SaaS Business Ideas: How To Come Up With A SaaS Business Idea In 2021
- 92% Of SAAS businesses fail. Now, if you are thinking about the pre-revenue stage and the idea stage that failure rate is probably even higher than 92%. So here's the big question. How do you actually ensure that you're picking the right SAAS idea? You're identifying the right SAAS idea and you're able to turn it into a real, thriving SAAS business. Having built and sold multiple SAAS companies over the last 15 years, on today's episode, I'm gonna walk you through the three critical principles that you absolutely need to know to actually identify the right SAAS idea and turn it into a thriving SAAS business.
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 are new to the channel, welcome. I drop an episode every Sunday with actionable strategies on how to start, build and scale SAAS businesses. So if you aren't subscribed already, be sure to hit the 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 growing community, if you're a part of my coaching programs, my people, welcome back. It is really great to see you over here.
Now, if you've been watching my channel for a while, or you've been following me for a while, you probably know my story. I started my first SAAS business in college with some co-founders. It was called Hipcow. We got acquired really quickly by a company called Plaxo. Plaxo was also a SAAS business.
I then started another SAAS business called ToutApp. ToutApp pioneered the sales engagement space. We were backed by Andreessen Horowitz. We grew it and then sold it to a market leader called Marketo.
Marketo was also a SAAS business. I joined as VP of strategy, we did a two year transformation of Marketo and then we sold it to Adobe for $4.75 billion. Now, that's the highlight reel. Those are all the things that went well, but if you really know me and you've been following me you also know that there were ideas that didn't go anywhere.
And so through the last 15 years of building, scaling SAAS businesses, I learned a few things about what works. Also, over the last 15 years on some SAAS businesses that actually didn't amount to anything, some SAAS ideas that didn't go anywhere, I also learned a few things about what to avoid. Out of all of that, I've been able to distill down three critical principles that you absolutely need to know so that you don't make the same mistakes, so that you increase your likelihood of identifying the right idea and turning into a real thriving SAAS business. And that's what we're gonna be digging into in today's episode. So if you're excited to dig in, go ahead and smash that like button and let's dig into principle number zero. So principle number zero.
This is something that I always like to start with with any sort of video about starting SAAS companies or growing SAAS companies. It's important to understand the three critical things that you absolutely need for any SAAS business to survive. The first is you need to be in a great market. The second is you need a great product. And the third is you need to have a great go-to-market. Now, here's the thing, this is why I'm starting with this because each of these are gonna be the three principles that I cover with you.
This is why this is principle number zero. And the problem that I see, especially with the high failure rate in startups in general, but also particularly SAAS businesses is that founders, a lot of founders that are technical like me, I was an engineer and then I really embraced sales and marketing, we tend to start with product. We get a brilliant product idea, and then we say, cool, let's go build it. And then we try to figure out, cool, who do we sell it to? How do we sell it? And let's do all of that. And that's essentially the wrong order. So first you need to understand that you need all three of these key pillars to be aligned for a SAAS business to actually exist, for an idea to turn into a real business At the center of this is where the money is.
If you only over-index on product, or go-to-market, or marketing, don't do the other two, then you'll have a pretty good idea, but you won't get into a real business. That's the first thing you need to understand. You need to optimize for all three of these pillars. Now, what we're gonna do is dig into what you need to do in these early stages, as you're identifying the idea, and as you're trying to turn it into a real business, what do you need to do for each of these key pillars? We're gonna dig into that now. So principle number one is you essentially need to start with market. Then you need to go into, go-to-market, actually, and then you need to go into product, which is, as you might imagine, the exact opposite of what most people think you should do.
And this is what I learned over the last 15 years. A lot of people will start with product, then they'll say, let's go hire salespeople and then realize they're in the wrong market. So what you need to do is actually start with the right market. You need to figure out are you in a good market, is the idea in a good market? Are you solving a good problem? And then go into how, go into identifying people in that market and then build a product. So let's dig into it. In terms of identifying the right market, there's essentially three key things that you wanna be looking at.
So the first thing you really wanna dig into is what is your domain knowledge? A lot of times people will wanna build businesses in categories or sectors where they don't have any domain knowledge. They don't know the industry, they don't know the people they're selling to, they don't know the role, they don't know the nuances of why, what's important and what's not. They're kind of theoretically saying, hey, this is hot, let's go into that. And what I've seen for the most successful founders out there is they have some sort of domain knowledge, they've been in that industry, or that role, or that group of people that they're selling to for some number of years, and they understand it, and therefore they're able to really understand the dynamics of the market and pick the right market. So the first thing you wanna really look into is what is your domain knowledge? What do you know? The second thing you wanna look into is what's hot.
Now, success leaves clues. And at the end of the day, there's nothing new invented under the sun. Everything is a remix of a remix of a remix. And so, for example, "Lion King" was not really an original thing.
It was essentially "Hamlet" with lions. I learned that last night. If you don't believe me, you can Google it later. But there's nothing new under the sun.
And so if you're starting to identify the right idea and the right market, your best bet is to understand what's working out there. So there's two resources that I like to go to, actually, there's three. The first one I look at is public SAAS companies.
I look for public SAAS companies for the market that I'm trying to go after and see if there's an old stodgy enterprise company that hasn't transformed yet. I try to look at if there's an old, and now there's old cloud companies that are slowing down. So if there's a public SAAS company, and they're kind of slowing down, and they're stodgy and they're not transforming, then you could probably go after them and disrupt them. The second thing I like to look at, especially if you're trying to think of, like, smaller SAAS businesses, like a micro-SAAS business, or sort of a bootstrap play where you can really turn it into profits, I look at Indie Hackers. That's, I think I spelled that right. And I also look at MicroAcquire.
Now, Indie Hackers essentially is a showcase of engineers, and solo founders, and small teams and bootstrap teams that are building small SAAS products and sharing it. And they go into detail around what the market is, how much they're making and what it does is it gives you a feel for, hey, what are the small products that are doing well? It gives you an understanding of what's hot in the market where there's already traction. Instead of you trying to theorize on some groundbreaking thing that no one may want, you start with, hey, this is something that some people are wanting, maybe we can make a bigger, better, more disruptive version of it. And so Indie Hackers is a great resource for understanding where the smaller companies are. MicroAcquire is a company, microacquire.com,
is a great company where we can find out SAAS businesses that are for sale of all different sizes. And if they're for sale, you know, you can start to understand where the heat is. Like, some of these businesses have revenues, a lot of them do, and you can start to understand what kind of companies are generating revenues.
And these are all small so there are opportunities for you to actually pick off one of these and say, hey, I'm gonna grow it and go much, much bigger into space. Ideally, what you wanna get to is an understanding of what's urgent and important in the market. And that's really what you're trying to get to from these prior points, right? A lot of times people will start with a product, and then try to go sell it and then realize that they're solving a problem that's a vitamin and not a painkiller, meaning, it's not an urgent problem, it's not an important problem. And while it would be nice to have no one is, like, rushing to actually buy the product and pay you money for it, because it's not that urgent of a problem. And it's not that important of a problem.
And so what's much more important, if you wanna be smart about this and you wanna do it the unstoppable way versus the wrong way, what you wanna do is start with market. And you wanna understand where is your domain knowledge? What's hot in the market and identify whether you're solving, you're going after a market that has a problem that's urgent and important. If you have that, then you can actually then start to build out the go-to-market and the product, and actually ensure that you are likely going after a solid idea.
Otherwise, if you just start with a product, you're gonna have to figure out, well, which market do we go into? Are these things true? How do we actually approach those people? And you're adding a lot of risk, and this is why there's such a high failure rate for a SAAS businesses, because they're not doing their homework, first, on eliminating the bad ideas. If you start with product, you won't know if it's a good idea or a bad idea, if you start with market you'll know very quickly if the market has already told you that it's a good idea. Okay, so that's principle number one, start with market.
Now, the second principle, you're like, we'll build product, right? It's like, no, don't build product. Don't do that yet. The second thing is actually go-to-market. And you might say, well, how do I go-to-market if I don't have a product? Well, hear me out. The biggest thing you really wanna understand now is, is your thesis correct? You have domain knowledge, you've identified some things that are hot, there's some revenues.
You think that this is an urgent and important problem and maybe the revenues of other companies are telling you that it is, but you don't know if it's true and you will never know if it's true or not until you actually go to market. Meaning you go to this market and start asking some tough questions. And so the second biggest mistake, if I say that founders, the first mistake they make, and I've made this too, is that you over-index on product and you don't think about what market you're in, you only go-to-market. The second mistake they make is they keep building that product, they don't think about the market and they never go to the market. And they keep thinking that no one's buying because you're missing this one feature. You're in that one more feature trap.
And so what's important for you is to not just assume that you have done the right homework and you know that this is a good market. You wanna validate if it's a good market or not. And so the biggest thing you wanna be doing, there's essentially a line here. This is pre-product, and then there's post product, right? So before you have built a product you should build go-to-market. And this is something that, you know, with all the movements that are going on in SAAS, whether it's building in public or it's, you know, starting with the community or being product led, all of these, essentially, are trying to just explain to you one thing, which is before you build the product, go build an audience with the market.
Go build an email list with the market. Go build a community with that market. Because once you get the actual people that you wanna be selling to, you can actually get a richer understanding of whether you're going after the right market, whether you have a valid, urgent and important product or not, whether it's hot or not. So what you wanna be doing is number one, build audience.
You wanna build an audience of the people in this market, of the people that would be buying your product. You almost wanna just assume the product's already built and it's amazing, and start talking to these people like, hey, we're building this thing. It's almost ready to go. We need to understand if this problem is urgent and important for you. We need to understand what you're using.
We need to understand if you would buy, we need to understand if you would prepay for it right now. And that's the way you can actually de-risk your SAAS business and make sure that you're set up for success. And I guarantee if you build this audience and essentially ask them what they want, you are gonna come away with a better definition of what your product should be versus what you think it should be. And you're gonna come away with much more validation about whether this is a real thing or not. I've talked to founders that have been working on their product for like three years and they have little to no revenues. And they're like, I think we're just this one more feature away.
I'm like, I don't think you are. I think you need to think about what your market is and I think you need to figure out who those people are and ask them some tough questions. And you should not ship any more features until you vet that out. 'Cause once you've vet that out, I guarantee your idea of what the product is, and what the next feature should be, and what's missing and how you need to position it will change. And so the second principle is you've got to build out your go-to-market to start building an audience. I see a lot of founders like, hey, we're still building it out and we're gonna launch.
Here's the thing, there's no such thing as a launch anymore. No one does a big bang launch. And launching on product hunt gets you a thousand users that's not really near market. It's a bunch of random people, so that doesn't count either. What you end up doing is actually a bunch of mini launches, a bunch of mini engagements, mini go-to-market motions that starts to build this audience.
You start to engage with them, you start to ask some tough questions, you start to validate your market, and you get a better definition of what the product should be. And that's the difference in how the pros approach it, the second-time founders approach it versus the first-time founders and I've read both. I've made the mistakes of not starting with product and not going to market, go-to-market and now I do it in this way and it works 10 times better.
Now, the other thing you would wanna do is as you start to flush out the market, you'll iterate on it as you start to build up the go-to-market, you'll understand what your product is. As you start to get towards revenues, in order to go from zero to initial revenues, you'll also need to flush out some things and you go to market. You need to actually establish what your value prop is. A value proposition is like one or two sentences that clearly explains what the value and result you're delivering is. And a lot of times people can't answer that.
I'm like, give me in one sentence what you guys do. And it's really hard to answer because it's too complicated and they haven't done the work. And the power of this is when you do these things, and you know how to think about value props, and you know how to think about positioning and messaging, you start to develop your value prop, which becomes really effective in getting more people into your world, into your audience so you can validate what you're building a lot faster. And the power in this is since you're going in this direction, you're de-risking everything around your business. You're not just building a product, hoping your idea is right, you're first validating the market, then you're testing that market, and then you're building the product based on what they're telling you, and therefore they're more likely to buy. And as you do this, you'll then continue to improve on what your market is, what your go-to-market is, it starts to become a really great motion machine based on true market feedback versus what's going on in your head, or why you think that, you know, no one knows what they need, but you're gonna give them what they need.
So that's the power of this. Now, the last piece of value prop, the other thing that you're gonna be able to flush out, if you do this right, is your positioning. Ultimately, if you're building a SAAS business, if you have zero competitors, then you might have a bad idea. Meaning there's always a competitor.
At worst, you have a competitor against a spreadsheet. And so you'll have to position yourself and you'll have to create the messaging, even when you're in the early stages of pre-launch, or as you're going into launch on hey, here's who we are, what we do, what the result is, and here's how we differentiate from the competition, and here's why we're 10 times better. And that's your positioning. And this could be, meaning that, hey, we go into a subset of the market or a smaller segment, or we differentiate on this one feature that's a game changer, whatever it may be, you'll wanna flush that out over here. Even before you start to launch, or you start to ask for money or you start to generate revenues because those are the two key things, when you go-to-market, that will help people understand what you're really doing here. So that's principle number two.
First, you start with market then you go into go-to-market. Now, the third one is product and there's some important things you need to actually address for product. Before I go into that, let me just pause here for a second. Are you starting to see the power in this? There are so many founders out there that go about it in the wrong direction.
They start with this brilliant idea, quote unquote, in their heads. And trust me, I've done this too that's why I've had companies that never went anywhere. You start with product and then you're like, oh, let's go, like, go-to-market and spend some ads and do this thing and we'll sell it. And then they're like, oh, maybe we're in the wrong market, how do we tweak this? And they're going in this wrong direction. Instead, if you really wanna make sure that you're successful with your SAAS business, start with the market, understand these key components, then go into go-to-market, start to ask, build audience, ask them the tough questions and then flush out your value prop and your positioning, and your messaging, and then go into building the product. And by the way, this doesn't have to be sequential.
You can do this in parallel, but as long as you're doing these things, each of these components will inform the other component and make it stronger and stronger and stronger based on true market feedback. So that's the power in this. If you starting to see the power in this can I just get a yes in the comments below, also smash that like button for the YouTube algorithm, really loves it when you do that.
Now, one more thing before I go to principle number three, if you're in that stage where you're developing your SAAS idea, if you are pre-revenue and you know you wanna build a SAAS business, I run a webinar every single week on exactly that stage, how to go from zero to 10k MRR. And what are the key steps you need to do? So I'll tell you more about it at the end of this video, I'll also link to it below. So if you're in that stage, you in the pre-revenue stage, it could be stealth, maybe you have some beta users, maybe you're identifying the idea and you wanna make sure that ideas right in the right market, you know, so I have a well-defined webinar that I run every week where I can teach you a lot more about it. So I'll link to it below.
But right now, let's go to principle number three. Okay, so principle number three is product. And by the time you're really, really writing code and really developing all the features like, beyond the plumbing of the SAAS business and the SAAS product, you have a better understanding if you do it this way, you have a better understanding of the market, who you're building for. You have a better understanding of the go-to-market, and you have a better understanding of what the audience wants and what their priorities are versus what you thought it would be.
You're starting to understand the value prop and the positioning. So now you can actually prioritize the right features. You can flush out your core product loop, all the things that go into really building a great product.
Now, in this video, like, we can't go into all the details of building a great product, but there's one rule that you absolutely have to follow and a lot of founders ignore it to their own peril. It needs to be 10x better than the competition. That's the rule.
And a lot of founders, you know, we get so enamored in our product and our features, we forget like, look there's competition. And by the way, competition could be nothing. Some people are just fine not using software for whatever you're trying to fix.
Competition could be a stodgy old spreadsheet, and that could get the job done just fine for normal people that don't want a sophisticated piece of technology or software for everything. Competition could also be an existing startup or an existing well-entrenched company that solves that problem already. And so, as you're thinking about the product, the big thing to understand is you don't need to replace everything that they're doing in the other product. There needs to be some aspect of it that's 10x better. And this has been true, like, you think about some of the SAAS greats.
When Salesforce started out, they weren't the first CRM and they didn't have all the features of their competitors, which was Siebel at the time. But they had this one thing that was 10 times better. And that was individual salespeople could log in really quickly and update their info. And they could do it from the computer and it was in the cloud and that was a 10x differentiator.
That was one thing, but they didn't have all the features of other CRMs in the day, now they do. And so what's important to understand with product is it needs to be 10x better than the competition, but it doesn't have to be 10x better than everything that the competition offers. It can be 10x better in one critical, urgent and important area that the competition doesn't do. And they're like, oh my God, we need this solved, so we'll do it. And that's the power in getting the right product strategy.
So let's recap because I know there was a lot there. Number one thing is every SAAS business is built on a great market, with a great product, with a great go-to-market. If you don't have all three of these, then you will not succeed. If you do, you will succeed massively. Now, 92% of SAAS businesses fail because go-to-market is not that great. Like, that's true and that's why I have a whole go-to-market program, but also a lot of these idea stage and pre-revenue stage companies fail because they start obsessing about the product.
They start with the product, then hope for go-to-market and then they realize there's no market for it. And so in order to do this effectively, you wanna start with market, you wanna start to flush out these key things on what's the domain knowledge you have, what's hot in the market, what's working. Is it an urgent or important problem, then you wanna go into go-to-market and build the audience with this market and start to stress test it. And you wanna ask them what they want, and if this makes sense, you wanna see if you can pre-sell them on it. You wanna then develop your value proposition, your positioning. This is super important.
And based on all this data, you wanna then build the product to ensure that you're building the right product, solving the right problem, and the market will actually want it. And you have access to the people that would buy it. There's no such thing as a big bang launch anymore. This is how SAAS ideas are turned into SAAS businesses. It's a little counterintuitive on what, like, a first-time founder would do. And this is what I learned the hard way in my 15 years of SAAS.
And even today, people still make the same mistakes, which is why I wanted to make this video. Now, now you know the exact steps you need to follow the three key principles you need to understand, to identify the right SAAS idea and turn it into a successful SAAS business. What you may not know is, well, how do I make sure that I'm identifying what's hot? How do I know if it's urgent and important? What you may not know is how do I build this audience? Like, what does go-to-market look like in this early stages? And what does a value prop look like? Like, how does that come together? What you may not know is what makes for a successful product, like, what is 10x better? So if you're in this stage where you're pre-revenue, you could be at the idea stage, or you could be already building and you're like, look, I gotta catch up on these other things.
I run a webinar every week that goes into the details of how to take a company, how to take a SAAS idea, how to stress test that core idea and how to get to initial revenues. I run this webinar, it's completely free and you can register for it, I run it every week. All you need to do is just go to tkkader.com/webinar, tkkader.com/webinar. If you go to that, you can sign up, put it, add it to your calendar, make sure you add it to your calendar and show up with your notebook because I'm gonna go a lot more in depth into exactly these three key pieces, and how to think about them and how to approach them. And this is perfect if you are in the idea stage, you're trying to pick the right idea or if you're in the pre-revenue stage.
I meet a lot of founders who're like, we're good. We're, like, we built the product we're gonna launch. I'm like, cool, what's your launch plan? What's your value prop? What's your messaging? Who's the ICP, like, what's the market? Is it an urgent problem, have you done that work? And a lot of times I get blank stares.
And it's because there's no such thing as a launch anymore. I'm sorry. You can't launch on tech crunch. It's not how it works. But if you do it in this way, this iterative way where you're building the audience, asking the questions, clarifying the product, building the product, clarifying the marketing and you keep doing this over and over, then you're gonna be successful.
And I teach you exactly how to do these key things. I go deeper into market, go-to-market and product inside of my webinar. So go to tkkader.com/webinar,
and you can register for it right now and you'll get in on the next one and then we'll dig right into it. Now, before you go, if you got value from this video, please smash that like button for the YouTube algorithm, just means the world to me and my team and just all of us. If you are new and you haven't subscribed yet, I do in-depth videos with actionable strategies on how to grow SAAS businesses every Sunday. So be sure to hit the subscribe button and the bell icon that way you will get notified every single time I drop an episode.
If you have a fellow co-founder, team members, if you're part of a community of other founders, please share this video with them if they would get value, it'd mean the world to us. 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 or in the webinar. So go register for the webinar right now, tkkader.com/webinar and also the next episode. All right, I'm done. See you later.