Transcription
In this video, I'm going to talk to you about why starting a software company is a terrible idea. As a marketer who's worked with over 40 SAS companies, I actually have to agree with this take. In most cases, it really is a horrible idea. And Alex Risi is one of the definitive business geniuses of our generation with eight figures in exits and a massive following, so there's probably some truth behind what he's saying here.
So, in this video, we're going to take a look at Alex Hero's advice on starting a SAS from the point of view of a SAS marketer. And if you stick around, I'll give you some of my best advice. Having worked with over 40 companies in the SAS world, they think that one, it's going to make their service company stickier, cuz they're like, "Ah, software is sticky." No, no, no, no. Software is not sticky. Really good software is sticky. Your software will not be sticky and will just cost you a lot of money.
Honestly, I have to agree with Alex on this one. I see a lot of service companies try to add SAS into their offer to make it more stickier, to reduce churn. When in reality, the best way to reduce churn as a service company is just make your service better, train your people, build systems. Adding a software into the mix is really just going to increase operational complexity and also, it's really expensive to build. As an agency owner myself in the services business, by far the most effective way to reduce churn is either train your team and be better at what you do, or improve your client experience and customer service. It's not to go and build this side project SAS you think is going to solve all your problems.
The problem is, 99% of people want to continue to run their info business and then drive it to a software company, in which case they do both kind of shitty and never actually get the exit, B, sticky software. And so they end up just having a kind of shitty mix in between because there's another person who's trying to solve the the exact same problem and doing it better than them because all they focus on is the software. Yeah, it's really hard to do two things at once as an entrepreneur.
Of all the 40+ SAS companies that we've worked with over the past few years, I think I can count on one hand the amount of founders who were splitting their focus between the SAS they were building and then the other company that they had. And honestly, a lot of the best ones, our best clients, are fully invested, all in on their SAS on a single company. This is especially true if you plan to raise VC money. Like, they're not going to back you if you're doing all these multiple different projects. If you're bootstrap, maybe you could make it work, but again, you're making it harder on yourself because you're splitting your focus in so many different directions. And a lot of these founders are honestly just super intelligent and effective at what they do. So if you think you're going to compete with the best in that space when your focus is split in two or three different directions because you want to have multiple streams of income or whatever your reasoning is, you're in for a rude awakening.
The funny thing is, I'm actually launching a SAS in a few days. But the only reason I'm even touching it is because I have a co-founder who's doing the bulk of the work and I'm really just running the marketing and being the face of it. But if I was having to build that product and run that company on my own along with the agency, I'd go insane. There's absolutely no way I could do either of them well.
And if you're getting into the software game and you think they're like, "Oh, I'm just going to market it and it's just like a course and then people are just going to have to stick with it because I introduce them to it," it's not true. It's not going to happen. You have to be really good at software and really know a lot about the business. In SAS, or any business really, product is everything. And marketing can only help you so much. Say you're really good at creating content and driving traffic to your SAS, but your product just isn't good, you're not going to get very far.
In the early days of the agency, we had to work with clients who maybe didn't have the best products in the world. And every single time, one, they'd struggle to get any traction with their marketing in the first place because social proof drives a lot of that early momentum for SAS companies. If you don't have clear client results or happy case studies, it's going to be difficult to get off the ground. And even if the marketing did work and get a lot of people in the door, they very quickly find out that, "Oh, there's a bunch of bugs. This product doesn't work the way it should," and they're going to churn one to two months in. So if you're not ruthlessly focused on creating a high-quality product, you've already lost from the start.
And yes, again, you can pump out all the content you want. You can do all the outbound you want. But as soon as you get people in and they see that the product does not live up to the hype, they're going to leave. And then they're going to tell other people. And now you're in this death spiral.
And not only that, software is one of the hardest businesses to get into for a variety of reasons. Number one, it costs money to develop stuff. Now, you're like, "Oh, I'm going to have an offshore team." Has its own risks and making sure that the product is actually what you want. But let's just assume that you, you know, have figured all that out. You have the cost of development, that's number one. Number two, the people you're competing against now are software people. And they are much smarter in general than I would say the guru world is at large. And that's because there's real money to be made there. A lot of these SAS founders are just absolute killers. If you think you're going to compete with them with some no-code product or half you're focused in one direction, half in the other, it's just not going to work.
And sure, there might be an exception to this. I wouldn't plan on that being the case. If you're starting from scratch, and sure, some no-code solution might be the way to get your V1 out there and just start testing, but you're not going to be able to scale that. And again, likely we're just talking about if your product isn't actually that good, people are going to find out as soon as you ramp up your marketing. And really, as Horos you said in other videos, great marketing to a bad product is really just letting more people know that your product sucks faster. You know that next month, your month is going to be bigger than it was this month, even if you do nothing. That's how a good business runs. And it takes time to get there. And people get impatient. And so they try and think that there's a shortcut. And there isn't. There just isn't. You just have to be better. And better takes work. Work takes time.
There are plenty of SAS entrepreneur success stories out there of people who just happened to stumble into the perfect idea at the perfect time. Stars align. They have this multi-million or billion dollar outcome. But those are more the exceptions, not the rule. And a lot of those people, the SAS or the software was their main focus. You're not going to kind of split your focus. And again, this is a common theme throughout this video. Finding success in any business is extremely difficult. Like, we're just starting to see real momentum with the agency. And I can't tell you how many iterations of our systems, of hiring, of all this different stuff, I've had to bang my head against the wall to like, really make it work. And again, if you dilute that focus across that business and another business, it's not really going to work.
The main takeaway isn't that SAS is a bad business to get into. Obviously, we work with SAS companies. Those are our core clients and they're fantastic businesses. I think the main idea I'm hearing from Horoi and I honestly agree with is that you don't want to split your focus unnecessarily. Then you wanted to be like, "I'm a smart cookie. I'm going to move above the space." But you're not. And they're not going to give you the multiple that you think they are.
And here's why. It's not that tech gets great multiples. The future value of a company is based on a discount applied to future sales between now and the day that the company dies. And so the number of sales that they think they could potentially generate, in terms of how big the market could potentially be, and the likelihood that those sales occur. If you have a software that turns people out, and mind you, in the software world, they measure churn annually, not monthly. And so if you have above 10% annual churn on your software, you're so churn rate is a percentage of customers who stop using a company's product during a given period of time. And for SAS companies, low churn is extremely important because it means that people are going to stick around and continue to pay more for longer for the product.
I was literally on a call with a client yesterday who said that churn is the death of SAS companies. And this is true for other businesses too, like agencies, for example. If my churn percentage is too high, then I have to keep getting new customers in the door just to keep the lights on. Not a great situation to be in. It's especially true for SAS because, as Horos is saying, a lot of the value that comes from SAS companies is because people are paying you on a recurring basis. But if those people are just not paying you anymore and coming in the door one day, out the door the next, not a great situation to be in. And you're not going to end up with this magic SAS multiple that everyone thinks they're going to get if they even get to an exit in the first place.
And this goes back to what we were talking about earlier with if your product isn't good, people are going to churn. And all your marketing is doing is letting people know that your product sucks faster. You probably don't have those types of churn metrics, which is probably why your software sucks. Unless you're a hardcore, true, God balls to bones software entrepreneur and you know everything about that world and you're willing to risk it to go all in on this, which is why a lot of these guys use funding up front because sometimes in a lot of software companies, they need to have funding in order to get the initial stuff off the ground so they can get market share and then they can start upselling people later. It's a much more competitive space.
So look, I know we've been talking a lot in this video and Horos has been talking a lot in this video about how starting a SAS company is not a good idea. But if you are one of those crazy people who wants to go all in on a SAS idea and you are willing to build a product and make it as great as it can possibly be and roll that dice and to make it your main focus, it's possible. But again, it's going to be hard to make it if it's like your part-time side project.
So if you are one of those founders that wants to make a SAS company your main focus and you're trying to figure out how to market it, I told you I'd give you some tips at the end here. So here are for five of my best SAS marketing tips that'll help you get it off the ground. First is going to be picking the right channel to market on. A lot of times I see founders of SAS companies, and other companies as well, spread themselves way too thin, way too early. For B2B SAS companies, or SAS companies in general, LinkedIn tends to be the most effective platform as of recording this in 2024. Probably still true in 2025 and 2026.
And tip number two, as you're posting on LinkedIn, post from your founder's personal account, or if you are the founder, post from your personal account, not necessarily a company page. This is especially true in the early stages. Eventually, you want both. But as an early stage founder, your personal brand is going to be the most effective way to get more distribution for your company. Cuz think about it, you scroll on the timeline, how many company pages do you actually see? Not very many. I could go open LinkedIn right now and show you that out of the 10 posts I've just seen, eight to nine of them are from personal brands.
Tip number three, as you start posting on LinkedIn from your personal account, make your sole focus becoming the go-to resource for your ICP. This is incredibly important. And if you do nothing else but this, you'll be in a fantastic spot. You don't want to get overly salesy too early. Yes, announce product features and give updates, but also create valuable content that educates and informs your target audience and positions you as a, I hate the term, but thought leader in your category.
Number four, as you start posting over there, you're going to realize that, "Oh shoot, nobody follows me yet." And I'm kind of posting into the void here. I'm posting, I'm getting maybe one, two, five likes if you're lucky, and maybe a comment or two on your post. It's a good start, but you don't want to be there forever. And one of the easiest ways to get more people into your audience without having to rely on the algorithm is actually go find people in your ideal audience and send them connection requests. Just send a blank connection request. Do it manually. And you'll see a pretty high acceptance percentage. And what you're doing is essentially feeding people into your audience that are going to see your content. Cuz when they accept a connection request, that's a mutual follow on LinkedIn. And it's pretty much guaranteed that they're going to see the next post that you make. So if you're posting consistently and feeding these people into your audience, you're going to create this flywheel and sort of avoid that cold start problem founders run into.
The fifth tip I've got for you, and this is how you make it feel like you're everywhere on LinkedIn. Once you start posting from your personal account and you start to build a team, as well as your company starts to get momentum, get them active on LinkedIn as well. A lot of the best companies that I've worked with or just have observed on LinkedIn have multiple people posting actively on theirs, their founder, other C-suite execs, even more junior employees sharing their thoughts and value on the timeline. And it creates a situation where your audience goes on there and they can't scroll two seconds without seeing something from your company. If you do nothing else but those, you'll be in a fantastic spot to market your SAS, assuming you're not splitting your attention in a bunch of different directions like we've been talking about.
So that was some of Alex Hero's best advice on starting a SAS from the POV of a SAS marketer. Now, if you are a SAS founder and you want to take your marketing game to the next level, I have a video on the channel that will help you do just that. I'll put it up on the screen right now. So go ahead and check that out. I appreciate you watching here and I will see you in that next video.