A fresh perspective on the stages of building a SaaS business

April 7, 2021

EP7: Our take on State of Independent SaaS 2021 – Part 1

Josh and Nate give their varying points of view on the State of Independent SaaS 2021 Report. Part 1 covers the first 3 sections of the report about the founders, companies, and pricing.
Searching For SaaS
Searching For SaaS
EP7: Our take on State of Independent SaaS 2021 - Part 1



Nate: [00:00:30] so it looks like we got a bunch of new Twitter followers this past week, or so you want to talk about that Josh
Josh: [00:00:36] Yeah, so I kind of came up with a little idea after we had the MMVP episode, so yeah, just kinda, I guess, pulling a little bit on the string of, of, of finally wanting to talk about my little I don’t know what you even want to call it. A way to manage out bound emails that I was getting in a, how would I say a nice way where I didn’t feel like a
Nate: [00:01:02] well, why
Josh: [00:01:02] makes sense.
Nate: [00:01:04] why don’t you give us the elevator pitch for it? Just to like, for people who don’t know what it is.
Josh: [00:01:08] Oh, great. Yeah, the whole, the whole general idea is I get a ton of these inbound emails that say, Hey, can you backlink here or, Hey, I want to talk to you. And just basically it’s people selling something in some way, shape or form.
You know, sometimes it’s with the guise of, Hey, I see we’re in the same industry. I’d like to connect quote unquote. And you’re just like, Oh geez, what do you
Nate: [00:01:28] yeah.
Josh: [00:01:29] So it was a way for me to it’s initially quickly respond and I have a, I call it the Josh bot and I just basically have a cut and paste text that goes to a, a type form and essentially lead you through a bit of logic and essentially asks you the questions I would probably ask you anyway.
So it allows me to. To feel nice about it. Whether a nice reply and yeah, I don’t, I don’t, I don’t feel bad and I get to respond and the benefits are I get out of their autoresponder or out of their email sequence. Sorry.
Nate: [00:02:00] yep. And you have their information. If you do want to follow up with them.
Josh: [00:02:04] Yeah. So I think it became a good way to just promote our, our podcasts a little bit, because we talked about the MVP and then we, it was like a proof of a MVP. And then at the bottom, I even just said, Hey, if anyone’s interested in this, like let me know. And I did get a few people, I have like four or five people that said they’re interested in a copy or beta in it or whatever.
So yeah, it’s, there’s no real this I need another SaaS, like like a pulled in the head type of thing right now. So, but But yeah, I wasn’t planning on necessarily logic it, but it’s interesting. I thought it could help other people. I don’t really think it’ll go much further, but I’ll take it a little next steps and see other stats people gather on it.
Cause I think in that Twitter thread, I, I shared a good amount of stats and like how people responded and response rates and selected and things like that. So
Nate: [00:02:57] Yep. So it was pretty great for that day. You just talk about a different concepts and stuff like that. Like with your idea, you can kind of get some input from other people
Josh: [00:03:06] yeah, I think it’s a great place in, we, I think a lot of our, our people the people that would potentially listen to this are on that listening to different things like that, getting different inspiration and feedback. And we did gain, yeah, we gained about 10 or 15 followers to our searching for SaaS.
Is it the number four? Did we do
Nate: [00:03:25] that’s right. Searching the number for SaaS
Josh: [00:03:28] Right, right. And so we got some followers there and I think it’s got an us maybe a few new listeners welcome.
Nate: [00:03:36] Yeah. So if you, if you want to, you know, hang out and chat a little more about the stuff you hear on the podcast, tweet us on Twitter. We’d love to, we’d love to engage there.
Josh: [00:03:46] Yep, definitely.
Nate: [00:03:48] So would you have in mind for today, Josh?
Josh: [00:03:50] So today I thought we’d talk a little bit about the state of independent SAAS report 2021. So so just a quick thing is just if people aren’t familiar with it it is a report by I trying to, I want to say Rob Walling and but I think it’s, if you don’t know, Rob Walling runs a community called MicroConf Specifically targeted towards smaller, independent SAS, founders, things like that.
So if you’re not aware they, they collected, I think they have it well, sorry. They, I think they have a database of red, red over 25,000 contacts, which is pretty impressive. Feel like we’re in this small space in the internet, but yet, you know, at other times it can seem quite large. But they had 534 people complete the survey this year.
This is the second year of the survey. Um, and it is meant for people currently operating company that has, was generating revenue and charging recurring fees for their software. So SaaS. So that’s how I read that. I think this is perfectly up our alley in terms of things we’re talking about and trying to get Nate his own SaaS.
So Yeah. Did you, did you participate in those Nate? Or have you you’ve seen it before at th this report and passengers?
Nate: [00:05:11] yeah, actually in preparing for this, I accidentally went through the 2020 version and it’s kind of interesting cause there’s a lot of overlap between the two. It’s pretty neat. I didn’t, I didn’t submit mine in the 2021 report. Did you
Josh: [00:05:24] I did not. Which might come up a couple of times during this episode, I realized while kind of reading through it and giving my thoughts for us to talk about it today. I did, I actually, I think I participated in the 2021, 2020 edition, not to say 20, 21. So I did not participate in this most recent one, but but yeah, you’re right.
They did a nice job in the 2021 and where they actually, I think. Showed a little bit of differences in how respondents were comparing a bit with the previous report. So,
Nate: [00:05:59] Yeah. And did you have any initial thoughts on, on the report itself?
Josh: [00:06:04] Yeah, I mean, I think, I think the big things that I am trying not, I guess anytime I read a report, I think about like the biases that are inherent in the reports, like by who is creating the report and the questions cause that obviously kind of creates a, a direction for what they, what their intent is and trying to get information out and, and their point of view.
In addition to just the 25,000, you know, MicroConf people and kind of what they believe. So it is a community, they kind of I think align themselves in a certain set of beliefs. But so I think that, you know, has its own. Biases. So that’s, that’s kind of where I, my brain almost automatically sits whenever I read like a report like this in general.
So that might come up a couple of times in this, this episode as well.
Nate: [00:06:56] Yeah. Yeah. And I think also when you aggregate the numbers too sometimes you can kind of get led to believe things that aren’t, they have a lot more nuance than you might initially think. Like they’ve got all these with these nice bar charts. And it might suggest that the trend is in a certain way, but maybe the causation is actually somewhere else.
Maybe it’s just an association that you’re seeing there. It’s not necessarily something that you could reproduce just by looking at a single chart.
Josh: [00:07:22] yeah. That’s, that’s true. I think, I think the team did a good job of rounding up a lot of that stuff and trying to, at least they, they did a nice job of pointing out their points of view and what they found. I think they have to. Opinions on each section. So as we go section by section, they have like what they expect, what fell in alignment with what they expected and sort of what surprised them and was, was unexpected.
So I think that was a, that was a nice thing that they did in there too, to kind of give their cliff notes version.
Nate: [00:07:51] Yeah. Well, should we dive in?
Josh: [00:07:53] Yeah. Yeah. Like I said, I think we’ll go through section by section. So the first section is it titled the founders and I’ll read a little subset over there and then we’ll go into some anything we found interesting in there.
So this section, we took a look at the founders who run these SaaS companies. How many started each company, prior startups they’ve launched and demographic information. So Nate, why don’t you go first? What did you find interesting in the founders section?
Nate: [00:08:22] so I thought it was kind of interesting was that a lot of people said that they had not started a prior company before. Like they have 39% of people said they hadn’t started a company before. And I kind of was of the thought that a lot of people starting a company have tried many times. At least that’s what I kind of expected.
I’m not sure if there’s, there’s some skewing the data there, something I’m not quite seeing.
Josh: [00:08:46] yeah, that, one’s interesting. I think, I think what, what, what, Donna me kind of in a similar way, and maybe this, this might change your mind a little bit. I think a lot of it depends on the wording of the question and if this, what they have in this text is exactly the question, which is before founding your current company, did you start a prior company now, like with all of your startups, they’ve all been under your same quote unquote company or business organization.
So. They didn’t ask, like how many products you’ve started or how many like, projects you’ve tried to create to get out there. So I’m wondering if that has some, some gray area in how people answered without being clear on that.
Nate: [00:09:28] Yeah. Yeah. And maybe this is more designed towards like serial entrepreneurs who like, like really put something out there and it actually went somewhere and then they they’re going to start a new company.
Josh: [00:09:39] That’s that’s possible. So,
Nate: [00:09:41] Hmm. The other thing that I thought was kind of neat was the, the age representation. It seems that a lot of people are in the 30 to 49 year range. I would have expected that more younger people would be represented there.
Josh: [00:09:56] yeah. And then, so I am clearly in that that, that other, the. I am actually in the second one sorry. I started like the 40 plus a demonstration just just early forties, but, you know but yeah, I think you’re right. It was a, there are definitely, even for me, I would have the same opinion. I think there were a lot more older people than I would have expected.
I didn’t think I would be in the meat of the curve. I thought it would be just, yeah, just, I, I, I think I agree with you. I thought there’d be more in the, in like the 20 to 30 range.
Nate: [00:10:30] And then one last thing that I kind of pulled out of here was the, the number of hours that people were working on the company per week. And I was surprised how many people were, were like diving all the way into the like 40 plus hours per week. I thought that it would be more a part-time folks who were, who were doing it, but I guess, you know, maybe that’s just MIS misunderstanding
Josh: [00:10:50] yeah. That’s where I start to get. This is where I start to kind of, I wouldn’t say question that results, but start to think a bit more about the segmentation of these results, because it’s what I do wonder is, you know, we talked about in episode four about all our why’s and talked a lot about why you’re starting and what your intents are and things like that.
And I think that’s a really important question in this founder profile area, which for me, is like, You could also have a, you know, there, there are, we know some successful SaaS founders that, you know, may work less than 20 hours a week on their SaaS. And that is how they’ve designed their life. And I think a lot of people, especially in the MicroConf community, even strive for that.
So, and they might be making a living wage or plenty of income and a certain amount is enough. And that, that isn’t, that isn’t colored in here correctly. Like, so I don’t know how to read this where like you see less than 10 hours and that might be, that might mean successful. And then 50 hours might mean successful or someone else in a company building phase, or because they actually have enough revenue to support themselves.
So that, that leaves me with some questions in that area and how I should read this. So,
Nate: [00:12:07] Yeah, totally. Totally. What, what were some things that you saw in the section?
Josh: [00:12:11] I mean, most of them, I think you covered, I think you covered most of the highlights that I was going to To mention. I mean, the only thing I would probably bring up again a little bit is the, the selection bias aspect. The, you know, you mentioned about you were, I think you were surprised at what was it, the number of people that hadn’t started a prior company before, and I actually wasn’t as surprised I think at that one only because MicroComp target is also like startup founders and to grow without like VC.
And I feel like you do get a lot of, a lot more people kind of side project, or just looking to like adjunct their income aren’t necessarily looking to be a company necessarily. But so I think it might skew towards the earlier side, which I think kind of goes throughout a lot of the results I saw.
Like there’s a lot more skewing towards, towards earlier for me on this.
Nate: [00:13:07] Yeah. Huh? Yeah, that’s a good, that’s an interesting point.
Josh: [00:13:11] So maybe we’ll move on to the next section which is titled the company. So this section covers the companies themselves, including team size, funding idea, validation, and more.
Nate: [00:13:23] so maybe you should go first on this one since I took all your points on the last one.
Josh: [00:13:27] sure. I can do that. So the first section 2.1, which is in addition to you, how many full-time or contract employees currently work at your company? So again, I am questioning the question to try to draw results from. So I saw that there’s specifically, you know, that the entries are no, or none, a sole employee, one to four, five to 19, 20 to 49 and 50 or more.
So again, I’m thinking of the skewing of like earlier stage versus like later and more mature But the other part that I don’t think is in here, it specifically says employees and full-time or contract employees. And I wonder how people classify different things like VAs or getting, you know, having consultants, like you might have a design consultant that helps you for different things.
Like to me, I’m, if I was using those or w and currently we don’t have a lot of contractors, it’s all like full-time employees, but I don’t know how to necessarily classify those. So it makes me wonder about the results.
Nate: [00:14:37] Yeah.
Josh: [00:14:40] Any, any thoughts on that? How would you classify them? Like I know in yours things, I think, I don’t think you’ve used any consultants or VA’s or anything like that. I mean, aside from what we talked about, pre this call, you said your, your your, your significant other, your spouse helps you with billing, but I think I don’t, I wouldn’t call that quite quite a VA or a.
Nate: [00:14:59] I have hired out a few things like on people per hour, that type of workplace I wouldn’t call them contract just because they’re, so the task size is so small. And I think as a, as an early startup, you’d probably use a lot more of that because you can’t commit to hiring somebody on for, you know, a week at a time or something like that.
You just sub out very small tasks. So I think that that is kind of missing here. But I think the, the solo founder, I think that that to me is not really surprised. I, I think that a lot of people probably go that route.
Josh: [00:15:31] yeah. Yeah. I think, I think you’re right. And this also kind of goes back to one of my earlier statements on how are they, what is their goal? How are they designing their lifestyle? And for some people. Just being the solo founder or two or three people is ideally what they want. So they don’t want, and they don’t want more employees and they would rather hire agencies to handle their marketing or, you know, hire fully hiring out other things.
So I think a lot of that is lost on here. Like you don’t get to really understand that. Cause employee count is again, it’s, I, I guess they are being very accurate on this, but I do wonder about the other, the other resources. So it could be sold a little on like, Hey, I’m the single man doing everything.
And it’s like, technically you are, but you’re also using a lot of other services, which is fine. So
Nate: [00:16:22] Yup. Yup.
Josh: [00:16:24] cool. So the next section is raising seed funding or raising funding. I thought that was interesting the way they grouped the stuff together. This again, probably wasn’t very surprising given, given the crowd.
Nate: [00:16:37] yeah, like the MicroComp community is pretty, not in favor of funding
Josh: [00:16:42] right. I mean, that’s strictly in their, in their, in their statement, which is Microsoft’s mission has been to help startup founders launch and grow without raising venture capital. So,
Nate: [00:16:52] yeah. But I think that they, they, they get into a little bit further along, but I think funding has more meaning than just venture capital. I think they, they put funding more broadly in terms of like, are you getting money from family or something like that as well?
Josh: [00:17:06] yeah, I did find it interesting that how much was in the 100 K to less than 500 K range. I thought that was a broad range given the scope But I’m sure they picked it for a reason, but.
Nate: [00:17:19] Yeah, but it does kind of make sense. Like if you get over a hundred K you’re starting to like hire people with that money, as opposed to like under a hundred K feels like you’re, you know, you’re doing just a very small, small amount of push with that extra money.
Josh: [00:17:34] true. True. The plus a hundred K you’re right. It’s like I could get an engineer to help me for a year and give me that sense of runway to like build this out.
Nate: [00:17:44] yeah.
Josh: [00:17:45] Right. So onto that other section, you brought up about founding teams, household resources. I thought this was a little strange. So this kind of, especially when glued with the top results about since your company’s founding, how much outside funding you’ve raised.
So it asks the outside funding question, but then the source of the funding, it seems strange to me that the founding teams, household resources, like if that was inclusive of the outside, like I that’s the one result that I felt that was kind of.
in there
Nate: [00:18:16] Like what does that even mean? The household resources, like, does that mean your spouse has a good job or something and they’re putting in resources or that fall under friends or that fall under friends and family?
Josh: [00:18:27] I, I would suspect that, that you’re more accurate with the other one. I would think friends and family money, which almost just has a, like a term, they call it friends and family money, right? Like it’s actually usually investment or alone or things like that. But that founding teams, household resources, to me sounds more like what you were describing.
Like my spouse is working and I’m taking a year off to kind of work on this startup and that’s kind of what is funding this. So, and I feel like the question they’re really trying to get at is more of like, how do people get this off the ground? Like, how do they find the time? Right. And I think that’s probably a separate question other than this source of funding, which I feel like that’s the outlier within the rest of the entries in here.
Nate: [00:19:11] Yup. Yup.
Josh: [00:19:15] cool. And let’s see categories. Oh, so the company categories best describe the ideas. This, yeah. This section is long. This one gets interesting. Do you, do you have some things to share that you look like you’re chomping at the bit for this
Nate: [00:19:26] I am chomping at the bit. I love this one because this, this for me is kind of where it’s at. It’s like, where do I find the ideas? Right. And I thought it was really neat that there, of course there’s the, I was experiencing the problem, which I think is like a lot of people, like a lot of founders talk that way.
Right. Like I had this problem. And then but then the part where it said that my customers or my clients were experiencing this problem and that’s like 25% or 22% of startups had that as a reason for starting. And I thought that was really interesting, like that you could use that the client work that you might do during consulting or something as well to find a startup ideas.
Josh: [00:20:05] Yeah. So have you found any in that, in that, in that area,
Nate: [00:20:09] And so I have, I’ve been keeping them under wraps a bit just because I haven’t totally fleshed them out yet. But. Yeah. I’ve, I’ve had a number of things with clients that I’ve kind of been like, Hmm, that might be something. And I’m kind of waiting to see how they, how my client solution rolls out in order to figure out, you know, where I could position that.
Josh: [00:20:30] right, right. Yeah. I think you’re, I think you’re right. I think, especially for this. Group the specific problem I was experiencing. I mean, I think that by far that makes sense. That’s the biggest like area that most people are, are finding ideas. I mean, I think what did they call it? Like the scratch your own itch type of type of problem.
I mean, that was the reason I started Uber note. That was actually that was not the reason I started referral rock. So that’s a little bit of an, an outlier there.
Nate: [00:20:56] So where did referral rock fit in this
Josh: [00:21:01] I actually, I don’t know, probably really, I mean, it was a little bit more of a serendipitous like moment I would call it. So
Nate: [00:21:11] Other.
Josh: [00:21:11] yeah, I’d probably would have checked others. So this, this was not yeah, referral rock does not tell very much about this one, but although the, the little I want to call it like kind reply or whatever I am to this outbound stuff is that one was from experiencing.
A problem. I think a lot of other, other things come from those. What about status lists? Where did that
Nate: [00:21:37] I think it was not so much a problem that my clients were facing, but something that my friends were facing. And I think I kind of took it off of that. I had a part who was partly experienced in my day job too.
Josh: [00:21:52] interesting. And what’s funny is like you spend a lot of, I know you’ve mentioned before you spend a good amount of time, like researching or kind of like you’re in this like hunting for an idea phase. So it’s, it’s a small percentage down there. It’s just 8.2 to 4% of people. I think just kind of doing research.
It’s not that your ears aren’t open for these other things, but I think in your, in your research phase of like looking for an idea,
Nate: [00:22:19] but I think that kind of goes together with something we had talked about offline before, which is that I think for a lot of people their business ideas seem to kind of happen to them. Like they were having a problem and they’re like, Hmm, this is really annoying. I should start a business. As opposed to saying, I want to start a business.
Let me find a problem. I think a lot of people just kind of, it comes to them as opposed to searching for it.
Josh: [00:22:41] Yeah. Yeah, no, I agree with that. The other one, I found that it was a little bit interesting in here that maybe we’re talking about is this very small minuscule one, the smallest one on there, the 0.19%, which is I purchased this business.
Nate: [00:22:58] Yeah,
Josh: [00:22:58] I think that’s actually, yeah, I think that’s a really interesting one that is definitely, probably not done enough.
It’s probably again to this, this smaller group or this, the bias of this Group here. Probably because it is, you know, they’re builders like they’re, you know, you’re, we’re all, most of the, a lot of us are engineers or marketers and things like that. So, and we may or may not have the means to go, you know, purchase, purchase potential businesses.
But quick short story. I did have a friend that in on a whim kind of saw like someone posting on a, I think it was a Y Combinator, or it was like hacker news type of thing about a business, like for sale, I think. And he ended up buying it and he ended up buying that and essentially taking it so much further.
I mean, he ended up with a, I would just say a large eight figure exit of sorts, but by paying in the maybe tens, tens of thousands of dollars for this, this App store app. But he essentially went from like an Apple version and also added an Android version and then made a web version and had them all talking to each other.
You know, maybe, maybe it’ll be a topic for a different discussion, but I mean, he, he grounded grinded it out and turned it, but also didn’t start from a cold start. Like they had some paying people had some distribution in some channels already established, and I think that could be a good option for a lot of people.
That’s definitely, probably how I’d look at a next one is like looking for something that I think I can add a spin to or where a founder might’ve hit their limit. That’s
Nate: [00:24:33] Yeah, I think that’s definitely one to consider a bit further. I haven’t thought about that very much purchasing a business.
Josh: [00:24:41] cool. I think another section we’ve talked a lot about on this podcast is validation. So did you have any interesting thoughts on this validation bar chart here?
Nate: [00:24:52] yeah. I was amazed at how few people built a landing page first or a PR or even pre-sold,
Josh: [00:24:59] right. That was what, less than 5% is built a land. They called a landing page, smoke tests.
Nate: [00:25:05] Yeah. And like 10% of people pre-sold and then basically everybody, or a good chunk of people, 30, 37% or so built an MVP or a prototype. I just think that’s, that’s incredible. I think that’s a lot of people building a lot of code that possibly they didn’t have to build. And you know, I’ve been there so I can feel them.
I can feel the
pain of
Josh: [00:25:29] you’ve you’ve you’ve that, that one’s been burned into a bit. So. And, and even the high percentage of, I didn’t validate before building seems pretty high that’s over 15%. Like you didn’t do any validation and you just got to building and they had the choice of saying, I built a prototype or MVP and they, you know, maybe didn’t check that so
Nate: [00:25:50] yeah. What did you with referral rock? Did you build a prototype?
Josh: [00:25:54] well, that was that kind of MVP thing I did with the Wu foo form and that type of thing. So I would say that that was sort of the, the, the dovetail of like the prototype and MVP type of thing.
Nate: [00:26:08] Yeah. So you kind of went the the 37% with those people.
Josh: [00:26:12] I mean, I think I, and maybe, I don’t know if this one is one of the ones where you can check multiple things. I D I guess I, you know, I had, I had a list of people that I emailed, so I didn’t have an audience, so I wouldn’t call it, ask an audience. I guess I did do kind of like a landing page, cause I did get people to. Like kind of sign up for it. So it’s kind of a combination. So it’s a little, a little gray in how I would categorize this, but I definitely didn’t pre-sell it? The pre-sold was, is interesting to me. It kind of goes back to the whole episode five MVP when we asked about what stuff is ethical and shady or not.
And I I’m, I’m on the fence with this and I don’t know. How do you feel about the pre-selling a product
Nate: [00:26:53] I, I kinda thought the same thing as you and I saw pre-sold on there. I right away thought scam. But I can see where there’s like valid cases to do that, but yeah, it doesn’t feel I don’t know. It would be good validation because someone has to give you money, but
Josh: [00:27:07] I mean, yeah, you can’t Val. I mean, until someone takes out their wallet, it’s hard to, Oh yeah. I’d buy that. And it’s like, would you, would you actually put your credit card in and give me your credit card? I mean, it’s, it is a great way to validate. And I think most people don’t charge them. I think mostly they might, they’re they’re doing stuff like they’re pre charging the account or so that they can, I think you can do this and Stripe and things like that, like, and not actually collect the money or you have full intent on returning it, if you don’t end up building the product.
And you’re probably very clear about it. I think there’s probably ethical ways to do it, but yeah, there’s definitely some other shady ways to kind of do that as if they know it or not. If the end customer knows or not is probably the key.
Nate: [00:27:47] Yeah, totally. Okay.
Josh: [00:27:49] Correct. Cool. All right. So what about the last one of this section, which is when did you land at the first paying customer of your product or company?
Nate: [00:28:01] Yeah. I was amazed that there was people over a year because. Potentially, these are these companies that are answering the survey are people who are either making money and it’s working out for them. Or this is like a side project, I guess we kind of thought that there might be some people on that camp.
But there’s a lot of people on one year plus like there, they, it shows here on the trap on the chart, we’ve got less than a year, one to two, two to three, three to five, five to 10, more than 10.
Josh: [00:28:31] right. And this one less, less than a year is less than 20%. And essentially the rest are a year plus. So that, that was surprised. That was surprising to you because you thought more people would be in the less than a year camp. Is that accurate?
Nate: [00:28:44] I thought that’s just going to be a lot of like new companies in here just because of the, the, the Microconf  world. I figured it would be more young startups.
Josh: [00:28:54] yeah, the 10 year plus. I guess, I don’t know. It’s it’s, I guess it’s surprising and not like, yeah, there’s a good amount. There’s less, a little, slightly less than 10%. That is more than 10 years ago. So that’s, that’s quite a long time in SaaS and these are probably more of that. I hate the word lifestyle, but they’ve created a lifestyle for themselves more than likely.
I don’t know. But they’ve, they were happy to work there 10 hours a week and they have essentially, they’ve built a little niche product not to insult them. It might be a big niche product. But that, that is doing very well for them and, and that they have a great lifestyle about it. And they also are very like tied to this type of community.
These are the right, these are their people as well.
Nate: [00:29:35] Yeah. So what, where does referral rock fit on this one?
Josh: [00:29:37] Let’s see. First paying customer was in June of 2015, so that would be S coming up on six years. So we would, wow. We’d be in that, that. Last quadrant over there, which is just less than like 23% or so, which is the five to 10 years, but just barely into it. Just like me just barely into my forties.
Nate: [00:29:58] yeah, that kinda makes sense. I guess you seem like a, you know, partially involved in microcuff kind of guy, so, yeah,
Josh: [00:30:07] Cool. All right. So section three is pricing in this section. We look at everything pricing, including topics like monthly versus annual pricing tiers, free trials, and more. Do you want to get us started on this one?
Nate: [00:30:22] sure. I guess looking at the first question about the pricing structure that wasn’t too surprising to me, like. Monthly bowls, people are doing monthly or annual subscriptions. And I think that kind of makes sense based on the requirements to, to enter in the survey. It’s kind of interesting that there’s metered and stuff like that.
Like that sounds complicated in terms of billing. What do you think about the monthly annual split?
Josh: [00:30:44] I mean, I think for this group, it’s probably about right. I think, I, I know, I probably thought there was going to be a little more on the monthly side, but I guess this is one of the ones where you can, this is a pie chart. So you have to be in one or any one. You can’t be in both because for example, referral rock has monthly plans.
We have annual plans. We actually even have six month plans. So I actually wouldn’t know what to do. Check for this one. Cause this one is not a, like, do you offer monthly and do you also offer annual? It’s kind of interesting that it’s like I’d have to probably see exactly how they asked it to, to, to understand better how it, but the way they’re drawing up the graph, it’s like, it’s a single selection.
You pick one out of all of these
Nate: [00:31:27] Yeah. And I, and I think to choose between monthly and entity, there’s a good talk. I think the Jason, Jason from SmartBear was talking about getting people on annual pricing. Jason Cohen. There you go. Yep. As a good talk, did you have any other thoughts on the pricing structure? What.
Josh: [00:31:43] a whole lot. I mean, I think the annual thing you, you both brought up that one is a good thing. It’s definitely for the non funded or non VC backed. It’s interesting. Cause it’s. A huge lever for cashflow being able to charge annual one of the other points that were made in here that I was a little more surprised at is the setup fee.
So we also do kind of a setup fee thing. And we also waive the setup fee if you sign up for an annual. So we do things a little differently. So it’s like if you sign up for an annual, we weighed the setup fee at referral rock. it kind of incentivize people to do that. And also we get technically more at bats with them.
So if it takes longer for someone to get ramped up, they’re not just going to quit after a month. They’ve kind of committed, committed a bit, a bit more. But like I said, I was surprised that 25% do charge a setup fee. Cause in my meanderings I feel like it’s a rare thing to see the setup fee. I always thought it was a, it’s definitely a good growth lever that I feel like is under utilized, but I was surprised to see 25% here.
Nate: [00:32:48] like a surprise that it’s so small, you would have thought it would be larger.
Josh: [00:32:50] Oh, no, actually I was surprised it was that high. So I thought, I thought, I thought it was one of those things, less people did and less people knew about. I think it’s a good, I think it’s a good lever.
Nate: [00:33:01] yeah. And intuitively makes sense. Right? Like you’re trading, you’re trading value to the customer by getting them set up, like, you know, bringing all their data in or something like that.
Josh: [00:33:10] yeah, I think it’s a, it’s a, it’s a really good win-win because one, if you’re doing a setup fee, you’re at least getting paid for your time and the tire kickers, you can kind of kick, kick, but you can kind of make a, make it a little easier and essentially you’re incentivized any way to help them.
Because if you get them on board, the likelihood they’re staying on is even higher. So you’re kind of, you’re, you’re, it’s a double win for the business. It’s a bigger hurdle for the customer because they’re paying a little bit more, but I think the right customers. It’ll help filter out the right customers from the, the ones that may waste your time, sign up for an app, sign up for a monthly burn your time with three calls and then quit when they don’t get results.
It’s like yeah, that was just an incredible waste of time that I just worked for $5 an hour.
Nate: [00:34:01] Yeah. Yeah. I thought the I’m sorry, go ahead. I, I thought the pricing plan one was interesting that there so many people in the one to $29 camp I think that that kind of points to me either that these. Respondents are selling like smaller products or a lot of people have like very entry level things that they’re, they’re trying to sell or like consumer products or something like that.
I would have thought that it would be higher.
Josh: [00:34:33] yeah, I mean, it does say this is the pricing plan for your base. So some of them are based like the meter type of stuff. Like you’re just paid per usage type of thing. But also, or lowest, lowest cost. So this doesn’t tell the range or the average cost. So they’re just there they’re entry level plan might be $25 or $10, but it might be maybe it’s also $10 per like, seat.
So something like something like a help desk software, it might be 10 or $15 a seat, which is normal and relatively reasonable and seems low. But at the same time, you’re buying packs of five seats or you’re at, you know, they might start with one seat, but then their average customer has 10 seats. So be inducted.
Exactly. So,
Nate: [00:35:17] Yeah. Yeah. That makes sense. That’s a good point.
Josh: [00:35:19] Yeah, my last point around the pricing overall is I, I thought this was interesting how much time they spent and how many charts were related to this this topic that keeps coming up across this, which is like, they, they are. Trying to figure out, I think, you know, free trial free forever versus, and, and free trials.
Do you require a credit card? Do you not require a credit card? I think these questions come up. I know in this section a good amount and I believe in another section and for me, I, I maybe I just, I never have any questions on that. I’m I think I’m clearly in one camp, which is like, no, no credit card required.
I never see the reason to put the credit card as an end user. I kind of almost like gawk and it’s definitely a stopping point, even if I’m a serious buyer, I’m like, I don’t want to put my credit card in. I just feel like I’m not sure, sure. What’s going to quite happen with this and I don’t trust it.
Nate: [00:36:13] Yeah.
And I think even on the last, like last year’s report, the outcomes in terms of like revenue for people with credit cards versus not, was pretty much equal. Like there wasn’t much of a difference
Josh: [00:36:25] right, right. Yep. Yeah. So, so I feel like there that this survey or this state of independent SaaS is kind of hovering a lot around this question. It feels like maybe this is a question that they have internally or they internally struggle with, or don’t have clear answers and they’re trying to get more on it.
But so I kind of almost glazed over those sections per se, personally. So.
Nate: [00:36:48] yeah. Yeah, I haven’t, I haven’t really struggled too much with that. I have tested both ways when I did with my status list outside of the Heroku store. And I found that putting the credit card was like an immediate stopper. Like if I put it before during the free trial if I put it before the point of upgrade that basically would just, people would just fall right off, right there.
Josh: [00:37:09] right, right. I think people do think kind of, like I was saying about the, the filtering, the tire kickers and that type of stuff away. I mean, I think that’s, that’s probably the strong argument why people would do that. But I also think you might be throwing the baby out with the bath water at times too.
Nate: [00:37:27] yeah. Yeah.

Narrator: [00:37:27] Well, that’s all for today’s episode. Be sure to check back with us next week for the rest of our discussion on the state of independent SaaS, 2021. Thanks for listening.