You need to sell a lot of 10$/month licenses for it to even viable to a 2-3 people startup in a developed country. There is also the cost of opportunity to consider in that.
Just go sell $2-4k/mo SaaS to a medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people.
Customer problem discovery is easier, you get reputation network effects within the vertical, you gain trust because you learn the industry lingo, you can actually solve peoples' problems because you're not balancing needs against unrelated industries, they're willing to pay, and once you get 20 customers you're doing pretty OK.
The one point where gp is wrong is you really can't sell $4k things; $10k min and $25k is better. eg a good to great salesperson closes 25% of deals, so you have the cost of 4 mqls per one close, and then the salesperson gets 20%ish of the deal.
Many of these buyers feel more comfortable meeting you in-person, so going to trade shows, writing articles for niche trade publications, and sometimes doing site visits are all very helpful. So is cold calling.
Sales cycles are often slow. You have to get used to customers taking months to decide, having lots of meetings with different stakeholders, and to get good at telling the difference between those who need a lot of meetings but will likely close versus those who will never do anything. It's a very different game than selling subs online, which I know little about.
The product does need to be decent but I disagree with others that it has to be amazing. Most enterprise software is horrible. They will be delighted if you actually solve their problems (rather than the problems horizontally-oriented software vendors want their customers to have), even if it has some rough edges, as long as you're very customer-focused, responsive, and available.
But it also tends to be durable revenue, because you get tightly integrated into their operations if you do it right.
I’ve successfully done exactly this.
Except in order to get there, we had to spend 3-4 years selling cheap $29/mo self-serve plans at volume to iron out all of the kinks in the product and UX. Only after that were we able to go upmarket selling $40-90k/yr contracts.
It all boils down to the fact that customers paying $20k/yr or more have extremely high expectations across the board. It’s extremely difficult to just pop into a completely new market with a brand new product untested by anyone, and expect large companies to trust and buy from you.
> customers paying $20k/yr or more have extremely high expectations across the board.
They definitely do, in certain ways. But also a lot of the software companies use sucks shit. But this part of the other comment cracked me up.
> a medium sized traditional industry that has ancient, crummy software
This is actually how to do it but the thing they're leaving out is that you have to already have knowledge of the specific industry and its players, their niches, and the software they use within them. You have to know where standards are high, and where the current options are bad, and how to market that improvement to the companies that are juuuust flexible enough to switch to your product while being conservative enough not to dump you if exactly one VP leaves.
Once you have all that in place, sure, you can "just" sell your software to them lol.
In most cases, this requires at least one former employee who used the crummy software. Most likely this person would be the one to identify the problem and propose an alternative solution.
Information like this is extremely valuable. It forms the core of the biz opportunity. Casual comments often overlook this.
Builders doing their own thing may not overlap with employees using office horror software 9-5.
(If you feel like you haven’t experienced any problems worth creating a company to fix, consider putting yourself in situations where you’ll be exposed to different/new problem sets)
To be clear: It usually makes no sense to develop an internal solution when there is an estabilished offering on the market. If there isn't, embracing an rough and incomplete Saas solution from a startup may work, but:
- You have no control on how the solution will evolve
- You don't own the solution (an internal solution can became a product on itself)
- You don't have any competitive advange (the money you pay are used to develop a product that benefit your competitors as well as you).
Anyway we survived but we understand why companies move upmarket over time now haha.
The key is providing a good value proposition. My software would save my customers more than they would spend on it yearly, while outsourcing $50-300k/year in salary worth of work that previously had to be done in internally (usually incorrectly).
You always need to solve an actual business problem that people are willing to pay to fix.
This is the graveyard of engineer driven startups in the enterprise space, who make the mistake of thinking that software quality matters. The fact is it is not a top priority, if it is even a priority at all.
In the enterprise space, if you're not a Fortune 500 company, all that matters is 'relationships', by which I mean sleazy sales processes (or actual nepotistic friends-and-family relationships).
Joel Spolsky wrote a great essay once about why there is no software priced between $1000 and $100,000. Because above $1000 you need a sales team that takes purchasing managers to strip clubs and play golf with CEOs, and that shit adds up. On the plus side, your software can be dogshit, like the stuff you work with every day.
What do most managers have access to on their corp card in terms of spend limits, without needing to get VP/finance approval for their purchase?
In my mind, I had the limit as $500/month (potentially from some old readings on the subject).
Corporate approval for a 10k purchase doesn't need to be complicated either. As a software vendor it helps to have a web page/email with all the relevant info intended to be forwarded to accounts payable.
Only engineer and product oriented types think that quality has any actual value. Unfortunately it does not, even less so if your only USP is "quality". If your products only differentiator is that it's technically better than the competitor it really needs to be 100x better in order to sway anyone's interest.
If your maximum work/effort you can put into any project is 100% which you have to allocate into fragments, the product person will put 80% into product development and 20% to marketing but a sales person will put 80% into marketing and 20% into development and unfortunately the latter will product much better results. All it needs to be is "good enough" but reaching to your target market with the right product really is the key.
The unfortunate side effect is that quality is best achieved by having the PR team write it out and put it into a snappy slogan on your product website. Done. Quality achieved.
Edit: And the above applies to your typical non-safety critical Saas, Enterprise, B2B, B2C software. And thinking back to for example the Boeing crashes it likely also applies to the the "safety critical" software/systems as well...
You can get very far with just sales and marketing, but if the quality isn't there, reputationally, that's going to catch up with you over time, same if you have dodgy business practices (i.e.: predatory pricing practices for existing customers, impossible cancellations etc.).
Nitpick, but this is the price range for most professional film restoration software.
The target is often small restoration houses with workstations at 10 or so seats.
As if that is easy.
50-1,000 person companies aren't actually that big. You can get to know the decision makers and it's not like navigating 20,000 person corporate mazes (also possible if you have the stomach for it).
It does seriously benefit from industry knowledge though. The reason so many people think it's a ridiculous pipedream is because they have no industry experience outside of tech, and that's a big problem -- a solvable one, but most people will never do what it takes to solve it and instead say that it's not possible.
It takes a lot of willingness to do non-tech things though. You can't just set up an online marketing funnel and watch the cash come in. It's relationship driven. The advantage of going after a vertical is that the relationships start feeding each other -- you get social proof within the niche industry. And you don't compete with VC-backed software companies as much because they much prefer horizontal solutions (which can get bigger and achieve bigger exits) versus vertical solutions.
For example, you could try to find 100 customers paying you $500 per month, and do OK with a small team. The alternative, of $10 a month, means you would need 5,000 customers, which could be impossible, depending on the circumstances.
Small businesses focused on bootstrapping should also be aiming for revenue within months, and not 3-5 years. But that's another topic entirely
> People say that but as someone trying to actually do that, it is freaking hard to commit to 3-5 years of virtually no salary to maybe get to the same outcome you would have had with a funded business.
Isn't that a better outcome than putting in exactly the same effort but winding up with a totally failed business (i.e. nothing).
I agree and I disagree.
It is hard to bootstrap a product. It's even harder to bootstrap a product that folks want to buy. It's even harder to do that when the prevailing wisdom on this (and other tech sites) is to go the VC-funded route.
The VC funded route -- for the vast, vast, vast majority of software businesses ends up being the exact same as the bootstrapped route -- except that you lose one avenue when you find out your business isn't "hyper-growth" or isn't going to be a huge as you claimed in your pitchdeck to the VCs. You lose the ability to pare back and to be what is described as a "lifestyle business". On failure, the business gets sold or stripped for parts, unless the founder can somehow get the VCs to agree to let them 'buy it back' or write-off their investment and give it back.
Bootstrapping means taking that risk on yourself; but it also means control over your options, and that is one fundamental strength to bootstrapping you don't get with VC funded startups.
Absolutely, it's no salary or the aptly named ramen profitability for a long time if your marketing is not aligned with the folks that will buy your software, or if your software really is just selling a solution to a problem no one actually cares about.
The 'hard part' isn't the engineering. It isn't the technology. The hard part is the marketing -- the connecting the hopefully expensive problem you solve to the right folks who want to buy that solution.
To your second part, I wholly agree that selling $10/month licenses is not a viable way forward if you want to be anything more than a solopreneuer.
But to do that, you need to hone your positioning so that you get in front of the folks with money who need to solve the problem your solution solves.
In your case, it looks like you run a web-auditing tool (according to your bio) called caido.io; and it looks like you're targetting basically everyone who needs to audit a website.
In the thought that "there are more fish in the ocean so why not fish there", that is a seemingly sound idea.
But you don't really want to spend your time trying to fish in the ocean if you have a barrel you could fish in and get the same result... dinner. (I did not come up with this metaphor, that was Jonathan Stark -- who writes a lot about positioning in this context).
The question you have to ask yourself is, are you positioning your product so that the CISOs or the large cyber-security firms would want to buy it? And if you did, do you think they'd trust your product at a mere $25 per month?
Anyway, the point to all this is that the problem is learning how to position the thing you build and get it in front of the right folks, and that's a marketing problem, not a technology problem, and that's something that we as engineers have ignored for far too long collectively.
I wish you the best of luck with your product -- we need more small software businesses in this world!
Depends on the problem. But I don't find a lot of companies that are all marketing and a bare cupboard of an engineering department. They exist, but they are not a universal.Also, most companies that are in this state today have shifted to it from one where product development with the engineering, was actually at least competent.
If you find marketing the hardest part, and most here probably will, you are likely an engineer foremost.
You need a good enough product, and you need it in front of the right buyers. Both aspects can be a significant obstacle to create a business.