These 4 Variables MAKE or BREAK SaaS startups

so after working with well over 50 early stage B2B SAS startups I can confidently say that most startups are focusing on the wrong problems in their business they're building features that nobody wants they're targeting low value customers who inherently are never going to stick around or they're communicating a proposition to the market that just isn't worth the value that they're trying to capture and I've discovered through working with these startups that most problems in early stage businesses so early stage specifically come down to just four variables which I'm going to run through in this video and if you're able to effectively solve these four variables it really is the difference between you know having 10 to 20% improvements in your business or scoring absolute home runs where you can get 50x 100x returns so let's jump into the video okay now if you're building a early stage startup then I probably don't have to preach to you how just how hard it is to go from zero to one in this um in today's market conditions and so before I continue in the description I think uh I'll put it in the description there'll be some links to customer case studies and testimonials to just prove that the startups I worked with have actually gotten results and some of them have on gone on to do tens of millions in profit not r Revenue in profit uh while being bootstrapped uh without raising Venture Capital um now the first variable we're going to jump into is the customer variable everything begins with your market right which is what your customer sits in every company is either made or every great company is defined or killed by their market right there's actually um a famous quote by Mark andreon I'm going to butcher it but it says something like Market Matters Most a g a great product and team can't save you if your market sucks right if you're just fishing in the wrong ocean then you're destined to fail doesn't matter how switched on or smart you are or how great you're building great you are at building a product um you're just destined for failure right so let's break the the customer variable down right so the first point I want to talk about is he who chases two rabbits catches none so I actually heard this quote years ago um from a great marketer called Sam ovens and I think this poison that um most startups have is just really a lack of focus um they're trying to go after too many market segments you know they're trying to serve midmarket Enterprise while also doing a plg motion um for the bottom of the market despite only doing tens of thousands or hundreds of thousands in Revenue you know really you should be finding product Market fit in a single Market segment for uh moving on or they're targeting multiple personas they're targeting marketers and sales people and operations people and the reason why you shouldn't do this is because each one of those personas has their own problems their own motivations and and if you're trying to serve all of them well you're just going to do like a five to six out of 10 job for any given persona but you're never going to be able to do a nine out of 10 a 10 out of 10 job um for any given Persona which is what you need to do to to you know build a remarkable company that's going to reach product Market fear and grow to tens of millions in Revenue now this is one of those classic things where I could say this 100 times and majority of people are still going to make this mistake right what I've learned through working with a bunch of Founders is that all of these mistakes sorry all of these lessons that you know we're taught over the last decade by experienced Founders and entrepreneurs every single founder thinks their situation is different these rules don't apply to me um you know they pay lip service to it and it always bites them in the ass right so you need to start small before you go big look at any great uh software company they always started small you know um Stripes started just as uh payment infrastructure for apis they served developers now they're the payment infrastructure for most startups uh you look at twilio again like an SMS API now um a billion dollar company I can go on go on and on with um all of these great companies that initially started small and this could be not just a customer going after one persona but also one problem having one core capability in the product having one core value proposition um so you know go narrow doesn't have to just be to the customer the second one is best fit segments I kind of um touched on this earlier getting ahead of myself here um really when it comes to finding product Market fit you should be finding that within a single Market segment right so if you want to go up Market you should go after that segment and you should have the correct go to market motions in place to communicate your message to that segment to generate leads from that segment to close those leads you know there's a whole motion that wraps around that and so if you're trying to go after two market segments at once well they're both going to require different messages they're both going to require different goto Market strategies how you acquire leads um how you close those leads is it plg is it through inside sales with an AE you know there it just introduces so much complexity um and so when it comes to customer you should be trying to serve your best fit SE segment now what do I mean by best fit well there's a couple of ways you can measure this and I I'll get rid of the next one because it's kind of uh relevant to this right so you've got on the quantitative side where you can emper empirically measure your best fit customer where um if we start at the top of the funnel with awareness the these people are resonating with your content more for example if you're doing content marketing you know you have inbound DMS You're Building relationships and Partnerships because these people are resonating with your message all the way down the funnel to conversion where these people are converting at higher rate uh relative to other market segments or personas um when they use your product their usage or retention is higher than other market segments or personas and so you should really be able to prove your best fit segment and ideal Persona and obviously you're only able to do this if you're measuring in the first place which most startups aren't doing but this is how you arrive at your best fit segment right not just Vibes or this is the customer I want to serve because very often you'll discover that you know most startups eventually pivot and it's because they realize oh actually this Persona over here um is is better to serve so the same could be said for ideal Persona as well ideally you're just going to be going after one Persona in the early stages all of my content is really focused for those startups of under 1 million AR um and this just allows you to provide the best experience to this Persona right if you look at uh clay which is a classic example in the goto Market space um they didn't start off being a tool for cold email um they I think they started off being a tool for developers um like a no code solution they discovered that um outbound personas were using their product they doubled down on that Persona and what that allowed them to do is it allowed them to build a product that was more beneficial to that Persona that might have not been as useful for developers anymore or recruiters um and it also allowed them to find their um ugc growth Loop where these outbound personas were happy to post content about clay organically because they found value from the product and that's because clay built the product for them um and Clay launched certain features that um benefited this Persona and this Persona was in incentivized to post this content right so everything kind of just worked together well and that would have never happened if they didn't see those signals and narrow down on that Persona and focus on serving that Persona if they were spread across multiple personas they might have been able to achieve the same outcome but would have just extended the time Horizon exponentially because you know obviously um they only have so many resources internally and I'll come on to later about the concept of product Channel fit because that does tie into it um nicely now how do you know if you've gone deep enough on your customer a good sort of simple sniff test here is if you're able to stand up in front of people and give a 40-minute presentation on the professional life of your customer right that's how deeply you need to understand your customer and this is why a lot of successful Founders they are selling into a market that they previously worked in or selling to a Persona that they were previously because they understand it at such a deep level and that's their Edge right so you want to get to that level of understanding where you just deeply deeply understand your customers now moving on to the next variable you can find you know the perfect customer but if you're not solving an urgent problem that they're willing to pay for then you don't have a business right so that brings us on to the next variable which is problem so just get rid of these so the best problems are Urgent you know sort of take my money right now I need to get this solved because things are going to go wrong if we don't solve this problem or we're going to lose our Competitive Edge or there are things happening at a macro level in the economy or the industry um and we need a competitive advantage to get ahead you know an urgent problem that people are willing to throw their money at you to to solve pervasive so they're widespread again maybe there's this sort of trend that's happening at a macro level um there's a lot going on in the SAS industry at the moment with AI with changes in buyer Behavior where now it's hard stand out and there's all these competitive factors that sort of trickle down from that um and so there's a lot of change happening at the moment in SAS industry with regards to how we sell to buyers where you know how we enable them and how we give them the right information at the right time because they no longer have to play by our rules right this is pervasive problem um and then of course expensive um this one's a bit more subjective but you know natural as a business um you know you're in the the game of um generating money and so you want to solve expensive problems um the the best way to put this is if you want to build A10 million business then you need to be solving $10 million problems right um and this is why naturally I lean more towards B2B because businesses have money they're willing to pay more money and shy away from consumer where you know consumers have less money and so they're going to have higher churn um the average revenue per use is going to be lower right so you always want to go after the more expensive problems but there is a balance because the more expensive you go then um that is going to reflect in your goto Market motion so you might need an inside sales team or a sales team to sell the software because it's more expensive which means it's inherently probably more complex um and that might not be the business you want to build right so you know um use your own judgment there secondly then Jobs versus problems right so this is a a good point so normal advice right and I'm you know I've kind of fell victim to this is you know find problems solve problems but I just want to add a little Nuance here because we all have problems just think of yourself you probably have you know 5 to 10 problems on your plate right now especially if you're an entrepreneur or um you know working in a high pressure environment not necessarily an entrepreneur but just because you have all those problems doesn't mean you're motivated to solve them right I have a pair of trainers in the other room that are the wrong size um I paid a lot of money for them and I need to return them right that's a problem but why haven't I returned them already well because I have other things on my plate that I'd rather solve first I'm not that motivated to solve that problem right and so that's where um the jobs to be done framework comes in I've actually got a I'll link a um a resource on the job to be done framework I had a conversation recently with a a marketing executive on this um but I like to look when when looking at um customers I like to understand their their jobs rather than just problems right so if you think of companies companies consist of employees team members and these team members go into work every single day and they complete tasks they they complete jobs they complete projects and workflows right we have the annual goal that's set by the company we need to hit this Revenue figure or this kind of objective that trickles down into departments who set their okrs their courtly objectives which trickles down into monthly targets and you know weekly projects right so people are going to work every single day to do their job right which breaks down into tasks and projects right and that's where software fits in you know when people um when the CEO is setting the uh annual Target for the company they don't go right um we need to hit 10 million AR what software can we buy to help us hit this target we they don't say that right they set projects and priorities and they build a strategy which breaks down into the daily and weekly things that the company is going to do that's where the software comes in right software helps people do their job it helps them complete workflows right like a cold email software doesn't help people increase their revenue it helps them send cold emails it helps them um manage their inbox more effectively right these are all jobs and tasks that eventually go up to uh booking more meetings getting more pipeline those pipeline turn into customers and that helps the company hit their revenue Target but the software isn't helping them hit the revenue Target right the software is helping them respond to their inbox more efficiently it's helping them send more cold emails and so um like a the most simplest way I can communicate this is just look at your icp's job description um you know you can find them on on job boards what are the individual tasks that they put in that job description they are probably the jobs to be done right um you know need to manage Cod email campaigns more effectively need to report the Cod email performance to uh line manager right these are all the jobs to be done and so where does where are the opportunities there where are the problems associated with these jobs where uh piece of software might be able to um improve things the final point on problem is supply and demand um so the best way to put this is it's much better to supply a motivated crowd who needs to perform a task rather than trying to convince someone that a task is worth completing right like if you kind of think of it as point a and point B um and somebody is wants to travel to point B because they need to complete a certain project or hit a goal it's much better trying to sell to that person and getting them to point B A a fast and more effective way than communicating to someone that who at who's at Point a and say hey you should really go to point B right that's what supply and demand is the demand is already there they already want to get to point B you're just going to help them get there um faster cheaper more effectively like a a real life example to think about this is if you've ever gone to a sports game and usually in the stadium they sell overpriced crappy junk food um and we buy it right even though junk food is bad and we know it's bad we'll still buy that $12 burger or $12 hot dog even though we know it's bad for us even though we know it's cheap and um sorry uh crappy food and overpriced food we will still buy it because we're in a we're in the stadium we probably had a beer or two we're hungry we're drunk um you know we don't care as much as if we're at home and so these vendors have the leverage they can charge they can make that food overpriced even though it's cheap because they're quite literally selling into a starving crowd right they are just supplying the demand that exists probably very different if you were just walking down the street and there was a a random Burger vendor on the side you'd probably be less inclined to buy that burger right because you're no longer in that situation okay so really much better to try Supply demand that exists rather than convincing people that there's a problem that they have um because then you're trying to change behaviors which is a an expensive game to get into um now how do you find these problems how do you find these jobs to be done how do you learn more about your customer well in the description I'm going to put um a resource that you can download called the structured interview method rather than you know when I speak with Founders and they're like oh we're struggling to grow and and then I dig deeper and like well how many people have you spoken with the first problem is usually they're not speaking with enough people but the second problem is when they are speaking with enough people or speaking with people they're not being strategic with um with regards to how they approach these conversations they're asking the wrong questions they're not listening deeply they're not validating their assumptions they're just hopping on PE on these calls with people and just having a coffee chat and then wondering why you know the conversations weren't useful and they didn't get the insights they wanted or um they didn't come away with the conversation learning anything new that's because they haven't approached these conversations in the right way and so I really recommend taking a look at this resource um and when it comes to understanding your customers validating any assumptions related to these four variables you follow this structured interview method to the T because it's going to help you get a lot more clarity with regard to these variables and just give you the confidence that you're building in the right direction okay so um now once you've found the these burn in problems you then need to articulate how you solve that problem to the market right and so that brings us on to the next variable which is uh proposition Okay so all heard value proposition um and so some Concepts to understand about uh proposition then is the first one is Promised Land um so I kind of touched about this a bit on Supply uh supply and demand where you know you have people who are at Point a they're trying to get to point B right this is a a journey that they're going on and when I say Promised Land what I mean is point B point B is the promised land that's where your churn problems go away your code email campaign start performing better uh your website conversions increase because buyers Now understand your product uh in a more effective way right this is where your customers are trying to get to um because this is how they hit their monthly Target their quarterly Target this is how the company hits their annual goal and everyone gets a bonus right this is the promised land a good proposition is able to succinct succinctly and effectively paint the picture of the promised land and communicate to the customer that you're the person that can get them there right now to be able to create a good value proposition well you need to be aware of what that promised land is and so that's why this stuff comes before this stuff right because how can you communicate point B to the customer if you don't even know what point B is for that specific customer right and then the next one is unique mechanism there are so many s um software products out there um I might I might be lying here you can fact check me but I think I saw there's like 14,000 software products just just uh in the MCH space right so marking technology space so the broader industry you're talking tens of thousands of of products right A lot of them making the same promises a lot of them at a surface level looking very similar from a features perspective and so naturally the question that comes to a prospect's mind is well what makes you different to X What Makes You Different to Alternative right and that could be another software product or it could be just um their current process for doing things um and maybe they're not using a product or maybe they're using um a person or a consultant right Alternatives can mean many different things um but naturally that's the question that's going to come to their mind is What Makes You Different to X and that's where your unique mechanism comes into it right what is your secret Source okay your what what is going to make you get the prospect to point B faster than all the other Alternatives right and this is really really important to solve and um just being brutally honest most people do not pay enough attention to this they've built they've copied a competitor or they' built a product that's very similar to competitors and fundamentally they're not doing a lot different to the competitor right and sometimes just being cheaper isn't a strong enough argument you actually sometimes a customer actually cares about getting to the end result more than the price and they're actually willing to pay more money if getting to the end result has a higher probability right so what is your unique mechanism to give you an example of a client I worked with instantly uh 0 to 20 million in two or three years there'll be a case study in the description their unique mechanism was that they popularized the concept of inbox rotation to the market right so a c cold email send in tool very competitive market one of the most competitive markets you know going against tools like lemlist Outreach salesloft uh woodpecker um and what inbox rotation was was if you looked at the existing tools all of them were charging per re seat right so or per inbox so uh let's say with um one inbox you could send 50 Cod emails per day if you wanted to send 100 emails or 150 emails per day you would have to have three inboxes and so they would charge you per inbox and if that inbox is $50 an inbox you're paying $150 a month right just for Simplicity sake now with instantly inbox rotation what they allowed you to do is basically use unlimited inboxes so you could have a hundred email inboxes um for a fixed price and their pricing was like $37 a month and then like $97 a month and I think it's still that price today right and so what that allowed them to do is create this attractive unique value proposition that was essentially hey unlimited send in for a fixed price we're not going to charge you uh per inbox we're not going to charge you per team member you pay us $97 a month and you can either send a 100 emails a day or you can send 2,000 emails a day we're just going to charge you $97 a month right and so that was a unique mechanism where it it was derived from the product itself and this is why everything interlinks so closely um but it was just so unique nobody else was doing this and it was just so easy to understand and it allowed customers to get to the promised land which was well if I can send more emails I can probably get in front of more prospects the more prospects I can get in front of the more meetings I can book the more meetings I can book the more customers I can get have right and it it truly changed the cold email space For Better or For Worse it CH the cold email space um because people were um able to do far more for far less they didn't have to maybe hire sdrs anymore or buy 20K a year software they were able to do a bunch of this stuff just with uh instantly and maybe some part-time uh contractors right so unique mechanism is very very important and it's something that isn't easy and in most cases requires some kind of innovation um so enough said on that so the next point is time to value right so this is really important as well um sure um you know that the customer wants to get to point B but how long is it going to take them to get point B and this is why companies will evaluate different options right well if I hire a consultant uh or if I hire an agency for example to do cold EML for me well they said it's going to take three months minimum you know they need to do some testing yada y yada and and paying in 3K a month that's going to be 9k a month before I see some results or I could just buy instantly myself that's $97 a month um it's cheaper but you know could I get the same results that an agency could because they're Specialists or should I uh hire you know a full-time person uh to handle cold email for me but then I need to bring them on and onboard them and ramp them up and I need to deal with insurance all this kind of stuff right this is what people are going through um in their mind right nobody jumps out of bed in the morning and thinks oh I'm going to buy a software product they're running through their options and they're thinking about okay well what's the um what's the probability that this solution could get me to the end result what are the costs you know these are all variables that they're thinking of and one of them is time to Value right like is your product hard to use um do you through your unique mechanism have you you know created a way to do these things more effectively like again if you look at instantly for example um very comp Cod emo is very complicated right you have to mess around with DNS records um you have to buy domains and inboxes very like complicated somewhat technical stuff and again they found a way to um decrease the time to value for customers by automating a lot of that inbox setup where you know um the automatically add the DNS records for you uh they connect to your Google account through OA um and that means you don't have to go around messing in the Google admin panel all of this kind of stuff that decreased the time to value that meant their customers from signing up can get that first meeting booked as quick as possible right so this is also an important factor when it comes to your value proposition that um too many people are ignoring get rid of some of this stuff okay so now um a real simple way to communicate your value proposition and as many ways to skin this cat is we help ICP solve problem by unique approach this is where your unique mechanism would be so that they can outcome right if you cannot succinctly communicate your value proposition like this then you do not understand your customer enough you do not understand your value proposition enough you do not understand why your product is differentiated is unique right and you'll be surprised you know you can ask most Founders hey what problem does your product solve or what does your prodct do and they'll go on and tell you like a twom minute story right um that doesn't actually tell you a lot of stuff and so there's a power in being able to succinctly communicate your products value proposition um uh used by this statement okay so last one now we come on to the product right so if the proposition is the essentially the promise you're making to the customer well the product is how that um proposition is fulfilled right and so it goes without saying it's really important that your product is capable of fulfilling that proposition right there's no point in having the best Marketing in the world the best claims that really resonate with the market if when people sign up to your product they're not actually able to realize that outcome they're not actually able to get to point B or it takes too long or it just straight out fails right so something we're seeing at the moment in the AI SDR Market is on the on the surface the proposition is great right automate your Cod emo you don't need sdrs you don't even need Cod emo agencies you don't need to manage people we'll just do the end to- end process for you um and basically what's happened I don't want to speculate too much but it seems like they have failed to fulfill the proposition and how do you know they failed to uh fulfill the proposition well because they have like 70% churn rates right and customers are only going to churn if they don't get the results they want or even there's uh a factor there where they're the wrong customers in the first place but your product has to be able to fulfill the proposition right otherwise you're just going to end up in a world of hurt where uh people churn but worst of all you know that's kind of a short-term effect the long-term effects are when people start spreading negative word of mouth and saying hey this product is trash then that thing can stick around for years right so you need to have a good product um that needs to be able to fulfill the proposition now why product is last is well to fulfill the proposition you first of all need to know what the proposition is right and to know the proposition well you need to know what problems you're solving and to know what problems you're solving well you need to know the customer and their problems right and so that's why product comes last because you need to know what you're building for and who you're building for so that you can efficiently um solve them the second thing is sticky um so ideally your product is going to be sticky in the sense that when customers use it they stay around right you just become embedded in their organization you become you become if if they were to lose you you know they would be in a bad position maybe they wouldn't get to point B anymore or maybe they wouldn't be able to achieve their goals anymore right so you want a sticky product whether that be um you expand into different teams in the organization through a good product Le um growth sales motion so you become very sticky where it's not just one person's opinion anymore it's 10 people's opinion to to remove you from the organization maybe it's through integrating into their workflows through product Integrations where um you know you plug into their CRM and to get rid of you would probably just be a really costly And Timely uh project to do or maybe you're just delivering so much value to them that they use you all the time and they're getting so much value that you know leaving you just um wouldn't be an option right and this is really the difference between being nice to have and a must have nice to have products are oh we can just go to competitor B it's cheaper might not get all the features but you know um we don't use this like for example this software I'm using at the moment here whim school is a nice t for me because I don't use it a lot and I could use any whiteboard in software right whereas a something sticky could be maybe it's stored all my data and it's you know used that data to make the product experience better and if I left the product I would lose access to that data you know that's where products um start to come snicky sticky through data or network effects right finally uh this has gone a bit longer than I thought I thought it be a 10-minute video um product Channel fit so this is super super important right you can um you cannot control channels right you cannot decide what Facebook does right you cannot control Facebook ads they can turn Facebook ads off tomorrow maybe you know they hit some compliance um they do something wrong and they get shut down there's nothing you can do about that right you can't control channels but you can control your product and so that's what product Channel fit is you build your product for the channel so um very early on I talked about clay how they sort of double down on that outbound persona now they found strong product Channel fit um because they built a product that had a relatively um quick time to Value where I could sign up I didn't have to speak to a salesperson I could use the product I could click around I could get value from it there is some kind of learning curve there but they also had features such as um um sharability features that incentivized users to share the product right so for example in clay you can create templates it wasn't always that way and you could share those templates right those templates are a form of content and they user generated content because the user is creating those templates and sharing those with people and so whether they're sharing them in slack or with team members or on social media that is a form of user generated content that would not be possible if those features weren't available in the first place right so that's what we mean by product Channel fit there's a common saying um of distribution matters most right and my interpretation of this saying isn't that you know screw the product you should just be cold emailing people and posting content that's not my interpretation of that saying my interpretation of that saying is that you should build the product with distribution in mind from day one right you should if you want to build a product that can benefit from viral marketing then you need to build a product that can benefit from viral marketing right you don't just build any product and hope to go viral or if you want to build a product that you can grow via paid marketing then again you need to build the product with that in mind maybe you need to have a model that makes that viable so you can actually get a good CA to LTV ratio or something that's really important in paid marketing is time to Value right if uh inherently if you're advertising on paid social colder audience colder traffic don't know who you are if you're making them jump through all these Loops to experience your product's value then again that's going to affect um your funnel because the cash conversion cycle is going to be longer because there's more steps because more people are dropping off and so paid ads probably isn't going to be viable for you because you need money for for paid ads right and so that's what product Channel fit means is building the product for the channel that you want to distribute it on so a common strategy today is building products that are suitable for social because social is how people find information nowadays they're not going to newspapers then you know most people instead of going to Google search and finding information they're doing it on Tik Tok or they're doing it on LinkedIn or they're doing it in Slack right and so people are building products that can be easily easily shared on these channels so that's what I mean by product Channel fit another example is if you look at these dating apps like um I'm a bit out of the game for a few years now but if you look at like Tinder and Bumble these apps only existed because um mobile became a channel right they would have not reached their success if they were desktop applications like the sort of older um dating apps right and similarly the data and apps that existed on desktop didn't succeed on mobile because they weren't built for those channels right and so that's what I mean by product Channel fit really important if you want to build something that can um you know exponentially grow on that channel rather than you Hammer to force it so those are the four variables um the last thing I'd say is it's very I mean you should expect that for each of these variables you will need to iterate them you know three four five times each before you sort of find that sweet balance where eventually you're going to find a strong product Market fit right so you might need to change the customer who you're serving maybe the customers you're targeting right now are inherently High churn and you want to change that right and that's one of those classic examples of where you can focus on 10 to 20% improvements like uh fixing your onboarding or sending more emails or more tactics inside inside the product to try trick people not to churn or you could just Target a higher value customer who's not going to churn right or or not uh he's going to have a higher LTV is going to stick around for longer right same with problem maybe you've got the right customer but um you know problem a is worth less than problem B and so you want to make more money you want to build a bigger business you want to have higher value customers and so you go after problem B etc etc hopefully making the the point there um and but really I don't think you ever stop um these are just sort of ongoing evolutions of building a company so the last thing I'll say here is check out the structured interview method what the hell was that in the description um and I'm also going to share a video which is about how to validate um software startup ideas recommend you give that a watch as well it's a bit longer in detail um that people have enjoyed cheers