Building a SaaS company is a dream for many entrepreneurs, including myself.
Seven years ago I attended a Startup Weekend run by Aaron Birkby and decided I wanted to run a startup.
As a longtime proponent of Rob Walling’s Stair Step Method, I knew the learning curve for starting a SaaS business was steep.
My software dream stayed on hold for years while I built up my skills launching and running Bean Ninjas.
So, when we saw an opportunity to solve a real problem that some of our eCommerce accounting clients face everyday around syncing payments, we started building software to fix this problem.
Today, I am now proud to say that our app Crossbeam has launched and we have our first paying customers.
Crossbeam syncs payments from Maropost Commerce Cloud (previously Neto) to Xero.
However from our MVP to sales and customer success, all of these areas a different in a software business compared to a services business. In this post, I’m diving into the key differences and how we’re approaching them.
Why build SaaS software?
Compared to services, software had a lot going for it, including:
- The potential to scale
- The ability to achieve financial independence
- An exciting challenge
- Diversify from client services and create another revenue stream
- Build a new skillset
The challenges with a (productized) service business
Many think that productized services are a great middle ground, but productized services aren’t always what they are cracked up to be.
While productized services are easier to scale than a traditional agency, there are still a fair number of challenges.
Some challenges include:
- Delivering the service(s) can be overly reliant on the owner(s) – It is possible to remove yourself from service delivery – like I did prior to going on maternity leave – but it requires more planning, training, and processes than software.
- Managing scope creep – Productized services solve part of that problem
- Harder to scale – A productized service with a tight scope solves some of these problems. However, it still requires hiring more people to scale rapidly.
- Profit margins – SaaS can have a net profit margin of 85% where as a large agency might be happy with 15-25%
Getting started with software
The idea for Crossbeam started when Matt (a developer), stumbled upon a blog post that Tracey wrote about the challenges she faced with existing Neto and Xero integrations.
While Tracey and Matt were brainstorming ideas about building a Neto and Xero integration, Tracey and Meryl were talking independently about becoming business partners and merging their eCommerce accounting firms.
Both talks came to fruition and in December 2020, Tracey’s firm, CloudCounting, merged with Bean Ninjas to become Bean Ninjas Australia – eCommerce Growth Accountants.
So, when the opportunity to work with Tracey and Matt on Crossbeam came about, I was eager to jump on it since there was a natural tie-in for the business.
This lead to Matt focusing on software development. Tracey taking the lead on the technical eCommerce accounting and myself focusing on sales and marketing.
Crossbeam officially launched in June as a Maropost Commerce add-on.
The challenges with software
Building an MVP is much faster when you are selling services
One of the biggest mindset shifts we needed to make is that software takes time.
Bean Ninjas was launched following the 7-Day Startup principle. In fact, we actually had our first paying customer in less than 7 days.
For Crossbeam, it took many months of software development to build it to the point it could be tested with customers.
We needed less than $1,000 to start Bean Ninjas, but Crossbeam required significantly more resources.
Funding a SaaS business can come from:
- Self funding
- VC investors
- Accelerators and alternative investing methods, such as TinySeed or Ernest Capital
SaaS: The long slow ramp of death
The volume of customers needed at our $49 per month price point is much higher to reach six-figures or seven-figures in ARR. However, once you get traction, the compound effect kicks in.
This is different than in a service business where you have to put in the same amount of effort for each sale. While templates and switching to a productized service model can reduce this, the sales process will never be as streamlined as selling a commodity SaaS product.
Handling feature requests
Tackling feature requests is different. we have to be ruthless about what we do build and what we don’t build for launch.
In a software business, you can’t possibly build every feature that customers want. That leads to a software product that is bloated and hard-to-use. So, when new feature requests come, it is about logging and evaluating each one. Then, the ones that align with the vision for the product or we think will benefit a significant chunk of customers will get prioritized.
The differences between selling services and software
DIY or a hands-on sales process?
While the sales skills you need to sell services and software are similar, the process for how you go about selling the two is very different. In fact, it is critical to find a sales process that matches the price point.
To me, sales is about listening to customer problems, figuring out whether we can help to solve them, and then guiding them to our products/services.
The book Built to Sell gives a great example of this.
People selling consulting services will do ‘one-off’ custom work in order to win the work. In the book, John Warrilow is recommending against doing this and trying to sell standardized ‘productized services’ instead in order to have repeatable work and build a scalable business.
Selling software forces you to do this even more as you can’t whip up a bunch of new software features in a few days. This forces us to think through what we are building and why. If there is an edge case where one customer wants a particular feature, it doesn’t make sense to build it unless we think there is going to be demand from a group of other customers.
So, tying this back to Bean Ninjas and Crossbeam.
In a service business like Bean Ninjas, we can afford to have a longer discovery call process along with a sales proposal to get to know a potential client and get clear on their pain points. Our monthly fees and average LTV make a high-touch sales process feasible (and even necessary).
This higher-touch sales process isn’t scalable for a software business like Crossbeam, which has a $49 price point. In addition, we need a lot more Crossbeam customers to get to a decent level of revenue and the initial ramp-up time to profitability is slower.
This means our approach to sales needs to be different. With Crossbeam, one of the benefits of building an integration app is that we are listed in the Maropost Commerce (Neto) app store. They are also helping us to promote the app through comarketing efforts, like guest posts and webinars.
Onboarding and customer support
Another key difference is our approach to customer onboarding and support.
By being an integration app, we were aiming for a DIY self-signup process.
At the moment, we’re still at the “do things that don’t scale well” stage. We’re offering hands-on sales support, which ensures customers get a great onboarding experience and we can learn and iterate faster by talking to customers.
And, all tech support is handled by Matt, the developer, right now, and accounting questions are handled by accountants from the Bean Ninjas team. This means that Crossbeam customers are talking with people who can help to solve their problems.
We see this approach evolving to a true DIY-model with robust self-service resources in place with time.
We are mainly marketing through our partners at Maropost and their app store. We expect to be listed in the Xero app store shortly too.
This is different to the Bean Ninjas marketing strategy (content, SEO, email marketing, etc.) and comes with more platform risk.
With Crossbeam, there is additional platform risk that comes with relying on a platform like Maropost. If Maropost decides they don’t want us in their app store or want to remove our access to their API then it could kill the business.
What is ahead for Crossbeam?
I love the business model, but I think it is a harder business model to get started with than services so I recommend stair-stepping your way there.
I think SaaS is easier when you have funding or other financial resources at your disposal and have already built up some experience as an entrepreneur.
Our overarching goal is to get to $100k in annual recurring revenue (ARR), and then we’ll take things from there.
For now, we are focusing on converting customers from OneSaaS to Crossbeam since their Xero integration is no longer available, and these customers need another alternative.
Next, we are focusing on converting new Maropost Commerce customers to Crossbeam since when they switch over to Maropost, it is likely they are also looking for an accounting integration at the same time.
Are you currently a Neto customer and interested in trying out our app? The app is now available as a Neto add-on. Get started with Crossbeam here.