Establishing a business is not a piece of cake nowadays, given that the market is overflowing with competitors. It would require your undivided attention, determination, patience, and a clear-cut strategy. In the tech industry, SaaS entrepreneurs need to tread very carefully as, according to most reliable sources, most startups fail within a few months of inception. Due to big mistakes and improper strategizing, many ventures fail to find any traction even after being funded for more than one or two years.
Patrick Parker, an expert in the Software as a Service (SaaS) industry, has an impressive track record in building and scaling SaaS startups to million-dollar businesses. He joins us today to identify the top three mistakes that cause SaaS businesses to fail.
1. Inadequate market research
“I have observed many young tech entrepreneurs relying on market assumptions and building the whole idea of a SaaS startup around these misplaced assumptions,” says Patrick. That is the top mistake, he believes, people commit while starting to run their startup. Many in the industry don’t put any value in the market research and definition of ideal customer profiles (ICP). This is a very dangerous tactic to start a business with and defies reason. “There is nothing wrong in making assumptions. However, the assumptions should get validated and be supported by adequate surveys and comprehensive market research,” he further said.
If you want to establish a perennial SaaS startup, you need to present a perennial solution to your ideal audience that addresses their pain points. If you fail to recognize or overestimate your audience or go wrong anywhere in your calculations, consider your startup as bound to fail.
2. Financial Mismanagement
Another mistake that Patrick highlights is the initial financial mismanagement by SaaS entrepreneurs and, again, some miscalculations. The problem with many in the industry is that they underestimate the capital required to build and sustain the startup for a longer period and manage cash flow improperly. Consequently, when funds deplete and finding an instant investment becomes challenging, entrepreneurs find it difficult to manage the business anymore, and burnout seeps in.
Also, too many founders expect the company to be profitable after a year or two, but the reality is that it often takes much longer than anticipated to reach profitability, which means that founders will either have to bootstrap the company or find alternative financing from co-founders, VCs or angel investors.
3. Lack of a Skilled Team
Ultimately, your team will make or break your business. A well-structured focused, and skilled team is an asset for an entire business and could even bolster it to the highest level of success. If you want to gauge the importance of a vigilant team, go through the successful enterprises, their hierarchies, and team structures. The team is so important, that investors often place a higher weight on the founding team than they do on the actual idea, especially in early-stage startups. Building a strong team becomes imperative when you are going solo in building a startup. Several surveys have showcased that only 1 out of 10 solo founders ever find success. This number speaks volumes about the need to build a strong team that will then help you build your business.
Patrick has learned from his mistakes over decades of his entrepreneurial journey. His advice and insights resound from years of experience he proudly possesses in the SaaS industry. After building hundreds of million-dollar businesses, he continues his voyage to guide young and aspiring entrepreneurs in their journey too. If you want to reach out to him regarding anything on SaaS, this is where you need to go.