How to build a SaaS Business – PART 1

This is the first part of a series about building a SaaS business geared towards small business owners with a SaaS idea.


Introduction

Investing your business’s hard-earned capital into developing a SaaS (Software as a Service) business can be terrifying. That’s why I’m sitting here writing this. I’ve been in the software business for 25 years and the thing number one thing I hate seeing is investing a ton of money and time into something and ending up with nothing.

With a startup, I totally get it. You put a bunch of money in the tank, you go for broke, and you either end up with billions or you flame out. But when it comes to being a small business and trying to invest into technology, which is becoming increasingly necessary, it’s a completely different game. Failing to produce results after investing into a product can tank your year or even your business. With the right approach though, it can become a structured and financially sustainable process.

Our method, the WIN-vestment Method, simplifies it into a 3-phased effort designed to guide you from idea to action and ultimately an investment into your business. We show you how to handle the hidden cost of software development, risk. And to not only plan for it and account for it, but to use as a guide to moving forward. At its core is “The Idea Fortifier,” a tool born from years of experience working with hundreds of business owners. This framework helps you turn your dreams into actionable next steps. We show you how building a SaaS product is not a one-time project, but an ongoing performance, more like running a theater company than building a house.

Who is this for?

This will be most helpful for people who already own a business and are looking to build a SaaS business. How to build a SaaS business is a guide for small business owners.

Who is this not for?

This is not for startup founders. Our method isn’t suitable for startups two reasons. 1) Startups are managed to either succeed or die. But small business owners can’t afford for their businesses to die. 2) Startups are built to make something happen NOW, so everything is under artificially fast time frames and 100% focused on the startup. But small business owners still have their main business to attend to.

Our Approach

We call our approach the WIN-vestment method of building a SaaS business from an existing company. It’s a silly name, we know, but the idea is simple, try to WIN your investments into your company. Treat each investment into a SaaS business as a discrete investment. We want to show you how to focus on a continuous process of “winning” each investment you put into your SaaS instead of a single, go for broke, effort. And bringing risk to the forefront of your efforts to keep it from biting you.  

Overview

My co-founder and I spent time at Georgia Tech Research Institute and Georgia Tech’s Advanced Technology Development Center helping government agencies and hundreds of startup founders create and develop new ideas. We also started our own SaaS businesses with varying levels of success and failure. These are the principles we learned to help people act in the face of uncertainty and handle setbacks without damaging their existing businesses.

PART 1 – Planning Phase

We’re going to talk about a method and a process. Think of it like the process is the assembly line and the method is the way the people on the assembly line work. First, the method.

The WIN-vestment method:

  1. Reduce the risk of taking action.
  2. Reduce the resistance towards taking action.
  3. Take action, Measure the results, and re-evaluate the risk profile, against the overall business goals to inform the next cycle.  

Said differently, the focus is on:

  1. Risk
  2. Resistance
  3. Results
  4. Repeat

The focus of a lot of approaches is to validate your ideas before acting. And then when taking action, to go for broke. Neither of these approaches is going to yield the results your business needs when you have a going concern.

In this method, you flip it, you reduce the risk to doing stuff so you can start doing stuff right away and then start to true it up as you see the reality of what’s going on.  

So, if our approach to building a SaaS does anything for the world, our hope is that it leads to less risk.

We’ve introduced the method, now let’s talk about the process

The process of starting a SaaS business is a 3-phased effort, and in all 3 phases you can use the WIN-vestment method.

The three phases are Planning, Launching, and Scaling. In this document, we’re going to talk about PART 1 – the planning phase.

NOTE: If you’re wondering why one of the phases isn’t “Building the product”, it’s because working on the product is something you are constantly doing. So, it doesn’t make sense to have that as a phase, since you are always going to be doing it. But how you work on it changes between the Planning, Launching, and Scaling phases. And we will detail that for you.

 Super important concept #1 – You’re always working on the product.  

Why do we mention this? Because a common misconception is that this is like building a house. Meaning, you build it once and it’s done. But it’s not like that at all. META, the owners of Facebook and Instagram, spent $43 billion on research and development last year. They most certainly would not be spending that much if their products were done. The truth is the product is never done.    

What it looks like ->



So, what do you do?  

You still make plans, you still have projects, and you complete them, but you must manage the effort more like a performance of a theater company than building a house.

Each “show” or release of your product will have costs associated with it, and each iteration will have either a positive or negative result for your business. Think of it like a good or bad performance.  

The better you make your releases, your performances, the better your product, or show, will do.  

Going back to META, they spend $42 billion on developing their products, is that bad? The answer is no, because it’s helping them generate $55 billion in after tax profit on $156 billion in revenue. This means that the efforts they put into their products, while continuous, are also generating continuous improvement to revenue and profits. It becomes a positive fly wheel.  

WIN-vestment Step 1 – Reducing risk

Your idea

An idea can be as intoxicating as love. It captivates you. It’s exciting. Reality on the other hand, is cold, brutal, and unforgiving. Investing in an idea is a process of introducing reality to it to see if it survives. It’s scary for this reason, you can kill your ideas, your dreams, your hopes. The warm feelings you get when you think about your idea are at risk. And the worst part is, half of this process is not in your power. It lies with people you don’t control, your customers.

Thesis of Step 1 – The risk starts with you and your idea

As stated before, building the product is an ongoing thing that will be worked on at every phase of this process. Meaning you should stop thinking of this as building a house. Drop this analogy. Instead, think of it more like a performance.

To reduce the risk of your dreams being dashed, we’ve created this tool, the Idea Fortifier to help you invest in your idea. By preparing you to introduce it to the unforgiving reality of the world, we hope to help reduce the pain that can be caused by either never launching your idea, giving up after facing resistance, or boiling the ocean and going broke trying to pursue it. All of it can rob the world of your idea and can hurt your confidence.

The Tool is called, “The Idea Fortifier”

Something we learned at Georgia Tech is that every startup idea someone has is connected to a deeper idea of what they are trying to accomplish. And uncovering that deeper idea, the idea of the idea, is the purpose of this first exercise.

The idea fortifier allows you to consider the reality of your idea more easily. It does this by forcing you to consider what about your idea you are willing to compromise on and what you will never be willing to change.

This way, if your first experiment doesn’t work, you know what you are willing to alter about your idea to try again, and it allows you to know when it is time to move on from this idea when the parts you are unwavering on are not working.

The first time I came up with this I was working with a student who was trying to build a crowd funding platform for women owned businesses. She had started talking to people about investing into the platform and had started to run into some confusing responses. Some people wanted her to invest in micro businesses in foreign countries. Some wanted her to build a startup fund. She wasn’t sure which direction to go. And most people didn’t really seem to grasp what she was going for. When we sat down to figure out what was important about her idea and what wasn’t, what she discovered for herself was the helping women was the core idea. How she helped women wasn’t so important as the why. Ultimately, she became successful by building a platform for helping women get into the trades. Had she focused on the funding element, she might have never realized her true passion.

Before we jump into the idea fortifier, let’s talk about your existing business:

We find that understanding how this new idea fits into your existing business is key to getting a grip on the investment and how you’re going to go about it.

Here are some ways we’ve seen work. Ideas for building a SaaS business seem to follow these three patterns.

Can you guess which one is the least risky? You probably guessed it, number 3 is the least risky to your existing business. Number one is the riskiest by far, because like a harrier jet that’s doing a vertical take-off, the riskiest part of the flight is the transition from vertical thrust to horizontal, it’s this transition that crashes these planes and it’s this transition that can crash your business.

Our conclusion? You need to understand 2 things about your idea. The first, how it relates to your existing business. Get clear on whether it’s a new business, part of your existing one, or a complete transformation. The second, what about your idea is negotiable and what is not. We’ll get into the second one now, let’s talk about the Idea Fortifier.

Tool #1 – The Idea Fortifier

Purpose:

To handle the uncertainty of bringing an idea into the world, it’s helpful to understand what about your idea you are willing to compromise on, and what you are not. In other words, to give your idea a higher chance of succeeding in the real world, or in being able to cut your losses if it doesn’t work out, you need to identify the parts of it that are truly non-negotiable and what you would be flexible on if it turned out that the world didn’t quite see eye to eye with you.

Idea:

 

Remove the parts that you will allow to change. These lines are for you to re-write your idea WITHOUT something. Remove something that’s not critical to you. Note: You can also add something here, this is your idea, go wild.

Example:

Idea: A platform to let people rent out their pickup trucks when they aren’t using them.

1 – Let people rent out their stuff when they aren’t using them (took out pick up trucks, maybe it’s for home owner associations to rent out club houses to non-home owners?)

2 – Let anyone rent out something they aren’t using right now (took out the idea of personal ownership)

3 – Core idea: Finding a use for things lying unused. Make sense? Now you try. (there’s a downloadable link to this at the end)

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Write out as many variations as you can without changing the unchangeable. Go crazy with this. For my example above, I’ll write out as many ideas as I can think of that help people get unused assets into use.

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Rank your top 3 – Choose your top 3 based on whatever criteria matters to you.

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That’s it for now. Hopefully you figured out how this idea fits into your business and what about it is non-negotiable. You to the first step towards starting a SaaS business and you learned the first part of our WIN-vestment method, reducing the risk of taking action. Good luck as you take your first actions! Stay tuned as we’ll be publishing the rest of our method and other tools to help you on your journey soon!

Downloadable tools:

PDF – click below to download.

Word – click below to download.

 

That’s it for now. Hopefully you figured out how this idea fits into your business and what about it is non-negotiable. You to the first step towards starting a SaaS business and you learned the first part of our WIN-vestment method, reducing the risk of taking action. Good luck as you take your first actions! Stay tuned as we’ll be publishing the rest of our method and other tools to help you on your journey soon!

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