Information Technology Dark Side

A Goal to Dream On
How do you think a company should set it’s growth goals for a SaaS product prior to its launch? What do you think those goals should be? What criteria might you use to figure it out? Would you look at market size, price point, competition market share, etc?

When I was daydreaming about TroopTrack.com, I did exactly that. After a while, I came up with a goal that was basically enough customers to make $500,000 in revenue after 2 years. Pretty reasonable right?

Wrong

The problem with this sort of goal is that I didn’t have a clue what I was doing. I wasn’t even in the market yet, and here I was prognosticating 2 years into the future.

And I call myself an agilist.

I should be ashamed.

A Series of Goals
Goals should grow incrementally, starting with the first attainable goal, and you should really only work on one goal at a time, the immediate next goal. That way, you can adjust future goals based on what you learn form working on your current goal.

A Goal to Start With
The very first goal you should have is to get a customer. One. This can be harder than you think, but whether you convince someone to pay real money for your product on the same day you launch or the six months later, the first time you get an email from Google Checkout that someone has paid you money you will be elated.

Why start here? It’s simple really. If you are focused on getting that one first customer, you will have a different mindset than if you are focused on getting 10,000. You’ll know their names. You’ll call them when they have problems. You’ll get out of bed in the middle of the night if you have to, just to get them to spend $X a month to use your stuff.

You’ll also be less flippant about cost. You’re only trying to get 1 customer, so why get a huge server? You can support one customer with a free (or practically free) account on Heroku. You’ll try hard to make one customer pay as much of the bills as possible.

You’ll also listen to the prospective customers and incorporate their feedback into your application. You’ll learn how much effort it takes to support one customer, and you’ll start to understand how many prospective customers it takes to create one paying customer.

All of this activity will lay the groundwork for your future business. You’ll develop a business model in your head that takes into account the cost of customer acquisition, support, etc. It will show you how to make your business profitable and sustainable.

Note: One of the things you aren’t thinking about when you’re focused on getting your first customer is expensive or broad advertising campaigns. It’s not time for that yet.

Next Goal: 10 Customers
This is the first big test. Can you repeat what you did to get one customer and have it work? Does your conversion rate (prospective customers to paying customers) hold true or spin off wildly in the wrong direction? Can you scale the interaction intensity up without running yourself dry?

Note: the number 10 is arbitrary if you don’t think about context. For a large, expensive SaaS product, that number should probably be 2. If your product is $35/year, then 10 seems about right. And, by the way, you’re still not thinking about advertising.

Can I get 100 people to give me money?
You’re probably starting to sense a pattern here. I’ve got more than ten paying customers, and I’ve learned a lot about my business. My conversion rate is holding steady at about 40%, up from a dismal 2% when I got my first customer. My revenue and my burn rate are holding steady and breaking even, but I don’t have enough profit to build a reserve.

How do I get to 100 customers? It’s finally time to start thinking about advertising. If I need 70 customers to get to 100, and my conversion rate is about 40%, then I need to convince 175 people to try it. How do I do that?

My thoughts turn to places I can advertise for free and target people who might be interested: Facebook and LinkedIn for instance. I can create a “fan” club in Facebook and advertise on groups in LinkedIn.

I also think about how I can add these customers without spending money. I need to preserve some of that revenue so I can have the money I need for my next goal.

And then: 1000 customers open their wallets
Once I’ve scaled my business to support 100 customers, things are a little bit different. I’ll have some decent cash flow, and since my costs shouldn’t really go up I’ll have a small amount of money to spend on advertising.

I don’t have a lot to say about this yet, cuz I’m not working on this goal just yet, at least not in a focused way. But I can see it coming, cuz it’s in my backlog.

Paradise or Purgatory: 10,000 customers
This is as far in the future as I can see. I don’t even know how I would scale up to that. I would need help.

But it doesn’t matter, because this goal is in the icebox and won’t come out until I get the previous goal.

You see, I’m waiting for the last responsible moment, which has yet to come.

Stumble it!