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MenuFor Initial Users: Sell User License or make it into SaaS?
For initial users we believe selling individual user license are better until we know issues that we will have to deal with if we go SaaS.
Should we go SaaS? or Sell Individual License?
Can someone list hosting related problems (bandwidth, outage etc.) and how to tackle with them while selling SaaS?
Answers
SaaS. Always.
I am a founder of a Startup about to launch our first product (mobile app). We looked at this very question. In the end we looked at the impact the decision would have on our company's valuation. Based on my initial, informal discussions with funders in my area (Canadian Atlantic Region) with single point of sale revenue a healthy technical start up is worth approximately 4-6X annual revenue whereas the same company with a subscription or SAAS model is worth 10x and up.
Always default to SaaS and only offer one-off licenses in exceptional circumstances.
Is your product for individuals, SMB's or larger enterprise?
I've spoken with many entrepreneurs who have sold products on a per-license and all of them are either in the process of transitioning to, or are already, selling their product under a new SaaS model.
The cloud infrastructures in place today make launching a SaaS product much, much easier for the average developer. The common term for these is "PaaS" or "Platform As A Service" and they vary from very 'generic & flexible' cloud platforms like Amazon Web Services (AWS) or Digital Ocean, to more specialised services like Heroku (Ruby on Rails), MongoHQ (MongoDB databases), PagadoBox (PHP).
All of these services have some kind of free tier for getting a new app started and for development, and then have very granular pricing for slowly scaling the cost of your cloud hosting with the size of your offering.
Nearly all platforms offer redundancy once you're on a paid tier, meaning if their physical hardware has a failure, your app will automagically be moved to a new piece of phsyical hardware and thus you'll have minimal/zero downtime. As you scale up, you can make this even more sophisticated with the right sys admin team working on it for you.
If you're launching a pretty simple B2B SaaS app like a project management or invoicing app, then your hosting costs will be negligible compared to your scale & revenue (excluding employee cost to manage). If you're launching something that involves media (pictures, videos, MP3's) then even on cloud PaaS, your hosting costs will still be quite significant, and you should have a chat with someone to estimate your costs first.
I built a SaaS product (KeepMeBooked) which was specifically targeted at people using traditional installed software (owners of guesthouses and B&Bs using Outlook or some other old-school calendar system installed on their PC to manage their guests and reservations).
It sounds like you are considering this problem from the point of view of what’s best/easiest for you. Might I suggest that you look at it from the customer’s point of view?
For the customer, is your product more useful as an on-premise installed product, or as SaaS tool?
(I’m assuming, by the way, that when you say ‘individual user licence’ you mean the user installs and hosts the software on their own computer(s). So we are comparing SaaS with on-premise software here, is that right?)
In my experience, almost all software solutions work better for the customer if they are SaaS: no installation issues; access from any internet-connected computer; everything safely backed up in enterprise-grade data centre; no version control problems; etc.
The few exceptions to this are typically where you need fast data-entry and rapid processing. For example, I use Google Spreadsheets for simple little spreadsheets, but go back to Excel if I need some hard-core number-crunching. Waiting a few milliseconds after each action in Google Spreadsheets slows things down too much for me.
Or where the customer is extremely sensitive about their data and won’t countenance it being controlled by someone else, however safely and carefully you look after it.
So, I’d suggest, you outline how a SaaS solution for your product would work and talk to your customers about whether it will solve their problem better than an installed product. They might not know, of course, so you’ll have to ask some careful and probing questions. As Henry Ford said, if you ask the customer what they want they’ll tell you to build a faster horse.
You’ll need to find out if accessing the product from any computer is useful to them, for example (do your customers work from an office and from home? Do they often change / upgrade their computers?) And what backup solution do they have with your installed product? Is that backup solution safe and reliable? Would your SaaS solution be better from that point of view? And so on.
If it turns out that a SaaS solution would be better for your customer, then it “just” comes down to you figuring out how to implement it.
Hosting and bandwidth shouldn’t be too much of an issue these days. There are plenty of wel-established cloud platforms (like Amazon EC2 and Heroku) where you just pay for the computing power and bandwidth as you need it, and you don’t worry about the details of the physical infrastructure. I’m no sysadmin expert, so can’t really advise on pros and cons of having your own hardware in Rackspace compared to running a load of EC2 instances. But I’m sure you can find someone on Clarity who is. In my businesses we’ve used BrightBox (a managed hosting provider in the UK), Amazon and Heroku, all of which were excellent. We also used NewRelic and Pingdom to keep an eye on everything 24/7 and troubleshoot performance / availability issues.
Hope that helps. Happy to take a call if you'd like to speak further.
Related Questions
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How should we plan a well-executed SaaS product launch to an existing customer base?
I'm a product developer, startup veteran, and advisor to SaaS companies. Hopefully you've been already developing this new product with input from your existing customers, letting them beta test it and give feedback. (If not, my advice is to STOP immediately and get enough pilot customers involved to be sure that you're delivering something really valuable to them, that works the way they expect it to work, is easy to understand and get started with, etc.. The last thing you want is to do a big splashy launch of a product that is D.O.A. because you built what you assumed the customers wanted instead of they actually demonstrated that they wanted.) OK, so let's assume that you've got customers in the loop. Interview the heck out of them. Really understand how they use the product, why they use the product, what makes it valuable to them, what they can do with it that they couldn't do before, etc. If the product's not done enough for them to be best testing it yet and getting results, at least get some insights into how they see themselves getting results from it. How does it/will it change their lives? As you do this, be on the lookout for things that really resonate. Emotional language, for example. "It's such a relief that I don't have to worry about sending invoices manually anymore." (or whatever pain it is that your software solves) Also look for (and try to elicit) specific result statements: "This new software saves me [or is going to save me] 15 hours a week. Now I can spend that time where I really want to, with my kids ( ... my cat ... my golf buddies ... )" You're doing this for three reasons: 1) This stuff makes for phenomenal testimonials; 2) it helps you come up with great ideas for pre-launch content; and 3) it generates *PURE SOLD GOLD* you'll use in writing the copy for your launch offer. OK, launch mechanics. There are people who teach huge long expensive courses on this stuff. I'll give you the Cliff's notes. While I haven't personally run a major product launch, I have been trained in the strategy and am very familiar with it. - Plan your launch period in advance. You might want to do a pre-launch sequence that lasts 1, 2, even 3 months depending on the magnitude of your product and how much effort you're willing to put into creating content for the launch. - Create some teaser content of interest to your customers who might want to buy this product. Offer to teach them something, or offer to give them a sneak-peak behind-the-scenes of your new product. - Send an enticing offer for this content out to your list. Get people who are interested in this content to sign up for it. This creates your launch email list. - Send your launch list weekly updates: development milestones, sneak-peak screenshots, videos, educational material, interviews with/testimonials from beta users, and so on. - You're not trying to sell here yet (not hard sell at least). Drop some hints that there is going to be a special offer when the product launches, just for special loyal customers like them. - Create at least three videos on topics that are really, really interesting to your prospective customers... not necessarily about your new product itself, but teach them about what they can achieve with it, or what others have achieved with it already. As you publish these videos, send the link out to your launch list. - Also send out an offer to see these videos to your main list, to entice more people to sign up for your launch list. - As you get closer to launch time, keep sending frequent updates to the pre-launch list, and send another email out to your main list to let them know that the product is launching soon, and that if they're interested in the special one-time-only launch pricing, they need to sign up for the "early bird list" (your launch list). - Send out a 24-hour notice that the launch is going to happen soon, and the launch pricing will only be available for a limited time (potentially, to a limited number of customers ... to increase scarcity and urgency). - I recommend that even if you plan to open the product up to all your customers that at launch time you limit it to a smaller number. This makes the inevitable post-launch gremlins less painful to deal with because you have fewer customers, and it motivates people to buy because they fear that they'll lose the opportunity to do so. You can open the product up to more people later... the delay will result in pent-up demand and easier sales. - Start the launch. Tell your early-bird launch list a few hours early, then tell your main list. Direct them to a web page with a video and long-form sales copy of your launch offer. - Send out 2-day, 1-day, 12-hour, etc. notices that the launch is ending soon and reminding people what they're missing out on if they don't act now. If you're offering a limited number of spots, tell people what percentage has already sold out. Remind people that if they're "on the fence" about this, that this is the time to make a decision. - Send out an email letting people know that the launch is over and thanking them for their support and their vote of confidence. Tell the people who didn't buy (or didn't get in) that you'll let them know that the product will be opening up for new registrations some time in the future. (You may get people sending you emails begging to be let in at this point, if your product is desirable and your marketing was executed well.) And, of course, you don't just have to promote your launch content to your existing customer list ... you can post it to social media (and encourage your customers to do so) to attract brand new customers into your world. If you'd like to go into more detail about launch planning for your specific product and market, I'd be happy to jump on a call and talk about ways to make this work for you.BB
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Freemium v.s. free trial for a marketplace?
It depends on a number of factors but I'd boil it down to two key things to start: 1) What is your real cost to provide a free plan or trial? 2) Who exactly is your customer and what are they used to paying and who and how do they pay today? When you say "online workforce marketplace" it sounds as though you're placing virtual workers. If that's the case, or if you're paying for the supply side of the marketplace, the question is how much can you subsidize demand? Depending on where you're at in the process, I'd also question how much you can learn about the viability of your marketplace by offering a free version, assuming again, that free is actually a real cost to you. I was part of a SaaS project that started charging people for early access based mostly on just a good landing page (we clearly stated they were pre-paying) and were amazed at the response. I've also run a SaaS product that offered free trials and realized that the support costs and hand-holding and selling required to convert from free trial to paid wasn't worth it, this despite the product's significant average ARR. You might be better off providing a "more information" sign-up form (to capture more leads) and let them ask for a free trial while only showing your paid options. I've been amazed at the lead capture potential from a simple "have questions? Click here and we'll contact you" This is all the generalized advice I can offer based on the limited information I have, but happy to dive-in further if you'd like on a call.TW
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For a SaaS, I find that Stripe is not available to Indian companies. What are other Stripe-like payment gateway options for Indian companies?
there is Balanced, Dwolla, Braintree but none of them seem to work in India yet.HJ
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How important is coding knowledge in starting a SAAS business? Should I start by learning code or just get started on the idea? Book suggestions?
I started a large SaaS Company for B2B where perfection in code is as importante as it gets. So here is my advice, DON'T CODE until you know what the Saas Really is. First start understanding what the problem REALLY is. Interview people and actually spend 100% of your time doing Customer Discovery. (This sounds easy but it is a skill you'll have to develop far more important than coding). Once you understand what the problem is, come up with a value proposition. Still no code. Then make a sell. If you can actually find things already existing that you can Hack and put it together then use that. Then make another sell. If you can sell it to at least 50 people if you are B2C, or if you are B2B you should have at least 1 customer. Once you do that then start automating some parts of the solution that you have hacked and so on. But THE most important thing is to be in constant conversations with your customers and hot leads. Remember you are a customer making machine not a coding machine, the first one is where the money is. Hope this helped you, if you want to talk more about customer discovery and customer development, just give me a call.JC
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What's the best way to sell a SaaS prior to launching?
I was involved with a SaaS product that launched a landing page and made clear that the product was still in development, but that we would give earliest access to people who pre-paid for the product. We also allowed people to choose what they paid, and promised them that payment would stay in-effect for several months. We generated revenue the first day of posting the landing-page publicly and increased revenue month-over-month. However, we discontinued the product as it was simply not big enough of a market for us to justify continued time and energy. But I would encourage you to pursue a similar model in that it's a great way to test and validate the pain others experience for the problem and a great way to ensure you're building the product to satisfy real customers. Happy to talk this through in more detail in a callTW
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