There’s a myth that growing a software-as-a-service business beyond a million dollars requires funding. Many startups looking for funding don’t receive it. Even those with funding aren’t guaranteed to succeed.
Bootstrapping is the idea of growing a software business slowly, from the ground up, and with limited resources. Bootstrapped software businesses often have a single founder, rather than two founders. Although they don’t grow as fast, they have a higher success rate than venture-backed startups, according to Rob Walling.
Y Combinator prefers startups with co-founders. Apparently, startups with two founders have a higher success rate. This is because every founder has weaknesses. If there are two founders that complement each other, this can increase the odds of success.
The first step to bootstrapping a successful SaaS business is finding product-market fit. You must validate your idea and make sure you have a product that solves a problem that businesses are willing to pay for. Rob recommends building SaaS products that serve other businesses rather than consumers.
Entering a competitive market isn’t necessarily bad. It means there is a need for the product. There might also be opportunities to solve frustrations that customers are experiencing with your competitors’ products.
If you’re able to create an easier-to-use product that is cheaper, this can become a competitive advantage. However, Rob mentions that many founders underprice their product. As your business grows, there are many advantages to charging more.
Most founders undervalue their product. It’s common for business owners to deal with imposter syndrome and other mindset hurdles, creating a tendency to charge less than the product might be worth.
As your SaaS business grows, you can increase prices. According to Rob, you shouldn’t be too worried about customers leaving. Worst case, you can always roll back prices.
Speed and flexibility are important qualities when growing a business from the ground up. Worrying too much about every move you make can slow down your growth or even lead to failure.
Your pricing is dictated by how you sell your SaaS product. If you target companies that require several high touch points such as a demo before they sign up, you’ll have to charge more. On the other hand, if your product is self-serve and doesn’t require a demo or complicated onboarding process, you can charge less.
A simple way to grow the revenue of a SaaS business is to charge more depending on the use of the product. For example, email providers often charge based on the number of email subscribers you have. As your business and email list grow, you have to pay more. As a founder, this is great since it allows you to grow your revenue without having to get more customers.
If you build a great product with amazing features, your competitors will eventually copy you. Having great features is a powerful differentiator, but it won’t protect you from copycats. Rather than trying to differentiate yourself from competitors with unique features alone, you should focus on branding. In addition to branding, network effects and owned marketing channels can help you become competitor-proof.
One thing that every business owner learns sooner or later is that nothing is static. Everything is in constant motion, and you frequently have to reinvent yourself.
There are several ways to market a SaaS business. High-touch funnels require a demo, often have longer sales cycles and involve more onboarding complexity. Low-touch funnels are self-serve, meaning that customers can sign up for a free trial themselves with minimal or no touch points.
Low-touch funnels often require a lot of volume. They’re a numbers game. If you can attract a lot of attention with a low-touch funnel, you can later combine this with a high-touch funnel that targets corporate clients at a higher price point.
In The SaaS Playbook, Rob Walling recommends several marketing approaches. His suggestions range from search engine optimization and PPC advertising to posting on platforms like Product Hunt. What stands out most is that your marketing strategy depends on your average revenue per customer. Low revenue per customer means you can spend less to acquire new customers. In this case, you often need to rely on free or cheap marketing strategies.
It’s common knowledge in marketing circles that whoever can spend the most to acquire a new customer wins. However, there are plenty of examples of companies with cheap direct-to-consumer products that are doing exceptionally well.
When it comes to hiring, you should hire at least one person. Even if you’re planning on running a bootstrapped lifestyle business, hiring a customer support person can help you avoid burnout as a founder.
Many business owners are really just freelancers. As pointed out in The E-Myth Revisited by Michael E. Gerber, at some point you have to transition to working on the business rather than in the business.
If your goal is to scale to a million dollars or more, you won’t get around hiring. Whether you’re hiring a customer support person, a developer or someone to help you with marketing, everything can be delegated with good documentation and training. Apart from customer support, the next positions to fill are related to sales and marketing.
Rob emphasizes creating an environment where your top-performing employees keep learning and are challenged. Hiring is one thing, retaining employees is another.
Once a SaaS business is growing, measuring progress becomes mission critical. The two most important metrics to track are your monthly recurring revenue and month-over-month growth rate.
As with any business, mindset is an important component. Bootstrapping a successful SaaS business is not just about strategy. It’s also about managing yourself as a founder and being in charge of your psychology. This includes making sure you don’t burn out.
Look for markets that are already crowded. This means that there is strong demand. Do you see software companies that are missing certain features? Can you spot frustrations in the market? This might be a great starting point for a product.
Raise your prices. It’s common for business owners and founders to undercharge. You can often get away with charging more, especially as your business grows and your brand gets stronger.
The SaaS Playbook by Rob Walling provides answers to many questions that startup founders might have. Rather than going deep into one topic, such as pricing or marketing, the book provides a broad introduction to starting and growing a successful SaaS business.
Throughout the book, readers can learn from Rob’s own experience growing Drip, a successful email marketing provider. It’s inspiring to hear how Drip grew from a small app into a big player using the strategies outlined in the book. Apart from his own bootstrapping experience, Rob shares several examples of strategies from other successful SaaS companies.
The SaaS Playbook helps you avoid common pitfalls and think about problems you might not even think of yet. It carries a positive message: You’ve got what it takes. You can build a multi-million dollar SaaS business from the ground up with limited resources and no funding.
One thing that could have made this book even more valuable would have been more examples, particularly when it comes to marketing. Rob lists many marketing strategies. Learning how other businesses have used these strategies, with concrete examples and numbers, would be a valuable addition.
This summary of The SaaS Playbook is best suited for people who want to start a SaaS business without relying on venture capital. It’s for aspirational founders looking to build a million dollar software business that they fully own.
Business owners or marketers that already have some experience may not learn something new.
When businesses have a lot of money available, they often become more inefficient. They try to throw money at every problem, rather than finding creative solutions and tapping into what Daymond John calls The Power of Broke.