Designing the Perfect SaaS Business (Steal My Checklist)

0:00Every founder dreams of building the next big SAS success. But what separates the ideas that just sound good from the ones that truly take off? After two decades in SAS, launching everything from ebooks about duckboats to multi-million dollar exits from SAS, I've seen one pattern repeat over and over. The best businesses aren't built on luck. They're built on the right foundations. But here's the thing. Most founders go about finding their business or product idea backwards. they fall in love with a problem or a piece of technology or worse yet some idea that just came to them out of thin air. I've done that and it rarely works. Instead,

0:37what if you had a checklist, a set of clear attributes that if your idea ticks enough of the boxes, you could dramatically increase your odds of building something that grows, scales, and maybe even changes your life. In this video, I'm going to share my personal checklist for the perfect SAS idea. The more boxes you can check, the higher your chance of success. Let's break down exactly what makes a SAS idea not just good, but exceptional. The first item on the list is going to sound obvious given how much I talk about it, but I would only go B2B. I'm going to sell the B to businesses, sometimes B to

1:11both. You've heard me talk about dual funnels where there might be a proumer consumerish version on the low end where it's a low price point and you're selling to people who are more price sensitive maybe doing it as a hobby or maybe doing it as a side gig like photographers or folks who sell things on Etsy that they make at their house but then you have a higherend top end of the funnel where you are selling $500 or $1,000 a month. And that's what I mean by B to both where you are selling to businesses as well as to consumers proumers. But realistically B2B selling to other businesses even if they're

1:48small businesses is probably the simplest way to explain it. And I've already talked about all the reasons why one would want to do that. So I won't belabor the point here. Number two on my list for an ideal SAS business is one that I'll say it's debatable and you can break this rule. It's not a hard and fast 99.9% of the time rule, but it is one that if you are bootstrapping or mostly bootstrapping a SAS, in general, I see the trend that vertical SAS has an advantage, especially when you're bootstrapping. So to explain the difference between vertical and horizontal as related to SAS, we can

2:23take our hypothetical example of an app I often use as an example called Postcard. usepostcard.com and it is an email marketing platform or an ESP, email service provider, but it's focused on realtors. And so the vertical is realtor versus horizontal ESPs like Mailchimp, Active Campaign, Aweber, they focus across all verticals. That's why they're called horizontal. I didn't make this naming up. It's just the way it is. So a horizontal play is a very general tool that can be used by any type of

2:56business. It's not industry specific. So, think of electronic signature app Signwell or Savvy Calal, which is a great scheduling link, a competitor to Calendarly. Those are all horizontal businesses because they're not focused on a single vertical versus a tool like Builder Prime, which is a company I've invested in, and they are kind of like CRM or like a business operating system that you run your entire business on, but they're focused on home improvement contractors. Or think of Gym Desk, which is similar. you run your entire gym and fitness studio on their suffer. So very focused on a single vertical. Now as I've said that I've said vertical is

3:37better. Now you might be wondering why I went deep into this and my first book start small stay small. I think I have an entire chapter about this. But realistically the nuts and bolts and the simple answer is that it is easier to market usually in verticals rather than horizontal because there's not hundreds of millions of dollars of venture being pumped in. you can usually carve out a pretty nice niche or or a position in that space and your customers use cases and what they need to use your software for are usually a lot more homogeneous if you're in a vertical because all gyms tend to run in a similar way versus if

4:09I'm going to build an operating system or you know software that every business you can imagine building gym desk but for every business it would be an absolute mess. So that's like an extreme thought experiment of how bad that can be. But the fewer verticals you serve, the fewer use cases you need to support. Now the danger of course of being in a vertical is it may not be large enough to allow you to grow to where you want to go. But if you're bootstrapping, you want to be 2 3 5 10 million in annual recurring revenue. You don't need a market that's that that big. And that's

4:37one of the advantages of not raising venture is that you can go after verticals that aren't big enough for the big funded competitors to come in out market outspend out build. You have a little bit of a fighting advantage there. I've talked about vertical versus horizontal, but I'm going to throw in a third term that I coined and it's called orthogonal. probably haven't heard this elsewhere because the only reason I came up with it is my co-founder of Tiny Seed, Anar and I were looking across all of our Tiny Seed investments and we realized that vertical SAS had a bit of an advantage actually quite a bit

5:09advantage over the horizontal plays that we've backed. There are exceptions of course but in general trends you know the numbers were kind of pointing in that direction. But the other thing we saw is there were horizontal apps that could be used across all types of industries but they were aimed at a single job title or single role of a person at a company. So imagine HR software, applicant tracking systems or whatever that is really sold to HR directors or the head of HR and people ops or imagine a scrum tool or an agile tool that is aimed specifically either at like a senior developer or potentially at the head of product or at

5:46a development manager, you know, the manager of the software developers at a company. That's what I call orthogonal. It's horizontal technically because it can be used across many different verticals. So all company types but the orthogonal is indicating that you are focused on a single job title or single role at a company. So one more advantage of both orthogonal and vertical SAS apps is that they are almost inevitably they're usually in kind of boring markets which is a good thing. They don't attract a lot of attention and you're over here in your corner minting money because everyone else is going and focusing on the new hotness of the day

6:21in verticals in tight industry groups. Think of HR or you know education professionals, realtors, just any any industry. They usually have places that they hang out both online. So it might be Facebook groups and Slack groups or WhatsApp groups, whatever, or in-person events. So this gives you an easy ability to get in front of them if you hang out there too. Subreddits, you know, there's all types of places where if you show up and you offer value and you offer to help people, you can actually find all your customers in one place. not all your customers, but you know, a huge amount versus if you were

6:53just a complete horizontal play, like you can kind of market to anyone. Where do you find them? Where are they? They're online. They're everywhere. Well, then how do you market to them? And finally, on the vertical, horizontal, orthogonal piece, word of mouth is usually much better with vertical and orthogonal products because obviously, think about if you're in a specific industry, if you're in

7:10construction, whatever, people talk. They talk about what they use, the new stuff sweeps in, and people start talking about it. Orthogonal is the same way. If you're an HR professional, you go to the HR conferences, you're in groups talking to other HR professionals and you're going to tell them if there's a new tool that is super interesting

7:24versus again coming back to horizontal. I'm not saying you should never do horizontal, but what I am saying is as a bootstrapper, I personally would want to veer in the direction of a vertical or an orthogonal product. Criteria number three is I'll say it's a nice to have, but it's a really nice to have, and it's to choose a market where the founder has some kind of advantage. You might hear

7:43this referred to as product founder fit. And this can be like a strong desire for a passion to work with that customer base. That's not a huge advantage, but it will allow you to succeed over folks who care less about it. Uh maybe you have a strong network in a space. Maybe you have a strong audience. Maybe you have deep knowledge of the space, a unique skill set that deals with a particular vertical or a particular role at a company as I've said with, you know, vertical and horizontal. And so this is a nice to have. I've seen plenty of folks design and build amazing products where they didn't have an

8:16advantage in their space. But since I'm putting together the list of an ideal SAS business, this of course is on that list. Criteria number four is for me that you can reach them online. This again, I've seen great businesses, especially ones that I've invested in be built purely through offline marketing through in-person events and in-person meetups. And I'll say, you know, I don't I don't particularly count cold email as like online marketing, although technically you can say it's online, but pretty much everyone has an email address these days. But realistically for me, and probably you, if you're watching this video, you do want folks that are online and that you can reach

8:51online, whether it's through SEO, content, partnerships, places they hang out, ads, cold email, as I said before, just makes things a little easier. So, can you build and bootstrap a great business without your customers being online? Yeah, within reason you could pull it off if the annual contract values are high enough and you can reach them through other means that aren't

9:12super expensive and your churn is low. But realistically, this goes on my list of things that I'd like in an ideal SAS. Point number five is that one maybe two people make the buying decision because when you are selling to a committee, there's a lot of work there. It's not a one call close anymore when you have to convince two, three, six, eight people,

9:30a whole committee to buy your product. In addition, in a perfect world, since I'm just dreaming here, the person experiencing the pain is the same one that is making the buying decision. That makes it even easier because if you have someone who's experiencing pain, but they need a manager or someone else in the company to make that decision, they have to then convince them that they're experiencing the pain and convince them that your solution is going to, you know, be more valuable than the money coming out of the budget. But when you're experiencing the pain firsthand,

9:59you just want to pay to make it go away. So, this one definitely fits on this list. Item number six is you're entering an existing proven market. And a bonus is that there's a large hated incumbent, maybe more than one hated incumbent. This makes it really nice for customer acquisition because if it's an existing market, then there's already some probably some search volume. There's potentially groups, whether again Facebook groups, Slack groups, or whatever built around this. And this incumbent has kind of been the pioneer that is walking ahead of you and taking the arrows in the back. and you can look at the mistakes they've made and the

10:32successes that they've had, what's worked and what hasn't, and you can double down on what's working for them, and you can avoid the potential mistakes that you've seen them make. Now, being in an existing market with a big hated incumbent, it's also really good for hiring. You can hire really good talent out of big companies that are creaky and groy and not moving fast, not super interesting to ambitious folks who may want to stay in the same space and have amazing experience. and you can pull them into your team easier than if there wasn't a big existing market or a bunch

11:03of competitors that you're dealing with. Now, with that, I want to give you a warning about some markets that are existing and have large hated incumbents, but are really hard to break into. Just some examples, but you can get the idea. There are more than this. So, trying to build healthcare SAS is pretty tough. It's it's hard to sell it.

11:19Uh it's hard to keep it all secure. There's just a lot to it. It's it's complex. It's long sales cycles. Same with selling to large governments. Now, I know some folks who sell to city governments, um, even counties, but man, you start selling to state and federal governments. Again, I'm not saying don't do it, but I personally wouldn't do it. It's not something I have a ton of expertise in. And if you do, and that's one of your unique advantages, well, that's great. It can be a moat. But if you haven't, it's really, really hard to get into healthcare and government, even education. Now, you know, again, I've

11:48invested in some companies who made it work, but the there's a budget process there. They're very seasonal. They're pretty price sensitive. It does depend on what you're building and for whom, but I would veer away if all things being equal, veer away from the education space. And then there are spaces that really don't adopt new technology quickly. Almost everyone is a lagard. If we're thinking about early adopters versus, you know, the mainstream versus laggers, but

12:11construction industry is pretty slow. Legal, accounting, retail, there are some that are just harder to sell into. Even like restaurants, I know they've adopted QR codes and credit card technology a bit more uh than they used to. mostly due to the uh pandemic. But in general, these are for my ideal business. None of these industries are on that list. Item number seven is that people are actively searching for a solution to their problem. Even if all the search traffic's being sucked up by the big giants who are amazing at SEO, it at least shows that there's a lot of interest and it's an opportunity for you

12:45to learn to get better and to find the cracks, find the edges of the longtail searches. Even in the age of AI where AI is slowly creeping in and taking over you know whatever the Google search results if there's a need people will find it they will search other places and as things change and these paradigms shift you as a startup can get in there and maybe you can't outrank your huge competitor in Google but you can find the cracks and find the other places to creep in. So if there is search volume, that implies that there is a need and that people are going out after it. And

13:17that that's a good sign that they really need this pain point fixed for themselves. And even if you as an upstart have to go to places like YouTube or Facebook groups or Reddit groups or second tier search engines or figure out other opportunities in places that folks are seeking these answers because typing something into Google and getting 10 blue links, you know, obviously is in question and potentially

13:41it could be argued that that is fading. But the searches don't go away. People still need to educate themselves on what software to use. And so if they're searching it, it's a great signal there's a deep need for your product. Speaking of deep needs for a product, if I'm going to build software, I want it to be an aspirin. And that means that it solves a deep pain point. So if you've heard me talk about this, it's aspirin versus vitamin. And aspirin is when I have a headache, I'm willing to drive to the store right now to solve that

14:07problem. Vitamins are nice to have. There's something I take when I remember, but there is almost never urgency in taking vitamins. And so products I build, I want them to be an aspirin. It means that they are essential. They solve the deep pain point. Oftent times, though, not always, someone is running their entire business on it. I mentioned this earlier where

14:25it's like the business operating system. So, I gave two examples earlier actually. Gym is software where you run your entire gym, martial arts, dojo or fitness studio on it. And builder prime is for home improvement contractors, but they run their entire business on it. And my last SAS app was Drip. And not everyone ran their entire business on it, but the bloggers and the online marketers did. They used it as their marketing database. And so it definitely

14:51fit the definition of being an aspirin. Number nine is choosing competitor pain versus customer pain. And in this case, I would personally choose competitor pain. Though I know that some other folks choose customer pain. The differences are competitor pain is when you have a lot of competitors and it's painful to compete with them. Customer pain is when you enter a small space, whether it's a vertical or an orthogonal play, and you have customers that are hard to educate, they're hard to sell to. They're they need they're not technical, so they need a lot of help with support, but there aren't many competitors, right? So, you kind of are

15:27not trading one for the other. But in a perfect world, you pick one or the other. And again, I would pick competitor pain myself because I'm willing to enter a fast growing competitive market that is proven and to pull customers from a large hated incumbent rather than deal with the day-to-day pain of customers. But I have seen people build incredible bootstrapped seven and eight figure businesses with customer pain. The worst of both worlds though, don't do this, is when you have both competitor pain and customer pain. Run away from that. The nine items I've shared today are just the beginning. They're the first half of my full checklist for designing the

16:01ideal SAS business. This video was actually pulled from one of my favorite modules in the SAS launchpad, which is my in-depth 9 and 1/2 hour course that takes you from zero to your first paying customer. Val Soapie said the course helped him discover his most recent B2B SAS, which he just launched, and with which he's already in the process of signing up his second client with over 80 employees after signing up his first

16:24client, who has more than 300 employees. We've also added a new module featuring Arvid Call, the founder of Podscan.fm. Arvid and I go deep on what really matters before you bring AI into your SAS. What to watch out for, what's working, and where founders are getting tripped up right now. If you're even thinking about AI, you'll want to check it out. If you want to dive deeper into the course, you can get the rest of this checklist for free. Just watch the 28minute DNA of a great SAS idea module available at sasaunchaunchpad.co. And if you watch it before June 1st of 2025, you'll automatically be entered to win a

16:58completely free copy of the entire course. And for subscribers of the channel, if you buy and complete the course in the next 30 days, you'll be entered to win a private 30inut one-on-one session with me. We can workshop your SAS idea, solve any challenges you're facing, or map out your next steps together. If you go to sassaunchpad.co and you go to checkout, use the promo code checklist to get $150 off the course as a thank you for being a subscriber here. All the details and that free sample lesson are at saslaunchpad.co. You'll find the link in the description below. Thanks for

17:31watching and we'll see you next time.