Top tips for successful SaaS businesses

💡JC's Newsletter #93

Nov 02, 2021

Dear friends,

In JC’s Newsletter, I share the articles, documentaries and books that I enjoyed the most in the last week, with some comments on how we relate to them at Alan. I do not endorse all the articles I share, they are up for debate.

I’m doing it because a) I love reading, it is the way that I get most of my ideas, b) I’m already sharing those ideas with my team, and c) I would love to get your perspective on those.

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💡Must-read

👉The Cadence: How to Operate a SaaS Startup (JoinColossus)

Consumer products tend to have high churn. As a result, you can't spend a lot to acquire that customer. So the only way to build a very large customer base is to somehow go viral. I mean that what by and large has been true with consumer products is that the big consumer companies didn't really spend any real amount of money on customer acquisition.

I think it is a very important point for our B2C offering. We are asking ourselves how do we make it viral and not driven by customer acquisition?

What makes for a good product hook?
Google probably has the ultimate product hook, which is just a search field. You put in your search query, hit enter.
And so with consumer products, you have to figure out what is the repeat transaction going to be?
And how do you translate that into a very simple, intuitive interface?
People make the mistake of trying to get users to engage in a complicated behavior before they've got them to engage in a simple one.

I found this point very interesting too. How do you start with a very simple offer, and then you expand?

SaaS customers have a much greater willingness and need to kind of engage with a more comprehensive product. They're willing to put up with more complexity and in fact, they often demand it and I call this the race to completeness. I still think it's very useful to have a product hook in mind.
Very often, it's a dashboard in the context of a SaaS company.

How do we make the best dashboard ever? One an HR wants to connect daily? Do you have good examples?

I've looked at the economics of both B2C and B2B subscription businesses.
What you see with individual products are just very high churn rates, 5% plus per month churn.
By the end of the year, you're lucky if you still have half your customer base.
Whereas with the B2B subscriptions, they keep adding co-workers and you can sell more seats. So what you see on the B2B at the team product is that not only do you have much less churn, typically call it 2%, 1 to 2% logo churn a month. You actually have net expansion.
From a business standpoint, there's no question that the economics are simply better than the individual product.

Interesting data points.

You have to have a reason for team members to want to use a product.
Those use cases typically involve some kind of collaboration within the product.
What I find works best for sales teams is to put them on quarterly plans. That's just by process of elimination. Monthly plans are too disruptive. In other words, if their plan is changing every month, does it create enough predictability for sales reps? If your sales plans are annual, that doesn't give you enough opportunities to make mid-course adjustments.

Pressure that is too short-term is counter productive for sales teams.

🏯 Building a company

👉How Big Tech got so big: Hundreds of acquisitions (Washington Post)

But the majority of acquisitions involved small start-ups with valuable patents or talented engineers, many of which led to products used today, like Google Docs and iTunes. Some acquisitions resulted in multibillion-dollar ventures, while others fizzled and resulted in products being sold off or shuttered entirely.
For the next decade, Apple acquired dozens of companies that contributed to its suite of tools still used today. It bought SoundJam MP in 2000, a music service that led to iTunes.
That same year, the company announced Apple Watch, with health tracking features that catapulted the company into health. From 2016 to 2018, Apple acquired three firms in the health-care space: Gliimpse (health data), Beddit (sleep tracking) andTueo Health (asthma monitoring).
Almost every Google product, from Google Docs to Google Earth, involved at least one acquisition.
Within a few years, the company was already making acquisitions, buying other search engine technology like Deja News and Outride to bolster its own.
When Google got into the office tools market to compete with Microsoft, it didn’t build from scratch. Instead, it bought start-ups already working on those products, like Writerly (which became Google Docs) and Tonic Systems (Google Slides).
Google’s revenue has always been driven by online ads, and in the mid-2000s, it bought the technology that formed the backbone of how these ads are purchased and displayed. DoubleClick gave Google a network of ad placements on hundreds of thousands of websites, expanding its reach beyond its search engine pages.
In emails obtained by the House Judiciary Committee, a Facebook executive said the company would spend 10 to 15 percent of its market value every couple of years to “shore up” its position with acquisitions.

👉Brain Food: On Chosen Talent, Writing, and Reasoning (Newsletter Hunt)

Since writing is very hard and rewriting is comparatively easy and rather fun, I always write my scripts all the way through as fast as I can.

👉 Dieter Rams Documentary:

Good design makes a product useful: A product is bought to be used. It has to satisfy certain criteria, not only functional, but also psychological and aesthetic. Good design emphasizes the usefulness of a product whilst disregarding anything that could possibly detract from it.
Good design is aesthetic: The aesthetic quality of a product is integral to its usefulness because products we use every day affect our person and our well-being. But only well-executed objects can be beautiful. It can make the product talk. At best, it is self- explanatory.
Good design is as little design as possible: Less, but better – because it concentrates on the essential aspects, and the products are not burdened with non-essentials.

🗞In the news

📱Technology

👉Ad prices (Platformers)

Ad prices are surging across every major social platform, according to this survey of the big networks. They’re up 89 percent year over year at Facebook, 92 percent at TikTok and 108 percent at Google.

👉Olympic Ratings, Google Earnings, YouTube and Brand Advertising (Stratechery)

And Performance Max, our newest AI-powered campaign, is now in beta. It lets brands buy ads from a single campaign across all Google properties – helping drive more online sales, more leads and/or more Store Visits. Early results for participating advertisers are great.

70% of YouTube’s reach was delivered to an audience not reached by the advertiser’s TV media.

🏥 Healthcare

👉Why going to the doctor sucks (Wait But Why)

Financially simple. Likewise on the doctor’s side: a flat, annual salary that, unlike the fee-for-service model, incentivizes quality over volume

Each member should be assigned to a three-person team that worked together to provide comprehensive, continuous, and coordinated care. Here’s how it looks:

The wellness advisor takes on everything about your health that’s outside of the doctor’s direct purview: nutrition, exercise, sleep, etc. Is Whole 30 the right kind of diet for me? Do air purifiers actually do anything? Is a Fitbit the best health tracker? The wellness advisor’s got you.
The concierge manager is a registered nurse and your go-to contact - someone you can text anytime about anything health-related. Basically how you’d treat your parents if they happened to be a medical professional.
Members get the distinct feeling that The Lanby gives an immense shit about them
Never asking a patient to repeat the same information twice

👉 Walmart Deal Shows Expansion in Telehealth, New Front With Amazon (WallStreet Journal)

Walmart Inc. said Thursday it purchased telehealth provider MeMD and plans to offer nationwide virtual health care services, another sign of the retail behemoth’s healthcare ambitions.
Two years ago, Walmart started opening a handful of clinics in stores, with doctors and dentists offering flat-fee primary care, such as $25 dental X-rays and $40 office visits.
Walmart can build its healthcare businesses by catering to consumers who crave lower prices and more transparency in healthcare costs, according to some of the people familiar with the situation, using its around 4,700 stores as a base. There are currently 20 clinics in stores with more planned for later this year.
Founded in 2012, MeMD provides virtual healthcare across the U.S. and runs 24-hour, seven-day-a-week service throughout the year. Walmart expects the deal to close “in the coming months,” the company said.

MeMD claims on its website that it provides telehealth for medical and mental-health visits to five million members nationwide. MeMD primarily sells its service to companies like used-car seller Carvana Co. who offer telehealth as a benefit to their employees.

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💡JC's Newsletter