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This article was published on December 22, 2017

Building a SaaS product? Avoid these 6 common mistakes at all costs

Building a SaaS product? Avoid these 6 common mistakes at all costs
Nathan Resnick
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Nathan Resnick

Nathan is a serial entrepreneur who currently serves as CEO of Sourcify, a marketplace of the world's top manufacturers. Having brought doze Nathan is a serial entrepreneur who currently serves as CEO of Sourcify, a marketplace of the world's top manufacturers. Having brought dozens of products to life, he knows the ins and outs of how to turn ideas into realities.

As an up-and-coming software as a service (SaaS) business founder, you face some risks. Risk-taking is inherent to building a business and making mistakes is also often inherent to starting your own company.

I’m a nontechnical founder myself who now runs the fastest growing sourcing platform that helps hundreds of companies produce products around the world. As we’ve scaled, I’ve made a ton of mistakes that I could’ve learned from others. Some of the world’s most recognizable SaaS businesses talk about their failures openly so they can help others in the industry avoid similar issues.

That’s why I’m sharing my most common mistakes that I’ve learned through my own experience and through others.

1) Confusing the cloud environment with the SaaS delivery model

When I was first starting Sourcify, I used the words“cloud” and “SaaS” synonymously. I realized that there are cloud-based SaaS product and also location-based SaaS products.

I learned this from Guy Levy-Yurista, the head of product at Sisense. When Guy was growing what has now become the top company to analyze business analytics, some of their clients had an on-premise version of their products. That was radically different than having it in the cloud and meant they had to face serious challenges when closing deals with some of their first clients.

As a SaaS founder, this is important to realize as you look to sell your platform to other companies that have software you need to integrate with.

2) Undervaluing your product

SaaS pricing isn’t easy, which is why a lot of companies end up undervaluing their products and services. To avoid this issue, start by looking at your competitors’ prices.

Although your pricing structure shouldn’t be based solely on your competition, their numbers can serve as a starting point for your research. When thinking about pricing, startups will tend to try and provide more value for a cheaper price. This way they can cut out the incumbent solution and win business. Selling the same product for the same price rarely works.

3) Failing to pivot

The SaaS market progresses so rapidly business leaders often have to pivot to survive. Your first business model definitely won’t be your last. Most successful software companies start with one focus and then realize another market that can utilize their platform.

Resisting change or persevering through adversity is almost always a mistake when building a SaaS product. For example, at Sourcify, we started manufacturing for smaller scale clients producing a few thousand units at a time or less. Now, we’ve realized the buyers at larger corporations are having the same problems with their supply chain.

From this insight, we’re moving upstream, regardless of the money we raised to solve the SMB problem we originally saw. No matter how much funding you’ve raised or how many hours you’ve put in, remain open to pivoting.

4) Providing insufficient customer service

When you’re building a SaaS product, one of the last things on your mind will probably be customer service. After all, you’re going to be swamped building out a great software as a service product.

Well, according to Lincoln Murphy, SaaS customer success expert, “At its most basic level, Customer Success starts out as an aim, not a department of people or a group of processes.” As you build your product, think about what your customers need and want. In fact, you’ll want to keep them in mind as you create and establish every facet of your business.

5) Dismissing passion

You don’t need to be passionate about building a SaaS product, but you’ll probably be more successful — and happier — if you are. When you are considering what your SaaS product will be, try to align your offering with an area you’re already interested in.

If that’s not possible, at least try to find some excitement towards your customer base. Allan Branch, co-founder of LessEverything, learned this lesson the hard way when he built LessAccounting.

He and his co-founder loved small businesses and wanted to target them. However, they soon came to realize that accountants and CPAs were the groups they’d need to communicate with to sell their product. Neither founder wanted to communicate with accountants, which hindered their company’s overall growth.

6) Forgetting about the competition  

It’s easier than ever before to build a SaaS product. More companies are fighting for space in the market, and if you want to compete, you’ll need to keep a close eye on your competition.

Chances are other companies that offer similar services are already in your niche. If you want to compete with them, you’ll need to stay up-to-date on their offerings and successes.

At my startup Sourcify, our marketing team utilizes SEO and brand mention tools to see who is making moves. As an example, if a competitor starts to push hard to rank for a keyword, we may also make offensive moves to outrank.

Competition can also be seen as a way to collaborate. Think of and Paypal. Without their merger, the two companies may have ended up killing eachother and their sure wouldn’t be what’s known today as the Paypal mafia.

Avoiding past mistakes

When you build your first SaaS product, there are countless things you can learn. Although learning from history might not be the most exciting lesson, there are critical things that you can pick up from business owners that have walked the path before you.

Although the six mistakes above are by no means comprehensive, they do represent some of the all-too-frequent issues that often hold entrepreneurs back.

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