Building and Managing SaaS Software Products for SMBs
The hard things and a few guiding principles to success
Small and medium businesses are the backbone to the socio-economic development of a country (Drucker, 2009). They form a major part of country's GDP by contributing to the nation's needs of goods, services and exports. They are also important job creators and are keys to socio-political stability within a country. SMB market is an interesting one and always poses a huge potential in terms of TAM. For example, according to Google's research there are close to 58.5 million SMBs in India alone contributing to 37% of India's GDP and fast adopting digital tools and technologies.
However, building and selling software products for small and medium businesses is no joke. The entrepreneurs and product managers who have uphold this responsibility can clearly empathize with this. It’s an unique challenge only if you are poised and excited to embrace it, else it can drain you. Why so?
Because, firstly it is easy to identify an underlying problem(s) of small businesses and build a solution around it. But then to go about and acquire customers who would actually appreciate the solution that has been built and will be ready to pay empathetically is the biggest challenge. Yes, the challenge is scaling and monetizing the product profitably. Small businesses are often unorganized and have build their own processes around as they grew. So they seek customizations in the product that can make it work in tune to their ways. And, all these product customizations that they seek are in absence of the dollars that they are willing to pay. So, it’s an arduous task to meet customer demands and acquire them. Acquisition is one aspect and then there is a huge challenge to retain them. SMB SaaS typically sees a high churn rate. So, in short it takes years to scale your product as in initial phase the growth in customers might just be linear. It may take years to reach the 'Knee Point' where growth will see an exponential aspect to it and scaling will be much faster thereafter.
That's the reason you will find very less software products for SMB space who have made it big like Intuit.
So, to summarize, yeah its hard. If you are not persistent and perseverant about your product and have a solid balance sheet behind sustenance of your company, you might end in giving up or taking an exit.
Sometime back I was leading product endeavors at greytHR, a SaaS based HR & Payroll software for SMBs in India. For the uninitiated, greytHR is a market-leader in India and Middle-east in SMB segment for HRIS software. When I was associated with them they had already close to 7000 paying customers (till March 2019) and were growing pretty rapidly. greytHR is slightly more than a decade old. And it was a great learning experience for me understanding this unique market segment, working with thousands of customers and building products for them. I am going to share a few key learnings in this post which can help budding product managers and entrepreneurs in SMB space to manage their products better.
Make friends with your first 25-50 Customers:This is a key starting point. Once you have acquired your first 25-50 customers, its very important to work with them closely. It makes sense to lie down with them all the time. See how they use the product, what hiccups they face, what is their feedback, do they see any value in using the product, is it helping them succeed? This will help you in furthering the viability of your product in the market, give you cues into bettering the product features and will help you redefine the next set of key features that you should be adding. Also, a good relationship with these customers can help in spreading that initial word about your product and defining key marketing/sales assets (1 pager value props, success stories, testimonials, case studies, app reviews, etc.) that will aid in acquiring next 500 customers.
Emphasize on the 'Perceived' Value: As SMBs are unorganized, they look forward to a software to standardize and help them automate their business processes that will save their time for focusing on their growth trajectory. So, the software should be able to emphasize the value to your customers that they can perceive, acknowledge and appreciate. For this you might have to focus on making the software easy to use and getting your customers to succeed with your product.
Make it easy to use: It is very important to think through the user experience and simplicity while defining the product features across each touch point right from product evaluation to onboarding to first usage in the product. One has to understand that the users in SMB space are not that seasoned or tech. savvy like one will see in large enterprises. For example, in case of HR product for SMBs, users are not even HRs in most cases. They are small business owners, fresh MBA-HR grads, people managers, IT admin or anyone who has been assigned with that business process responsibility. So, its key to simplify or rather de-mystify the business process for the user and make it seamless for him to realize the value.
Customer Success Matters: It is key to gauge the customer's usage of the product and health score of the account. As churn is very high in SMB space, it is always advisable to periodically touch base with your customers share relevant data that demonstrates a measurable and trackable ROI to your customers, especially in initial few months. Have forums where your product experts engage with customers, lend their helping hand by addressing their concerns, remove their initial purchase anxiety and constantly nurture them with product benefits, use cases, tips and tricks which can help foster the product usage and thereby perceive the product value.
Focus on Effective Product Discovery: Engineering a product or a key feature is a costly affair. Hence, as a PM, when you commit on building a product or key feature, it is very crucial to do it 'First Time Right'. This calls for an effective product discovery. Product discovery is all about gauging on incoming product ideas/feature requests and then methodically picking up select few for incorporation in the product. As a PM, you can start by weighing the incoming product ideas with different parameters like business viability, technical complexity and operational feasibility. Its best to start with a secondary research of market potential by deep diving through market insights and competition to see if the idea is viable for your business and then reaffirm the same with customer interviews. Once you have selected the product feature that you want to build, its best write a detailed product narrative covering use cases and benefits that your customers will derive out of this and partner with a UX designer to envision it with the help of a prototype (usually click-through works best to assess the usability and user experience). It makes sense to validate this prototype with your key stakeholders within the company to avoid any hassles later during engineering. Lastly, user testing is a must to validate if your users see any value in the product feature, and make sure you consider their feedback before you transition the feature for development.
Genericity vs Specificity: While continuously building and developing features for your product, It's always wise to think through various use cases and have a product or feature vision in mind with solid research into domain/industry/market and competitive landscape. Keeping the product or feature generic reduces the functional debt over a period of time and aids to easy scalability of the product. Do not build literally whatever customers ask for. While addressing customer asks are key for a growing business, it is better to understand the root problem and solve that. Most customer asks will be around the issue that they directly face and almost always superficial in nature (around UX like give me a button to do this do that or let me have a checkbox of options to select, can I have an API to do this, etc.). But it makes sense here to talk to customers, understand the reason they wish to do it this way and identify the root problem. With this root problem, you will be in a better position to see if this problem needs to be solved, does it make sense for your key customer segments, can this be productized. If yes, then you can take this root problem and can derive use cases on how your key customer groups are going to solve their problem(s) using this feature and put forward an elegant solution by focusing on extensibility, scalability and usability.
Be Data Informed: Its best to define key success metrics for your product or feature and set up a product analytics dashboard. This is irrespective of the product phase or the number of customers you have. Data that goes into this dashboard can be software telemetry, system events like clicks, scrolls, etc., usage data, task completion rate, behavioral data or explicit user created data like feedbacks, ratings after a key user journey within the product. These can give you cues with respect to usage and user interactions within the product or simply put can help you stay informed on the whether your product is delighting customers or not. It should also be of note that in SMB or enterprise space you have to be sensitive about the data that you are tracking else it can get you into legal hassles. Mostly software telemetry data is harmless and customers should not have any concerns but its better to add it to terms of usage and make them agree before they start using your product.
Define the Boundary conditions: It's key to define boundary conditions while developing a feature. Boundary condition is all about placing limitations around your product features keeping the product capabilities and use cases in mind in order to optimize the product performance and provide a better user experience. You can consider this as max. and min. definitions of a feature. For example, if you have a table in your feature which can have custom columns, it's important to define the minimum number of system provided columns that will be available out of the box, maximum number of custom columns that it can have, maximum number of rows that the table can support, maximum file size for import capabilities if the table has import, etc. If you do not define this, then there are high chances of users misusing the feature capabilities (of course unknowingly). As discussed above, SMBs are unorganized and while growing they define and re-define processes which are not the industry standards but work-arounds which can quicken their growth trajectory (sometimes well known as 'jugaad'). To cite an example of the same, in the previous HRIS product that I had managed, we were once surprised to see the various ways our customers were using (abusing) the employee document management system. From storing company and historical HR files/records to manage employee performance to use it like almost like a Dropbox, customers on their own have worked out (frugally innovated)various number of use cases in absence of any set boundary condition defined within the system. This is value for money for them but in SaaS it’s a cost of cloud for the vendor. Additionally, it impacts product performance and many a times attract unnecessary support requests which as a PM you won't want for your product.
Last but not the least, its also important to understand the market dynamics (esp. competition) and improvise on the pricing tactics like having a freemium-limited use pricing plan, distinct product plans separately catering to the needs of small businesses and mid-market segments, etc.
Happy building classy products & delighting your customers!
More readings and references:
Druker, P.F., 2009. Innovation and Entrepreneurship, New York: Harper Collins.
NEAGU, C., 2016, The importance and role of small and medium-sized businesses, Theoretical and Applied Economics Volume XXIII (2016), No. 3(608), Autumn, pp. 331-338
https://www.salesforce.com/hub/sales/small-business-sales-guide/#
https://hackernoon.com/why-you-should-be-data-informed-and-not-data-driven-76079d187989