research and set milestones, going to the next step: hiring a local sales representative, then an implementation consultant, and finally signing enough projects to support a team of three and sign an office lease.
Reaching 50 million: managing complexity
People do not buy products; they buy solutions. To reach $ 50 million, SaaS companies need to improve their implementation capacity while adapting their product. The constant development of the product is essential for the long-term survival of the product. A more diversified product portfolio further enhances your market potential.
To reach $ 50 million, you must have a team that can take care of your product pipeline and implementation. During our recent phase of growth, we considered that we had never really invested in our brand as an employer nor in our recruiting capabilities. The search for qualified staff has become a bottleneck for our overall growth strategy. Since the product can not exist without the people who build it, we started recruiting "good enough" candidates too quickly. This caused significant headaches and costly mistakes. Moreover, with our international expansion, our organization was becoming extremely complex.
Complexity creates three fundamental obstacles: the inability to recruit staff / train a sufficient number of managers; a lack of systems and infrastructure to evolve properly; and the inability to cope with the dynamics of the market. As we move to $ 50 million, we have tried to remove these barriers. In part, this comes from rethinking how our organization defines leaders. But for each organization, the challenges will be different.
Everyone will have obstacles and opportunities. But each company must remain diligent. Do not expect growth because you are in SaaS mode; If you are in SaaS mode, you will face intense competition. Look at each growth cycle differently and as an opportunity to understand what challenges and opportunities will hinder or fuel your growth.
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