Resources
- https://microconf.com/sois-report-2021
Transcript
Josh: [00:00:42] Cool. All right. So moving on to section five for SaaS metrics this section dives into the companies. SaaS metrics data like monthly recurring revenue, MRR growth rate trial to paid conversion rates and more so do you want to start again or is it my turn?
Nate: [00:01:01] I think it’s your turn.
Josh: [00:01:02] Ah, okay. So I think the biggest thing, you know, and I’m probably going to just beat my drum on this, on the, on the, the selection bias of who fills this out.
But if you look at the chart, you know, there’s, there’s a good amount in the less than a thousand dollars MRR range in terms of monthly recurring revenue. And if you even look on the first, like the first three items, less than a thousand, sorry, I’ll just group them all less than 15,000 overall. I mean, there’s, this, there’s a significant swath there, which essentially adds up to probably, well over 50%, it’s probably looking like 60% ish, maybe more And yeah, it’s, it’s not surprising to me.
And I think because I feel like the higher you get, the more you don’t want to share anymore. Like, I think this get tallies into the whole building and public thing where I think people are happy sharing and sharing the wins. And they’re looking for a coach. They’re looking for cheerleaders, community support, all these things in these lower ranges.
But once it starts getting like, you know, to where, Hey, am I getting prying eyes or is someone wanting to take away my market share the building public type of thing? I think you, you start getting less respondents. So
Nate: [00:02:20] Yeah. And it’s easier. It’s easier to build in public when you’re in a crowd, but when you’re the special one that everyone wants to beat, you don’t really want to tell everybody, you know, you’re your special
Josh: [00:02:31] Right now you’ve got a target on your back too. And then we’re just like, Oh, there’s there’s cheese down that tunnel. There’s other things. And I could be like, Nate, but let me just add this twist to it. Or I can be just like Nate. There’s a lot of, there’s a lot of copycats out there too. And there’s probably a lot of just people listening to podcasts, people, listening to things, just searching for their idea.
And, you know, from a moral standpoint or an ethical standpoint, they don’t have any problems. Just kind of ripping stuff off. It’s it’s sad to say,
Nate: [00:03:01] Yeah. And I think that’s often overlooked. I was kinda naive on that one until I listened to a podcast recently and they were talking about the thousands of Groupon clones that came out after Groupon started to be successful. And I was just amazed by that.
Josh: [00:03:15] Right? Yeah, no, no. I know they do it with like countries, especially if someone is like going to do location-based types of things where certain areas, they just kind of beat them to the punch and there’s. A lot of the ride sharing stuff. I think a lot of companies did that. And then, you know, they got bought by Uber because they laid down the infrastructure is easier for them to buy it.
Then build, you know, the ride share in X country for themselves too.
Nate: [00:03:40] Fun fact, I made a ride sharing app way back in the day.
Josh: [00:03:44] Did you the Canadian, right? Or just your, your, your Canadian town ride sharing app.
Nate: [00:03:49] Basically it was the, the Ottawa to Toronto ride sharing app because that’s the only ride I cared about.
Josh: [00:03:54] Nice. Where did that go?
Nate: [00:03:57] Just about nowhere. Actually. I had a I had a partner with it, a guy who was a business guy and we drew up all the papers and everything and I built out the app and then there’s kind of like, you know what, this isn’t really going to work.
Let’s just up here. We all use Kijiji. I think down there you’d probably use Craigslist or something, but Yes.
Josh: [00:04:15] Interesting. Okay, cool. Yeah. And my only other comment on this section on the SAS metrics I, again, I think they, they were, there’s a lot of charts on here about the credit card upfront stuff. So this is another one of those areas I felt like was to me, you know, beaten to death a little bit. So
Nate: [00:04:33] Well, one thought I had on this section also is the amount of people who replied with, I don’t know, four metrics especially like a visitor, a website, visitor to free trial conversion. Maybe that’s just because a lot of them are early on. But I feel like when I was working on status list especially the first that’s like the first thing I did was.
Set up some automated metrics on that. So I could track how my changes were affecting things. I was just a little bit surprised by that.
Josh: [00:05:03] I am too, but I think when you put it that way, like, are you tracking it on status lists anymore?
Nate: [00:05:09] yeah, I still do. It’s just automated. Right. I just look at the numbers.
Josh: [00:05:12] Okay. Okay. Well, there are maybe you’re you’re in a minority there, or since you already set up the instrumentation, so to speak, to do it, but you’re right. I mean, I think that it is surprising in this day and age with the metrics driven stuff. That’s like, you can get this pretty easily. It’s not like it’s, it’s buried, buried somewhere.
And some of the tools even provide this practically for you. I think if you’re, if you use some of these in a certain way,
Nate: [00:05:37] Yeah. And for all those people who built the MVP and the prototype, like it’s like two database fields, then you would know that stuff. Yeah.
Josh: [00:05:45]Yeah, I mean, aside from that, I think most of the, probably because I looked, I would say starting this conversation off with the section, because there were most of the, the the entries were in the lower area like the below 15,000 MRR and it’s, I don’t want to insult anyone. That’s nothing to scoff at.
That’s it
could be, it could be great. So but then reading through some of the other charts in terms of like churn and in terms of, I think there were some other ones on, you know, average, monthly turn over the past three months, things like that. I, I guess for me, I just, I didn’t have a lens to look at with this very strongly that I was like looking for specific insights on, so.
Nate: [00:06:28] I think what’s also hard with these is especially if you’re a younger company or a smaller company, is that the, like the churn numbers and even like the the percentages of conversions and stuff like that, they just move around so much and so fast. Like you could have one really bad month and you have this huge turn rate and then the next month, you know, the next couple of months you could be all fine.
And I think that’s important to think about because. When you measure things a lot, you can kind of get stuck on those measurements and kind of think that you know, maybe you really screwed up and maybe you did nothing.
Josh: [00:07:03] Yeah. I think, I think you’re right. It’s like, like looking at the growth rate one. It does remind me when I’ve hear. Sometimes I hear, you know, a founder get on a podcast and they talk about, yeah, I’ve had like, you know, double digit growth and it’s like, well, yeah, when you’re. On the smaller end, that’s easy to maintain, you know, once you get higher.
So I think there’s a lot of, there’s definitely some segmentation in this that could be more helpful and more useful, even if it was segmenting, like, Hey, here’s the, let me batch this into two groups like below $10,000 and above $10,000. Like now let’s look at these that could for me start to draw out more conclusions and more interesting artifacts that like, okay, you’re at least in this range.
Or like I said, Oh, what’s your turn rate? When you have five customers and one drops off, Oh, you’re 20% germ. Like, it’s like, okay, well that’s not bad when you’re, you know, you’re getting your first five or 10, but you know, when someone is at, you know, 500 customers and they’re, they’re dropping, you know, 10 customers you know, a month.
Then that, or, sorry, 10 a hundred, sorry. A hundred customers a month. That’s like, Oh,
Nate: [00:08:16] Yeah, yeah, exactly.
Josh: [00:08:19] cool. So anything else, or should we move on to marketing?
Nate: [00:08:24] no, I think that that’s good there.
Josh: [00:08:26] So, Oh yeah. Marketing the section. There’s this section covers several topics around marketing, including ideal customers and top advertising platforms. So I believe it is your turn to go first.
Nate: [00:08:41] so a bunch of the stuff in here just seemed like pretty expected to me, like categories that people were targeting, whereas like businesses, you know, and that a lot of the businesses were 10 to 50. Employees. I was a little bit surprised that there are people targeting the one to nine employee business range.
Just because in my consulting experience, I’ve found that generally people in the one to nine employee range, their purchase decisions feel a lot like a consumer purchase. At least that’s the way I’ve experienced it. And so are surprised that there’s that many people targeting, targeting that niche.
Josh: [00:09:19] interesting. Yeah, that’s kind of, it goes with one of the comments I was going to make, which is that before that they have this All right. What do they even call those like cloud charts or something before with the names are bigger with more numbers. But the first question is what are the most common rules for your customers to hold?
And by far the biggest one is founder CEOs. So this kinda goes back to the whole scratching, your own itch thing. And also it goes back to like, again, probably businesses on one to nine it’s it’s, if you’re scratching your own itch. And you’re looking to, you know, everyone’s head space is, is being an entrepreneur when you’re an entrepreneur.
So it’s hard to get out of that. I think echo chamber. So they’re oftentimes you know, focusing, focusing on those on those areas, which I think probably now that you think about it, it’s probably not totally surprising that it’s kind of largely skewed towards these smaller sized businesses as well.
Nate: [00:10:14] Yeah, I’m surprised that there’s not more sales on this page. Like I guess, like I’m just thinking of the components of a business and how like important they are and how much people spend money in those areas. And like marketing makes sense and operations and support makes sense, but I thought that sales would have been somewhere close to marketing.
Josh: [00:10:34] yeah, yeah, right. I got it. Yeah. Sales on HR are small and like, I see so many sales, SAS companies. Right. There’s tons. And it’s, it’s, it’s like, if I can, it’s a great, well, I wouldn’t say it’s an easy sell, but it’s a sell where if you can prove that you can help someone sell more, it’s kind of is a very fast ROI to pay for yourself.
Nate: [00:10:54] Yeah, it’s easier to sell. How can I make more money than to say you can save on operations?
Josh: [00:11:01] Yeah. I might argue that one. That in terms of, and it’s funny as writing copy for referral rock and saying like, you know, we want to say, Oh yeah, you can. You can get more sales and get more referrals, but putting, when you actually put that down on a landing page, it just feels like, like everyone is saying that type of thing.
It’s hard to differentiate yourself. So I think everyone looks at those with eyes, like, yeah. Yeah. Okay. Whatever. But what does it really cause it’s like, yeah, I know that that’s, what’s going to do so it’s almost like you almost have to go without saying I’m going to make you more money or do you just sound spammy being like, I can help you make more money.
Nate: [00:11:36] Yep. I think, I think that when people actually understand that you really can make them more money. Like that’s been my limited experience with selling consulting is that when I once, like, once you’ve gotten to the point of the customer actually understands the solution and like what the solution means for them.
I’ve found that the stuff that helps them sell more is easier to sell than the operations. Like this is going to make your operations more efficient. And maybe that’s just my limited experience. I don’t know.
Josh: [00:12:05] I think you’re right. I mean, yeah. It’s once it’s a no-brainer that’s we’ll help them make money. I just think when you, actually, if you say that it’s like
Nate: [00:12:14] Yeah.
Josh: [00:12:14] not, not, not believable, it’s just like, yeah. anyway,
well the other reason I think sales is not as like most of the, I would say a large amount of people in this, in the, in the MicroComp area probably are not haven’t done.
Sales were, haven’t done traditional sales, so they’re not, that’s not in their wheelhouse of scratching their itch. Right? So developers, founder, CEO, these big ones, marketing operations, and support they’ve been in those likely in those roles. So again, on the scratching, an itch, if that’s where their ideas are coming from, that’s, that’s a large, a large area.
And you think of salespeople. Yeah, they’re just, they are usually not engineers, right? They, most salespeople don’t have an engineering background or vice versa. I don’t, I don’t think you really go from sales to engineering or go from engineering to sales. So I think the crossover is small and I would argue the same thing with things like HR and accounting, which are another one of those small sections of the type of customers that they’re targeting.
Nate: [00:13:15]What would you say your target is for referral rock in terms of the categories here?
Josh: [00:13:19]Marketing. I mean, it’s pretty clear marketing. Yeah. I mean, with us, with referrals, you can kind of transcend across like sales. It could be for the smaller companies, it’s always founders CEOs. Right. And into that smaller quadrant of like you mentioned the one to nine people in a business yeah. What I found interesting about that real quick is that, you know, we also are realizing like, we’re, we’re not our own customer are, you know, we actually just went through this lead scoring exercise of like how we, how we rate them, how we want to route.
The right lead to the right sales person internally at referral rock. And, and you’re right at below 10 employees is like, is, is the not as, not as high lead score not as likelihood to buy, not as likely to be a good fit for referral rock. There’s 10 plus. And we have a lot of other things in our algorithm we may get into another day.
But what’s funny is right now we’re at like 16, 17 people. I believe. And yeah, so we’re just like barely into what would be our own target customer. So it’s kind of interesting looking back at that going like, Oh, what resources do we need to do our own programs and things like that. So drinking your own Kool-Aid is hard sometimes too.
Nate: [00:14:36] this is true.
Josh: [00:14:39] cool. One thing that I thought was also missing out of this, so. I knew they’d go into the ad stuff. So I didn’t find that, that interesting. I don’t do a lot of ad stuff. I don’t know. I know you’ve done some with Reddit and some other things, but did you pay much attention to the ad things in here?
Nate: [00:14:55] I think the only interesting thing I saw in there was the it’s like a lot of people are saying they don’t run ads at all. And I wonder if that is indicative of technical people who are afraid of marketing and just started doing it, or if they are like, they are actually focusing on marketing, but they just chose to do other forms of marketing rather than running ads.
Josh: [00:15:17]Hmm. Yeah. I don’t know. I think, I think there’s probably a combination of, of that. The things you mentioned in addition to just not having the funds, right? Like you to, to, to run those, they’re not. They’re not cheap. You can easily cut your arm off and burn, you know, a thousand dollars running these types of ads.
And I think any of the ad platforms are like, well, you need to, you know, you need to spend a certain amount to start getting an ROI. Otherwise you can’t just like, you know, like your sampling size. Yeah. You, you know, you run, you get five clicks you over the course of a day. That’s not enough to prove if it, if it can work for you or not.
So I think I decided with you and it, my guess is they just don’t have the time and don’t have the expertise and also just don’t have the funds for it. So they’re more concentrated on, on more organic or more other channels that will I guess, pay them back faster or not have to worry about burning.
Nate: [00:16:15] Yeah, probably the not burning money. That, that makes sense to me.
Josh: [00:16:18]What I found really interesting too is in this section, they didn’t, they didn’t cover some things that I thought would be more fun and interesting for the, this earlier start crowd. Cause you could see from the results, it’s definitely sides towards like a smaller scale earlier start crowd, but there is not things like, what is your primary area of distribution?
I was kind of looking for that. I went, I spent through the marketing and I’m like, cause I want to go, Oh yeah. You know, ours is SEO and some other ones, but at the same time, like what are other people doing? So I had that question and I probably had that question for you is like, where were they? Where’s your primary source of customers coming from?
And even where did you get your first customers? Like your first 10 customers where they come from? I thought those would be great questions for this section, but I didn’t see them.
Nate: [00:17:07] That, that would be really good questions for this section. And I think last year, actually, they did put like what were your sources? And they had, SEO was a really big one in content was a really big one on last year’s survey.
Josh: [00:17:19] Hmm. Yeah. I’m wondering why they decided not to include it. This
Nate: [00:17:23] yeah. And that is, I do find that odd as well, in terms of in terms of referral rock. Do you guys do much online ads or is that kind of, you stay away from that?
Josh: [00:17:34] we do a little bit, I would say we’ve hinted some parts we’ve paid the Piper for things like Capterra, which I think as many people as a love hate type of thing. So and those are all like, you know, pay per click types of things. And they’re competing for, you know, software listing pages and versus pages and alternative pages, that type of thing.
So We do pay a little bit to be on those. I definitely wouldn’t pay for the top ranking, but at the same time, I think it’s worthwhile to just be in the conversation if that’s where people are searching. And there are a good amount of people searching there, unfortunately. But we have sampled with Google ads.
I’ve done specific Google ads for different campaigns in a certain timing that market timing, like a certain event, like we actually had we won’t go too far into it on this episode, but one of our bigger competitors closed up last year. And so then I did some ads on, you know, alternatives specifically just to get other, other eyeballs on us.
Cause I knew there were people actively searching. So and the other one I’ve done too is just yeah, just, just the high value terms. The ones that are, I would say probably not high value, just that the people that are. Lower in the funnel on their decision-making. So if they’re specifically looking for X software, like referral software we’ve done ads with those and it’s sort of mixed results, but I’ve done it in sprints here and there and tinkered with it.
But most of the time I don’t have time to manage it actively. So I sometimes just turn them off. And instead of it just like leaking like a sieve out the back.
Nate: [00:19:10] Leaking money on the, on the road.
Josh: [00:19:13] Yeah, true. So let’s see we are on to our last section. The section is growth. So this section looks at how several factors correlate to revenue growth. Recall that correlation does not equal causation. I know you brought that up earlier. Just because two factors move in lock step does not mean that one is causing the other. So where do you want to start with this one? Need.
Nate: [00:19:38] yeah. So I guess when I look through this section, I kind of glazed over. I’m just looking at the different revenue numbers and the different things that they’re comparing because Like, like revenue is important, but I think that like revenue is the effect of, of many product decisions. And like, I feel like it’s a lot more nuanced than you could put in a chart.
So I kind of had a hard time comparing that. What, what did you think
Josh: [00:20:04]I’m right up the same alley. So for me too, I had a hard time to Kyle kind of correlating or drawing any real conclusions. They have this one on founder account versus growth. It was kind of like, okay, don’t know what that’s going to really tell me. Prior peak versus growth founder hours versus growth.
They did have this one on ideal customer, which that one. Didn’t really give me a whole lot of information, because again, it was like the bigger sized businesses pay more and are going to, you’re going to get more growth out of, so for me, a lot of this was not anything surprising and honestly, yeah, I, I kinda glazed over it a little bit too.
Sorry to say.
Nate: [00:20:47] I thought that was the one that was kind of odd. That was like kind of piqued my interest a little bit was the MPS score versus growth where they had like really high NPS scores and they weren’t growing a lot with MRR. I was like, huh, that’s kind of interesting.
Josh: [00:21:02] Yeah, I don’t know. I almost think like, you know, the, yeah, that they’re right. That’s that is interesting. And the only thing I would think about is maybe it’s maybe it’s there, the smaller subset, you know, again, we, without the segmentation, it’s hard to tell, like, this is, this could be the less than a thousand dollar a month person that is paying that is tone charging people.
You know, $2 a month for something that is a very good value to the end customers. So they’re super happy and they’re giving you a great NPS score. Cause they’re like, they feel like they’re getting away like abandoned with super high value and only paying $2 a month. So things like pricing, I think, affect the NPS score.
So they might be candidates that are pricing way too low and their customers are super happy about it because they’re
just a Yeah,
Nate: [00:21:50] yeah. Or the guy sitting at a hundred NPS, you know, he had one customer that just loved it and then didn’t do any other samples because they only have one customer.
Josh: [00:21:59] True. Yeah. And that kinda leads into some of our other, my, just my general challenges. I think with some of this reporting kind of leads, leads back to a bit more of the segmentation types of things. But before I get to my rounding up, but What other sorry. Did you have anything else on the growth area
Nate: [00:22:19] no, I didn’t. Did you
Josh: [00:22:20]No, not really. Actually, yeah, one, one quick thing. I think there was, they do have these sections on the funding effects of growth. Um, there’s a whole, was it sorry, it’s a six point 10. They just have this funding versus growth section and a couple, two charts at the last bit about funding which, for me, I’m not, I feel like, I feel like you know, MicroComp is also, I, I, they have a, they have a funding arm to them now in the past two years called tiny seed.
So it’s not VC. You know, they, they, I think pitch it as more founder friendly funding and they do a lot of they have cohorts and a lot of education and a lot of accelerate, you know, a lot of coaching and things like that. So I think it’s, it’s really good values for the right types of founders.
So I feel like this part was maybe almost like a sales pitch at the end. Maybe I don’t want to throw them under the bus. It probably wasn’t, but at the same time, it just kind of wrapped up that way quickly. It was like the last two ones are about funding and FYI, you know, tiny seed stuff. So, and like, Hey, if you want to grow this way, you should take something, some funding from us.
I don’t know.
Nate: [00:23:34] Yeah. Yeah, that seems a little bit self-serving but they did also ask the question. So you’d expect that they, you know, they did their due diligence on doing that correctly.
Josh: [00:23:43] right. And I mean, they do so much for the community in general. I don’t think it’s I, I, it, it just, just, it does paint a certain picture with it. It is kind of ironic to me in general, like that, you know, For the longest time, you know, their podcast startups for the rest of us in MicroComp heaven had been all about, you know, no VC and yet they have raised money for this and they’ve raised it.
It’s like almost like they’ve dipped their toe over to pull money in to then feed the smaller, the smaller side of the internet of the, types of startups. So,
Nate: [00:24:19] But I think like, like you and I have talked about at other times, like there is a place for funding and like you, or I have not been in that place yet. But that could be where some of this is pointing to that. Like, Hey, there are people out there where funding made sense and look, it has worked out well for them.
Josh: [00:24:34] right. And I agree. I think, I think what they’re doing is good because I think they’re reaching a lot of entrepreneurs that are looking for not just the capital, but looking for the help or just looking to get, I think their whole thesis is getting them over the bump of. They’re daytime, you know, normal service, you know, consulting work that you might be doing.
And how do I, I’m seeing I’m, I’m in this juxtaposition of, I’m getting some funding, I’m getting early traction, but I can’t afford to make the jump or make the leap. And I think that they’re, they’re providing that type of a, kind of a jumping board or trampoline or whatever you want to call it. So,
Nate: [00:25:16] Yeah, totally.
Josh: [00:25:18] so rounding up to what, what sort of takeaways do you have overall for this report?
Nate: [00:25:23]I think I think overall one of the things that I would kind of. Mentioned to other people is just that there’s all these numbers and you can really get caught up in comparing yourself with the average or whatever it is that you’re chasing. And I think it’s important not to, not to focus so much on the numbers, but to focus more on doing the best at what you’re, you’re setting out to do like reports, like this are helpful to kinda know where everybody else is at, but it’s not like the, it’s not like if you’re you’re below $15,000, you know, you’re just not baking it.
Right. It’s right. There’s, there’s good places to be for everyone. And success looks differently to different people.
Josh: [00:26:03] so you’re saying like, don’t, don’t use this to judge yourself necessarily too harshly, like everyone. Yeah.
Nate: [00:26:10] I think it’s helpful. I think it’s helpful to compare, like, for example, like. Looking at the marketing section, seeing how many people are not doing any online ads, I think is helpful for me to kind of change my focus a little bit, or at least understand that there are people doing other methods of, of marketing that seem to be working for them outside of ads.
Josh: [00:26:29]I think I’ll go back to, I’d like to see more segmentation, I think it would be interesting to see, like we talked about like the, you know, a certain area of like the ones that I would be most interested in is kind of like how it would align with the stage of the business. I am less concerned with how many founders at this point, I think, you know, I think that matters early in the start of it, but later on, it’s kind of like you’re off the ground and you have something that’s working in some way, shape or form.
Now I’m more interested in the, okay. Are you off the ground? Were you not off the ground? Are you, are you able to self-fund yourself or not? And I think those would probably be good lines to see some of the segmentation. The other one I would say is what I touched on, even at the beginning of the episode which was like, what is their goal?
You know, was it to be the source of income? Like have they reached the finite state? Have they not, because it’s, it doesn’t tell intentions. Cause it could say, you know, where you’re, where you are. So that’d be another interesting way to segment it as well. And I’d actually even be interested to see how that changes over time, because I can’t tell you what I would have answered some of these things years, different years ago in terms of you know, I’d be really happy if it just, you know, replace my income and then it’s like, now, now, now.
I, I equivalent equal success when we are, you know, the name in this space or you know, when we’re at X amount of people or X amount of revenue or different things. So those things probably change over time over the founder journey. And I think that’d be interesting to capture for them over, over time, especially as they’re comparing year to year.
Nate: [00:28:06] Yep.
Josh: [00:28:06]Yeah. And, and thing on the last other piece I would argue on the segmentation was the, they, they, they are notoriously known for like splitting their conference up between starter and growth. So I think that also kind of is that same kind of segmentation. And what’s funny is there’s, I’m sure they would like to get more on that growth side, but I, and I, and that’s why I thought some of the, some of this reporting stuff was sort of biased as we saw from like, Skewed towards the lower end in terms of like revenue and things like that.
But I’m sure Rob and crew would agree that they would love to have more data from the upper end. But yet now we’re back to the fact that I didn’t participate and I would probably be in that, in that section. And I am to blame I am partially to blame for a lack of results there, but I think it leads to some of the other discussions we had, which were things like, you know, is there, are there, do you have reasons you’re not sharing or you’re not participating?
And I can’t say it was a conscious decision. I kind of saw the surveys out, asking for entries and I don’t know, it just didn’t Dawn on me much this year. I either forgot or I purposely kind of was like made it, made a flash in the pan decision to not do it this year. I don’t know why.
Nate: [00:29:26] Yeah. Yeah. I think I kind of had the same thing. I saw it go by and they just kinda let it go by
Josh: [00:29:33] Great. Right. So yeah, I think that probably wraps us up for about this state of independence and SAS report. But it was interesting. Maybe we’ll do this again next year and see, see what’s changed. And see if maybe they’ll hear some of our feedback by then.