Don’t make these mistakes..📝
Hello there. This is a monthly newsletter from Together. Today, we want to talk about common mistakes SaaS founders make. Our aim is to help entrepreneurs and founders realise their potential.
What can we promise you from this newsletter?
It will be fun and smart.
It will not take too much of your time. We know you have a lot to do.
Five traps SaaS founders fall into
This is a special issue. Together has been running and partnering with companies for just over a year now. We’ve met scores of founders and we have picked up on a few things. There is a pattern that founders follow, be it bootstrapped or venture funded. But it happens in the early stage of their development.
It is important for founders to not repeat these mistakes.
We’re entering an interesting time where market dynamics are playing a role in consumption and buying. Founders need to be more mindful of how they spend their time and money. It’s said that a wise person learns from their mistakes. A wiser one learns from others. We want to list out some of these mistakes so founders, especially those who are approaching $1 million to $10 million ARR, can learn and avoid making them. For founders who are in super-competitive markets, avoiding these mistakes could mean acquiring a large market share and managing to not just survive but thrive during a time when others will struggle to keep their heads above water.
We spoke to our colleague Dushyant Mishra to pick his brains about what founders should and should not do, based on brainstorming sessions he’s had with founders, senior operators and the team at Together. Let’s dive in.
“Finding the right fit is not just about the salary, it’s also about the experience,” says Dushyant
Don’t fall in love with names and titles 🧱
One of the most common mistakes founders make, Dushyant says, is trying to hire a senior staffer who comes from an “impressive background”. Leadership is a skill that cannot be taught. In most cases, it will serve founders well to get someone who has led a team or product before.
But don’t get distracted by the companies they have worked at. Rarely will a customer move with a salesperson. Look at their experience and the types of companies they have worked at.
“If they have worked at a startup or a startup-like setup, it will help in integrating with your team and accomplishing goals,” says Dushyant.
Ask how they’ve made sales. Did they get sales baked or did they have to find customers through cold calling and profiling? This will tell you what kind of salesperson they are: a closer or a hunter.
While we’re at it, please check out this excellent two parter on how to hire your first US sales person.
Target the right geography. You need to understand what you’re selling. Some companies are built to sell to a US customer, some to an Indian customer, and some to a SouthEast Asian customer. Identify and start channelling your energy there.
Even when it comes to geography, identify the customer you want to target.
Listen to what they have to say. If they ask for a new feature, dig deeper.
Ask them why they need the new feature. Are they replacing an existing need or is there a need your product has created?
A lot of times your product will enthral a customer into making a huge purchase. But the key is repeatability. “Will you find several such customers who can make similar purchases? If you can, you’re on the right track,” says Dushyant. If not, you’ll have to have the gumption to say no.
Often founders hesitate to say no in the early days. It is a skill that has to be learnt.
Know when to step away from managing every little detail. The initial toil, taking the time to build every minor feature, and seeing the success of early versions of your app, are all greatly satisfying. But after you reach a point where you know you are only going to scale, find the right people to delegate different tasks to. This is also why hiring the right leaders is so important.
Double down on what’s working 🏅
The temptation is real. To get into newer categories, launching new pricing plans, giving loyal customers special leeway, you name it. If you see something working for your core business, the first thing to do is go all out on making it even better.
In the early days of selling your product, Dushyant says, it is okay to experiment with things like pricing, features, and new kinds of customers. Maybe you began by wanting to be the solution of choice for SMBs, but now your product is used by large enterprise clients. Once you know your customer, do more. Make your product the only one worth paying for.
Once you make a sale and build trust with the customer, don’t stop. “Cross selling and upselling other offerings more is the way to go,” says Dushyant.
There will always be more products on offer, more pain points to solve. Going after something that is not your core, that deviates from the key problem you solve, will drain resources.
Founders become too focussed on solving the problem and don’t leave enough opportunity for chance. Do not assume you know your market from day one. Leave room for surprises. And once that unexpected customer shows up, deliver. In the long run, see the data, and gather insights. If there is a new market to be targeted, go for it.
Pricing and retention 💵
Founders often think that free users are cost centres. In PLG companies, if the conversion is about 5-6%, everyone else using the free tier is not adding anything to your product.
“That’s shallow thinking,” says Dushyant. Free users are as important as paying customers. These customers are happy to give feedback, they can point to things that can be improved. This is invaluable.
Think tiers when you price. But sometimes founders go too deep and create too many tiers. Tugce Erten says, “five is ideal. Three is good too. Any less than three or more than five creates problems.” Tiers create an illusion of choice.
The best way to price is to map against a competitor. Founders need to ask, what kind of differentiation do I have? “Find a way to price that,” says Dushyant. By just offering a lower value to sway customers is bad practice.
Often founders think linearly, says Dushyant. They think that what they have now, they’ll keep next year and don’t start working on retention until the customer doesn’t show signs of renewing. “Retention is an all-year cycle. Great customer service and talking to your customers to keep fine-tuning the product are good ways of keeping those customers loyal,” says Dushyant.
“Don’t think just about user features, but also maintenance.”
Find the right metrics ⭐️
There is no one metric that every SaaS company should follow. The true metric is PMF. Once you have PMF, that's when you can start thinking about metrics such as revenue, and gross margins begin playing a role.
Dushyant says that often founders start looking at gross margins too early in their journey. “Pre-PMF focusing on gross margins or revenue can lead you down a risky path.”
Pre-PMF, revenue as a metric can make you think you’re not doing well or you’ve achieved PMF before you have. The first few months of a company are to be spent building a product. Everything else is a distraction.
Founders who learn tech tend to think only about user features. It gives them a great thrill. They keep trying to find features that can make the customer’s life easier. A dashboard that can parse through data and help customers decide. But they don’t think enough about the maintenance of the product.
“No one enjoys the more mundane part of development — maintenance,” says Dushyant.
Dashboards usually mean founders need to own the data that is being generated by the systems they’ve put in place.
Founders need to anticipate that they will be called into scaling, maintenance, and interpreting this data.
This will cost founders man-hours and, hence, money. If the dashboard scales, founders will have to make hires here as well. Otherwise, it will slow down innovation.
“Founders need to own and tell their stories effectively.”
Content, storytelling, and PR 📜
SEO can get traffic to the website, but it can’t build a brand, especially if the customer is in the US.
“Brand needs to be built from day 1. It needs to constantly be reinforced. SEO posts can’t do that for you,” says Dushyant.
Content can also be used as a hook for PLG companies. Because content helps build trust, newsletters, blogs and podcasts are good channels of distribution and they help communicate with customers.
Tell a good story, says Dushyant. It helps in moulding the narrative when you talk to the customer. “Content is a way in which customers understand that you not only have the skill to solve their problems but also the ability to think deeply about a sector,” says Dushyant.
Often, founders put PR as something that’s a good addition. It’s important because not only does it become a superb source of traffic, it helps the marketing team put out messages and reach out to customers.
What Together has been up to ✍🏽
A few things we’d like to share with you.
We welcomed Bytebeam to our network. The company led by Gautam BT, Raviteja K, and Bharadwaaj Ramakrishnan is trying to build a backbone for companies that want to use connected devices.
SaaS founders are discovering that the US GTM motion is different from the one in India. We asked Varun Shoor how a website should evolve when the primary market changes.
It has been a year since we started up. And our colleague Dushyant put out a two-part post detailing his experience at the firm. It sheds light on how Together functions and how we analyse companies.
A little social media popcorn 🍿
Keeping with our story today, the co-founder of Morning Brew parsed through some mistakes founders make.
This on growth loops is worth a read.
That’s it from us for the month. If you believe you’ve got an idea that we need to hear, write to us at email@example.com
We’ve got an exciting guest lined up for next time. Until then, stay safe, and let’s build Together.