5 Deadly Mistakes That’ll Kill Your SaaS Business
Over the past year and a half, I’ve been building my SaaS company, MailTag.io.
I personally invested over $250,000 into building the product. 😳
In retrospect, I made a ton of mistakes.
(Perhaps, more mistakes than any other founder in the history of SaaS!)
So, I founded this publication to help other aspiring SaaS founders avoid some of the mistakes that I made.
Enjoy this first post!
Mistake #1): Pricing Your SaaS Product Too Low.
The lower you price your SaaS product,
the lower the quality of human being you will attract.
Your worst customers will typically be those who pay you next to nothing.
Regardless of your industry, your SaaS product should be priced at a minimum of $15 — $25 a month.
“But Alex! That’s crazy. All of our competitors are charging just $5 a month!
If your product is better than your competition’s products, and you are providing a unique solution that solves a real problem that your customers are facing, you should charge more.
Trust me! Many beautiful things will happen once you raise your prices.
For one, customer churn will dramatically reduce.
MailTag’s Steady Customer Churn Reduction:
*Obviously many other things went into this accomplishment, behind the scenes. For example, as time went on, our product improved with new features.
But nonetheless, the biggest factor in reducing our churn was raising our price.
When you center your product’s value proposition around “being the cheapest”, you’re making a massive mistake.
People will buy your product because it solves their problem. Not because it’s on sale.
Mistake #2): Avoid Freemium (At All Costs!)
Perhaps the worst mistake you can make when starting a SaaS company is offering a free plan.
Free plan users will inevitably drain the life out of you.
In my experience, they complain the most to support (draining valuable resources away from your paying customers) and are typically people that are very difficult to deal with.
“But Alex! There are many successful freemium companies! Just look at Dropbox!”
Listen, I’m not saying freemium is impossible to do (it’s obviously not).
But here’s the indisputable truth: It’s 1,000 times harder to build a freemium company than it is to build a subscription-only company.
Look — I understand why so many people are attracted to freemium.
It would be “cool” to have millions of users on your SaaS platform enjoying your software.
But what you don’t see at Dropbox are the tens of thousands of support requests that get submitted every day from their millions of free plan users.
What a headache! 🤯
Still not convinced that freemium sucks?
Consider the data storage and hosting cost to support a massive number of free plan users.
(Not to mention your support team costs)!
The bottom line: You’re providing a valuable service that solves a real problem. Charge for it.
My personal suggestion is to offer a free 14-day or 30-day trial.
This way, your customers can try your product completely free (no risk!).
I also recommend not requiring a credit card upfront. ❌ 💳
Instead, simply require the user to pay at the end of their free trial.
Why? Because if you’ve done a good job at building a valuable product, then you should feel confident that people will pay for your service at the end of their 14/30 day trial.
Requiring a card upfront creates friction in the onboarding process and is never a good idea.
Mistake #3): Not Listening To User Feedback.
“To hell with user feedback!
We tell the users what they want!”
— No successful SaaS founder ever
I’ll admit it. I made the mistake of trying to be “a Steve Jobs”.
During the first year of running my SaaS company, we never reached out to users for feedback or ran a single survey. 🤦
My philosophy was that I knew what I was doing and our users didn’t.
… That was dumb.
There are endless reasons why you should run surveys and collect user feedback.
… Your users may have valuable ideas for product feature/integration suggestions.
… Your users may know of product bugs that your team is unaware of.
The list goes on.
One of the most invaluable pieces of feedback you can collect from your customers is their phraseology when describing your product.
Listen carefully to the way your users describe your product. Look for patterns. And then use this data to experiment with marketing campaigns.
For example: If many of your customers are describing your product as a tool that would be a great fit for “product managers”, you should consider marketing to that audience.
Mistake #4): Not Using A FB Retargeting Pixel.
Have you ever visited a website and then started seeing ads for that website everywhere?
Yeah, that’s retargeting.
If you do not have a Facebook retargeting pixel on your website, you’re literally throwing money out the window.
The easiest customers to acquire with Facebook ads are people who have already been on your website (the technical word is “retargeted traffic”).
Why is retargeting so awesome?
Because in my experience, it costs about 3–5X as much to acquire a customer on Facebook using cold traffic (people who have never heard of you before).
“But Alex! I don’t plan on running Facebook ads!”
True, but you may change your mind in the future.
So, you might as well begin collecting pixel data now. Plus, it’s free to set up. So there’s nothing to lose.
Mistake #5): Self-Cancellation Ability.
Do not give your users the ability to self-cancel their subscriptions.
At first, this may sound slightly “evil”, but it’s for a good cause.
Communicate with every single customer who wishes to cancel their subscription. Learn why they wish to cancel.
Then, build a centralized spreadsheet/Google doc with all of the cancellation feedback.
If you start seeing a pattern (such as multiple customers leaving because your product is “laggy”), you probably have a product issue.
The other advantage to removing the self-cancelation ability is that many times you can save the individual from canceling altogether!
You’ll likely receive many emails from customers who simply need some clarification on how to use your product (giving you the opportunity to save the customer from leaving).
Here’s a quick message you can provide to users requesting to cancel:
No problem, I’d be happy to process this cancellation for you.
But first, would you be so kind as to please let us know how we could have served you better?
John Smith | YourCompany.com”
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