SaaS Business: 3 Common Startup Traps to Avoid
- When I first started out in SaaS as an engineer, I was an engineer that turned into a startup founder, I made a ton of mistakes. Obviously we all do. Some mistakes were easy to overcome, some mistakes were dumb. Other mistakes led to months of building the wrong product. It led to loss revenues, and it came to near death experiences for the company.
Here's a big question that we all make mistakes and some mistakes honestly are meant to be made. Like you're gonna make those mistakes and makes you stronger. There are other mistakes though, that you really should just avoid.
In fact, if you know about these mistakes and you do the exact opposite of them, they can actually save you a lot of time and help you actually grow your SaaS business faster. So having reflected on my own journey as a startup founder, having worked with over 250 founders in my coaching programs, having serving this community and studying the game through these episodes, I'm gonna walk you through the three most common mistakes that founders make that I made in SaaS. And in fact, if you do the exact opposite of these, you'll be able to win faster. Intro.
(upbeat music) What's up everybody, welcome to Unstoppable. I'm TK, and on this channel, I help SaaS founders like you grow your SaaS businesses faster with an unstoppable strategy. Now, if you're new to this channel, welcome. I drop an episode every single Sunday with actionable strategies and tactics from the trenches. So be sure to hit that subscribe button and that bell icon, that way you'll get notified every single time I drop an episode with the TK Energy.
Now, if you're already part of this community, if you're part of my coaching programs, my people, it's really awesome to see you over here. All right, so I was at an investment event the other day, and I got asked the question. Hey, TK, what are the three most common mistakes that you see founders make as they go through their journey? I had to stop and think about it for a second, but the answers started to come really quickly because in my own journey, I know what mistakes I've made and what I've learned, but also now having worked with over 250 founders directly in my coaching programs, plus studying the game and doing probably over 100, 200 episodes in this channel, I have gotten to some level of synthesis on what the common patterns are. And what was fascinating was in these three mistakes, what I learned was, you know what? These are three mistakes that no one really needs to make. And in fact, if people know them and do the exact opposite, they'll be more likely to succeed.
So in this episode, I'm gonna walk you through those three mistakes. The three most common startup mistakes that I see that I've made, that founders still make. And also I'm gonna tell you what the opposite of that is, so that if you do those, you'll avoid the mistakes, but you also win faster.
So if you're excited, dig in, go ahead and smash that like button for the YouTube algorithm. And let's go into principle number one. Mistake number one. First real quick, let me lay out the land. Every successful SaaS if you've been watching this channel for a while are basically made of three components, market, product and go-to-market. Those are the three components that you're really trying to get a fit on.
And if you do, the money is in the middle. This is a whole bunch of money right over here. And so if you're successful in optimizing for the right market, and then the right product, bringing to that market, solving that urgent important problem, and you have the right go-to-market to bring that product to the market, those three things coming together is where success lies.
And in the early stage when you're starting your SaaS business, when you're getting the initial revenues, maybe you're trying to get to that initial 3 million of ARR, in that journey, you're trying to optimize for these three things. And I work with founders upwards of 100 million ARR. And in that journey too, they're constantly reorienting themselves on having the right market, the bigger market, the right product, a better product and the right go-to-market to scale.
So these are three components that make for a successful SaaS business. So within this, that turns out the three most common mistakes aligned directly with these three pillars. So the first mistake that I see founders make goes under market. And the mistake number one they make is the massive ICP trap.
Now let me define this. ICP is your ideal customer profile. Sometimes I call it your initial customer profile, if you're just starting to get to initial revenues. And the biggest problem that I see with founders is they don't get clarity on exactly what market they're going after. They fall so much in love with their product, or maybe they're thinking so much about this AppSumo deal that they're gonna do.
They forget, look, what is the market we're going after? What is our ideal customer profile? What is the urgent and important problem that we're solving? And is it specific enough for us to really differentiate ourselves? One of the toughest things for founders and I fell into this trap too, is we're trying to build relatively large companies with SaaS companies, what we want to be serving as big of an audience as possible because they're so scalable. Even if you're doing a micro SaaS business, you wanna go after thousands of people, if you're doing a true SaaS business, you go after millions of people. When we're doing that, it's very easy to fall into the trap of going after multiple ideal customer profiles, of going after a very wide market.
Now saying, look, our total addressable market is so huge and say, we're gonna go after all of it. And that's one of the biggest traps I see founders make. What they don't do is really, really hone in on a very specific category to go after, as the initial landing point, as the initial customer profile. Couple of things happen when you do this, when you actually define your ideal customer profile, you initial customer profile, you get really honed in a very specific market, it allows you to really define who are the people you're going after. Do they truly have an urgent important problem? And how do I actually get my product in front of them? How do I validate this idea for our product even to make sure that we have something. They get so caught up on the numbers on millions of people, they end up talking to no one.
They get so caught up on going after as large of a market as possible, or as many markets as possible, as many ICPs as possible, they end up neither here nor there in their messaging, in their product and in their go-to-market. And because of that, they fall into the ICP trap. And the massive ICP trap basically makes it, we're like, look, we wanna build a massive company and they end up not getting traction anywhere. If you think about it, something like Amazon, which is one of the largest companies in the world, they started by selling books on the internet at a time when no one was buying anything on the internet and the internet was smaller than ever. That was very, very specific.
Now they sell everything everywhere. So what they did was they went after a very, very specific market, and then over time expanded that market and expanded their product and expanded their go-to-market. They earned the right to go after larger and larger markets.
Founders who ignore market, they don't even think about what's the urgent important problem we're solving, what is their ideal customer profile and just obsess over product, never actually get product market fit because they're not thinking about what people actually need. They're too obsessed with what they wanna do. Founders that go after too large a market in the beginning, never differentiate, are never able to compete against the other players in the market because SaaS and startups are competitive enough.
So if you really want to make sure that you avoid this massive ICP trap, what you wanna do is actually get into a specific ICP. You actually want to create an initial customer profile, right? That's the first thing you wanna do. And that's how you wanna avoid that trap.
So that's principle number one in market. Let's go to principle number two. Principle number two is product. And in specifically the mistake that I often see is the one more feature trap. And this is one of those things.
Whenever I'm talking to an early stage founder, I'll tell 'em like, are you doing the one more feature trap? And they're like, eyes just light up and then just like shrink. And then they kind of look down and they're like, yeah, that's exactly what we're doing. It's one of those things where as soon as you read that, one more feature trap, you'll know right away if you're in the one more feature trap. In case you're not feeling it and you're still wondering what the one more feature trap is, the one more feature trap is where no one is wanting to buy your product.
You're not getting traction, you're not getting the revenue numbers. Maybe you're not getting the initial revenues or you're not able to scale and you keep telling yourself that you're this one feature away from everyone wanting your product. That's the one more feature trap. And here's the thing, turns out there's never gonna be that one feature that really changes everything. There's always gonna be more features that you can convince yourself that you need to build for the market to properly say yes.
Let me explain on that. I see this all the time, where in the early stages, founders will say, oh, we pitched this company or we pitched this company and they said, hey, if you have this three features, we'll totally you back. And then they go away and then they build it and they go back and they're like, yeah, this is not a priority this quarter, let's talk next quarter. Or they build a feature and they product led and they run more ads. They give over money to ads and more people come through, but the conversions don't happen, even though they added that feature.
Now, oftentimes, and trust me, baby TK made this mistake. I wasted months building the wrong product, thinking I was one feature away. That's why this is so near and dear to my heart. What's really happening is you're basically getting a polite no.
People are saying, I don't want your product, but they're not saying that, they're just saying polite. They're like, well, if you have these five other things and it took me to Mars, I would probably buy. And if you think about that and dissect that, what they're really saying is maybe you have these five impossible things, I will maybe buy, instead of just saying, look, this is not an urgent important problem, and the solution is not compelling enough or differentiate enough, so I'm not gonna buy.
That's really what they're saying. It's like just a polite way of saying it. And so oftentimes I see founders and I've made this mistake too. They actually get caught up in the one more feature trap. They're adding more features, adding more features.
And guess what, the more complex your product is in the early days, the more features you add, the harder it is to explain to people what it does and to sell people on it, and the harder it is to actually get traction. So it's counterintuitive. So what you need to really figure out is are you really adding features that's gonna make it more marketable, that's truly solving the urgent and important problem that you're trying to solve for, or are you just lying to yourself and staying in your comfort zone and staying in coding instead of going out to the market and figuring out what is the urgent important problem? What do they really need, or maybe even go-to-market and saying, how do we actually sell this product and market this product and position this product? We'll get to that later.
And that's the biggest mistake. One of the most common mistakes that I see. And the opposite of this is to actually think about core loops. Instead of adding one more feature, one more feature, one more feature, you wanna start thinking about your product as what is the urgent and important problem in the market that we're solving, and what is the one core loop in our product that actually delivers that result? That is a different way of thinking about your product strategy. So instead of saying one more feature, one more feature, and finally they'll buy, it's like, how do we actually solve their problem in as few features as possible and as few clicks as possible. And that makes a massive difference.
Now, before I go to principle, number three, let me just pause here for a second. I'm starting to get the power of this. Are you starting to see how these are common traps, that you really don't need to learn the hard way that if you start knowing about early on and you start doing the exact opposite, even these two, it can massively change the trajectory of your startup and your SaaS business. If you start see the power in this, can I just get a yes in the comments below and also just smash that like button for the YouTube algorithm. It really likes it when you do that so does my team. Also, if you're in this stage where you're starting out your SaaS business, you're learning more about SaaS, you're trying to get to that initial revenues, that initial threshold of revenues.
So let's just say like 10K of MRR, then I encourage you to check out my weekly webinar that I run that teaches you exactly how to go from the pre-revenue stage to initial revenues. It's completely free. I'll link to it below.
You don't have to go right now. Let's go to principle number three, because this one, this common mistake is also super important for you to know. Okay, so the third most common mistake that I see is under go-to-market. And under go-to-market, first of all, the obvious mistake is if you are ignoring the market and you're just stuck on the one more feature trap, the obvious mistake is you're not even doing go-to-market.
Go-to-market is your sales and marketing activities. And here's the truth. In the early stages, it has to be founder led sales and marketing. It just does.
You can't outsource it and agency's not gonna figure it out. They're not gonna figure out your messaging. All that stuff is not gonna come to me. You are gonna have to own it. And like take it from me. I am an engineer, I code and I had to embrace go-to-market.
And that's why I love it so much because I knew that without it, there would be no business. And so the obvious mistake here, and to just not even embrace it, not even look at it, not even thinking about how do we bring this product to the market. Let's go-to-market. How could you like, if you don't bring the product to the market, how do you have a business? You don't. The thing is, it's very easy to say, oh, we're just product led. And so they will find us.
That's like this today's version of build it and they will come. They won't. You have to market it for their product to be able to lead them into the sales process or you have to market so that your sales team has pipeline. It has to be one of the two, or you have pipeline. So go-to-market is important. The base level mistake is founders just don't embrace it.
And that's one thing like I'm not even gonna write down, 'cause if you don't wanna do that, you're missing one of the most critical pillars of building a business. You have the market, you have the product, you have to have the go-to-market, which brings the product to the market. I'm not gonna write that down. You need to do it. And I know sometimes we stay in our comfort zones as engineers, or maybe we get scared. Like maybe you do come from a sales and marketing background, but SaaS is scary, but you just gotta embrace it.
The real common mistake after that, even with founders that are doing the founder, like sales and marketing, and they're saying, cool, I'm responsible for this. And if I get the initial traction, then I can go hire more reps. I can go hire marketing person. I can raise more money or we have profits.
There's still this one big mistake that I see. And that's the we didn't do the math trap. The beauty of SaaS businesses is it's actually very mathematical. It's very machinestic. There's, it's a machine you're building.
And so that means that there are very predictable things in that business and you can actually tweak them to get better results. And oftentimes when you are embracing sales and marketing, which is great, kudos to you, or you're thick in it, when you're trying to bring this product into the market, regardless of whether your sales driven or product led, you still have to do marketing to introduce the product in the market, a lot of times founders don't do the math. I was guilty of this and I was like, maybe no one wants it.
But the reality was I didn't do the math. What is the math? The math is in order to get a certain amount of dollars in revenues, you need to actually have a certain number of opportunities or trials, okay? Meaning in order for someone to pay you, they first have to trial the product or go through a sales process. In order for someone to become a real sales opportunity or a product led trial, you need to have a certain amount of leads, right? And in order for someone to become a lead where they know about you, you can use the word lead in a lot of different ways, maybe they start, they go to your website and download a lead magnet, or they actually know about you and engage with you on social media, any number of things, right? They read a blog post, but they have to end up saying, hey, I'm kind of interested and then get into a trial or a sales opportunity. And in order for someone to become a lead, you need to have a sufficient amount of traffic. There is literal math in this, meaning most of the time, 20% of people that become opportunities, convert to revenue. 10% of people that become trials, it has a lower conversion rate that start trialing your product, become revenue.
Most often, 10% of leads become opportunities and trials. And 20% of traffic become elite. This is what you typically see. These are essentially benchmarks.
And a lot of times people don't do the math. Meaning if you only got 10 website visits, only 10 people ever ended up on your website or looked at your social posts in your target market, then the math never will get to revenue. You don't have enough people at this stage of the journey. And a lot of times founders give up or say, oh, I need to go do this one more feature, no one cares, but really the reality is not enough people in the market know about the product. The traffic is not there. Now let's just say, you're getting a ton of traffic, but no one's converting to a lead or joining your mailing list, right? Or engaging.
Then you are doing go-to-market, but maybe it's not the right market or your messaging is off. Now, let's just say, they're becoming leads and they're starting a trial, but they're not converting. Well then maybe your messaging is off or it's the wrong market.
They don't have an urgent important need to fork over cash, but they'll use a free product or there's something wrong with your product. Now let's just say that they're getting into sales conversations, but they're not converting. Well in that case, it could be that it's the wrong people in the market or the positioning is off, or your sales presentation is off or your product sucks. No one does the math.
That's one of the biggest mistakes. And when you start to look at this in a mathematical way and starts to help you actually diagnose, okay, what's actual problem? Do I actually have a clear idea of my ideal customer profile in the market I'm going after? Do I have a core product loop that solves that problem? Do I have a clear go-to-market that's attracting these people in the market and getting them into the product and the marketing process? You can start to look at this in a mathematical way and start to understand what do I need to focus on and what do I need to fix? So to recap, I know that was a lot. Here are the three most common startup mistakes I see founders make and I've made too that there's no reason for any of us to make.
Some mistakes you just have to make and learn, okay? Other mistakes you need to avoid and do the opposite, so you go faster. In this case, here are the three mistakes that you absolutely need to learn and do the opposite of. Number one, think in terms of market first.
What is the market we're going after? What is the urgent and important problem that we're solving for? And how do I know that we can differentiate in that market? Is there clear need? Based on that, build your ideal customer profile versus going after two larger market. Being neither here nor there, or just ignoring the market needs altogether. That's number one.
Number two, instead of falling into the one more feature trap and adding more features and adding more features because just because people said, hey, if you add this one more feature, I will buy and you add that feature and they don't buy. They're just politely saying no. Instead of adding one more feature, which adds unnecessary complexity to your product, which makes it harder to sell, think in terms of core product loops that actually deliver an aha moment for the market and the problem that you're looking to solve.
And then number three, instead of just thinking, maybe I'm not good enough, maybe this is not good, do the math on go-to-market? Well, firstly, embrace go-to-market. If you don't embrace sales and marketing, you will never bring your product to the market. The product doesn't sell itself. Even if your product led, you have to embrace go-to-market.
And as part of go-to-market is actually do the math. The math is very simple. If you wanna generate a certain amount of revenue, you need a certain number of trials because 10% of trials convert to revenue. If you need a certain number of trials based on your revenue target, then you need a certain number of leads that lead to those trials. Well, how do you do that? Well, 10% of leads convert to trials or opportunities so you'll now know how many leads that you need.
Now, 20% of traffic converts to leads. So figure out based on the number of leads that you need to get the certain number of trials that you need to hit your revenue target. What is the amount of traffic that you need? That's it. Just do that math and you'll know right away.
If you're doing go-to-market at a sufficient level or not. If you are, then you can diagnose exactly where it's falling apart and go tweak each of these three things. You avoid these three common mistakes and do the exact opposite of what I talked about, then you will be able to fast track your trajectory to success, to initial revenues, to scale for your SaaS business.
Otherwise you can waste months building the wrong product, thinking that the market needs something, but they don't really need it. And also just wondering, am I just an idiot for doing this with just all the things and all the emotions that I went through. So now you know exactly which mistakes to avoid.
What you may not know is how do I think about my ICP, my ideal customer profile? How do I think in terms of core product loops, instead of just adding more features? How do I think about go-to-market? What are the key components to actually flushing out in an initial go-to-market strategy so it can drive to initial revenues? So if you're in that stage where you're building a product and you're maybe pre-revenue, or you maybe have like a dollar in revenue and you really need to get to that 10K MRR stage, then I invite you to check out my weekly webinar. Inside of this webinar, it's in depth, it's action packed. I go into detail about these three pillars and how to think about market, product and go-to-market so that you can actually get to initial revenues for your SaaS business without wasting months building the wrong product. This is experience from the trenches, having built multiple SaaS companies, having helped over 250 founders, scale their companies anywhere from pre-revenue all the way up to 100 million revenue. This is action packed webinar. It's completely free.
All you need to do is just go to tkkader.com/webinar. Super simple. I'll also link to it below, tkkader.com/webinar. And you can like just fill out your info and get access to it right away and watch it at your own pace. It's an incredible action hack webinar, much more detailed that goes into each of these components that I've talked about and it's completely free. And also if you got value from this video, please smash our like button for the YouTube algorithm.
It really likes it when you do that and so do we. My team, and I put a lot of love into these videos, a lot of effort in these videos to make sure we bring your actionable content from the trenches. Also, I drop an episode like this every Sunday from actual experience in building SaaS companies, and now working with founders like you one-on-one to make sure that you're set up for success. So be sure to hit that subscribe button and that bell icon, that way you'll get notified every single time I drop an episode. Also, if you have a slack group or a group of other founders that you collaborate with, if you have a team member that will get value from this, a co-founder, please share this video with them, it just mean the world to us.
We wanna help as many founders as possible out there to build incredible SaaS businesses. And lastly, remember, everyone needs a strategy for their life and their business. When you are with us, yours is gonna be unstoppable. I'm TK, and I'll see you in the next episode.
(orchestral music) All right, let's do this. Back in the studio. And why did I screw that up? I'm just getting back into the groove.
2022-09-24 05:36
