Sell or Build: What a SaaS Entrepreneur Needs to Focus on
Written by John Stoddart, Consultant at ChannelCreator
As the owner / developer of a SaaS B2B solution you are faced with what is, essentially, a financial dilemma. What should you prioritise first: building out your product (spending money) or finding early beta customers to sell it to (making money)? Unless you are independently wealthy and have endless finance to fund your venture.
To boil it down, do you sell or build?
It many ways, this is a simple and stark question for a business owner. What is the priority? Producing something which exists beyond wireframes; something that actually works and that completes your product vision. Or selling an incomplete, early beta vision at the beginning of the cycle.
We’re going to take a quick look at the pros and cons of each approach.
Build it and they will come
If you’ve ever seen the Kevin Costner movie Field of Dreams then you’ll know about ‘build it and they will come’. It is about believing in your product and having the faith in it to see it through to the end. But this raises two very important, mildly philosophical questions: when is a SaaS product finished (answer = never, you continuously make it better) and at what point can you have sufficient belief in a product so you can convince someone to buy it even if it isn’t complete.
There are significant advantages to building out first. If you have a clear plan of what the finished article looks like / smells like / behaves then building out can be a good approach. This does need to be balanced especially if you operate in a competitive marketplace. So, if you’re new solution is entering a highly competitive market, then it might actually be better to sell earlier (when incomplete) to gain first mover advantage (or simply so someone else doesn’t eat your lunch).
Another significant advantage to building out first is to the value of the business itself. You are building a tangible asset and, in the worst case, you have something to sell. You are also in a better position to speak to funders as you have something more substantial on which to base their valuation. But funders will also want to see revenue growth and customer adoption too.
Sell, sell, sell (and then sell again)
There is an old phrase in the IT world which everyone should recognise: vapour-ware. It has been around for years and it revolves around IT companies selling something which doesn’t really exist. There are companies which are renowned for it. They announce a product and then build it out if enough customers show interest and ask for it.
What we have to consider here is the commercial reality of any business. The raison d’être of any company is to make money in the long run and selling early makes this very much more easy. Funders will have a more favourable view of a company if it has paying customers even if the early ones aren’t paying full commercial rates. As a SaaS publisher you will be measured against a number of metrics and one of the more important of these is net additions. Getting this right early is extremely important.
How do you sell something that doesn’t really exist? You can ask a management consultant because they don’t really have anything tangible to sell (ever). Perhaps you might also want to take a look at Fine Arts salespeople who seem to be highly expert in maximising subjective value. My point is: it can be done.
One last thing that selling allows you do is expose your product to real users. It will be of great help with product development. You might think you know how customers will use your products but, in my experience, you will be surprised at how paying customers will use it in reality. You will only find this out when they have their hands on it.
Sorry, but that’s not made it any clearer
In reality, the optimum answer is to do both almost at the same time (slight lag to sales). It is important to sell and build at the same time. You do need to make progress with building out your product so you have something to demonstrate to a prospect.
It would be usual for a company to have enough money to fund a complete build out without having some beta customers. Early customers will be very useful: case studies, product feedback, sales momentum, market buzz and somewhere to take prospects to see the reality.
Our advice is…
You do need money to build out so focus a bit more on selling as early as you can. Do some sweetheart deals early on but make sure your product has the right functionality and build sales momentum.
Acting as a local sales office for B2B SaaS and software companies, ChannelCreator delivers UK & European sales acceleration and rapid ROI, providing clients with exactly what they need to set up, break into and expand within the European market.