3 revenue models for B2B SaaS Startups
I have built a multi-million dollar revenue business from scratch. Here are the top 3 ways to generate revenue for your B2B SaaS Startup:
1. Pay-per-outcome model: In this model, you charge on a per-outcome basis. For instance, if your Product helps the business generate more leads, you charge on a per-lead basis. For this, you need to have a sound knowledge of the domain because the cost of a lead in say banking, would be very different in the Edtech industry. So you should be aware of that for your industry. An example of such a pricing model is Google PPC (pay-per-click) ads.
2. Pay-per-usage model: In this model, you are basically the infrastructure provider to the customer and so, the risk of the outcome is on the customer. You only charge on a per-usage basis. A simple example is WhatsApp Business API where Meta charges on a per-conversation basis. Meta doesn't get into the specifics of how the conversation is helping your business. They will deliver the message and charge you for that. Other examples - Cabs, AWS, etc.
3. Pay-per-seat model: In this model, you charge the customer on a per-user basis. As the customer grows in size, you generate more revenue. An example of this pricing is Slack. Other examples include Google Workspace and a dozen other tools. This is quite a common pricing model simply because it helps you build a steady revenue stream from the customer, irrespective of usage or outcome.
There are a few other ways to increase revenue from your customers:
1. Upselling more users: If your customer is on a 100-user plan, can you convince them to add 20 more users/agents? If your product is doing well, most customers would automatically increase the number of users.
2. Upselling a higher plan: If your customer is on a basic plan, can you explain to them the value of your premium plan, so that they upgrade? For instance, your basic plan could have limits on the data storage or the type of analytics you provide. The premium plan will have higher limits.
3. Cross-selling your other products: Do you have other products that you can sell to the same customer? Go and showcase it to them. If they are the buyer, they are more likely to buy from you, than someone else, simply because they already know you and are comfortable working with your team. If they are not the right buyer for the other product, ask them for references.
What other ways do you think you can add more value to your customers so that you can get more revenue?
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Sunday, 5 February 2023
3 revenue models for B2B SaaS Startups
3 revenue models for B2B SaaS Startups
Saturday, 4 February 2023
6 hiring mistakes to avoid at all costs
6 hiring mistakes to avoid.
1. Hiring by pedigree only. Recently I was talking to a friend who hired a 10+ year experienced IITian from one of their large competitors for their early-stage 10-member startup. She didn't interview the candidate properly and no wonder it was a disaster. She blindly trusted the pedigree of the candidate - IITian and past experience at a unicorn and obviously it didn't work out for her. IITians are not always smart. I'm sad to say that some of them have a lot of arrogance and ego. If you're hiring for an early-stage startup, you want people who can get their hands dirty and get things done. Focus on that rather than just the pedigree of the candidate.
2. Hiring from really large companies. If you are an early-stage startup, it's generally not a good idea to hire people who are working at the opposite end, which is, large and funded companies. Early-stage Startups require generalists. Large companies require specialists. If you mix the 2, you might end up hiring a candidate who is misaligned.
3. Not having clarity of the Job Description. So many founders build an 'approximate' job description. I think half of the job is done if you just spend time nailing the job description well so that the candidate, and you, both have clarity on what is expected of the job role and what isn't. Be as clear as possible on various parameters like the background of the candidate, experience, competencies, etc.
4. Not doing reference checks, especially for senior roles. So many startups just interview candidates and take a bet. While the bet may go well, there is a chance that the bet completely goes wrong. By doing reference checks, you can significantly increase the chance of the bet going right. Reference checks help you verify that whatever the candidate told in the interview, is indeed true. Trust, but verify.
5. Not interviewing the candidate properly. A lot of Founders just talk to the candidate at a high level rather than digging deep into their behavior, competencies, skills, beliefs, values, etc. So many founders do the talking themselves rather than listening to the candidate. Don't do that. Your job in an interview is to let the candidate speak so that you get to understand them better.
6. Not spending time on employer branding. Today, candidates look at the online presence of the company. They look at Glassdoor, LinkedIn pages, and founders' profiles before even applying. If you don't have decent employer branding, you're sure to lose out on good candidates. As a founder, you should go and share your thoughts online so that people get to know you better.
Important note: There are exceptions to all the above points. These are broad guidelines and not thumb rules. There are no thumb rules in Business. Whatever works for 1 company may not work for others. Use these broad guidelines to experiment and figure out what works best for your startup and apply the learnings accordingly to improve your hiring.
Friday, 3 February 2023
5 misconceptions about starting up
5 misconceptions about starting up.
1. You need a lot of capital to start a business. Nope. There are indeed some businesses that may need a high capital investment upfront. But, almost always, you only need a little capital *to start*. You can always build an MVP with a small amount of money. This is especially true for Software businesses because if you are a programmer, then you can write the first version of the product yourself. If you are not a programmer, then you can either 1.) get a technical cofounder or 2.) use no-code tools.
2. You need job experience before starting a business. Nope. I was a college fresher when I started Cogno AI and today, we have 200+ large enterprise clients. So long as your learnability is high, you don't need prior experience. Prior job experience does help, but it is not a prerequisite for starting up. There are countless other examples of college entrepreneurs who made it big.
3. You need to have a network before starting a business. Nope. Network definitely helps a lot to get access to enterprise customers or investors. But you don't need to have one in order to start a business. Today, there are so many startup incubators that help you with mentorship, guidance and help you with access to investors. All you need to do is to dilute a small percentage of your company.
4. You need to have domain expertise in the area where you are starting up. While it definitely helps to know the domain well, it is not at all mandatory. For instance, we started Cogno in the Financial Services space with ZERO prior knowledge of the space. Our first 5 clients were the State Bank of India, SBI Life, SBI Mutual Fund, ICICI Bank and Kotak Mahindra Bank.
5. You don't need a cofounder for starting up. While there are cases of a single founder doing well, it is highly recommended that you get a cofounder so that you can discuss ideas, keep a check on each other, help each other during tough times and build a team that has a complementary skillset.
Important note: All the above points have exceptions. There are no thumb rules in business. The above points are guidelines to help you increase the probability of success as has been seen in multiple cases. The above points do not guarantee any form of success and the reverse is also true - not following the above points doesn't mean that your startup will fail.
Thursday, 2 February 2023
7 ways to grow your startup
My startup was on the verge of bankruptcy because of an abrupt Cofounder exit. 2.5 years later, we did $1M in annual revenue and then got acquired in a multi-million dollar transaction.
Here are 7 ways to grow your startup:
1. Expansion within existing customers. Make a list of your top 10 customers and go and meet them personally. Ask them what other problems they have which they are looking for a solution to. See if there is a pattern and if you can find other problems to solve.
2. Expansion to other Sectors/Industries. Talk to the prospects in the other sectors and see if a small 10 - 15% change in your product can help you open up a new industry. Then you can gradually start setting up a team that is dedicated to that industry.
3. Expansion to other Geographies. Can your product be sold to a nearby country? Travel to the nearby countries and talk to the prospects and see if they also have a use-case for your product.
4. Go up-market. Are you selling to SMEs? Try selling to 1 large enterprise. Then 1 more. Then hire a dedicated Enterprise Sales Head and then ask them to build a team. Large customers are definitely more demanding, but they also pay well.
5. If you're Sales-led, explore some Marketing channels. Try running LinkedIn/Instagram ads. Explore Google ads, Facebook, YouTube, Tiktok, etc. Hire 1 person to just experiment across marketing channels and see if they can find a channel from where you can start acquiring customers. Then double down on that channel.
6. If you're marketing-led, explore Sales channels. Try hiring 1 Salesperson and ask them to meet some prospects and pitch them your product. Give them a goal of 3 - 6 months within which they have to sell enough to fund their salary.
7. Explore channel partnerships. Ask yourself - which companies can sell your products to their customers as a bundle or as an upsell. Become their Product partner and let them be your Sales partner. Refer point #1 above for more details on this.
A lot of you might be tempted to try out everything I mentioned above. Don't do that. Figure out 1 of the 7 points above which is relevant to your business. Execute it. Then delegate it to someone. Then pick another point. Repeat. Don't try everything at once. It's a recipe for disaster.
What other methods can be used to grow your startup? Share your thoughts below.
Wednesday, 1 February 2023
13 mistakes to avoid in your startup
13 mistakes to avoid in your startup:
1. Not getting Founders agreements done. I had a cofounder exit the company abruptly after some 1.5 years of starting up. I could save 50% of my startup only because we had a cofounder agreement. Make sure you have a lock-in of no less than 3 - 4 years.
2. Being slow with decision-making. I see so many founders getting into analysis paralysis over small things. Startups are all about moving fast, getting feedback and iterating because you cannot take decisions independently without customer feedback. So best to try and fail rather than over-analyse and not even try.
3. Not meeting customers. So many founders spend too much time on laptop building so-called "strategies" rather than actually meeting customers and gathering their feedback about their problem statements and what they want. Don't be that founder.
4. Not building a Customer Success team early on. The moment you have 2 - 3 large clients, start building a Customer Success team to retain these clients. It is easier to get revenue from existing customers who trust you than getting new, unaffiliated customers. Especially true for B2B SaaS.
5. Only chasing money. Remember that you are doing business to solve your customer's problems. Money is a byproduct. Focus on customer delight and money will follow. Focus on only making money and customers will leave.
6. Not treating your team members well. Your team members are the reason for your success. Without them, you are nothing. Take good care of them. Treat them well. Guide them and help them achieve success in their job.
7. Not being focused and chasing everything. Don't chase every sector, every industry, every geography. As Kunal Shah says - "If you try to become everything for everyone before becoming something for someone, you will become nothing for everyone".
8. Focusing too much on competitors rather than customers. If you like a girl, would you focus on what other boys are doing for that girl or would you focus on what that girl likes? Same for the customers. Focus on what the customer wants and not on what competitors are doing, and you will have a sustainable business in place.
9. Not delegating work and trying to do everything yourself. Look, we all have only 24 hours a day, of which the productive hours can be at most 8 - 12. Don't be that founder who wants to do everything perfectly and then ends up doing nothing and gets burned out. Remember - "Done is better than perfect".
10. Chasing investors rather than chasing customers. The customer is the only one who will pay you money. Everyone else will ask for money. Investors invest so that they can get more money back. Focus on the customer and the investors will follow.
11. Not planning things. Not everything can be planned because startups, especially early stage, are chaotic. But not having a plan is worse because you can't be chasing every new thing every day because you haven't prioritized your work.
12. Not taking risks/bets. Startups are all about taking calculated risks and then making them work. If you are too conservative about taking bets, your growth would be slow and that might demotivate you. It is better to take bets and fail and learn than not progress at all.
13. Quitting too early and trying too many ideas. I see so many founders trying out every shiny startup idea and then hitting a roadblock and then trying something new from scratch after a few months. This way, you definitely cannot progress. Every startup idea will have some roadblocks. Don't quit too early.
What mistakes did you make in your startup? Share them in the comments below.