Another way of looking at this is that, in a dynamic world (especially technology), things are constantly changing, and the very term passive implies your product is static. If you leave your Saas product that has <1,000 hours of dev time alone, thereby becoming a passive income, your very dynamic competitors who are always looking for their next revenue source will be building additional features and trying to steal your customers. The only way this doesn't hold true is if you develop some sort of barrier to entry for competitors that keep it from being worthwhile for them to try to compete with you. Oftentimes, the best barrier to entry is building a product that is difficult to replicate, which means more like >10,000 hours of dev time, which is 5 years of work. In the small business/Saas world, you are either growing or you are dying. It is very hard to maintain a static/passive business.
your very dynamic competitors who are always looking for their next revenue source will be building additional features and trying to steal your customers.
Small software businesses are, to borrow a metaphor from DHH, a lot like a local Italian restaurant. Nobody at BigCo wakes up in the morning and says "There is a spaghetti joint in East Phili [+] with revenues of $30k a month? NUKE IT FROM ORBIT IT IS THE ONLY WAY TO BE SURE."
Similarly, like spaghetti shops, small software companies do not primarily make money because of "features." The notion that software is bought because of features is something that running a software company will quickly disabuse you of.
[+] Edit to add: picked randomly because I happened to just watch a TV show set there, not to be representative of any of the Phili software companies I happen to know. (They're all substantially larger.)
> The notion that software is bought because of features is something that running a software company will quickly disabuse you of.
Can you expound on this? Are you saying that they have loyalty once they have signed up with one provider. Or maybe that they only care about the main feature and tertiary features don't tend to sway them?
Most software buyers buy for reasons which have little do to with features, which after all are generally not perceptible at the point the sale is made. General vibe, risk reducing copy on the website, credible endorsements, words from friends, and the moon being in retrograde all probably matter more than the Nth feature at the margin.
Merely having features will not magically cause customers to discover you or convert from your free trial. Customer churn rates in SaaS are sensitive to many things but feature parity with competitors is generally not a dominating factor, because it's so low on the list of concerns. (The rule-of-thumb in low-touch B2B SaaS is that your churn starts relatively high, hits 5% pretty quickly after you work on it, and then you get long road to 2% as you get better at everything.)
> Most software buyers buy for reasons which have little do to with features, which after all are generally not perceptible at the point the sale is made.
I have worked for/with a number of Saas companies, including one that was purchased by a major company for a high eight-figure amount, and based on the sales cycles I observed and participated in at each company, the idea that feature set has little to do with purchasing decisions is a ludicrous claim.
Keep in mind this is about low-touch. Typically people stare at a webpage with prices and buttons, and try to figure out if the service solves their problem, if it's reliable, if the UI is comfortable, if support is readily available, if other users like it, or how easy would be to transition from their current solution. Not so much opening a few of them and pulling out a spreadsheet to see which has most features.
What happens often is that you get a sale because you support some oddball feature.
Your best bet with SaaS is try to do that. Find a cluster of customers (realtors, doctors, train hobbyists) and over support their oddball features and get a good rep for supporting that vertical. Word of mouth within the cluster will get around (person to person, vertical forums, etc) and you will dominate that space. Once you are the big fish in that small pond feature set, branch outwards to other ponds.
Thanks. Do you think this holds just as true for B2C SaaS? I'm building a product for podcasters. I guess they would be considered B2C since most of them are not making money. Also most of them are sole decision makers.
I once had a VPS that I paid something like $10/month for. I bought it with intentions to host a project idea there, but never really got engaged on it after that. I paid for that VPS for like three years, it sat doing nothing at all. A few times I thought about canceling it but I didn't because every time I thought about it, my thought was "I should really get around to working on that idea" not "I am wasting $10/month."
I finally did cancel it as part of an overall "reduce small annoyances in my life" effort.
But if I'm at all typical, a lot of software or services are purchased with intentions to use it and then it is never used. But also never canceled.
If you are talking b2b support and long term plans and sustainability are far more important than features. To make sure your clients do not have issues with the features you provide is hard enough and that is why most do not and when they do support on more features than competitors they get completely overwhelmed. Once you have clients it is very hard to add features and, to a large extend no one expects you to. It is all sales and marketing with support; that is expensive enough.
Features are one of many aspects that small Saas businesses compete on, with other small Saas's and the BigCo's of the world. My statement wasn't meant to imply that features are the key to running a successful software company. My point was that if you are not actively involved in maintaining your product, which includes marketing to new customers, supporting existing customers, properly handling the finances, etc, it is going to be very hard to maintain your position.
> Small software businesses are, to borrow a metaphor from DHH, a lot like a local Italian restaurant. Nobody at BigCo wakes up in the morning and says "There is a spaghetti joint in East Phili [+] with revenues of $30k a month? NUKE IT FROM ORBIT IT IS THE ONLY WAY TO BE SURE."
It's not the folks at BigCo you need to worry about as the owner of a small software business. It's other small business owners (or would-be small business owners).
> Similarly, like spaghetti shops, small software companies do not primarily make money because of "features." The notion that software is bought because of features is something that running a software company will quickly disabuse you of.
Feature set is an aspect of "product." The importance of feature set varies from market to market, company to company, but implying that feature set doesn't really influence purchasing decisions is patently silly.
As an example, one of my clients sells software to lending institutions. Evaluation of product, and feature set in particular, is critical to the sales cycle for a variety of reasons. One is that in many cases, my client's software will augment or replace existing software and processes at these institutions, so ensuring that they're not losing capabilities is important. Another is that the market is competitive and potential customers are naturally going to compare the functional footprints of the solutions they're evaluating, even if their needs are relatively limited.
Most markets worth pursuing are highly competitive today, and companies that assume they don't need to pay too much attention to product because they have customers on lock are likely to find themselves vulnerable.
Similarly, like spaghetti shops, small software companies do not primarily make money because of "features." The notion that software is bought because of features is something that running a software company will quickly disabuse you of.
There's an old & cheesy (maybe true, maybe not) cliche: "Features TELL, benefits SELL"
