Creating a SaaS Product is NOT the Same as Creating a SaaS Company

Earlier this year, I attended MicroConf: Growth Edition in Las Vegas. This three-day event brought a variety of speakers to the stage, sharing their stories of building SaaS products and eventually scaling them into new startups. There was a common theme resonating from many of the stories that confirmed a strong belief of mine:

Creating a product is NOT the same as creating a company.

Like many of the founders I’ve met and helped over years, several of the presenters shared stories of building an amazing product with a solid fan base, and then hitting a point where they began to feel torn between further developing and supporting their product and managing the “business” part of their new startups that was catching up with them.

Sound familiar?

If you stop developing the product and engaging with your users, the product may lose its momentum, customers may lose interest, and you may lose touch with the very thing that sparked your passion and drives you to do more, to do better.

However, if you don’t manage business issues like cash flow, financing, infrastructure, technology redundancies, hiring, firing, culture, and so on, your amazing product may crush the shaky foundation it sits upon.

So – what’s a founder to do when they reach this point? How do you move forward when the product you’ve created has become more than just a product and needs a scalable, maturing business structure behind it to support the continued health and growth of the product?

3 Solutions (and not a single one of them is “easy”)

I wish that this section could be titled with something like “3 Easy Solutions…”, but that’d be a total fabrication. Once your business hits this point, things are going to get uncomfortable for a little while. You’re going to have to trust other people, relinquish control of one or more areas, and communicate in a more disciplined fashion than you’re likely used to.

What got you to this point is a completely different skill set than what you need to get to the next point. The transition time that you’re facing now is when you have to exercise flexibility, communication, and trust.

NOTE: If any or all of that makes you say, “No way!”, I highly suggest you consider selling the business. I guarantee you will not find a story out there proving that a founder can successfully scale a product into a thriving, growing business without becoming more flexible, communicating more information more often, and trusting more people. I’m certain you can find people who tried – but none that succeeded. If you cannot do one of these three things, cash out now.

OPTION 1: Hand Over the Reigns

I’ll start with the one that tends to strike the most fear when I initially propose these three options to new startups: hand over the reigns to an executive or team of executives who will manage the business.

That’s right, I’m suggesting you consider the possibility of hiring someone else to run YOUR business.

How this moves the needle…

It’s simple: hiring someone else to handle the business aspect will allow you to continue focusing on your product and your customers. While you have your head in the product, someone else is keeping an eye on cash flow, dealing with HR issues, creating and analyzing reports for investors, hiring new customer support agents, approving marketing plans, forecasting next quarter’s budget and otherwise managing the flow of resources to support your work and put a little money in your pocket.

How this can backfire…

There are two main reasons that this option can backfire for new startups: 1) You hire the wrong person/people for what appears to be a logical reason or 2) You undermine their authority. Obviously, these can be related, but they are each dangerous enough on their own.

Let’s start with hiring the wrong person/people for what appears to be a logical reason. I’ve seen this far too many times to count. A founder decides that they need to hire an exec. Since they need this person to do things that they themselves aren’t proficient at or interested in, they assume that the person they hire must be drastically different from themselves. The founder likes to pull all-nighters, wear sweats to the office, and rarely has any idea what day of the week it is, let alone what time it is. So, they assume, the person they hire to run their company must be the exact opposite. This person must be obsessed with timeliness. They must wear a suit to the office every day. They must be a 9-5 machine.

“That’ll balance us out.” It sounds logical… but it’s a recipe for disaster.

The founder’s erratic schedule and sloppy appearance will drive the exec crazy. The exec’s attention to office hours, reminders about deadlines, and his suits will drive the founder crazy. They will avoid one another and do all they can to work around one another.

Although you may need a set of skills that are drastically different than yours, it doesn’t mean you need a set of values that are drastically different. The person/people you hire should have similar cultural beliefs and should value many of the same things you do. Your differences should simply fill in gaps in one another’s skill sets. Your differences should not oppose one another, competing to win.

When you do hire the right person/people, trusting their decisions, talking to them about your concerns, and ultimately backing their direction should be easy. And here’s the deal: you must do it.

You and your executive team will disagree, you’ll argue, and you’ll battle. But, you’ll need to come to final decision that you all agree to present to the team, the customers, the investors, and the public. When your execs tell the staff that they need to dogfood the product for at least 2 hours a week, you can’t tell anyone to “not worry about it”. When your execs make a contract decision that affects a client, you can’t take the client’s call later and promise to “take care of it” for them.

The instant you do that, you take away the exec’s power. Then, everything that you had hoped to offload on him/her will be back on your plate. Your ability to focus on the product will be out the window.

Who should consider this option…

This option works well for two types of SaaS founders. The first is the type that really enjoys programming. If it breaks your heart to think about not being the one who knows every inch of your code, this is you. If you feel that budgeting, approving marketing plans, hiring, and firing all interfere with your ability to do what you love to do – this is you.

The second type is the side-project founder. This founder developed a solution to a problem he/she/they had and it took off. While they had some interest in it at some point, their passions have them busy elsewhere. But, with the right executives at the helm, the little side-project that could, has the potential to scale into a full-fledged business.

OPTION 2: Hand Over the Code

If handing over the reigns doesn’t sit right with you, how do you feel about handing over the code? You could hire or promote one person to take the lead development role, or build out an entire team to tackle product design, programming, and customer support.

How this moves the needle…

This is the flip-side of the coin above. Without the programming tasks on your plate, you can define your culture, hire a staff, pitch investors, forecast the next quarter, work with the marketing team on messaging and branding, keep an eye on cashflow and so on.

How this can backfire…

The obvious backfire here would be with the wrong hire. Maybe the person is a great coder, but not a great motivator or communicator. Maybe they aren’t a visionary, or a strategic planner. Maybe they are really good at promises, and really bad at follow trough.

Hiring the wrong person is always a risk. But, this shouldn’t stop you from doing it. You’ve heard it before – hire slowly, fire quickly.

The other potential backfire on this option is, like with the first option, is in your ability to get out of the way and let this person do their job. If you place someone else in charge of development, you have to let them be in charge of development. No rewriting what they wrote, no little “tweaks” or edits, no pulling resources for a little “side project” to get the features or reports you want.

Who should consider this option…

If coding is something that you do because you can, but not because you can’t not… this option may be for you. As the original developer and ongoing executive, your vision can remain intact and you’ll continue to be able influence the development… but someone else will see that the work gets done.

You should also be the type of person who can admit that they don’t know what they don’t know. You’ve built a successful product, but as I said before, it takes a whole different set of skills to build a company. You’re going to have to be ready to be wrong, to fail, and to seek advice, learn more about each area of business, and continually develop your own set of skills.

OPTION 3: Hand Over the Process

For those of you that are struggling to imagine either of the two options I’ve already presented for your new startups, I’ll reluctantly offer you a third. However, I’ll be honest with you – this is a stopgap measure. It’s my way of tricking you into the one of the first two options… just leading you there slowly.

Handing over the process means hiring a consultant or coach to guide you through the neccessary steps to bring a level of maturity, stability, and scalability to your organization.

How this moves the needle…

This is a much slower process than the first option in which you’d hire someone who knows how to run business and let them do their thing. And since you’re still going to need time to lead product development, it’ll move a bit slower than the second option. But, with a guide helping you continually identify the next step, and holding you accountable for completing each of those steps, your chances for success greatly improve.

Like I said, though, this is a stopgap measure. As you make your way through the process, and you begin to see how planning, tracking, reporting and analysis push your product over the hump and you see the company emerging – I’m willing to bet you’ll better envision how you can best contribute to the future growth as either the lead developer with a solid executive team, or as an executive with a solid development team.

How this can backfire…

As a strategic growth consultant myself, I probably shouldn’t be saying this… but this option can backfire if you become too dependent on the consultant. Like a football coach, the consultant is there to draw out the play, explain how it works, and practice a variety of outcomes to prepare you for real life scenarios. But, when the whistle blows – it’s up to you to make the decisions, to implement the strategy and to head for the goal line.

Your coach should be supporting your continued growth, not making decisions for you. He or she can be a long-time advisor, as long as you continue growing.

Who should consider this option…

Anyone who isn’t completely sure where they’ll best fit in the future of their new startups, should consider this option. If you’re not sure whether you’ll like management or development more, or if you’ll bring more value as an executive or a coder, this option can help shed light on those areas and help you make your decision.

The Worst Action for New Startups is Inaction

If you’ve already started feeling pulled between developing your product and developing your business, now is the time to act. Waiting will only increase the chance that what you’ve built so far will collapse on itself.

Of course, if you need help deciding or you’d like our assistance in moving forward with any one of these options, let us know! We love helping new startups understand their options and make the best choice.



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