This is the first blog in a two-part series by High Alpha’s Director of Go-To-Market, Egan Montgomery. You’ll learn his tried-and-true playbook for mitigating risk when launching and growing new SaaS companies.
It’s difficult to bring a SaaS company to market these days.
Buyers are complicated. Marketing channels are multiplying. New competitors emerge seemingly overnight.
Meanwhile, customer expectations are getting higher. Software users need more functionality from our products. They demand more value from our marketing, more knowledge from our sellers, and better support from our success teams.
No one feels this pain more than brand new software companies. Without customers, without a product, and without a large team, it’s easy to feel like new founding teams are on an island. In many ways, they are.
With limited resources, these founders need to make some existential decisions about their business, and they don’t have the luxury of being wrong too many times (or for too long).
More than 50% of startups fail within the first 24 months. That’s a pretty short shot clock, eh? So, what should we do?
The Best Learning Happens With Customers
There’s no way to guarantee success. We know this.
All we can do is search for ways to mitigate risk in a venture that is otherwise fraught with risk.
Picture this: Company A and Company B are incepted on the same day and set out to solve similar problems.
Company A says, “We need a product!” and so they get busy building. For six months, the team is hard at work. They debate the roadmap. They argue while they whiteboard out pricing and packaging. They build slide decks outlining their ideal customer profile and buyer personas.
Around month four, they hire a sales rep to sell the product when it’s ready and a demand generation marketer to drive leads for said rep. After six months, right on schedule, Company A launches the product. Yay!
Guess what? Nobody wants it.
The product isn’t selling. Prospects aren’t taking meetings. The rep is mad. The marketer is discouraged. Meanwhile, capital is running out and Company A has little to show in terms of traction. You know how this story ends.
Ok, so what about Company B?
They show up the same day as Company A, but rather than starting with building their product, Company B prioritizes getting their first customer.
Company B designs a creative pilot program that involves some light tech and supplemental services. They offer exclusive founding customer benefits. They pitch customers as advisors to give them a chance to weigh in on the future of their exciting product.
In exchange for founding customer benefits, Company B asks for true partnership. They want candid feedback. They want new ideas. They want to understand the nuances of the market. They want case studies and logo usage.
They sign a customer. Then 2. Then 5.
Company B is learning what to build (while building it!). They are learning what makes a good proposal and what customers always fight on the Master Services Agreement. They start to see what the marketing should look like and what their best sales plays are.
Company B marries their product and vision with what the market wants and needs.
This is how you mitigate risk. This is how you build a better product. This is how you find Go-to-Market fit efficiently.
Finding the “Sweet Spot”
It takes more than a good idea to build a breakout company. In the early days, it’s essential to stay focused on the intersection of three things:
- Your disruptive idea
- What the market wants
- What the market will pay for
So, how does this relate to the notion that the best learning happens with customers?
Well, your idea is your idea. But what the market wants and what they’ll pay for is discovered by doing, not by guessing. Founders who prioritize sales early find answers to these questions early. It isn’t rocket science.
It’s not about winning every deal. It’s not even all about revenue. Being told “no” by a prospect is a very useful thing, as long as you get them to tell you why. Was it price? Is your roadmap missing important integrations? Are they the wrong person to be talking to at the business? Are you talking to the wrong type of business?
This customer learning is critical for dialing in your sweet spot and quickly achieving Go-to-Market fit.
Center the Conversation Around Real Customers for Better Decision Making
Amazing things happen when the conversations within your business are about real prospects and real customers.
Some guesswork and hypotheticals are necessary, but it is remarkable how much more effective decisions are when a conversation is rooted in the real world.
For example, let’s talk about pricing and packaging. Some founders will spend hours toiling over pricing and packaging, considering every input and detail. The pursuit is noble, but the market will almost always blow it up.
Other founders spend less time on pricing and packaging upfront. They put together something defensible and then show it to prospects to get a reaction. They ask for feedback, and they work with the market to edit and improve the model.
Which founder arrives at market-ready pricing and packaging first? Yeah, you guessed it. The Founder who asks their customer about the pricing.
There are countless other examples of this, ranging from product decisions to sales to brand marketing and everything in between.
Don’t waste time guessing when the answers to your most important questions reside with your customers.