A little personal news… I’m joining the team behind Maptia. Actually, I’ve been working with them for a bit over six months but I suppose I’ve convinced them to keep me around at this point. This post is mostly about the why part of the story and it’s fairly personal. If you mostly want to hear the more concrete stuff about what we’ll be doing and when it’ll be over on Maptia where I’ll be writing a lot more often shortly (you can subscribe here).
Getting your first customers can be really challenging. I’ve spoken to a lot of entrepreneurs who thought of and built a first version of a SaaS product that seemed like a great solution for a certain niche, but they just couldn’t get that initial traction with customers.
From my research I have found a few common strategies that have worked. Most fall into the category of things that don’t scale. Some require that you do many months of preparatory work before you build the app.
In Chapter 2 I point out that knowing how will you find your first 25 customers is part of finding a good business idea. If you truly have no idea, you probably shouldn’t build the product. However you may also find it makes sense to work backwards from a group of customers to a business idea.
For example you might find that roofing companies are extremely easy to find: they advertise their contact info in business directories and you could easily meet 10 roofers per day just by hanging out in the right section of a hardware store. Now you know that if you had a SaaS product for them, it would be very easy to find the first 25 customers and beyond.
Keep working from both directions to refine or reject ideas, both working backwards from target markets of customers and working to find customers for certain ideas that otherwise seem valid.
In my experience, successful Micro-SaaS businesses consistently use one of the following strategies for acquiring their first customers.
Become a consultant
Storemapper’s first five customers came from a single email blast. Over nine months of freelancing for e-commerce clients I kept a spreadsheet of every client email, even for gigs that I didn’t end up winning. On launch day I emailed the list of about 30-40 targeted people and within two days there were five paying customers.
Consulting for e-commerce businesses was a fantastic way to learn about exactly what kind of products they needed, their willingness to pay for solutions and where the pain points where strongest. The real upside that you are getting paid the whole time. If you find yourself getting hired repeatedly for a similar job, you may be able to just “refactor” that job into a SaaS app that can scale.
Consulting-first also necessarily forces you to focus on a lucrative target market. If the businesses aren’t hiring consultants or freelancers to solve problems, odds are they will be tough customers for SaaS.
Forums and IRL conferences
Consulting in e-commerce gave me a big advantage in generating business ideas but it didn’t prove that many actual customers.
The immediate next phase for Storemapper was to find places where e-commerce merchants were looking for answers to stuff. Most of the big e-commerce platforms like Shopify, Bigcommerce, Volusion and WooCommerce have forums. So I searched the forums and tried to be helpful. Of course I jumped to the few topics specifically around store locators, but I also looked for popular threads on topics with lots of activity from merchants just setting up a new site (or migrating from another platform) — prime timing to choose a store locator app — and just added helpful comments. I would let my forum “signature” with a link to Storemapper do the marketing.
The generalized tactic is to find where your target market clusters and be there. This could be online in forums or the comments sections of an industry blog or in real life at meetups or conferences.
Aggregator sites and blogs
Hopefully your target market congregates somewhere online. If it’s software for developers, then you’re looking at Hackers News, Product Hunt and Reddit. Maybe there are niche blogs that cover the topic. Become a member, be helpful and without spamming folks, politely point them towards your app when it’s a relevant solution. If you’re knowledgeable on the broader topic, it can be helpful to invest some time answering questions not directly tied to your app to build credibility and not come off as a spammer.
Several successful Micro-SaaS businesses have been started by “blowing up” on certain popular sites. But it wasn’t just pure luck that they hit number one on hackernews or reddit. They had often spent years being helpful and cultivating the respect of the community that then responded when they finally launched a product.
Business directories (or hit the streets)
It will be easier to find customers in certain B2B markets than others. If you sell to plumbers, real estate agents, or attorneys you can just search any online business directory and put together a huge list of leads. Look through Yelp, Craigslist and Google local listings for local businesses. Give them a call and ask if that have any pain points in their business and politely introduce your software product.
A variation of this is if you can find your customer type by just walking around. Build an app for ice cream parlors, bodegas or drug stores and you can find customers by just strolling around your city and chatting with the owner. Bring a laptop, sign them up for a free trail and walk them through the setup process on the spot.
If your target customer business doesn’t have a storefront, a little bit of research will still almost always turn up a directory website.
Steal business from jobs boards and freelancer sites
If your Micro-SaaS replaces a job that your customers would typically hire a freelancer or consultant for — great fodder for business ideas — then jobs boards can be a fantastic place to find new customers. Setup a regular process to search for job postings on every site you can find and tell job posters they can “hire” your app instead.
I knew several of my freelance clients had been interested in hiring me to build a store locator so I figured that was probably happening elsewhere. I had previously used just one or two sites like oDesk and Elance (both of which are now Upwork.com), but now I created accounts on every one I could find. I would trawl the sites for jobs that included a store locator in the requirements, “apply” for the job and pitch them on using Storemapper instead.
While I was freelancing I discovered that two of the major programming freelance sites let you create an RSS feed for new jobs that matched certain search terms. So I made a feed for any new jobs that contained “store locator” and used IFTTT to trigger an email to me with the link. I’d quickly confirm it made sense, then paste in a standard pitch to the effect of “I don’t want to do this job but you should use my app for this part of the gig” totaling about 30 seconds are work with a pretty high success rate of getting new customers.
Ride the wave
Sometimes you can get bigger platforms to bring your first customers to you. In Chapter 3, I mentioned that a good way to find good Micro-SaaS ideas is to look at fast growing platforms and find an unmet need. You want the need to be large enough that a decent percentage of the platform’s users want it, but not so large that the platform itself is likely to build the solution themselves. If you hit that sweet spot, you may find that the people behind the platform will refer customers to you.
Justin Jackson calls this catching the big wave. Catching the big wave is all about timing. When I launched Storemapper in the Shopify app store, it was the only store locator solution. So we’d get all the app store searches, all the recommendations from customer support and all the discussion forum searches. Shopify was really blowing up at that time and we caught the big wave. These days the Shopify app store is quite saturated and even has quite a few copy-cat store locator apps. The big wave is likely over for Shopify. Since I’d like this chapter to stay relevant for more than a few months I won’t make a suggestion for where the big wave is right now, but it is a strategy worth remembering. If you initially built your SaaS as a standalone, rather than directly integrated to a platform, it may be worth some development time to build an integration with a growing platform if you think it will help you ride the wave.
The Parallel Track: Build the audience
The best and hardest method of acquiring your first customers is to carefully cultivate an audience over time, gain their trust, learn their pain points and build product for them. When you deconstruct a successful Micro-SaaS business you often find that they got their first customers through this kind of path. The downside to this approach is fairly obvious, it takes a lot of time and energy to produce content, interact with and cultivate an audience. You have to invest all that time before launching the product and learning if people will really pay for it. The upside is that if the product is good, getting your first customers will be smooth sailing.
Essentially this is a parallel track running through all of the previous chapters on finding a good business idea, building the first product and acquiring your first customers. You can build an audience on a reasonably broad topic, find out from that community what kind of product they need, build and launch it to that audience. In this track you can spend considerably more time on the first version of the product and you can also be a little less niche since you already have a good batch of initial customers.
Most of the tactics and criteria I have laid out can be relatively mixed and matched. But this strategy can’t really be remixed. The type of business, the target market, the way you validate it and they way you build and launch it all need to be dialed in for it to work (or to be worth the time and effort).
Also, this whole workflow does not work for a large number of businesses that might otherwise be good Micro-SaaS. Nobody would have read a blog about store locators. Building an audience around the idea of making e-commerce apps would not have brought the right audience: my actual potential customers are e-commerce shop owners, not developers.
I actually don’t recommend this approach for first-time Micro-SaaS entrepreneurs. Even though it is one of the more successful ways to launch and get your first customers, if the product fails you’ve invested far more time and energy to get to this point. It’s also much more difficult to ditch a business if you have an audience following your every move. It seems to take most entrepreneurs several attempts to find a Micro-SaaS business that really works so I would recommend targeting a niche, building a quick MVP and using one of the above strategies to find your first customers.
How NOT to get your first customers
There are a number of well-known customer acquisition channels that I think are particularly bad for early stage Micro-SaaS businesses. Here are the general things you want to avoid.
Any cost per acquisition: VC-funded SaaS companies are almost always cashflow negative. The wonderful magic of big, funded SaaS is that you can spend $100 to bring on a customer who pays $20 per month, and as long as you know that customer will stay around for a year or so, you are generating value for the company. But this cashflow formula means the more customers you add and the faster you add them, the more money you lose each month. This situation can be lethal to a bootstrapped business. Unless you have easy access to capital at generous terms and/or are very experienced with paid acquisition I would avoid any channel that has a discrete cost per acquired customer.
Compete with funded startups: I would avoid entirely almost any channel that involves bidding against or any degree of competition with funded startups. This is just not a fight you can win as a bootstrapper.
Heavy time investment: At the beginning of this chapter I argued for doing things that don’t scale. You shouldn’t be too stingy with your time in the early stages of acquiring customers. I strongly advocate channels where you can invest a little bit of time, get a new customer, and repeat. However I really recommend avoiding channels that have a big investment of time up front to get up and running. Do not underestimate the amount of upfront time it takes to negotiate an affiliate deal or set up a retargeting campaign. These kinds of things can turn into huge de-motivating black holes of time that end up distracting you from your real goals.
Un-vetted signups: In general you should be able to confirm that the type of customers coming in through a channel are in fact a good sample of people who should be interested in your product. This is why certain forums and directories are great sources. Channels that bring in a random slice of people on the internet should be avoided. You don’t want to flood your app (and support queue) with unqualified customers who are just poking around who will waste your time and then not sign up for a paid plan.
Some specific comments on a few common channels to avoid:
Adwords, Facebook ads, etc
For all the reasons above this is probably the worst possible way to get your first customers. It costs per customer. You are competing directly with every single company in the space, most of which probably have much larger budgets than you and vastly more experience bidding. There is also a pretty substantial overhead cost of time or money to get even a half-decent campaign up and running.
I am not a big fan of SEO as a customer acquisition strategy. Partly this is because I just don’t fully understand it and I don’t feel like my bullshit radar is very well calibrated when dealing with SEO tips, tricks and consultants. If you are already an experience SEO ninja, great, ignore me. If you would be reliant on how-to articles or consultants to boost your SEO ranking I really advise against it as a way to get your first customers. First it’s a black box and an extremely vulnerable position if Google changes their algorithm. Second, it’s just so passive that you have no idea what kind of traffic you are driving to your site. You may boost your ranking for certain search terms but you really don’t have any idea who the people are that are searching and clicking to your site. I much rather cold call people I know are potential customers than sit there and try to divine whether or not this traffic is at all relevant to my product from Google Analytics.
Affiliate deals and partnerships
These can really seem like a great deal at first pass but I would strongly encourage you to avoid them. First, don’t fall for the survivorship bias. You may hear from a fellow entrepreneur about the amazingly successful AppSumo deal they ran last month. But nobody (except I guess me) is going to shout from the rooftops about all the affiliate deals they spent dozens of hours emailing, calling, negotiating that turned out to be a total waste of time. On top of the massive time overhead to set most of these things in motion, they are not repeatable and can also flood you with support requests.
If you’re looking for more tactics for acquiring customers, Gabriel Weinberg, the founder of Duck Duck Go, has put together an epic manual in Traction. Keep in mind that the book is aimed a little more at the funded startup scene, but there is a mountain of actionable advice in there.
Adii Pienaar, one of the founders of WooThemes and now Receiptful, has a great ebook and podcast aptly named Your First Customers, also a great resource.
In June 2011, I was doing freelance work for several e-commerce companies and a few of my clients asked me to build them a store locator for their site. I ran the idea of turning that into a Micro-SaaS through the meat grinder and determined it had potential. Once you get an idea that looks worth doing, you should carve out time to build a Minimum Viable Product (MVP) as soon as possible. Getting hung up on an idea that you never execute is worse than having no idea at all.
About three weeks later, I had a flight from San Francisco to Buenos Aires. Somehow I was able to book a first class flight with frequent flyer miles by adding a stopover in New York, so I was looking at 30+ hours in a comfy first class seat or an airport lounge. I decided to build the entire first version of the product on that flight. So the moment I got on the flight, I put on headphones and fired up the text editor. Thirty hours later I landed in Buenos Aires. The first thing I did was go straight to my hotel and pass out for ten hours because I had about a dozen glasses of free champagne and eight cups of terrible airline coffee.
But as soon as I woke up I deployed the site and my Micro-SaaS was live.
I emailed all of my previous e-commerce clients and within 48 hours we had five customers paying five dollars a month. Storemapper went from a sketch of an idea to paying subscribers in less than 72 hours.
This is a classic testament to Parkinson’s Law: that work will expand or contract to fill the time allotted to it. If you give yourself an unlimited time horizon to launch a product you’ll likely never finish it. Setting a defined period of time, and drastically cutting whatever you need from the scope to make it happen, is the best way to launch a small product.
Shipping a Minimum Viable Product
This chapter is going to focus primarily on the concepts of shipping a Micro-SaaS MVP. I frequently get more tactical questions looking for specific resources on how to learn to code, or which frameworks to learn, and so on. I learned to code almost five years ago now and the software world moves quickly. Many of the resources that I learned from are now stale or defunct. I’m not an avid programmer. I think of myself as an entrepreneur who codes or someone who likes to quickly hack together something that works and is valuable. I don’t stay that up to date on the actual programming community and I’m just not the best person to answer specific questions on what resources to use to learn to code at this point.
Build first or Pre-launch?
I want add my opinion to a common debate in the world of minimum viable products. Should you pre-launch or build a working product first? Pre-launching usually means some kind of effort to build a launch email list by blogging about the topic, reaching out directly to potential customers, doing consulting and case studies or basically anything else besides writing code. The goal is to build trust and a list of potential customers so that you can have a big launch and quickly get to a decent level of recurring revenue. The big benefit from this, aside from having your first customers ready on day one, is that you can refine the idea with your target market and get closer to product-market fit without having to write code.
I think that products that are pre-launched are more likely to succeed, BUT I believe that pre-launching is not the right strategy for most people.
The main reason is that pre-launching is a long game. It requires patience and commitment and you don’t know if this is a viable business idea yet. Yes, a well pre-launched product will probably do better all things being equal, but all things are not equal. It’s a huge time investment to pre-launch a product. Your primary mission at this point in the game is not orchestrating a splashy product launch. Rather you want to get to paying customers, and thus real feedback, as fast as possible. Pre-launching just delays this.
Another common reason not to bother with a pre-launch is that the target market for most good Micro-SaaS ideas is just not interesting enough to pre-launch with a blog or podcast. We still don’t really have a blog for Storemapper because there just aren’t that many interesting aspects to store locators. It does a job, simply and cost-effectively, which is the best kind of Micro-SaaS. There is probably a correlation between ideas that are too boring to blog about and good Micro-SaaS ideas.
My recommendation for most entrepreneurs is to follow the tips in the rest of this chapter to massively pare down the scope of the MVP and just launch it fast.
What I mean by “MVP”
The idea of what counts as an MVP has been the subject of considerable debate since Eric Ries popularized the term in the Lean Startup. A full discussion could be (and probably is somewhere on the internet) its own ebook series. But my opinion is that for Micro-SaaS an MVP should actually do the job it purports to do.
The publication of the Lean Startup has lead to a rash of tactics that supposedly allow you to learn whether customers would buy your product without the hassle of actually building a working product. The most common variation is simply building a landing page with a demo video explaining how the product works and asking people to input their email to “sign up” – then after they submit their email, surprise, you tell them the product is not quite ready yet, or they are on the waitlist, and you’ll notify them when the product is ready. You use that data on email signups to decide if you have “validated” the idea.
The Lean Startup introduced these ideas as an alternative to the dominant methodology for venture-backed startups prior to the book’s publication in 2011. Startups at the time would raise millions of dollars on an idea, spend a year or more building a perfectly working version of the software and then run a huge product launch campaign. Most of the time it was only then, after a year or more and millions of dollars spent, that they would discover nobody actually wanted the product. Lean tactics are a compelling alternative to that VC startup approach, but Micro-SaaS products are not even remotely in the same category.
I think the data you get from an email opt-in experiment is mostly garbage. In SaaS the only thing you ultimately care about are customers that will pay you money month after month. You can’t learn anything about whether you have a product that customers will pay for on a recurring basis until you start charging them and you really can’t start charging them until you are giving them some form of value.
So I firmly believe even the MVP for Micro-SaaS should actually do what it says on the label so you can start providing value and charging customers right from the beginning. Note that this does not mean that I think everything must be solved with code, see the section below on making features by doing manual work by hand behind the scenes.
What if you can’t code?
I’m going to be honest, I have not met many people who have successfully bootstrapped a SaaS business that were not themselves developers. You don’t have to be a wizard ninja coder – I had only been writing code for nine months when I built the first version of Storemapper – but your odds will be substantially better if you are able to build and launch the business yourself.
But, if your plan is to hire a developer, the rest of this chapter will help you really refine the scope of the first version so you can minimize your upfront cost and start getting paying customers earlier in the process.
Building an MVP: Don’ts
The first version of Storemapper was hilariously bad. It lacked many features that anyone designing a SaaS app would deem essential.
You can download screenshots of the original app by dropping your name and email in the form here. These 5 images represent almost the entire app at the time of launch.
Mature SaaS apps are complicated beasts but lots of what they do is not part of the core value, not part of the job the customer is hiring the app to do, but ancillary features. If you use a lot of SaaS products it’s easy to accidentally include these in the first scope because of course you need them right? Wrong, most can be left out for the launch. Here are a few broad categories that you can aggressively trim in order to ship quickly.
Only build for new users
Do not build features that only current customers would need after months of using the product. Focus only on delivering value to new users because that’s all you will have at first.
You can comfortably skip the following features for an initial launch:
- Change billing method. One valid credit card is all you need at the beginning.
- Change subscription level. Hopefully you only have one plan, but otherwise you can change plans manually for customers on request.
- Update account info, reset password, change login details. Again, do this manually when needed
- View past invoices. Customers will request this feature when it’s necessary (tax season) wait until then.
- Leave out a button to cancel their account. Just put an email link so customers can request to close their account. The main benefit here is it gives you the opportunity to ask follow-up questions about why they are canceling.
Go very light on branding
Good branding is important for a software business but it is most valuable when potential customers’ first impression of your business is visiting your website without any prior contact. Early on you will be acquiring your customers manually so you can build trust and explain that the app is under development. All you want to to do with launch branding is reassure people that this is not a scam and it’s safe to enter their credit card details.
- Do not hire someone to make you a logo. Use plain text and a free webfont, unless you are a designer and can crank out a logo in minutes.
- Do not build a fancy landing page with slider images, testimonials (because you don’t have any yet), pricing tables and gorgeous full-page stock images. Grab a cheap SaaS landing page theme and tweak it if you must.
- Do not spend hours in CSS building a custom UI framework. Use something off the shelf like Twitter Bootstrap. Tweak the color scheme if you absolutely must but I did even bother.
- Do not hire someone to make you a hand-crafted narrated “explainer video”.
Other common features that you can skip
Below are a few larger features that can be skipped. This is not an exhaustive list. The broader point is that almost every aspect of SaaS besides the core job to be done can probably be cut for the MVP.
- Multiple plans and pricing options. Almost all SaaS products have multiple plans with a nice table laying out the features at each plan level. This is a great strategy for segmenting your customers and maximizing your revenue. But it is not something you should include in the MVP because the code required to segment certain features and allow users to upgrade/downgrade plans is substantial. Whatever features would be in the top tier plan should be the only plan.
- A free tier (or freemium). This is so important I’m going to have a whole section on it below.
- Multiple payment options. Pick one (I suggest Stripe) and ask for a credit card upfront. If customers like your product but want to pay you by check or Paypal, tell them sorry, it is really not worth the hassle.
- Multiple users per account. In mature SaaS you will come across valid situations where the billing receipts need to go to accounting, the main email notifications go to the manager but a three people on the product team will be using the product day to day. There is value in adding clear support for this as the product matures but in the early days just tell them all to use the same login.
It’s impossible for me to predict every single SaaS feature that won’t be necessary for an MVP but try to generalize the principle as much as possible, reducing any bit of SaaS trappings that do not directly add to the core superpower you are trying to give your customers.
Leave out everything that you can do manually.
An MVP should be a lot like the Wizard of Oz. It looks like a big monolithic entity but behind the curtain is a person pulling the strings and levers to make it all work. It’s increasingly possible to launch “software businesses” without writing any code at all. You can string together some services like Unbounce, Typeform and Zapier and customers can sign up and pay through your site but behind the scenes you just have humans doing the work that appears to be software. With SaaS it’s generally not possible to completely avoid building an app but if a certain feature can be done manually and customers would be fine with a 24-hour turnaround, do it manually.
For example, there were tons of edge cases and bugs in the process for uploading a CSV file in Storemapper. All I did was recover from any error with a note along the lines of, “Sorry something went wrong! Please email this file to email@example.com and we will upload it for you ASAP.” I would re-format the file, make bug ticket, and upload it manually. It took months of coding, little bug fix by bug fix, to finally get that feature where it would work most of the time but most customers were perfectly satisfied with early manual process.
Avoid the faux professionalism
When you are selling to businesses there is a temptation to want to make your “organization” seem more professional than just one person hacking something together. While I’ve certainly fallen for that myself, in general I have found avoiding this kind of thing is both faster to launch and has some surprising benefits. As Storemapper grew a few competing apps surfaced that purported to be larger companies, either with highly corporate landing pages or listing a dozen people on their team page (which I can still can’t believe). But many customers explicitly told me they preferred to support an “indie developer” or solo entrepreneur and became some of my best customers. Even better, the kind of customers that would really prefer a more professional sheen to your product are likely to be the most annoying kind, asking for paper invoices and all kinds of custom work. Save time and avoid all this nonsense.
- Don’t bother with email addresses at your custom domain if it will take you more than 30 minutes to setup. Use a gmail account.
- Don’t use a fancy help desk app in the beginning. Just reply to the emails.
- Do not for the love of god put your phone number on the website. Some entrepreneurs may disagree here, arguing that phone calls with customers are a valuable resource. But for me, flat out refusing to do phone calls was the only way to keep focused on building a great product for all customers.
Eventually I decided to take this process one step further and explicitly brand my app as a small business. The footer of every main screen of the app has my face and the quote below. Which may seem a bit weird but a lot of customers like it.
Building an MVP: Do’s
The biggest thing to battle in the stage of the game is scope creep: an ever expanding list of things you need to do before launching. The most important part of this chapter is the Don’ts above that will help keep that scope pared back. But here are some things that I recommend doing.
Use (and pay for) existing services
I can’t emphasize this enough. Re-inventing the wheel is the enemy of the MVP. Today in software there are so many open source or affordable building blocks out there, mostly the result of developers trying to scratch their own itches. Time is by far your most limited resource. My triage for any new feature idea/request looks like this:
- Don’t build it.
- Really, just don’t build it.
- Okay, fine, look for some existing service that can get you a good enough version of it.
- Really, there’s nothing? Go look again?
- Still nothing? Okay, code the simplest possible version of it from scratch.
You want to use services with the fastest time to ship, even if they are not the most scalable or most cost-effective in the long-term. I used Ruby on Rails, hosted on Heroku, with Stripe for billing and Cloudflare for SSL. Whatever their relative merits to their competitors, each one is unequivocally the fastest-to-done in their category. I still use all of these by the way.
As the product has matured, I rolled my own solutions and cut out reliance on certain paid products, but Storemapper still leverages over a dozen bolt-on services. The net cost is a few hundred dollars a month and it’s completely worth it. The full list is here on Medium.
Separate your app and your landing page
Of the many things I did wrong on my first Micro-SaaS, one of the most annoying was this to setup a separate WordPress installation for the landing page and other “content.” I recommend having your root domain (your-biz.com and www.your-biz.com) point to a WordPress site with your landing pages and your blog at your-biz.com/blog. Then have your actual application hosted at app.your-biz.com or some other sensible subdomain.
There are literally tens of thousands of great SaaS landing page WordPress themes for very cheap that you can drop in but not nearly as many good landing page themes for Rails/Angular/Meteor. Later on if you want to have a designer work on the landing page, you will find almost all of them can get in and directly edit a WordPress site themselves but many will not be able to work on or deploy a Rails application.
It will also be much easier later on to add additional landing pages or a blog. This is all the kind of content you want at your root domain and indexed by Google for optimal SEO. I did not do this at the beginning and it is both a big pain to go back and change later. I recommend setting this up from the start.
Do ask for credit cards upfront.
Do not allow people to sign up without a credit card. There is a lot of debate in the SaaS world about whether requiring a credit card upfront or after the end of a free trial is the more optimal approach. But this debate is irrelevant when it comes to an MVP.
You will see a lot more signups without requiring a card upfront, but a huge chunk of them will be time-wasters and not serious buyers. The onboarding process will be very manual and support tickets per customer very high at first. If you let in the time-wasters you’ll be doing 10x the support work for a few percentage points more long-term paying customers.
Once the product is more mature and the onboarding flow more automated, it may make sense to test whether asking for a card upfront generates more long-term revenue, but in the MVP stage it is a nightmare and should be avoided.
Lastly, it is also a huge hassle to code a workflow to bother customers to add their card after their free trial expires, freeze their account if they don’t, and so on. Skip all that and ask for the card right at signup, set it up to automatically assign them to a plan after the free trial end unless they cancel.
In a similar vein I really recommend against a free plan. This the same reasoning behind requiring a card upfront. At this stage you are still maximizing for information and feedback. You want to know for sure that the product adds value to every single customer you bring on and the only way to judge that is people continuing to pay.
One of the big benefits of the no-freemium, card-upfront structure is that you can always keep your costs under control preventing any explosions in free trials or free plan usage. If you’re still not convinced, read about freemium almost caused Baremetrics to implode.
If you look at your product and you are convinced that freemium is the way to go, you might want to consider whether this idea is in fact a good fit for Micro-SaaS. The cost structure of freemium is risky, do you have deep enough pockets to actually lose money on your business in the short term if free users grows too rapidly? If people need to use your free product for months before they consider upgrading, I would question whether the product provides enough immediate value to be a Micro-SaaS business, though it may be a good fit for a funded startup.
Use a single price point.
Every successful SaaS business you’ve ever seen has a fancy pricing table showing all the different plans. But I would strongly recommend against this at the MVP stage. One monthly plan is plenty.
The business logic behind offering multiple subscription levels, prompting people to move between them and limiting access to certain features is immensely time-consuming to build. In the beginning you are just throwing darts at the wall on pricing. Your pricing will be wrong and you’ll need to change it dramatically as you go, so I don’t think you gain much by segmenting your first customers by different totally random price points.
Storemapper started with a single price point, $5/month. In retrospect this was ludicrously low as our average revenue per user in recent cohorts is around five times that. But I still think it was a pretty good move. You can always raise prices and find ways to upsell customers later. In hindsight I would have started with something between $9-15/month and raised it as the features were ironed out. More on adjusting pricing later.
Admin Login: The one bit of code your app must have
This is one feature you might be tempted to cut in your quest for a truly minimal product launch. But you must give yourself superpowers to swoop in and use the app on behalf of your customers. Your answer to almost every question from early customers should be to just login as them do it for them. Then send them screenshots or a screencast of how you did it so they learn next time. You need an admin screen that let’s you view all your users and then login as them.
It’s literally five lines of code in Rails with Devise and it can make or break your onboarding process early on.
It’s becoming more common in some SaaS apps, but you cannot imagine how magic it seems to customers who email support asking “How do I do X” and you respond with, “Here’s how you do it, also I already did it for you.”
Shipping a first version of the product is the biggest hurdle in the entire journey to a profitable software business. When I talk about my SaaS business I constantly meet people who have one pretty decent app idea that they go years without bothering to make a specific scope and carve out the time to build and launch something. Having one idea that you constantly talk about, but never execute on, is the biggest trap in entrepreneurship. Use this chapter to pare back an idea to it’s essence, schedule the time and ship it. I’ll leave you with some awesome Hemingway on Coding quotes that always get me in the mood to get to work.
As I mentioned before, the most important part of ending up with a good Micro-SaaS idea is throwing out a lot of them. But there are a few good ways to prime the pump and look for new ideas. Here are a few methodologies that I’ve developed or generalized from other Micro-SaaS entrepreneurs.
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Scratch your own itch
Eat your own dog food as they say. This is the classic example of how to build a product company and it does work. The most commonly cited example is of course 37signals, a design firm that built a project management tool, Basecamp, for their own internal needs. They realized other firms might need a similar tool and started selling it as SaaS. The software business quickly eclipsed the design business and now they can hardly be called “Micro” with millions of customers. Here is the origin story.
Another great example is Josh Pigford, the founder of Baremetrics. Josh was running another Micro-SaaS business and was struggling to get some basic financial metrics like Monthly Recurring Revenue out of his payment processor.he hacked together a minimal product that anybody, but first and foremost his own business, could use to instantly get SaaS metrics from their payment processor. Realizing lots of other business owners would have a similar problem, he opened it up as a product and shot up to $8,000/month in six months.
This is a well tested strategy but it has two big problems at this point in time. First the idea of scratching your own itch has been around and popular for a while and second the type of people who build software businesses tend to be somewhat similar in their needs. There are only so many itches to scratch for a software entrepreneur and at this point a lot of them have been sufficiently scratched. Slightly paradoxically, this is in fact part of the reason why now is such a good time to build a Micro-SaaS business. Scratch your own itch has been around so long, that for almost everything someone trying to build a software business needs, there are 15 other software businesses selling pretty great solutions for it. Once you hit on an original idea, you can often use those other itch-scratchers’ off the shelf solutions rather than having to build your own internal tools.
Pieter Levels, the creator of Nomad List, has a good solution to the over-saturation of scratch your own itch. In his book MAKE he suggests that if you live an interesting or unique life, you will generate new and unique itches to scratch. In his case he was living a digital nomad lifestyle, traveling around the world in a backpack while building a new startup every month. He needed to figure out the next best place to live each month comparing data like cost of living and internet speed for cities all over the world. So he scratched his own itch, crowd-sourcing a basic dataset and built a site to help other digital nomads connect and solve the problem.
If something about your life is really unique, then you can use scratch your own itch in that area. If you are a freelance graphic designer in San Francisco who likes yoga and green juice, you’re going to need a different strategy.
Niche versions of existing SaaS
A lot of big funded SaaS startups have built generalized software that many different types of businesses are using for their own specific needs. These SaaS businesses have to target a wide audience because of the shear volume of sales their company size and valuations require. Looking at generalized products like Salesforce, Quickbooks, Basecamp, Freshbooks, Shopify and WordPress can be a good source of ideas for niche SaaS products.
A great example is Mindbody, which is custom SaaS for yoga studios. Everything about the app is customized specifically for this niche: online class schedules, tracking teachers, accepting payments and subscriptions. A yoga studio could probably cobble together all of those features from a few existing big SaaS products but when there is a single product that works for them out of the box it easily clears the 5x better hurdle. And I think you would be surprised at how low the bar is here. Even something as simple a building a simple CRM with data fields and workflows pre-built for a particular industry could be enough of a UX improvement to sell well.
Haven’t seen any great examples yet for this, but I think there is a big opportunity in just building a simple CRM for specific industries. Even if it’s less powerful that Salesforce, a simple contact and pipeline tool with workflows and a data model (even just having the right words and terminology built in) could sell well enough to be a healthy Micro-SaaS. Salesforce for wedding photographers. Freshbooks for dentists. Play around with combinations until something passes the Meat Grinder.
Repeatable freelance and consulting work
SaaS, and software more generally, has been stealing work from freelancers since the beginning. Nobody wants to be in the business of reinventing wheels, so if you see a specific type of job that businesses are paying contractors to do over and over again from scratch, there may be an opportunity to build a SaaS solution. This was the method that generated the idea for Storemapper. There was no good plug-and-play solution for a store locator app on the market and several of my own clients asked me to build them one. I could have made something from scratch and sent them a bill for $1,000 – $2,000 each but it was a broad enough need to warrant investigation as a Micro-SaaS. Another thing to look for is a big change in complexity. I did some research into other store locators and found that companies with a store locator would have a relatively simple site, something easily built without a developer on Squarespace, WordPress or Shopify, but the store locator would be a big step change in complexity. So I reasoned that you might have a lot of customers who could launch their entire site without a developer, except for the store locator. Great opportunity.
The best way to sniff out these kinds of opportunities is to actually become a consultant in a particular field and really learn what customers need.
Automate manual tasks
Sometimes you can use the sections from Chapter 2 on what makes a great Micro-SaaS idea, to generate new ideas. One of the best attributes of a Micro-SaaS business is automation. So you can start from there and look around for things that could be automated, and then test to see if they would be good overall businesses.
A great example is Stunning which is an app that handles dunning, an odd term for the painful process of following up with customers whose credit card on file has expired and getting them to update it. Without Stunning you are forced manually check this each customer, setup an alert if their regular monthly payment fails, and hound them until they update their payment info. With Storemapper I did this by hand for the first year. It was awful and I was not very good at keeping up with it until one day I realized fully 20% of my “paying” customers were not actually paying me due to some kind of billing issue. Stunning plugs directly into Stripe and automatically starts sending follow-up emails and in-app messages to customers until they update their account. It’s a great business model.
Build upon growing platforms
Like automating manual tasks, this source of ideas works hand in hand with what makes a good business model. A majority of the successful Micro-SaaS businesses I have encountered are plugged in to or enhance a rapidly growing platform. Baremetrics and Stunning built on Stripe a massively popular new payment processor. Mailparser, a Micro-SaaS for parsing data out of emails, got many of its early clients through Zapier a growing business automation tool.
We’ll discuss this platform strategy in more detail in a following chapter on acquiring customers but again you can work backwards for a source of ideas. Keep a look out for rapidly growing platforms, check their forums and Twitter mentions to see if there is one big feature or use case that many users are clamoring for but the company doesn’t seem likely to build themselves.
The best version of this is a platform bolt-on that can use that integration as a beachhead, but isn’t too tightly interwoven with that one platform. If you can also add value as a standalone product and integrate with other competing platforms, you have an even better idea.
Since I started blogging about Micro-SaaS, the overwhelmingly most common question is something like: “Store locators, hmm, seems like such a simple idea. How can I find an idea like that?”
I went into elaborate detail in this blog post about all the different ideas I worked on before Storemapper to emphasize that I don’t really know a straightforward method that works without failing. In fact, failure and trial and error seem to be essential parts of the process.
However with the benefit of hindsight, and from talking with other Micro-SaaS entrepreneurs, I do think there are certain elements to look for in a good Micro-SaaS idea.
The Meat Grinder
In Chapter 3 we’ll dig more into methods for finding business ideas. But first I want to turn the entire premise on its head. It is far more important that you develop a fast and effective way to reject business ideas than finding ways to come up with new ideas.
I call this approach The Meat Grinder and into it in further detail in this post. The Meat Grinder is a quick way to determine that a business idea is in fact a bad one for Micro-SaaS. Every section on what makes a good idea, can also be inverted into how to identify a bad business idea. A big part of the rest of this book is about refining your Meat Grinder process. We’ll dig deep into building a minimum viable product, customer acquisition strategies and pricing and business economics so that you’ll be better equipped to quickly assess ideas on each of the Meat Grinder questions. If you are motivated to build your own business it is likely that you will come up with lots of potential ideas. The trick is to figure out which ones won’t work and move and the worst, and most common, pitfall is to get hung up on one flawed idea indefinitely. The Meat Grinder is a series of tests, based on what makes a good Micro-SaaS business idea, that allows you throw out ideas, a critical part of the process of coming up with an idea that is a good fit for you. As you read through each section below think of how you might use it to identify weaknesses in some of your current SaaS ideas.
What Makes a Good Micro-SaaS Idea
I’m not going to lie. Finding a good Micro-SaaS idea is hard. Micro-SaaS is a niche within a niche. It’s an amazing business model when you can make it work. But it’s hard enough to pull off running an entire SaaS business by yourself with a mediocre idea. So it is worth spending a good deal of time carefully considering business ideas. Getting even just a few of these criteria wrong can turn into a huge waste of time and money.
Be 5x better than customers currently pay
There are two components to this rule. First, your potential customers should already be spending money on the pain point your product solves. I’ve met a lot of would-be entrepreneurs with really ingenious product ideas, but their target customers are al- ready solving the problem for free with spreadsheets, email, whiteboards or nothing. Never underestimate how hard it is to get a business to start spending money on something they previously were not spending money on. Even for a small business the friction of finding the first contact, THEN connecting with the manager who decides the budget, THEN waiting for internal approval on in the budget request, can add up to enough to kill your customer acquisition funnel. It is much easier to sell a product in a category where the business already has a budget allocated.
The second is that you must be 5x cheaper or 5x better. You won’t have the time or resources to do the high touch sales to walk a customer through the incremental value of a 25% improvement. Your product must be obviously, hilariously cheaper or better because you will have a hard enough time just getting the right customers to your landing page. In the case of Storemapper, our customers needed a store locator and their alternative was paying at least $1,000 for a developer to build one from scratch. When I launched the product it was $5/month. Even with later price increases, Storemapper is still massively cheaper and better compared to building one from scratch. This is the beauty of going after a true niche. It can be surprising how often businesses, operating in segments too small for billion-dollar startups to go after, are making do with (and paying for) some truly awful, 15 year old garbage software that you can come in and radically improve upon.
All this adds to up to your conversion rate from free trial to paying customer. If your target market is already spending money and you are 5x better/cheaper a very high percentage of customers will stick around after their trial. I’ve seen estimates that for large VC-funded SaaS companies the rate of conversion from free trial to paying customer is around 5-15%. Storemapper’s has consistently been above 50% which is much closer to what you need to succeed with a Micro-SaaS.
Other players in the field
In Micro-SaaS you do not want to follow the Silicon Valley “Zero To One” theory of creating something completely and totally new. Existing competitors serving the same underlying demand are actually a very good sign. Yes, if you have an idea and there are ten nearly identical products already then you should probably move on. But if you search and you can’t find a single product or service addressing a similar need, it is probably a sign that there is not much of a market.
The best scenario is finding consultants who serve the market inefficiently and expensively or customers currently suffering with horribly out-dated software. Another variation is a successful product that is pigeon-holed. Maybe someone built a successful Excel add-on or Salesforce tool that is tightly integrated with that platform. If you see an opportunity to serve a similar need on web or iOS or Slack you could be on the right track.
A defined group that needs your product
This one is so critical. I’ve met many wantrepreneurs stuck on a product idea of generally improving productivity or team management or workflows. These products could theoretically be used by anybody but in reality get used by nobody. It is impossible to interact with and market to “any modern knowledge worker.” It’s very important that your Micro-SaaS be built for a defined audience so you can narrow the marketing effort and focus the product features. Getting initial feedback before you build the product and bringing on your first customers is much easier when you are targeting a defined group like real estate agents, accountants, travel agencies, etc.
One of the best examples I’ve seen of this is a Micro-SaaS dedicated entirely to companies that do window washing for large industrial buildings. The founder, a freelance programmer, was contacted by a single window-washing company who needed an app to help schedule their trucks and accept payments on-site from customers. They couldn’t afford a full custom build but offered to introduce the founder to other customers and a forum dedicated to window cleaning businesses (yes, there apparently is such a thing). He posted a question “What features would you want from the perfect window cleaning software?” and received hundreds of replies. A year later he is earning a full-time income from his window cleaner Micro-SaaS and is hiring his first employee.
It’s also important to think about how easy is it to actually find this target market. If your target market is lawyers, great, Google them and go to their offices. A window washer Micro-SaaS will have an easy time finding new customers since window cleaning businesses tend to explicitly list their contact info in the “window cleaning” category of every Yelp, Yellow Pages and other online business directories. If your target market is traveling vacuum salesmen, how are you going to actually find them?
Lastly it’s worth considering whether you actually like interacting with the target market. Lawyers may be easy to find, but if you discover that you actually hate talking to lawyers you might want to bail before you commit to spending at 20-60 hours per week with them for the next several years.
Have at least one channel for the first 25 and 250 customers
Once you have a defined group that needs the product you should be able to quickly come up with at least one way you could get the first 25 customers for free. For Storemapper this was a combination of my existing freelance clients (the first 5 customers) and trawling the Shopify discussion boards and inviting new customers one by one. Then you need to up the scale and think about at least one way to get 250 customers. The point here is to think about whether these customers congregate around any particular places, directories, locations, websites. Do they hang out anywhere and identify themselves as the type of person who should buy your product. Ultimately you’ll need more than one channel to make the business successful. But if you can’t think of even one, and you would be surprised how often people cannot come up with one when they pitch me their idea, then you should toss the idea in the meat grinder.
Line of site to a Minimum Viable Product that you can build
I won’t spend too much time on what makes a good Minimum Viable Product (MVP). If you’re going to build a Micro-SaaS then read The Lean Startup and spend a few hours reading blog posts about the topic as it has been extensively covered. But my point is that you… as in YOU… should have line of sight to building an MVP. If step one of actually building involves “find a developer” or “spend $10k to hire someone to…” then you should move on. Anyone can think of a fantastic business idea that starts with “First I’ll get a developer to build a facial recognition algorithm and some machine learning…” but it is never going to happen.
If you can’t code, there are lots of clever ways to launch an MVP without coding. And if you can code, then add the additional constraint of building it in a month only on weekends. If you can’t sketch out the basic process of building something, that you could charge your customers money for then it’s probably not a good Micro-SaaS idea.
And I’m talking about an MVP that actually works. Ditch the viral landing pages, the interactive prototypes and pre-product video demos. The MVP can be crappy and lacking a lot of features, but it should actually do what it says on the label. Even if you find a beautifully underserved niche and a cost-center that every company spends $1,000s on, if the MVP is going to take six months of coding to launch, you haven’t found a Micro-SaaS idea. You need a team or you need funding or you need a new idea. Because if you sweat it out for six months building that product and there was a flaw that kills the product you’re going to go nuts and never take another swing at building another idea. You have to build in resiliency for the inevitably high likelihood that your idea actually still sucks. Build and launch fast.
Do you have founder/product fit
This idea has been covered from several angles because it is important. Chris Dixon calls it founder/market fit. Dan Norris calls it enjoyable daily tasks. The point is that you shouldn’t consider business idea in a vacuum. I have discarded business ideas that, based on the criteria above, I think are great but aren’t the right fit for me. I just don’t want to devote several years of my life to working on that problem. It’s hard to reject a business idea for this reason, particularly when you’re still looking for the first one, but it is the most important criteria for success by far.
I tried to keep the above sections closer to timeless principles rather than explicit recommendations of good ideas that might go stale but I’ll briefly wade into some more specific recommendations here with the caveat that these are much less reliable and possibly out of date.
Focus on Automation
A great number of the successful Micro-SaaS businesses I have encountered are products that have an initial setup period but then continue to provide value to the customer on an ongoing automated basis. Storemapper works this way. Customers do some initial installation and customization and then their store locator continues to just work, driving traffic and sales to their retail locations. I would look much harder at automation based businesses right now rather than a tool that requires your customer to login every day and use it.
Sell to growing markets
This is may be obvious but you want your target market to be a growth sector not one in decline. Look for ideas that sell to ecommerce shops rather than stores in a shopping mall. Build SaaS for Uber drivers before traditional taxi drivers. Build for freelance designers rather than corporate accountants. Make sure your total addressable market is going in the right direction.
Small online businesses are the sweet spot
Building a product for large businesses can be annoyingly complex with multiple layers of approval for billing and never-ending stream of requests for customizations. Freelancers or individuals can move quickly because you only have to deal with one customer (who also holds the credit card you need) but they can be too budget conscious and price sensitive. Small business of 3-10 people, preferably working in something online like ecommerce, publishing or SaaS themselves are the ideal Micro-SaaS customers.