Micro SaaS Products - Are They Actually Profitable?

0:00in this video i look at microsas products and i answer the question are they actually profitable stick around until the end where i'll talk about the place i would go to find almost endless inspiration for new micro sas ideas i'm rob walling i'm a startup founder with multiple exits author of three books about building startups and an investor in more than a hundred companies to begin i'd like to define microsas because if you're watching this video you probably know that sas is software as a service but microsas is a little different microsas is a little corner of the sas space and there's a few factors that i use to define micro sas i don't

0:34believe there's a generalized definition but this is how i think about micro sas as someone who's been knee-deep in the sas space for about 15 years the first feature of microsas is there's usually a small tam or total addressable market this means there are only so many customers who will ever use your product you're going to have a growth ceiling and that's okay that's the point of microsas is that it's easy to get in it's easy to start growing and you're gonna know that somewhere around five twenty thirty thousand dollars a month you know these are not million dollar companies in terms of annual revenue while that ceiling may sound like it's a

1:07bug it's actually a feature it means that super large companies that need to be able to build a business into let's say seven eight nine figures in order to dive in they're gonna stay far away from these markets and so that leaves it to folks like yourself bootstrapped and mostly bootstrap founders who want to grow an incredible lifestyle business another way i think of microsas is it's usually almost like a single feature more than a full piece of software and the nice part about that is oftentimes they don't require a ton of maintenance because you can build the feature folks get value out of it you get paid and

1:39that's it aside from fixing bugs and minor updates you're not constantly in a feature race with a bunch of other competition that's another element of microsas is there usually isn't a ton of competition it's not like building an email service provider or customer relationship management software where there are literally hundreds of other players sometimes you might be the only game in town because the space is so small or other times you might have one or two competitors but it's not as competitive as these larger sas markets another element of microsas is they usually not always but usually have a single organic marketing channel so this is something like ranking high in google

2:14ranking high in an app store like shopify or the wordpress plugin repository that's great because you don't have to spend all the time to invest in marketing to try marketing approaches and you don't have to spend all the money to market like a lot of fast growing sas companies do in addition most of the microsas that i've seen really don't have employees there might be a few freelancers or contractors that are around to help with development updates or to help with support or to help with just some minor things that come up but you often don't need any full-time employees because again the the app itself is small the

2:46footprint is small and the marketing kind of takes care of itself for the most part i really do think of microsas products as the essence of a lifestyle business this is a business that you build that either gives you an amazing side income while you work a day job and it's not a ton of time to build or to maintain it or it allows you to quit that day job and build an incredible lifestyle for yourself where you can seek that freedom and and the purpose of having a company without having to deal with all the headaches of constantly growing and building and competition and shipping

3:16the next feature you know there's so much that goes in to building what i'll just call a normal sas or a standard high-growth sas company that a micro sas makes easier on the founder if you really truly are in search of that lifestyle so now that we understand what micro sas is let's answer this question are they actually profitable if we think about profit it's the revenue you take in minus your expenses revenue's pretty obvious right typically you're going to have customers paying you for the service and they're getting value out of it and even if your revenue is low let's say it's a thousand or two thousand or

3:46three thousand you have to compare that to what the expenses are and so let's look at the three most common expenses for a micro sas app number one is your hosting or your infrastructure costs sas apps require some type of hosting sometimes this is really inexpensive sometimes it's included in the marketplace that you're in in most cases hosting an infrastructure for a microsas are going to be relatively low obviously if you're doing a lot of computation you're doing something with machine learning or ai those can creep up but in general they are going to stay relatively low the second expense can be marketing as i said above usually

4:20marketing is almost taken care of by organic rankings and so it depends on how much time and or money you're investing in that when you think about expenses so if you're ranking in google naturally and you just can do minimal upkeep then there won't be a ton of expense but if you find that you have to put out new articles or optimize them obviously you're either doing that yourself or you're paying people to do that and lastly freelancers are contractors that you bring in to do the work to do email support maybe to maintain the application if you're not a developer to help out with marketing if

4:49that's something that you need to do and it's a trade-off right if you're doing a thousand a month then you're probably going to be doing the work yourself you're not going to be bringing freelancers in if you're doing 30 000 a month you're probably thinking about hiring some folks to help out so you don't have to be answering every email that comes in asking for support i ran an amazing lifestyle business called hiptail and you might consider it a micro sas it wasn't in a marketplace but it did have pretty good seo rankings and it grew to about thirty thousand dollars a month and the expenses were in the two

5:21to three thousand dollar range and so to answer this question are micro sas companies profitable the answer is an emphatic yes they can be insanely profitable even when your revenue is low if you keep those expenses low and you do the work yourself as i said above they can throw off a ton of profit and while i said above that there is often a ceiling to microsas companies that negative comes with the benefit that they are insanely profitable and usually more profitable than standard sas companies where you have to hire a team and be constantly building out the platform in just a second i'll tell you about the place i

5:52would go to find almost endless inspiration for new micro sas ideas but before that if you enjoy this video i would love it if you hit the like button and subscribe to the channel we have amazing videos coming out every week so if i were starting out today and wanting to build a micro sas i would go to a link we're going to include in the comments it's at rocketgems.com where he has listed 68 b2b sas marketplaces with opportunities for indie hackers micro confers bootstrappers and folks looking to launch both microsas businesses but also wanting to get into what he calls a sas marketplace which is where that takes

6:25the heavy lifting of the marketing away from you and it makes it so you can focus on building essentially an add-on to an existing ecosystem this almost perfectly fits the definition of microsas that i've laid out in this video so i hope you enjoyed it and i'll see in the next one [Music] you