If this is your first time reading, I recommend you start with a new B2B SaaS venture.
tl;dr This is my first update of biweekly posts for my B2B SaaS venture challenge. I discuss how I plan to start my own B2B SaaS business, how idea extraction is the hardest part, general criteria to pick a market, the problem with the “follow your passion” platitude everyone says and the highs and lows so far in the first 2 weeks of this challenge.
To be clear, I am not starting completely fresh — this exploration actually started December last year.
In the spirit of transparency, I am following Dane Maxwell of The Foundation and his approach to building a successful B2B SaaS business.
I. General plan of attack
II. Idea extraction is the hardest stage
III. Picking a market
IV. The problem with passion
V. Highs and lows these past 2 weeks
VI. Lessons learned
Whereas the craftsman mindset focuses on what you can offer the world, the passion mindset focuses on what the world can offer you. This mindset is how most people approach their working lives.
There are two reasons why I dislike the passion mindset (that is, two reasons beyond the fact that. . .it’s based on a false premise). First, when you focus only on what your work offers you, it makes you hyperaware of what you don’t like about it, leading to chronic unhappiness. This is especially true for entry-level positions, which, by definition, are not going to be filled with challenging projects and autonomy—these come later. When you enter the working world with the passion mindset, the annoying tasks you’re assigned or the frustrations of corporate bureaucracy can become too much to handle.
Second, and more serious, the deep questions driving the passion mindset—’Who am I?’ and ‘What do I truly love?’—are essentially impossible to confirm. ‘Is this who I really am?’ and ‘Do I love this?’ rarely reduce to clear yes-or-no responses. In other words, the passion mindset is almost guaranteed to keep you perpetually unhappy and confused. . .
– Cal Newport, author of So Good They Can’t Ignore You: Why Skills Trump Passion in the Quest for Work You Love, on why “pursue your passion” is dangerously destructive and to focus on being a craftsman instead
I. GENERAL PLAN OF ATTACK
I am really excited to pursue a B2B SaaS product, much more so than I was with Cusoy.
How B2B SaaS is starkly different than Cusoy:
- It is revenue first
- It has recurring monthly revenue
- It has paying customers
- Its investors are the customers, not VC’s
- It is easily scalable with software (compared to attempts to scale Cusoy with its nature of crowd-sourcing information and data)
- It is an actual business, not just a “startup”
- Last but not least, it allows me to reach my personal goals much faster and more efficiently
All you need to start a business is a paying customer. That’s pretty much it.
Also, I keep saying “B2B SaaS” … because my nonexistent product doesn’t have a name.
Because I don’t know what the product is going to be.
I have no idea what I’m going to make. At least, not right now.
So, just how am I planning to do it, you ask?
This is based on a very unusual yet compelling premise that you DON’T need to have
- an amazing idea, or
- technical skills, or
- funding, or
- domain expertise
None of the above. Yes, you heard right.
Sure, if you have an amazing idea, it helps. This is probably the least important factor, as execution over ideation is paramount.
Sure, if you’re technical, it helps.
Sure, if you have funding, it helps.
Sure, if you have domain expertise, it helps.
But you don’t need any of that.
…I can already sense some derision and objections to my “crazy” statements above, and to be honest, I myself am a little doubtful of some things (I’m not scared of not being technical, but domain expertise seems pretty important)… but this B2B SaaS challenge I’m going to completely challenge and test my deep-seated assumptions and not let my limiting beliefs stop me.
So, how would this work then?
A simple, straightforward five-step process with clearly defined milestones and structure:
- Idea extraction and validation
- MVP prototype and info pack creation
- Building the product
- Scaling, growth and distribution
1. Idea extraction and validation
Call and talk to actual businesses to get to the root of a business problem that can be solved with automated software. There are abundant business problems all around us; it is up to you to get a hold of them and firmly grasp on a problem that business owners want so badly solved that they’ll pay you for it. Find the pain.
2. MVP prototyping and info pack creation
Build a prototype that sketches out the solution and do tons and tons of usability testing… enough to get it to the next point: pre-selling. You can even create an “info pack” or sales-like brochure too. “MVP” in this sense and at this stage doesn’t necessarily have to be software, per se.
Do NOT build the product or write a single line of code until you have customers who will buy and preorder it even though it’s not even built yet. That’s the best validation, hands down, of knowing you’re truly solving a problem. A good target here to establishing product-market fit would be 5-7+ people preordering — though obviously the more you get, the better.
4. Building the product
Get this… use the presales to actually fund the product development! Don’t need to go out and raise angel/VC money but completely bootstrap the business. Genius, right? But it’s so true. (No, I am not going to be building this product — I plan to hire a developer or find a technical cofounder.)
5. Scaling, growth and distribution
Getting more and more customers, scaling and growing the business. Pretty self-explanatory. This is the point where you have reached product-market fit and just need to push the pedal to accelerate growth.
I see Dane’s approach as rather brilliant and am excited to follow this framework.
Coming from a Silicon Valley tech startup/company background, I had initial trepidation and a “this is too good to be true” reaction when I first heard about this but I truly believe it’s doable. Aren’t you supposed to come up with a great idea, try to get thousands (if not millions) of users, not worry about monetization and then pitch VC’s to fund you? Ha.
No, it probably won’t help you build the next billion dollar company (or maybe it will, who knows) — but based on results I’ve seen from Dane himself and the businesses he’s founded and run, I believe 100% in its potential and that it’s just a matter of hustling from here.
No guesswork. No B2C monetization headaches I had with Cusoy. No trying to raise money from VC’s. No need to “pay your dues” and spend 10 years in a market before finding a solvable problem.
Just straight up creating a software business that solves actual business problems people face.
II. IDEA EXTRACTION IS THE HARDEST STAGE
Most people get stuck in the first phase of idea extraction and validation — of selecting a green light market, of being able to reach businesses and of extracting deep level insights (enough to move onto phase #2) — to create a software solution to a well-defined business problem.
There are nuances involved here that I won’t necessarily get into, like how to cold email or cold call, and nitty gritty tactical strategies — but most people get stuck in a vicious cycle of picking a market, failing to reach business owners and prematurely giving up and deeming it a “bad” market. Or they speak to five or ten people, keep running into walls, and give up on market X and move onto market Y, where inevitably they come across similar roadblocks.
That’s just one example “trap” people fall into — there are many other variations of struggles and problems people face, regardless if they really are a function of a “bad market” or simply lack of persistence and experimentation on the entrepreneur’s part (more often than not, the latter is truer).
I definitely think this is the “valley of death” where most people attempt to give this process a shot to building their own B2B SaaS business and fail.
I myself have already uncovered several software ideas speaking to my market, but am hesitant to move forward before I can confirm and validate them with other business owners. No one wants to build a product just for one business — that’s not B2B SaaS, that’s just a software consulting company. I don’t want to build a software consulting company.
III. PICKING A MARKET
There are certainly different ways of selecting a green light market niche, so just take some of the approaches below as guidelines.
These are guidelines I myself am following and I think offer a great starting point if you are unfamiliar with a certain market or don’t know where or how exactly to even start.
Approach #1: 7 criteria to pick a green light market niche
1. Lucrative industry of at least 10% profit margin
2. Profit driven market – no non-profits, drive for profit to continually grow
3. At least 5,000-10,000 businesses in the industry
4. Company is reachable through phone, email, FB, LinkedIn or message boards
5. Must be able to speak to the person with pain point on the phone
6. Average company earns $100,000+/yr revenue or preferably profit
7. Currently paying to use some sort of software
Approach #2: Simple 1st grade math problem
Another approach to selecting a green light market is nothing more than a 1st grade math problem that doesn’t need a 10,000+ business rule in the industry like approach #1 above stipulates.
You need numbers.
What is your target income? What roles do you want to play in the business you create?
Create target revenue and cost numbers based on hiring and outsourcing work you don’t want to do.
Revenue ==> target take-home costs.
Once you have your target revenue, you can play with your market ideas to see if the market size is big enough to serve you.
Find out market size, revenue and how much they spend on costs.
Guesstimate what businesses would spend on your product. Maybe do a low, medium and high end and say it’s $100 in the medium, midrange option.
Then take market size — let’s say it’s 10,000 in this example.
Let’s pick some lowball numbers with market sizes — 2%, for example.
Say you capture 2% of 10,000 businesses = 200 possible customers.
200 customers * $100/month = $20,000/month revenue product.
Factor in $2000/month development costs, $5000/month sales/marketing and $1000/month other expenses (these are all just hypothetical expenses).
So $20,000/month revenue – $8,000/month expenses = $12,000/month profit, or your take-home.
Look at this as your maximum potential. If that meets your needs, you’re set. If you aspire to go bigger, think of a bigger market. You can play with the numbers too — like a higher priced product vs. a bigger market, etc. Also think about if the market is ever going to be growing.
The important thing here is that there are no hard and fast rules: you can set your own “rules” based on your own goals.
Just be clear how big the market is, how much you can charge businesses and how much of that market you can capture. You can generally predict those things, so it’s not difficult to try to figure out.
Hope those two approaches above give some great insights on how to pick a market to start picking profitable ideas.
Now, onto another “common” question I get and common problem people face when picking markets.
IV. THE PROBLEM WITH PASSION
“Follow your passion.”
“I don’t know what my passion is; I want to find my passion.”
Do these platitudes sound familiar?
These statements are probably the most overrated, oft-repeated, over-hyped pieces of advice people give to young college graduates just starting out to find their jobs.
They’re also infamous advice people give to people who want to start their own companies.
…I’m going to challenge your beliefs and what society tells you and say the above is completely unnecessary.
In fact, “passion” is probably the most loaded word I’ve come across.
My two arguments against the problem with passion:
- You don’t need “passion” to get started.
- Attitude and “passion” follow behavior and great work.
1. You don’t need passion to get started
The interesting thing is, you don’t need passion to get started on a business. It doesn’t matter.
You can actually build a business that builds a dream lifestyle without passion.
…I can sense some strong objections and overwhelming skepticism right now, but have an open mind and just think about this for a second.
If you’re looking for your passion, if you want to make your business your passion — the problem is, when you start a business on your passion, it’s like you have blinders on. It’s very difficult to start a business around your passion that ends up becoming a profitable enterprise to fund your lifestyle.
My hypothesis why this is is because most people’s passions are B2C, that is, consumer-oriented. We’ve already established most B2C startups are difficult to monetize (strictly speaking from a software point of view) without funding because they aren’t revenue-first. I don’t know any friends who are passionate about solving big telecom problems or are obsessed with cloud infrastructure and energy problems (huge markets and opportunities with incredible amounts of capital) — more so people who love food, fashion, entertainment, social network and photo sharing sort of “passions.” Am I right?
It’s difficult but possible (and recommended for the long term) to start a business on your passion… but for now, instead of trying to find your passion, become passionate about the process of you becoming free.
This is the assumption that you want to become financially independent, design your own lifestyle and become a lifestyle entrepreneur. Which is my intention and goal.
Make that your passion. Within your freedom gained from this business, then you can discover your passion along the way and not have to worry about it making money or not, because you already have money coming in.
You don’t need money, time or domain expertise — your passion is the process of you becoming free.
Most successful entrepreneurs are serial, repeated entrepreneurs. They start multiple enterprises and it’s not about the idea, they’re just super passionate about the process. The process is living in a creative spark and getting to create.
Incidentally, the more experienced an entrepreneur you are, the lower you value an idea. Conversely, the less experienced you are, the higher value you will place on an idea.
Experienced people know ideas don’t make money unless you execute well.
A side note on “passions”
I actually believe “passions” are somewhat bullshit because anything can be interesting the more you learn about it. I myself have a childlike curiosity about things and always find it fascinating how things work, especially if I’m not familiar with them.
In psychology, you learn about a concept called the “mere exposure effect” which dictates that people develop preferences for things because they are familiar with them.
I’ve seen in my own personal experiences of people telling me they hate X or think it’s irrelevant and boring, but circumstances compelled them to explore them and over time, they warmed up and actually found X to be extremely interesting and like them now.
Still don’t believe me? Let’s test your assumptions.
Try a little experiment. Pick a topic you are unfamiliar with (and to make this more fun, a topic you think is completely boring) and read or research 30 min about it every day for 30 days. Better yet, go talk to people in those industries and ask them why they went into the business, what problems they face, etc. Learn about it and soak it in for 30 days. Then let me know if you still think it’s not interesting.
2. Attitude and “passion” follow behavior and great work
I was introduced to Cal Newport back in 2008 or so and his book How to Become a Straight-A Student: The Unconventional Strategies Real College Students Use to Score High While Studying Less was the most helpful college help book I’ve found out there (thanks, Dad!). Not to mention, he actually featured me anonymously in one of his Study Hacks blog posts (no, I won’t tell you which one) back when I was sort of all over the place in exploring my interests and “passions.”
His latest book So Good They Can’t Ignore You: Why Skills Trump Passion in the Quest for the Work You Love is incredibly eye-opening and debunks this myth that you need to “follow your passion” to find work you love.
Newport vehemently argues against pursuing your passion, that that advice is actually incredibly destructive, as it makes people waste massive time and energy in unproductive soul-searching, endless second-guessing, and chronic job-hopping.
The narratives in this book are bound by a common thread: the importance of ability. The things that make a great job great . . . are rare and valuable. If you want them in your working life, you need something rare and valuable to offer in return. In other words, you need to be good at something before you can expect a good job.
Of course, mastery by itself is not enough to guarantee happiness: The many examples of well-respected but miserable workaholics support this claim. Accordingly, the main thread of my argument moves beyond the mere acquisition of useful skills and into the subtle art of investing the career capital this generates into the right types of traits in your working life.
This argument flips conventional wisdom. It relegates passion to the sidelines, claiming that this feeling is an epiphenomenon of a working life well lived. Don’t follow your passion; rather, let it follow you in your quest to become in the words of my favorite Steve Martin quote, ‘so good that they can’t ignore you.’
Newport says don’t soul-search and try to find what truly moves you or search for the “perfect” job that the universe magically and conveniently predestinated for you and which you’re supposed to be doing.
Instead, loving what you do is most often a by-product of being good at something—particularly as being good at a job gives you what Newport calls “career capital.”
Don’t obsess over discovering your true calling. Instead, master rare and valuable skills. Once you build up the career capital that these skills generate, invest it wisely. Use it to acquire control over what you do and how you do it, and to identify and act on a life-changing mission. This philosophy is less sexy than the fantasy of dropping everything to go live among the monks in the mountains, but it’s also a philosophy that has been shown time and again to actually work.
“Career capital” as in “the skills you have that are rare and valuable to the working world.”
So… this sounds great and interesting, but how does this apply to me?
It’s been interesting to think about and a point of personal reflection. What is my “career capital”?
I have a knack for networking, hustling, cold calling, sales, product design and user experience/customer research. These skills have set me apart from the typical person and have helped me every step of the way in my career path today.
I believe these skills will help me succeed in this B2B SaaS endeavor, regardless whether or not I am “passionate” about a certain market or industry (of course, it would be ideal if I liked my market).
I’ve also began to realize I am at my most useful in early-stage companies like this and probably am not interested or inclined towards working within large corporations like Microsoft.
V. HIGHS AND LOWS SO FAR IN 2 WEEKS
1. Move over all of my lead/info/notes from janky, ghetto Google Doc spreadsheets into a more stable, robust CRM system. I had been debating between using Pipedrive (got 6 months free) or Base CRM (14-day trial before $15/month). After using the Base CRM trial, I’ve decided to stick with it. It’s absolutely stellar and has extensive customization and filtering I need that Pipedrive doesn’t have. I’ve also tried ToutApp but I didn’t like it.
2. Organize all of those existing leads and systematize them. I haven’t been in contact with any of them since December 27 and they’re all in various stages of lead generation. It was just a complete headache to organize but I finally got through it.
3. Cold email 100+ new prospects. I’m doing this manually without my virtual assistant helping me anymore, since I also have to log each interaction and follow-up into Base CRM too. We’ll see how this goes.
4. Go through my notes on cold-calling, email scripts, phone scripts and more. I thought I’d be ready for cold calling this week, but I’m not. Getting things ready and prepared so I can start cold calling next week.
5. Review podcasts and interviews of people who went through what I am going through.
6. Getting my systems and 20 mile march in place.
7. Did 2 idea extraction calls/meetings (each at least 45 minutes).
8. Finally emailed people to do follow-up calls. One of my limiting beliefs was that I didn’t want to keep “bothering” them—but, you never get what you don’t ask for.
9. Audited Reddit survey results. I started this survey back in early December and got 17 responses, most of which were interesting and substantial rather than vague and uninformative. It only took me an hour to organize responses to digest and analyze them, and another half hour to do follow-up calls… but I kept avoiding it until now. Again, not sure why. This is the easy, duh stuff to do, I know.
10. Hypothesis to solving the problem of finding a technical cofounder. I had an epiphany yesterday after talking (with some frustration) to some engineer friends. I have a new hypothesis to tackling this problem and will keep you posted how this goes — don’t want to reveal it yet before I get a chance to test.
11. Small side job. OK, am doing a small side gig on the side. Unsure if this is good for the long-term, but the cash is always welcomed.
1. Still have not cold called. To be fair, I had just organized all my leads and notes, etc. into Base CRM last week, but didn’t really take the time to reflect and analyze my past 8 calls and 15+ email responses for low-hanging fruit. I have this aversion to analyzing these calls (30-60+ min each) because they would be time-consuming but realized this was necessary before jumping into new calls.
2. Did not follow-up with warm leads. As of now, I have 15+ phone numbers of people willing to take my call. For the life of me, I just could not pick up the phone. It’s a bit difficult… but need to really get over myself and my fears and just pick up the damn phone and dial.
3. Struggling to narrow down within my market.
4. My current workflow is very slow and inefficient. May need to hire a new virtual assistant to source new leads for me while I can take care of the rest.
5. Sleeping late. My average bedtime is around 2am. I need to get up earlier is I want to start making calls in the early morning net week.
VI. LESSONS LEARNED
- Every morning ask yourself — what is the #1 revenue-generating activity I can do today? Not check email, not consume content, not watch videos, not listen to podcasts.
- Find your 20 mile march. Every day complete your 20 mile march so you don’t get burned out.
- Behavior shapes attitude. Don’t procrastinate. Figure out your systems and habits.
Next update will go into which market I’ve chosen and insights I’ve gained… and hopefully I will have cold called many people 😉
See you in a couple weeks!
P.S. I’d love to meet you on Twitter here.
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