Episode 282 | The Long, Slow SaaS Ramp of Death

Show Notes

In this episode of Startups For The Rest Of Us, Rob and Mike discuss the long, slow, SaaS ramp of death. They define it, tell you how to recognize it, share their own experiences with it, and give tips on how to get out of it using tactical and mental coping mechanisms.

Items mentioned in this episode:

Transcript

Rob [00:00]: In this episode of “Startups for the Rest of Us,” Mike and I discuss the long, slow SaaS ramp of death. This is “Startups for the Rest of Us,” episode 282.

[Theme music]

Rob [00:18]: Welcome to “Startups for the Rest of Us,” the podcast that helps designers, developers and entrepreneurs be awesome at launching software products, whether you’ve built your first product, or your just thinking about it. I’m Rob –

Mike [00:26]: And I’m Mike.

Rob [00:27]: – and we’re here to share our experiences to help you avoid the same mistakes we’ve made. What is the word this week, sir?

Mike [00:32]: Well, we’re making a final push to get all the development work done for Bluetick before the end of next week because, obviously, at the end of next week, right after that, MicroConf starts up. So, we’re trying to get everything out the door and just doing some testing on different things, making sure people can use it end-to-end; and then, hopefully, by the end of next week, I’ll be able to start onboarding people a little bit in advance of the intended release date; or, at least the private release to the early-access people. I’ll start onboarding people, and I do have a volunteer to be the first person on it. So, I’ll start working with that person, and we’ll go from there.

Rob [01:05]: That’s exciting, man. How does it feel?

Mike [01:06]: Good. There’s obviously little jitters about, “Well, I know that some of this code is” — I wouldn’t say it’s janky or anything, but probably hasn’t been tested a lot. I think there’s a big difference when you’re first rolling something out versus something that has gone through thousands or tens of thousands of iterations and you know that it’s pretty solid, and that it’s got a lot of the edge cases taken care of. But because I’m reading mail from people’s mail servers, like the iMap protocol, there’s a lot of edge cases. So, there’s all these things where things could go wrong. And I went through over a hundred thousand emails in my own mailbox, so I’ve mined those out and got all the edge cases out of there; but who knows what else is out there, you know?

Rob [01:54]: Oh, yeah. Once you get into this stuff, kind in the wild, where you have emails; or, you have data that may not be as well-formatted as, quote-unquote, “in a laboratory,” or in unit tests that you might write, there’s always going to be edge cases. We’ve seen such crazy stuff with Drip, whether it’s on the reply-tracking side, or just something wants is to send. You send tens of millions of emails a month, and suddenly you’re just going to find edge cases. So, I would guess that right off the bat, you’ll catch a few as new folks sign up, and then there’ll be a nice lull where you’re okay. Then once you hit scale, where you start really doing a lot of iMap stuff, you’ll probably see even more weird edge cases. Like, emoticons or emojis won’t work, or there’s just tweaky stuff that different mail servers do.

Mike [02:29]: Yeah, then there’s also places where, in the RFCs for the iMap protocol, there are ambiguities, and different mail servers handle those things differently. Some will follow the letter, and some will just ignore what the RFC says. So, there’re places where, for example, you’re not supposed to have nulls in certain places; and there are emails that do it, and they just ignore the protocols. Then especially when you get into things where people are sending spam, for example, or you’re looking in a spam folder and saying, “Okay. Well is there an email in here that got miscategorized that we want to validate whether or not someone replied to it?” Any of those could be really screwed up just because who knows where those things came from, or what mail server they could have originated from? They could’ve even just come from a Perl script or something like that. Who knows?

Rob [03:16]: Yeah, I like to think of it kind of like if you had code raw JavaScript without a jQuery, right? All the browsers handle things differently, and there’s all these edge cases. And ten, 15 years ago when we did code bare-bones JavaScript, it was such a hassle. There is no jQuery equivalent for mail servers, and you have to deal with all the nuances and the product differences and, as you said, the ambiguities of the spec.

Mike [03:38]: Yeah. We’re already separating out some of the code where we are trying to identify what the mail server is in order to start handling some of those edge cases just because we know that this particular case is handled very well in this mail server, and this other mail server just simply doesn’t handle it at all.

Rob [03:55]: That is the worst! The worst is when you start having ‘if’ statements, and they’re, “If mail server is XYZ…” Aw, that’s terrible, man.

Mike [04:02]: Yeah.

Rob [04:02]: Well, it’s good to hear you’re still on track, and excited to hear an update once you have that first early-access person in and then when you get to your milestones of getting five or ten people in there, using it. First paying customer – it’s all coming quickly, man.

Mike [04:16]: Well, technically, all of them are paying customers at the moment.

Rob [04:20]: Oh, nice, nice.

Mike [04:21]: Everyone who is on my early-access list of these initial sixteen people, they’ve all paid me for it. So, it’s really just a matter of making sure that it’s working for them. Obviously, if it doesn’t work or it can’t work for them, then I’ll issue refunds as needed; but everyone that I’m putting on it over probably the next six weeks or so is essentially a paying customer already.

Rob [04:439: Right, but when I was saying “coming on board,” I meant subscribing –

Mike [04:44]: Oh, yes.

Rob [04:44]: – because they paid you up front for the privilege of early access, and that’s obviously cool for both sides; but at a certain point, you’re going to have to prove enough value that they’re willing to pay that every month. And that time will come once they’re using it. Cool.

We have a whole slew of new iTunes reviews. I won’t read them all, but Jerry Weir from Luxembourg said, “A great show. Value in every episode. If you’re at all into starting your own business, alone or on a team, you shouldn’t miss out on ‘Startups for the Rest of Us.’”

We have [Prof.?] DuChamp from the United States. He says, “Listen, or miss out. You choose. If you’re doing anything related to startups, you would be plain silly to not listen to this podcast. Mike and Rob do a really good job of explaining the minutia of building your platform. It’s not about interviewing the biggest names in the industry, or even talking about trending topics. They get into stuff that really matters.”

So, thanks, guys, for the five-star reviews. We got seven or eight other new ones, 475 worldwide so far. If you want to help us on our push to get 500 worldwide reviews in iTunes, please log in and give us a five star.

Mike [05:42]: A few minutes ago, I mentioned that we were working on getting Bluetick finished before we MicroConf, and one of the things we’re doing this year is that – we usually do giveaways for a lot of the different sponsors; and then as part of “Startups for the Rest of Us” and the Micropreneur Academy, we give away a couple of different things. This year, we’ve just decided to give away an Amazon Echo, so that’ll be one of the grand prizes from Micropreneur Academy this year.

Rob [06:05]: When the Echo first came out, I almost bought it. I think it was, like 99 bucks if you were in the early access program, and I decided not to because I kick-start so much stuff as it is, that I have stuff laying around my house and stuff that I’ve given away, or sold, or whatever; and I just didn’t really want another device. But there’s buzz building around this thing, and I’ve heard that it’s really cool. You have one, right?

Mike [06:25]: Yes, I have one. It’s very interesting. There’s a lot of different voice commands that you can give it. I ended up on a mailing list. I don’t know whether it was part of registration process or anything like that, but what they’ll do is they will email me as they start adding new features, and they’ll tell you in the email, “Hey, say this to the Amazon Echo, and it will start responding to you in this way or that way.” Or, you can play games with it. They’ll tell you about new games that came out, or new things that they’ve integrated into. There’s a few, different, other devices you can get that will automate different things in your house. You can integrate it, I think, with Nest at this point, but there’s also other thermostat controls that you can use. Then there’s a device that you can plug into your car, for example; and because your car is probably close enough to your house to get Wi-Fi and connect through that. You can ask Echo information about your car based on what it is feeding back through that interface. So, there’s a lot of other devices that they’re working on, but in and of itself, it’s pretty interesting the types of things you can do with it. My kids will use it for a few different things here and there, too.

Rob [07:24]: I think Amazon is sneaking in the backdoor, and I they’re going after, eventually, the home automation market. Right? I think they’re going to try to be the hub for all of that, which was not apparent when they first launched this. I thought of it as more of a media device and a to-do list management device and a timer or something; but it seems like they’re making inroads. I guess with – as well as the speaker and the voice recognition work, that it’s getting legs. I’m hearing people talk about it, so it’s on my wish list right now. I would guess I’ll be getting one in the next month or two. All I really want – I want to be able to set a kitchen timer verbally, without having to use my hands. I want to be able to start a Spotify playlist, start Pandora, audible books and put stuff on to-do lists. If I could do all that verbally, and it was seamless, and it worked almost every time, it’s a no-brainer for me.

Mike [08:08]: Yeah, I’d say the voice recognition is pretty good in it. There was a few times where it will obviously fall down. If you happen to say a name, for example, then it will just pick it up. Or, if it even thinks that you did, then it will try and interpret whatever it is that you said. So, there’s obviously those types of issues, but you’re going to get that with any device, I think.

Rob [08:26]: Yeah.

Hey, I’m listening to the book “Masters of Doom” again. The last time I listened was probably a couple years ago, and it’s a story of id Software. It’s John Carmack and John Romero, who built Doom and Quake and Wolfenstein 3D; and I can’t get enough of this story. This is either the second or the third time I’ve listened to it and, to be honest, I just kicked it on. I was going to listen to the first ten or 20 minutes, just to refresh my memory of some things; and I’m three or four hours in now. It’s such a compelling book, and it’s one of those complete outlier stories where they just happen to hit a few, big changes in videogames and computer games. They hit the cusp right in the late ’80s, early ’90s as PC games are just starting to come into fruition. They were also working 90-hour weeks and loving it. There were a lot of extenuating circumstances. They were kind of the perfect age to do it. They weren’t older with families and kids and everything, so there’s reasons that what they did resulted in the success that it did. Nonetheless, the story is so compelling and well-told. It’s just fun to go on the ride with them.

Mike [09:25]: Very cool. Yeah, I still have that on my list of things to check out at some point, and I just haven’t gotten to it.

Rob [09:31]: Yeah, it’s purely a fun startup read. It’s obviously not a true story, but it’s not something that you’re going to take away actionable business tidbits or anything.

Mike [09:39]: Right, and that’s probably why it hasn’t really made it up the top of my list yet.

Rob [09:43]: Totally. Yeah, you’ve got other things on your mind.

So, today we’re talking about the long, slow SaaS ramp of death. This top came from a thread in Founder Café, which is our private membership community. We asked for topics for the podcast, and someone said, “I’d love to hear you guys talk about the long, slow SaaS ramp of death. What is it? Did you experience it? How do you recognize it? How do you get out of it? Tactical, as well as mental coping mechanisms to help you get through it would be interesting.” Two or three people chimed in about elements they wanted to hear about, and so I figured we’d start. We’d define it. We’d talk about what it’s like to experience it, how you recognize it, some ways to basically cope with it, both tactically and mentally.

Mike [10:20]: Yeah, I first heard this term several years ago at the Business of Software conference, and it was a talk given by Gail Goodman, who was the CEO of Constant Contact. I think Constant Contact got recently acquired by somebody for – I don’t know. It was a billion dollars or some ridiculous number like that. She talked about the very early days of Constant Contact and how, when they launched, they weren’t getting a lot of traction, and the growth was incredibly slow. They were one of the – I wouldn’t say the first SaaS company out there, but they started back in I think it was around 2000 or something like that, and that’s about the time where her talk picked up. She showed an example of what the growth was like, and it was a very, very long ramp of very low growth. Of course, you know over time that the growth compounds, but it seemed like the growth levels that she was expecting were significantly lower than what you would expect for a SaaS company.

Rob [11:19]: Yeah, and since they were so early in the SaaS space, they had a hard time even convincing people to use web-based software. Everybody wanted to download the stuff on their desktop. As a result, the growth was lower than you would see today, but the interesting thing is that this concept of a “long, slow SaaS ramp of death” resonated so much with everyone who has ever been involved in a SaaS app; because although the pitch or the slope of the ramps these days may have a sharper curve because we can grow things faster and people are more used to paying for SaaS, it’s still stands that we all still feel this. So, even if Gail talked about a specific growth rate, and nowadays we can do five times that, or ten times that, it still feels like a “long, slow SaaS ramp of death” if you compare it to people who are starting consulting firms or productized consulting firms; or someone who maybe gets a hit, a mobile app in the App Store; or, someone who’s doing big enterprise sales and doing those that are 100,000, 200,000 a pop. They can start and grow a business. All those can start and grow a business a lot faster than SaaS. SaaS is essentially the tortoise in the race, right, where it just plods along, plods along, and it grows. The particular growth rate isn’t what’s important here; it’s that it will always feel slow. That’s really why this phrase resonated with so many people. It’s very, very rare that someone’s not going to feel this if you’re starting a company.

Mike [12:41]: I think that’s probably an important point to come on and talk a little bit about – is the fact that it’s always going to be slower than you want or slower than you expect. I think that’s part of a human inclination to want more; or, to just want something to be faster, or better; or, to expect that you’re going to do better than you’re currently doing, because there’s always higher expectations that you put on yourself, rather than those expectations that other people are putting you.

Rob [13:08]: Yeah, we’re all impatient. We’re entrepreneurs, and that’s the point, is that we don’t like systems that don’t make sense, and we don’t like things that move slowly; and that is what makes us founders. That’s what makes us start things, to try to change things; and we want to change things now, not in six months, not in two years. Unfortunately, SaaS apps take a lot longer than we want them to. I was trying to think of any exceptions that I can think of in recent memory of actual SaaS apps that have had such steep growth curves that the founders might not feel that they went through the “long, slow SaaS ramp of death,” and I can only think of a couple. One is Slack, and Slack is one of the fastest-growing SaaS apps in history, as far as I know. I think Xero is another one. They raised $170 million. According to a recent podcast I heard, they are claiming to be the fastest-growing SaaS app, so maybe those people don’t feel that way. Also more within our community, I think Buffer has grown very quickly; and Laura Roeder’s Edgar, they all had good growth curves. I wonder if you went and asked Leo from Buffer, though – Leo or Joel, to be honest – if they felt like early days didn’t have a “long, slow SaaS ramp” – because now they have traction, right? Now they have a name and that mini brand that Jason Lemkin talks about, which we’ll discuss a little bit later. But, the early days of getting that boulder moving up the hill, I think, is always going to feel like the “long, slow SaaS ramp of death.”

The problem is that this feeling is exacerbated by the massive success stories that surround us, because we hear these outlier success stories. We hear and we see Buffer’s metrics and Laura Roeder talking about Edgar getting to 100k and MRR in five months, or however long it took. And, frankly, while those are great stories, they are Cinderella stories. They are one in a thousand, or one in 500. They’re very rare, and they set your expectations to unrealistic levels. Same thing with Peldi in the early days launching Balsamiq. He had great success. It took off like a rocket ship, and he got to a half million dollars. It wasn’t a SaaS app, but it got to half a million dollars in revenue in the first year. I remember someone signing up for the Micropreneur Academy right after that and saying, “Yeah, my goals is to get to half a million dollars in my first year.”

[15:12] We had to say, “Whoa, whoa, whoa. No, that’s completely out of the realm of possibility.” Not literally out of the realm, because it could obviously happen; but it’s just not going to happen. Peldi hit just such this unique culmination of things: right place, right time, right idea, right person. Everything matched up for him, and I would say the same thing for the Buffer guys and for Laura Roeder with Edgar and for Slack. Of the thousands or tens of thousands of startups that have launched in the past few years, there’s literally a handful that have had that.

So, I think the idea here is don’t let these unrealistic expectations make you think that you have to be growing as fast as everyone else, because it’s not the case. Hundreds and thousands of other startups are growing a lot slower than those other guys. They really are outliers. We can be happy for them, and we can look to see what they did to succeed and try to adopt that, but we can’t have the expectation that our startups are going to grow like theirs.

Mike [16:03]: Well, the other thing to keep in mind is that it’s more about what is right for you and what’s appropriate for you and what you want to get out of it. Just because you have this idea in your head that you could grow the startup extremely fast or extremely big in a very short time period, the other question that I don’t necessarily think that most people think about is, “What is the cost of doing that?” And I don’t mean the cost in dollars. It’s what’s the cost on your mental sanity, your health, your relationships and all the other stuff; because unless you’re running a high-growth startup that you have investors that you report to, that you really need to be able to show massive growth in order to even justify your own existence – if you’re running your own business, the only person you actually have to answer to is yourself. So, I think there’s a different matter of the expectations and scenarios for a lot of these things as well.

Rob [16:53]: Another part of this question that the original poster asked – he said, “How do you recognize the ‘long, slow SaaS ramp of death’?” My sentiment is that you’re just always going to experience that. That’s the default, right? It’s going to be the rare, rare outlier case. And you’re going to know if you’re not experiencing it, because things are going to be blowing up like crazy, and you’re going to be growing 50 grand a month in MRR or something. Then you’re not really experiencing it. But, to be honest, I don’t personally know a SaaS founder who hasn’t felt this as they’re going through it; because no matter how fast you’re growing, you always want to grow faster. Today, if you don’t have a SaaS app, or you’ve just launched, I bet you’re thinking, “Boy, if I could grow at a thousand dollars a month, that would be amazing.” But as soon as you get there, then you’re going to want 2,000, and when you get to 2,000 a month, you’re going to want 5,000. It’s really the arrival fallacy, right, of you’re never going to be happy with it. It’s always going to feel like you’re on the “long, slow SaaS ramp of death,” so I think recognizing it isn’t even an issue. I just think accepting that it’s going to be there is the way to go.

Mike [17:49]: With all of that said, there are some things that you need to keep in mind in terms of being able to cope with that, and what we’re going to talk about now is some tactics for coping with those particular feelings of either an inadequate growth rate, or you just aren’t getting to where you want to go as fast as you want to be.

The first tactic is to try and establish some sort of virality around your product. I don’t necessarily mean go out and try and identify some mechanism for making sure that your product is in front of every, single possible person it could be in front of. It’s more about trying to find ways that you can scale the app using mechanisms other than yourself or the things that you’re doing. So, when you talk about virality in general, what you’re usually talking about is other people talking about your product on your behalf so that you don’t have to do it, so that you don’t necessarily have to be present for every conversation. You don’t necessarily have to be driving every little bit of traffic. If there’s people talking about your app, then, in essence, what ends up happening is that you benefit from that traffic. So, whether it is other people writing up articles about your product, or you doing a podcast tour and talking about the product, essentially you’re leveraging other people’s networks and other people’s influence. What that can do is that can help drive growth for your app without you being directly involved in all those various aspects of it.

Rob [19:08]: Yeah. True virality is really hard to get into a product, and try to fit it in retroactively is not easy. Very, very difficult. You tend to have to design the product itself around a viral loop. So, thinking about something like, when you sign up for Facebook, how they ask you to invite friends and that you really can’t get much out of it until you’ve invited those friends. That was an early viral loop. That’s been overdone so much that it doesn’t work as well as it used to, but people first started doing that, it was pretty clever. Even having a “powered by your app’s name” link in something that is customer-facing, so we have the “powered by Drip” link at the bottom of our widget. MailChimp has “powered by MailChimp” at the bottom of their emails, of their free plan. I think Hotmail did that in the early days, where they had “powered by Hotmail,” or something like that; and that really helped drive a lot of viral growth early on.

So, the idea here is that your “long, slow SaaS ramp” is always going to be there, but the way to make it more palatable so you can deal with it is to have growth; because growth really does solve most problems. I think I should couch this. We’ve said this many times, but you’re really not going to grow until you find product-market fit. You have to build a product that people really, really want. Then grow from there. The first step is to basically find product-market fit as quickly as possible. During that part, you’re going to have just a flat growth curve, pretty much. It may take you months. It may take you longer than that, but that’s going to be the really hard part. Once you have product-market fit, growing is a fairly repeatable and scalable process. There’s a lot more detailed and specific information about growth than there is about finding product-market fit, because finding product-market fit is so much more about art than it is about science; whereas, growth is a lot more about the science of it. So, getting this growth going is what can help you feel better and get you out of the long, slow SaaS ramp. Obviously, baking virality – that could be an entire podcast series just doing that, but that’s one thing to keep in mind as you’re getting started.

Another tactic that works pretty well is to target a community of users that has strong word-of-mouth; they talk a lot online. An example of a community that doesn’t do this is folks who own construction businesses. They may talk once a year at trade shows, or they may talk amongst themselves with industry trade publications; but the word-of-mouth for your product is not going to be strong until you have the vast majority of that market. Whereas, in the designer community, or the agency community – the consultants, the SEO and marketing consultants – or, the founder community – all these communities, they have really strong word-of-mouth because they’re always constantly sharing with one another what they’re up to, new tools they’re finding. Just picking an audience can be a big part of helping you grow faster. Because, again, if I build accounting software for construction firms, versus accounting software for startups, I’m going to be so much more likely to get that early strong word-of-mouth with the startups, because they’re just talking to each other more often. And so, this won’t cure your “SAS ramp of death,” but if you really do build an amazing product – you can think about how Zen Payroll and Zenefits came on the scene, and they targeted startups first. Then once they got that strong word-of-mouth and the mini brand, then they were able to spin that up into faster growth.

Mike [22:16]: One of the interesting pieces of what you just said about targeting communities that have a strong word-of-mouth is that this is an area that I think a lot of people discount, or don’t think about when they’re first looking at building a product, because they’re more interested in the problem itself and how they can solve it and how they can do better than the other things out there. They don’t necessarily think a little bit further down the road about, “How are people going to find this?” “Is there going to be either a viral loop that I can tap into, or an existing market of people that are going to be easier to get in front of than other people?” “Are these people talking to one another?” What you just said about the word-of-mouth – I hear a lot of people saying, “I’m going to go after the real estate market,” or, I’m going to go after the attorneys market, because they’re under-served, and their software is terrible.” I’m not saying that either one of those things is an untrue statement, but at the same time, if you completely discount the fact that a lot of these people don’t necessarily talk to one another outside of those trade shows on a yearly basis, then it makes getting that word-of-mouth growth loop very, very difficult.

Rob [23:20]: Right. We’re not saying that you can’t grow without these things, but these are the higher-growth approaches. These are things that are not content marketing and paid acquisition. Those are great, standard, long-term approaches. SEO is another one. Those are your standbys. Those are your blocking and tackling, right? You’re going to implement those, and that’s going to get your growth curve going over time; but you will ride on the long, slow SaaS ramp if all you’re doing is content marketing, paid acquisition and SEO; because that stuff just takes a long time to do. Right? There’s this phrase “grinding it out” that I think about. A way to try to short-circuit that and not feel like you’re grinding it out as much is to use one of these faster-growth approaches. And that’s virality. That’s targeting the community with strong word-of-mouth that we’ve talked about.

Another one is to try and get to a million dollars in ARR as soon as possible. I realize we’re all trying to do that, but there’s this thing called a “mini brand.” I think this term was coined by Jason Lemkin from SaaStr. I really like his stuff. He basically says once you hit a million, you will tend to have this thing called a “mini brand.” You’re not a brand that everybody knows, but you’re a brand that enough people know that you will just start having strong word-of-mouth even if you didn’t have one before. You’ll start having an audience and fans, even if you didn’t have one before. That’s actually when it gets easier to grow, once you cross into the seven-figure range, because you’re just on the lists. When the people write the blog posts about the “Ten Best XYZ Accounting Software,” you’re on every one; because once you hit that rate, you have enough users that people are talking about you, and you just have a footprint. That’s another kind of hack – is to get to that point and to get enough customers using you that people are just naturally talking about you.

Mike [24:54]: The last hack that you can use to leverage a higher growth rate is to look at an audience or a community that you might already have access to, so whether that’s one that you’ve built yourself or one that you’re familiar with or involved in. You look around at a lot of these stories about people who have a really high growth rate. “Oh, I posted on Reddit or Hacker News, and I got 300, or 400 subscribers on the first day for my app.” They talk about these large growth rates. It’s because they were already plugged in. If you’re not plugged into that particular network, then it’s very difficult to just walk in and on day one you have the credibility from people to be able to attract that type of user base or that community. A lot of times, if you’re not already involved in that community, they have no idea who you are. So, when you approach them from the outside, they say, “Oh, well, you’re just self-promoting and self-advertising, so I’m really not interested in listening to what you have to say, because you’re not here to benefit the community. You’re here to benefit yourself.”

So, if you’re already involved in some of those communities, look to those to tap into; but if you don’t, again, you can also build your own audience. You can build your own community over time before you get to the point where you launch. And having that built-in audience before you launch can be really, really helpful, especially if you’re targeting that audience with your product. If there’s not a lot of crossover or overlap between what your product does and the community, it’s not going to be very helpful. It’s very similar to a lot of these stories you hear about entrepreneurs who have these massive audiences. It doesn’t have to be a hundred thousand or a million people. It could just a mailing list of a couple thousand people that are following them on their blog. A lot of times, what you find is that when they launch a product that’s not applicable to that, they might get one, or two, or five sign-ups out of it; but they’re not going to get the hundreds or thousands that you might expect if they had 20 or 30,000 subscribers.

Rob [26:44]: Yeah, and it’s interesting. Obviously, being part of a community is one thing, but it’s so much more valuable to really have your own audience, to basically have your own email list where you’re communicating with people. The hard part with that is, as you just said, you can have a mailing list of 20,000 people who were listening to you talk about design, or entrepreneurship, or something. Then if you actually go and launch a product, like a SaaS product, especially, it’s going to be really hard to get them to buy from you. It’s not just going to happen magically. I’ve seen it happen over and over where people have personal brands, and they have a sizable email list – let’s say 15 to 30,000 range – and they start a SaaS app, and it just doesn’t resonate because: a) you didn’t have a product-market fit from the start; b) if you haven’t already been selling these people something, directly – aside from info products, because info products are exceptionally easy to sell to audiences – but if you haven’t really had a specific brand name in a specific space – Laura Roeder is actually a good counter example to all this, right? She did build an audience, and they were buying from her. They were buying social media training from her for years and years, so she was selling really solid stuff. Then she essentially launched a tool to do exactly that. Everything she’d espoused, she launched a SaaS app called Edgar that does all of that. That was such a perfect fit, and it’s such an example of how to do it.

Rather than having that blog where you have, “Alright, designers and entrepreneurs are buying stuff from me about how to launch products,” and suddenly you just go and launch your SaaS app that isn’t a SaaS app that helps people launch products. It’s a SaaS app that does their accounting, or helps them do – I don’t know – landing pages. I’m just trying to come up with ideas here. You will get a few who sign up, but since it’s not directly in line with everything you’ve been talking about, your uptick to your own audience is going to be a lot lower than you think, unless it’s directly in line. So, I think having an audience can be super powerful, but it can also leave you to have higher expectations than you should, of how many of those will actually convert. When we were launching DRIP, I valued the leads that I got through Facebook ads and through organic traffic and through these other means, podcasts that were higher than my own audience; because I knew that, while I would get some hardcore folks who wanted to use Drip or to use a product that I built, I knew that the conversion rate on my own list – my Software by Rob list – would not be as high as these other traffic sources that had come truly to see the product and to get the value proposition that I was preaching.

Mike [28:58]: I do want to clarify one, little, tiny piece of that because we glossed over it: the fact that what we’re saying here is not that you can’t use your own personal audience that is unrelated to find specific people, or to mine it for people you can use very, very early on in the process to make sure that you’re building something that people want, and that it’s something that they need, and that they’ll pay for and all that stuff. What we’re really focusing on here is the fact that that list is not going to be as applicable for high growth rate. It’s not that you can’t use it for a lot of the early customer development and stuff like that. That’s absolutely what you should be using it for and what you can, and it works really well. We’re just saying that you’re probably not going to get giant growth rates out of it is all.

Rob [29:41]: That’s a good point. Exactly. That’s what you should use it for, is the early days, getting to product-market fit. But once you tap that list a few times, you’re done. You’re not going to keep growing from it.

All right. So, let’s dive into the last section here. We’re going to talk about some mental coping mechanisms, because there’s obviously a lot of stress that goes along with this, and there can be frustration when things aren’t growing quickly. In fact, if you go back and listen to my MicroConf talk from last year, I talk about how frustrated I got after we watched and just kind of plateaued between 7 and 10,000 MRR, and we weren’t able to get past it for another four or five months, till we actually found product-market fit and started growing. So, I have a few tactics here of ways to get you through that and some thought processes to think about it.

The first one is just to have realistic expectations from the start. Realize that if this is your first-ever SaaS app, it’s going to grow really slow. You’re going to make a lot of mistakes, and don’t look at the examples that we mentioned above of people who grew really fast. Look at examples of people in your community, whether it’s the MicroConf community, Founder Café community; and ask what realistic growth rates are. I can tell you that when you’re at a thousand MRR, and you’re growing at a few hundred dollars a month, that’s a perfectly realistic growth rate, and you should actually — I won’t say you should be happy with it, because you should never be happy with anything, right? As a founder, you want to be pushing it further, but that is not a terrible rate if you’re just trying to figure out your early marketing approaches. So, 10, 20 percent growth when you’re doing a thousand or 2,000 bucks a month isn’t very much, right? It’s a few hundred dollars a month. And while you shouldn’t be striving in these early days to kick it up ton 50 percent or 100 percent growth month over month, and while that is totally possible, that’s not something that you should expect or be disappointed if you’re not achieving. I think that’s something that gets people stuck – that they see these outsize results, and their expectations are not realistic.

Mike [31:25]: One of the points that Rob just made about having realistic expectations from the start of it is that a lot of times, you’re still really trying to figure out what that product-market fit looks like. Early on, you don’t have it. Chances are really, really against you that, out of the gate, you have product-market fit and you know exactly what it is that people want. And even if you do know what people want, sometimes it’s difficult to put it in words that resonate with those people. And those are two very, very different things. Just because you’ve built what they want and what they need, it doesn’t necessarily mean that it’s easy for you to convey that to people in a way that makes it easy for them to not only understand, but to attract their attention. So, keep that difference in mind and understand that when you’re going through this process, a lot of it is about figuring out exactly what those things are that resonate with people, because those are the things that are going to drive your growth. It’s not having the best product, or the product that hits all the check boxes that somebody has. It’s about being able to relay that information to somebody in a way that attracts their attention.

Rob [32:27]: The next tactic I have for mentally dealing with this is to have a mastermind group. This is advice we give a lot, but that is going to be something that’s going to be able to give you a sanity check on your growth. I think that’s probably the third tactic I’d mention – is to get a sanity check on your growth, whether that’s through your mastermind group, looking at normal SaaS metrics, just asking around, asking in Founder Café. Look at normal growth for the vast majority of these apps, not these one-in-a-thousand outliers.

Mike [32:55]: The next coping mechanism is to celebrate some of the different milestones that you meet, whether that’s a thousand dollars a month, or $5,000 a month, or even if it’s just those numbers in total, in aggregate. One of the episodes previously, in episode 268, we talked about setting annual goals; and one of the recommendations was to concretely define some different milestones and make sure you celebrate them, whether that’s going out to dinner some night, or buying yourself something. Just make sure you’re setting aside time to pay attention to those milestones and realize that each one of those is a stepping stone on the way to something bigger and better, because obviously you don’t go from a dollar a month to a $100,000 a month overnight. It just simply does not happen. That said, you do have to be mindful of the different steps that you’re taking along the way, because there are going to be a lot of those steps.

Rob [33:46]: I think lastly, take some time to reflect. Look back six months, 12 months and compare your revenue to this month’s. It’s surprising how you can get to a point where it feels normal to be at X revenue a month or X growth rate per month; but if you look back even just a few months, you were way less than that. You forget the progress you’ve made, and you forget how hard you’ve worked to get where you are. So, this isn’t celebrating milestones as much as it is just look at how far you’ve come and think about the work that you’ve put in and the results and the benefits that you’re reaping from that, and just celebrate and be happy with that. Then, the next day wake up and be pissed off at how slow you’re growing and try to do five more marketing approaches, because that is the roller coaster of doing this. That’s the roller coaster of startups, and it’s the roller coaster of SaaS, for sure.

Mike [34:31]: Yeah, and I think it’s important to look back at that past revenue, because chances are really good that – especially if you’re not making a full-time living from your app – that most, if not all, of the money that you’re making from your app you’re probably putting right back into it. So, you look at your bank account, and it hasn’t changed. Or, maybe it’s even lower than the previous month because you spent all of the money that you made this month, plus all and then some of the money that you made the previous month. So, it’s very difficult to just look at the dollar amount in your bank account and recognize what your accomplishments actually are. You really need to go back and look and compare your revenue over time in order to get a better understanding of that, because you probably are spending as much money as you possibly can in order to drive that growth, and it’s not obvious through just looking at that bottom line in your bank account where that growth is, or even that you have growth.

I think that wraps us up for the day. If you have a question for us, you can call it in to our voicemail number at 1.888.801.9690. Or, you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.

Thanks for listening, and we’ll see you next time.

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One Response to “Episode 282 | The Long, Slow SaaS Ramp of Death”

  1. Bluetick is an awesome opportunity to document on this podcast your steps from zero to a ton of customers.

    Why not allow us to follow you along the process? Seems everyone can learn a lot.