Let’s talk about how to get your B2B SaaS business on a path to profitability ASAP.
Related Post – https://nxtstep.io/daily/profitability-and-the-10x-effect/
Deeper Dive on SaaS Economics – https://nxtstep.io/blog/how-the-world-of-saas-economics-is-changing/
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Episode Transcript
Hey folks. Sean here and today. What I wanna talk to you. Is the level of importance in designing a path to profitability for your B2B SaaS business? Now, being profitable has any number of different advantages, but there are many startups out there not following this strategy and getting themselves in trouble.
We’ve talked a lot about Uber and how. When they came to their ipo, they were pretty direct about the fact that they may never have a path to profitability. Economically. That model just doesn’t make any sense to me, and for a million reasons, I recommend you stay away from it. We see what that can become with companies also like WeWork, whose IPO was ultimately canceled because they ultimately were trying to do the same thing.
So why one was able to move forward and the other wasn’t auto. I can’t answer that question, but regardless, I think that points to the fact that that strategy’s not great. So why do you want to be profitable? . Some of the most obvious reasons and important ones are, number one, you can ultimately fund your own growth, so you can move at your own pace.
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You can grow as fast or as conservatively as you would like to, but. two and three are that you can maintain maximum control as well as you can stand a benefit from the majority of the rewards of your efforts because you aren’t making a mess of your cap table by bringing in a ton of investors trying to figure things out, especially on the earlier side, right?
I’d rather you have a lot of that mapped out before you might need something to grow from there, and that’s akin to like starting the fire and then looking for gasoline if you want to. Larger, generate more heat, whatever, right? Not necessarily to start the fire from the beginning. I think you can do that yourself by getting a strong value proposition designed around an ideal target market.
Now, I wanna talk to you about a tactic that I’ve used several times rather successfully in order to get my software businesses to profitability as soon as possible, and it’s something that I call the 10 x effect. Now, the gist here is, . Leveraging the 10 x effect means that for your target market customer, you’re going to figure out how to improve upon the solution that they’re using today by a factor of 10.
Now, when I say solution today, that can be another piece of software that can be done by people, that can be a services business, whatever it is they’re using to solve their problem. That’s what you gotta be better then, and through discovery, you can figure that out. So if you find. Their top problem, how they’re trying to solve that today and how effectively that works.
You can figure out whether or not you can do that better by a factor of. . Now, some examples of what category that might fall into could be something like faster, cheaper, better. In that if you can do it 10 times faster, 10 times cheaper, or 10 times better, you’ve successfully achieved the 10 x effect, and that puts you on a strong path to profitability because there’s gonna be plenty of room there in order for you to offer the service design and build the solution, deliver it in a way.
Makes your customer extremely happy because you’re providing with a very strong return, which means there’s gonna be enough room in there for you to be able to generate and build a highly profitable and successful SaaS business.