Why to Avoid B2C SaaS at All Costs

0:00Building SAS for consumers sounds sexy. Instant signups, viral growth, changing the world. But here's the harsh reality. Most of these businesses fail for the same reason. In this video, I'm going to show you why and reveal the only BTOC SAS strategy I'd ever bet on after starting six companies, investing in 224 SAS startups, and writing five books

0:23about building life-changing businesses. Before we dig in, it's important to define what we're actually talking about. I see people talking about B TOC SAS all the time, but when we look closer, most of the big names don't actually fit the bill. True B TOC SAS is extremely rare and most examples of B TOC SAS either pivot to B2B or they only survive at a massive scale. So here's a

0:46few examples of not really B toC SAS. Netflix, YouTube Premium, HBO Max, Spotify, these are actually content businesses. You don't pay them for software. You don't care that it's software delivering the music or the streaming show. What you care about is the content. These are subscription content businesses. Content as a service, not software as a service. iCloud is another example folks have brought up. The reason iCloud works is only because it's bundled with Apple's hardware ecosystem. They are almost a trillion dollar company. And if you are almost a trillion dollar hardware company, you too can start a BTOCish SAS. But iCloud doesn't stand on its own

1:26as a SAS business. Dropbox is another one I hear brought out. They actually started B TOC, but now over 80% of their revenue is B2B. And then there's LastPass. It's the same as Dropbox. Co-CEO David Fogno said in a 2025 interview that Enterprise makes up 75% of their revenue. So even though you might think on the surface they are

1:46BTOC, they are actually a B2B company. There are a handful of BTOC SAS examples that I know of. One is wab or you need a budget which is budgeting software and personal finance software for consumers. To-d doist is another one. Fitness and sleep trackers are another example and you can see them selling to consumers and succeeding. Beyond those there are handful or two that I know of that are true B TOC versus the 50,000 plus B2B SAS apps in the world. So, if it's true that B TOC SAS is actually quite rare, why are so many founders still obsessed with building these businesses? And there's a few reasons. One, they see the

2:25appeal of a massive user base, right? The idea of millions of potential customers is intoxicating. Another reason is that often times founders have a personal connection, right? Founders want to solve a problem they face themselves or build something for quote unquote everyone because they want to appeal to a mass market. The third reason is the emotional appeal. There's a sense of perhaps impacting the world or fame from building a beloved consumer brand. Folks watch movies like The Social Network or they hear the story of Google or Twitter and they think I want to do that too. I want to appeal to a big broad audience and be quote unquote

3:00famous. But the fact is that very very very few of these succeed. And the last reason is perceived simplicity. You don't have enterprise sales cycles. You don't need to talk to pesky businesses. You don't have to go through procurement processes or red tape. You just launch and you grow like magic. So, it's easy to get excited about skipping the B2B or the enterprise headache. But here's the catch. Even though selling to consumers feels simple, the buying process on their end is anything but. And when it comes time for someone to actually pull out their credit card, the psychology is totally different from selling to businesses. Everything I'm saying in

3:33this video is from my personal experience and the experience of the tens of thousands of founders who watch this YouTube channel, who listen to my podcast, who I've invested in through Tiny Seed, who are in the micro community. Over and over, I see the same sentiment of I wished I had listened to you sooner or I'm in B TOC and my gosh, this is awful. And those are the sentiments I'm trying to communicate to you here in this video before you make the same mistakes. So, let's get back to

4:01how consumers make purchase decisions. So, in your personal life, a $30 a month subscription is probably something you're going to pause and think about. But for a business, if that subscription will save an hour of time a week, or it'll make a business, I don't know, $100, $200, $300, it's a no-brainer. A $30 expense for a business is a rounding error. They spend more than that on toilet paper in a given week. As consumers, we judge return on investment differently in our personal lives, whereas businesses are much more willing to spend money. So, they're much less price sensitive. So, let's look at some key metrics to see why BTOC SAS just

4:39kind of sucks. The financials suck. Low price points and high price sensitivity mean you need thousands or tens of thousands of users to make any kind of money. And you can't spend any money to market to them. Because the moment you spend a couple hundred to acquire a customer, which is not very much in the parliament of acquiring SAS customers, but once you've spent that, you're

5:00already in the hole and you're negative. So, let's take a quick example. If you're making $10,000 of MR at $8 per user, that requires more than 1,200 paying customers and tens of thousands of signups to get those 1,200 paying customers at typical free to paid conversion rates. The other thing is the unit economics are hard. It's really hard to maintain any kind of healthy LTV to CAC ratio or lifetime value to cost of acquiring a customer. And I commented on this before, but what advertising platforms can you realistically acquire your customers at a cost that is actually profitable? For consumers, it's almost zero. You need virality in

5:35quotes. And you think you're going to stumble upon virality by having a free plan and it just is very, very, very unlikely to happen. Another reason why B2C is so tough is churn. Consumers churn in much higher numbers than businesses do. So I have some rules of thumb for churn. If you're selling into enterprises and doing large contracts, you'll see net negative churn or 1% monthly churn. If you are selling to maybe small businesses, you might see 2 to 3% churn if you have a healthy business. If you're selling more to proumers, maybe you have 5% churn, 6% churn. And if you're selling to consumers, you can see 10, 15, 20%

6:13churn. More even more than that. I've seen BTOC businesses with 25% churn. That's not even really a subscription business anymore. It's it's not a onetime payment. It's a four-time payment. People are paying you four times and then bailing. You're turning over your entire customer base in less than 4 months. It's catastrophic. And your business is on fire. And when your churn is that high, you're effectively a leaky bucket. It's so hard to build compounding growth. And you're more likely, you really likely to plateau pretty early on. So, you might be thinking, "But there must be some way around this, right? Maybe if I get my marketing just right or if I go viral, I

6:44can beat the odds. So, let's look at some of the most common myths that trip up SAS founders when they're thinking about B TOC. I hear and see founders fall for these traps all the time. The first is if I build it, they will come. And you've heard this before, that's not going to happen. Distribution and marketing and getting people to care about what you're doing, getting people to your website, getting people to click by is really, really hard. That's the hardest part. Building the product, especially with AI and no code and all the other advantages you have these days, building the product can be hard,

7:13but it isn't the hardest part. The hardest part is getting folks to care. If you build it, they will in fact not come. Another myth is viral growth will save me. True virality is very rare and it's orchestrated. Very, very few apps ever get to the point of having any type of meaningful viral coefficient. And if you think you're going to stumble upon it as your first effort because you built something interesting that you think some consumers will want, you are incorrect because there are people with more experience than you building B TOC apps with a lot of funding who can't find that viral loop. It's very very

7:47difficult. Another myth is low price means faster growth and it's actually the opposite. Low price means lower revenue per user, higher support load, often higher churn, it's usually going to mean slower growth and early plateaus. The fourth myth is that churn isn't a big deal, but churn is the death of any type of subscription business, especially SAS. High churn makes scaling nearly impossible. And the last myth

8:09I'll mention is I'll monetize it later. So, you want to delay monetization because you want a bunch of consumers to use your product. But realizing that, especially if you're bootstrapped or don't have buckets of money in the bank, you have to monetize early because you likely don't have the time and the money to keep an app going for what, months, years without monetizing it. And just because you're not monetizing it doesn't mean you don't have high churn. People can churn out of free apps, and they do all the time. Consumers are notoriously fickle about these kinds of things. In a minute, I'm going to talk about the one

8:44way that I've seen BTOC work. But first, I want to tell you about Microcom Connect. MicroCom Connect is a world-class online community for bootstrapped SAS founders. We keep the quality of the conversation and the members incredibly high by having a moderator who's in there engaging with folks. And it's a paid community and that means people in micro connect are serious about getting things done and there are great conversations about how to do things about I need support, I need help and it's an extension of our famous hallway track. If you head to microconnect.com you can check out everything we have to offer with that subscription. There's a

9:19lot that's included. I encourage you to go check it out. microconnect.com. All right, so back to the question. If B TOC is really really hard to make work and you probably shouldn't try it as your first effort, when does B TOC work? When have I seen it work out in the wild for bootstrapped and mostly bootstrapped founders? A case where serving consumers and proumers works is where you have a dual funnel or a B to both. And this is where you're serving both businesses and consumers and proumers. An example of this is Castos, which is podcast hosting. It's where I host Startups for the rest of us and the Micro Comp

9:53podcast. Castos has lowpriced tiers for hobbyists and then higher tiers for businesses or podcast networks. The reason this works is that their brand scales from having a lot of users and a lot of folks talk about them online. You get real revenue and stability from your business customers. Even if your lower-end folks, your consumers and proumers may churn at higher rates. But it's nice cuz it gives you a nice sustainable smooth growth curve. One of the drawbacks to going enterprise only, for example, is you might close a big deal this month and then not a big deal next month. And so your growth can be spiky. But having B2B with a dual funnel

10:29can smooth out that growth curve. If you're thinking, "All right, Rob, I hear you. Maybe B TOC isn't for me, but how do I actually find a B2B SAS idea that's worth building?" If you're thinking that, you should check out this next video. I'll walk you through the seven ways I've seen founders find an idea worth building. Make sure you subscribe for more content like this, and thanks

10:48for watching.