Chatting SaaS Startups with Leo Lax: The journey from consulting to a scalable product company
I once had a discussion with a potential founder who was thinking about applying for our SaaS Accelerator Program. We sat down and chatted about how he was currently running a consulting company that also offered a customized software application to a wide variety of customers.
Although at this point the founder was customizing solutions for each of his customers, he began to realize there were significant patterns in what his customers were asking for and the solution he was delivering. He then thought to himself, “…I think I have a product.”
Starting out as consultants before or while building a product company is a very common roadmap that we see with many founders. In most cases, this cadence gives the founders visibility into the problems their customers are facing, and allows them to dive into customer discovery all while building solid rapport, which, in turn, can be leveraged to build a standardized product solution.
Consulting revenues are also a way for founders to bootstrap their startup. This common founder journey is one that even the most successful SaaS companies to date have undergone, including Hootsuite, a Canadian social media management company founded in 2008 (psst… did you hear? Hootsuite acquired our alumni company, Heyday.ai in a $60M deal, just last month!)
So, what are the things I need to consider when moving from consulting to product?
It is likely that you currently have a product that you’re customizing for each of your customers. But, to truly make the switch from consulting to product, you first need to lock down the feature set and function. This means, nailing down a standardized product offering.
This may feel uncomfortable for many founders because it means accepting that you will no longer be able to meet the needs of all your customers. Saying “no” to potential customers may make your skin crawl, but shifting your mindset to “design once, and sell again and again” may help ease your mind.
Instead of going around and figuring out how you can solve different problems for different customers, with customized solutions, you can now tell the world what you’ve got and the customer will come to you.
You will be now approaching customers from a marketing standpoint, which means calling out to those who have specific problems and showcasing the solution you have that addresses them.
Now that I have a standardized product, what’s next?
Now that you have a product, your job is to refine the product so that it is fully functional. This is a necessary step before you will realize any repeatable revenue from what you have built.
While this typically means that you’re losing money for the first few years of your product’s life, it doesn’t mean that your company or product won’t see success in the long term. You will simply be investing any revenue you make back into your product through sales and marketing activities, and focusing on tweaking and perfecting your product market fit.
While you undergo this refining phase in your startup’s lifecycle, either you will have to fuel your progress with internal funds of your own or you will have to get money from elsewhere – loans or VC money, which creates a different transition you will need to manage.
Clear communication + transparency with your investors
Today you might be the master of your destiny, but once you bring investors into the mix the dynamic will inevitably shift. Part of your startup journey will be learning how to manage this new dynamic, and how to make it work for you and your company.
In this new environment you will be accountable for sharing the success and failures of your company with your investors and consulting with them when making key decisions.
To succeed in this phase of your company’s journey, you need to learn to be comfortable to share with your investors both the successes as well as your failures. It is especially important to identify these obstacles and ask for help. Sharing your challenges with your advisors, mentors and your investors will bring to you the ideas you will need to overcome them.
First, the product is going to be pre-defined and set. You will sell that product to your niche market, and say NO to the rest.
Second, you will develop and address that market through marketing and sales activity. So instead of going out and asking what they need – you will instead tell them what you have.
Third, your financial structure will change because in order to do this, you will have to invest in your product well in advance, which usually is accomplished by bringing some investors to share the financial load.
The journey from consulting to product has been done successfully many times, but it has also been a source of anxiety and challenge for some. But it is never a reason to not try. As they say, “You can not hit a home run, unless you are in the game.”