Evaluating Modest SaaS Business Ideas

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There’s no “One Right Way” to evaluate a business idea; it’s a very personal process. Everyone has different requirements and priorities that they have to balance, and what might be an amazing idea for one person sounds like a terrible idea for another.

I co-host a podcast called The Modest Product Podcast where Steven Abadie and I talk about our experiences trying to build, launch, and run modest products.  I’ve spent a couple years working on Nodewood, a JavaScript SaaS starter kit and while it’s in a pretty good place, I’m looking for my next project – one I can use Nodewood to build, and in doing so, improve it.  I don’t want it to just be a “toy” project either, I want it to be legitimate business idea that fits my ideals and could really help people.  Why waste my time and others?

So I’m evaluating each idea I’m considering carefully, and I wanted to share a little bit about exactly how I’m evaluating them.  This might be helpful for other people looking for modest or “bootstrappy” business ideas, but it will also help me formalize some of my thoughts on the subject.

Obviously, some of these considerations are more important than the others, but this isn’t a ranked list or anything where you can do math to come up with the quantifiably-best idea. It’s more of a series of lenses I use when evaluating an idea, to make sure I’m taking as many important weaknesses and strengths into account before I’m more seriously invested.

Oh, and credit where credit is due!  A lot of these ideas come from a conversation hosted by Justin Jackson.  He started collecting ideas in a Google Doc, and I decided I wanted to expand on it for my own benefit.  Then I figured I may as well share what I’d come up with, in the same spirit the original list was shared.

Is this an exciting product?

You may have heard that there’s two kinds of products: “vitamins” and “painkillers”.  It’s a very simple idea and doesn’t fully or cleanly divide all products, but it’s a useful way of understanding how people will potentially view your product.

“Vitamins” are nice-to-have products that make your life easier or better in some way, that you know you probably should use, but are easy to put off until later when you’re “ready.”

“Painkillers” solve a clear and present need that is not yet met.  Painkillers are exciting, because they enable you to significantly improve your business or yourself in a way you may not have thought previously possible.

This isn’t a clear dichotomy, because products that used to be considered vitamins can transform into painkillers as technology and culture advances (sending email invoices for physical services, for example), and vitamins in one niche may be critically needed painkillers in another.  But when you consider the product and what it enables for your target market, you should be able to understand at least, is it exciting?

Exciting products are easier to market, more prone to being spread by word-of-mouth, and generally require a lot less customer education, which limits the amount of “extra work” you have to do with a constrained amount of free time.

Does this solve a significant enough problem that people will pay for it?

Constraining your solution to a too-small problem space will definitely make it easier to build, but it can leave you with a product that’s not really worth buying. Collecting and storing people’s receipts online (for an example that may or may not come from my own experience) may be useful as a backup for people, but without some sort of time-saving scanning/OCR and tax preparation calculations, it doesn’t really solve a significant enough problem that the alternative (store them all in a shoebox and deal with it at tax time) doesn’t solve just as well.

Will customers regularly use and see value from this product?

A product that people regularly interact with is a lot easier of a sell than one you use infrequently, even if the value obtained is the same.  If a user logs in every day or week, then when the monthly invoice comes up, they remember you and the value you delivery.  If they log in once a month or less, there’s a better chance that they’ll forget or be ambivalent to the value you deliver, and cancel.

Does this product provide value to companies at broad stages of their life cycle?

One of the problems with Nodewood was that it was only really valuable to companies that hadn’t started working on their product.  Since it’s a starter kit, if you’ve already started, you don’t really care about it.  This means that the marketing for Nodewood has to start very early, building up brand awareness with people who may eventually start a SaaS business, and will hopefully still remember you fondly at that point.

It’s much easier to market a product that applies to a company at broader stages of their growth. Not to mention, they’re much more likely to have money to spend in later life cycle stages.

Does this product align with your values?

I mean, pretty obvious here.  If you can’t stand Bitcoin, don’t start a Bitcoin app.

That said, you probably want to take a minute to think about second-order effects here.  The original inventor of NFTs had lofty goals, but didn’t think about the scam whirlwind they’d eventually unleash.

Do you like your potential customers?

If you’ve never gotten along with teachers, for example, it might make it difficult to properly empathize with educators as potential customers.  This can make it harder to identify the real issues they’re facing, and, at best, delay finding product/market fit.  It can also crater your motivation, since you’ll be working with these customers regularly, and if you don’t value those interactions, it can wear on you.

Will you be able to stay motivated to work on this product?

This is as much a personal question as a product question, but products naturally have different “cool curves”, where motivation to keep going ebbs and flows.  If your product requires a lot of motivation up-front to power through some boring bedrock, and you’re currently feeling burnt-out, you may never get off the ground.

Conversely, if your product is fun to build but challenging to you to sell and maintain, you’re going to have a great time writing code, but running the whole business may end up being a chore.

This is one of many areas where considering a co-founder could help shore up any potential weaknesses.  In addition to them being able to take on tasks that would wear you out, you can share tasks that neither of you want to do, as well.  That way there’s half as many of them, and you have a shoulder to cry on afterwards.

Can you build this product in a reasonable amount of time?

If it’s going to take you two years to just build the MVP, you’re going to want to consider the problems that come with that.  Motivation, as we just discussed, will be hard to keep up for a long period of time.  The market opportunity you identified may dry up or be filled by a competitor.  There is likely significant technical risk in such a long project, and it may take longer than the projected two years.  Additionally, iterating rapidly on such a complex prototype is likely to be difficult as well, which means you could have a harder time achieving product-market fit.

On the other hand, if it only takes you a couple weeks to build out the majority of your product, you’re going to be vulnerable to fast-following competitors.  Established players in the market could duplicate your offering with their superior resources, or, even if the niche you’ve identified is too small for them to care, other bootstrappers could likely replicate your work just as quickly as you did.  Quicker, too, since they’ll have your work as a blueprint.

Every product has a moat you build as you build it.  Too much moat and you may never get across yourself.  Too little, and the barbarian hordes will just flow right across.

What is your moat?

To expand that last thought a bit, it’s helpful to ask yourself: What will the moat for this product be?  What hard work or specialized knowledge or access will you need to develop, and are you okay with that?

And if you can’t identify a moat, again, beware of fast-followers.

Is this product easy to distribute?

One of the early ways that Google tried to monetize search was by selling Google Search Appliances – you’d purchase a physical Google rack-mounted server, connect it inside your data center, and let it index internal documents for you.  A really neat capability for businesses to be able to have at the time!

They obviously no longer sell this hardware, and one large reason is that it was a royal pain in the butt to distribute and maintain.  Since it required actual physical delivery and setup, there were all kinds of technical and legal hurdles to move past before a sale could even be agreed on, and then scaling that business became a chore.

You likely aren’t looking at building physical computing appliances for people to install in their data centers, but the modern equivalent is on-premises software.  Far less frustrating to install, but still very frustrating, when compared to a simple SaaS.

And even if distribution is fairly simple, if your product requires a fair amount of work for your customer to set up on their end before they see even a shred of value (snippet installations, workflow building, time to evaluate data), this will also slow down your sales cyle and add to your per-customer costs.  One way to defray this is to offer “concierge setup” for an additional fee.  This protects your time while allowing for you to still help customers that need it.  It also provides you with a marketing lever, as you can waive the fee for critical clients, or at high tiers of your service (your “Gold” plan or for annual payments, for example).

Is downtime a life-or-death emergency?

Obviously, all downtime is a bad time, but some are worse than others. If you run a meme-generating service, being down is frustrating to people and disrupting to you, but nobody’s really being hurt by it.  Alternatively, if you run an Internet Of Things company that locks and unlocks doors over an API, if that API goes down, people could be locked out of their houses during emergencies!

People aren’t always willing to pay more for critical services, especially if it’s not a service they regularly think of as critical.  How many times have we all heard the story of someone losing their life’s work because they didn’t have decent backups?  You would think that by now everyone would have a proper backup strategy in place for important data, but unless you think about these things seriously and regularly, you may be ignorant of the necessity of paying reasonable prices or simply not willing to pay at all.

Will you spend a lot of time doing customer support?

A product that requires a lot of customer interaction can seriously limit your ability to build and grow that product and business.  Some products are just very complex and require a lot of personalized work that a certain percentage of your customers will just require help with.  These products may not be a great fit for a solo (or duo) bootstrapper – even though a solid customer support experience usually solidifies that revenue – because it’s preventing you from locking in additional revenue.

This can potentially be offset by having very good documentation, videos, walkthroughs, etc.  You have to keep in mind the amount of time it takes to create these resources, obviously, but even they’re not a wash, since they can be a valuable source of SEO-based traffic, if built properly.

Will this product be all-consuming?

This is kind of broad, but does this feel like the kind of product that will take over your life? Consistant customer support, regular feature requests, constant marketing, price & legal negotiations… It’s important to look at the total “burden” of this product on your life and make sure it matches up with how much you’re willing to give, whether that’s a lot or a little.

Does the person who gets the most value out of your product control the credit card that will be used to pay for it?

If not, you don’t have to just convince the primary user of the value of your software, but also have them convince their boss.  At best, this will lengthen sales cycles.  At worst, it’ll trashcan sales.

Do your potential customers regularly pay for products, ideally for this kind of product?

Some customer categories love trying new things, but not so much paying for them.  Developers are a great category for trying new tools, but Linux developers aren’t especially fond of paid software.  Teachers are generally happy to find anything that can save time and help them teach, but don’t typically have a big budget at their disposal.  Finding a customer category that regularly spends money on the kind of software you’re intending to build can make it signficantly easier to actually sell them software.

Is your market a large one with a lot of upmarket competition?

It’s a lot easier to get a small piece of a large market than it is to get a large piece of a small market.  There’s more momentum and, as they say, a rising tide floats all boats.  Upmarket competition shows that there’s a wide variety of customer demands, which means it can be a lot easier to laser-focus onto an underserved niche and use that to jumpstart your business.

Is there demonstrated demand for a downmarket competitor?

Sometimes, the upmarket competitors just suck up all the air in the room, or it could be a product category that prohibits downmarket competitors from actually competing, due to a large minimum feature set, regulatory capture, etc.

For example, the “general-case word processor” market has a fair number of upmarket competitors, (Microsoft Word, Apple Pages, Google Docs, Open Office Writer, etc), but word processors require a very large feature set to be competitive.  Sure, maybe nobody uses more than 20% of the features of Word, but it’s a different 20% for everybody.

This can be a useful opportunity to niche down, however, as while there may not be a great opportunity to compete in the general-case word processor market, there are a lot of special-case word processors, targeting fiction authors, blog authors (with built-in SEO tooling), etc.

Is the market still growing?

A growing market will support more niches than a contracting one, as well as give you more opportunities to identify and adapt your product to find product/market fit.

Is it easy to reach your audience?

This is super important.  You have to know where your audience hangs out.  What sites do they frequent?  What industry trades do they subscribe to?  What conventions or conferences do they attend?  Where do they find answers to tricky questions?  And most importantly, how do you make yourself a part of these spaces?

Some audiences are naturally prickly to any sort of advertising.  (Try posting about your startup in programming subreddits, for example.)  This is fine and actually makes a lot of sense – communities that are too friendly to advertising frequently find themselves overrun with it.  Instead, you can get ahead by genuinely becoming part of the community, giving back, and becoming known.  Then, let word-of-mouth work for you.

An audience that remains terribly difficult to reach will complicate your marketing efforts.  This can be beneficial if you have a co-founder who specializes in reaching this audience (it can be your moat), but for a solo founder, it can make life especially hard.

Is there a powerful distribution channel available to reach this market?

Sure, you can fire up a website and just serve anyone who follows your SEO trail of crumbs to your sign-up form.  But some of founders have been finding success by exploring alternative distribution channels.  For example, Heroku provides a directory of add-ons that you can search through and install with a few simple clicks.  Many Heroku developers will search there to solve their problems before they even go to Google.  If you’re providing API services for developers, having your service in Heroku’s add-on directory can funnel traffic to you with minimal work on your part.

There are all kinds of similar distribution channels to consider, many of them growing at a tremendous rate.  Shopify has an app store, Word Press has a whole plug-in ecosystem, Salesforce apps are well-known to support entire teams of developers.  There are definitely risks you assume when relying on distribution channels like this for your business’s growth (what happens if you get kicked out from the store, or a powerful competitor shows up, or they change their API significantly when you don’t have time to adapt, etc), but the boost in discoverability and distribution can be a really killer advantage.

This is obviously not a comprehensive list of things to consider, but it can hopefully help identify factors you may not have otherwise considered and make a more-informed decision.  If you’d like to find out what I end up working on next, after having wrung a few dozen ideas through this particular wringer, please consider subscribing!

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