6 Mistakes that will kill your B2B SaaS Startup
When I was 16 years old, I was daydreaming about an automated business. I imagined money flowing into my account while I was asleep.
I was so amazed by stories of companies like Salesforce, Buffer, or SendGrid and how they could create value and earn money with online software.
I started programming when I was 11 years old. I soon realized that I could make money selling software. I loved programming and making money, who wouldn’t want to do that?
I spent tons of time developing the product and building a Marketing Machine. Three years later, growth was non-existent, so I pulled the plug.
I thought that Marketing was the key to everything. I believed that by having the right kind of traffic coming to my website, these people would become my customers. I was wrong.
Marketing isn’t the answer to all your problems. Marketing takes blood, sweat, and tears. It takes plenty of resources. Above all else, it won’t save a bad product.
As a marketing consultant, I often hear comments like “I’ve got about 20 clients. We want to start marketing to acquire tons of leads and scale this up”. This article is my answer.
This post was written for first-time entrepreneurs with less than $20k of MRR. You don’t fit this profile? You can also keep on reading to learn about my greatest failure.
- When you’re just starting out, your Product matters more than anything else. Forget about Marketing and use Direct Sales instead to gather feedback.
- Forget about all these sexy startups writing about their success. They aren’t writing about the endless nights close to bankruptcy!
- Content is slow. Paid acquisition is extremely expensive. If you decide to start Marketing, make sure you’re making a deliberate decision.
- Always choose the fastest path to your customers. Get rejected as quickly as possible and never hide behind a website or a blog post.
Thinking that Direct Sales is for Losers
Back in those days, I wanted something automated. I wanted something sexy that could pay for my summer vacations (Croatia is expensive).
When thinking about ways to get feedback clients, I didn’t want to go the good ol’ prospecting ways. I thought “Who acquires customers through email these days?”.
I thought to myself “All these companies acquire clients thanks to Marketing. I’ll do the same”.
Little did I know that most of them start with direct sales and emailing people to move past initial traction.
Mistake #1: Thinking that Direct Sales is for losers
Patrick Barnes from Advocate.ly got this part right:
When starting Advocately, we didn’t start Marketing straight away as we had very limited time. We focused on Customer Development, Validated Learnings and Customer Success instead.
Our thinking can be summarized by this quote from Eric Ries, “The only way to win is to learn faster than anyone else”. At this stage, more validated learnings are significantly more important for long-term success than any number of leads.
Besides using referrals and Word of Mouth to fuel Growth, we were also reaching out to people that fit our ICP (Ideal Customer Profile) by email and LinkedIn messages. These were personal messages and we were genuinely interested in their feedback.
Starting Marketing would have distracted us from our end goal: Building what our customers need to achieve their desired outcomes (also called Customer Success).
As Patrick puts it, you’re not in the stage for “Growth” nor “Marketing”. You’re in the stage for validated learning.
Get in front of your prospective buyers as fast as possible and get their feedback on what you’re building.
Content is all about “getting rich quick”
Inbound was just starting to rise, and all the cool kids were saying “Content is King”. I thought “Let’s create content. Traffic will flow in, and I’ll get tons of leads”.
I thought Content would be cheap. I would write some stuff and Google would send me tons of traffic, and I’ll be able to book MRR like crazy.
Here is what happened:
Some of the mistakes I made:
- Writing solely on my own blog
- Writing thinking that I knew their problems
- Writing without having a promotion plan in mind
- Thinking that SEO would be the main traffic driver
It took me two years to go from 0 to 7k visitors. I can see all the rookie mistakes I made, but you’ll probably face the same issues if you have no Marketing experience.
Mistake #2: Content is all about “getting rich quick”
I thought at the time that content was cheap. Mainly because I was the only writer, thus “money not spent”.
Let me tell you this, if you’re a founder you have a huge opportunity cost on writing content. It’s time you aren’t spending elsewhere.
If you decide to hire someone else to write your content, it’s going to take them two years before they figure it all out, and it’s going to cost you at least $100k.
Mistake #3: Content isn’t cheap
Signups were still low and the business wasn’t growing. I had no idea why. Which brings us to my next point:
Hiding behind Proxies
When you are just getting started, you don’t have many leads. You’ll try different things to see what sticks.
The main issue with that approach is that you have nothing to benchmark your results. You launch stuff, but you have no idea of what’s working and what not. Here are some ideas:
- Your product doesn’t solve people’s problems.
- You didn’t use the right distribution channels.
- Your website doesn’t work well on mobile.
- Your website isn’t well optimized (CRO).
- You aren’t writing on the right subjects.
- You didn’t target the right keywords.
- Your messaging is off.
The list goes on and on. You have no way of understanding what went wrong. You’ll be completely in the dark.
Nathan Barry grew ConvertKit from $0 to well over $500k of MRR. Here is a quote from a recent interview:
Starting over I’d also focus on direct sales sooner. The feedback from each rejection is so much more powerful than just having your online sales pitch silently rejected hundreds of times each week.
The lack of a solid baseline makes it very hard to start doing Digital Marketing because you don’t have a way of understanding why you’re being rejected.
Mistake #4: Not relying on direct feedback (hiding behind proxies).
Optimizing before launching
The same as everything in business, running a good Marketing campaign comes by having the right priorities. It comes with prioritizing high-impact areas.
Before I acquired a single visitor, I already had tons of systems in place to convert them to a customer.
I didn’t want to waste any of these precious visitors that might turn into a customer. I can tell you now that this didn’t matter at all.
Mistake #5: Optimizing before I launched
If you don’t have any traffic, don’t waste time on creating the perfect funnel. Acquire traffic; you’ll figure out your funnel later.
The Economics behind Paid Acquisition
This is one mistake I didn’t make because I was too broke. However, many entrepreneurs think that Paid Acquisition can solve their Marketing problems.
It’s one of these channels that you can turn on and off in a snap. CPC might appear low so you might say to yourself “Let’s do a quick experiment and see where it goes”.
Let’s say you turn on Paid Acquisition tomorrow, and you realize that it’s driving some results, will you have enough money to fuel growth?
Assuming a fully loaded CAC of $650 and an ARPA of $60, it will take 11 months to be profitable on a single customer.
If you want to acquire 5 per month, here is what your runway will look like:
You might get away with using Paid Acquisition if you have other channels funding your growth (with better economics). However, if Paid is your only channel, be ready to invest $65k (case above) to start turning a profit.
You’ll also note that “Cash” here doesn’t include anything else than your Marketing costs. Forget about engineers and infrastructure. This is just Paid Acquisition.
If you’re bootstrapped, funding that growth might kill your business. The above graph doesn’t even take Churn into consideration.
You need to be able to say “Let’s invest $10k and see if that works. If it doesn’t, it’s fine; we’ll do something else”.
Why $10k? In my experience spending more than a million in Paid Acquisition, you’ll need enough budget to experiment if you want to start seeing results.
If you already have plenty of customers or you’re VC funded, Paid Acquisition might make sense. If you’re just getting started and you only have a few bucks in the bank, this is probably not the right move.
The Impossible Pivot
Back to my story. After two years of running the business, I had everything to succeed (IMO):
- Relationships with Bloggers
- Sales Presentations
- Lead Nurturing
- Social Profiles
- 100+ Articles
- Case Studies
After these two years, and creating all these materials, I realized that I was on the wrong path in terms of product.
Creating all these materials creates a lot of internal friction. Until you’ve truly validated your product and who you sell to, you probably shouldn’t be doing any Marketing.
I built a Marketing machine focused on the wrong product, for the wrong people. I had to shift my positioning and product in a radical way. I had to start over.
I pulled the plug. I was too tired of this business. I invested all my energy to build it, just to realize that I was focused on the wrong thing.
Mistake #6: Focusing on Marketing before Market Validation
Marketing won’t save a bad product
That was an expensive lesson to learn. I spent years building that business and it never really took off. My main mistake was to think that Marketing would solve all my problems.
Marketing would allow me to sell while I was asleep.
Marketing would be a quick and cheap way to generate leads and customers.
When you read success stories online, they rarely discuss the hard work involved in achieving their success.
They just speak about “The Good”. Always try to see “The Bad and The Ugly”. It worked out for them. It might not work for you.
Marketing won’t save a product that doesn’t solve customer’s problems. Don’t hide behind Marketing. Get out there and find people to talk to!
If you don’t believe me, you might believe Dan Martell who created and sold three companies (Clarity, Flowtown…):
What I ended up learning the hard way — when building Flowtown — was that you couldn’t market your way out of a bad product.
Most people create a product based on an idea they had in the shower. Then they start doing Marketing to acquire customers. Don’t be that guy!
You might want to start as early as possible by building an audience, but make sure that they’re the right people to target.
Especially during the early days, place customers at the center of your attention. Start by building something awesome. You’ll figure out Marketing later.
Working on demande generation before PM fit seems insane, especially when you look at the time involved to get a return on your investment (last plot).
For the sake of curiosity … could you tell a bit more about the product you tried to launch and why you didn’t try to refocus on customers before investing in marketing again later on?
It’s an awesome question! I was working on an invoicing and cash flow solution for SMBs (to solve the needs I had at the time). I decided to stop because it meant to start over. I would have to considerably shift the product and the marketing to make it work.
Which leads us to “Why not start over?”. It’s one of the hardest thing to do as an entrepreneur but you need to keep your energy levels and motivation above a certain threshold. When you have no real momentum for 2 years, your energy really goes down. Down to a point where you just want to throw it all away…
Hi there, thanks for this, I must admit I was impressed with the article, very comprehensive and complete! I completely agree on your point about content marketing, and how we should treat it as a long-term investment. I have to say, however, I must disagree that in my opinion, proper content marketing is indeed not cheap, and we have to play smart. Thanks!
Hey Mike, Sorry if my article wasn’t clear. I actually meant to say that content isn’t a cheap strategy. The article states the cost of hiring and producing high quality content as being a main driver for very high CAC. Thanks for your comment!