The Worst Advice on SaaS I’ve Read (Recently)

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Merrill R. (Rick) Chapman, Softletter Editor

I was sitting here working on the second edition of “SaaS Entrepreneur: The Definitive Guide to Starting and Sustaining Your Cloud Applications Business” and minding my own business when I received a mailing from the Philly SaaS LinkedIn Group with this comment:

“How to Start and Grow a SaaS Company
I’ve just learned everything you need to know about starting and scaling a SaaS company…”

So I took a look and was linked to THIS blog:

And read it. I think many of the points made in the blog are just off base, but this assertion particularly raised my hackles:

+++ Don’t Sell to Very Small Companies: companies with 1-10 employees regularly fail, and too many of them going out of business will cause too much customer churn. Even if they don’t fail, they’re still too expensive and difficult to support to be cost effective. Complex apps aren’t good for very small customers because support costs will kill you. +++

Really? THIS is the secret to growth? Wow. I guess someone forgot to tell Carbonite, DropBox. MailChimp. Constant Contact. All those regional SaaS companies that service SMB such HVACs, real estate firms, local businesses via aggregate portals. Heck, I guess WOW is also a massive failure.

This is just terrible advice. Who you sell to is determined by the type of product you offer and the market you’ve targeted. Obviously, you don’t try to sell a manufacturing ERP system to a local hairdresser using a small CMS portal to track and grow their customer base. And if you ARE selling small business portal systems, you obviously had better architect your system to efficiently self-provision and plan for appropriate churn rates. But it has and is being done.

And you know something? Growing to $25m is darned good performance! Anyone who achieves that has done something pretty unusual in the overall scheme of things. Not every company can (or should) be a billion dollars in size. There are thousands and thousands of opportunities that await entrepreneurs in market segments of all shapes and sizes and it’s perfectly OK to grow and flourish in a niche you understand, can harvest, and from which you can generate much coin.


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