How to pivot from an agency to a SaaS business

 


If you want to save yourself a lot of pain, your first business shouldn’t be a SaaS. 

In fact, if your first business was service-based, like freelancing, consulting, or an agency, your second business probably shouldn’t be a SaaS either. Instead, focus on building a recurring revenue stream via a membership site or a productized service.

That’s because there is a steep learning curve with building your first SaaS business. Here are all of the things you need to think about with SaaS: product development, UX / UI design, QA, server administration, security, DevOps, user management, customer support, payments/invoicing, marketing site, admin app, backups, data import/export, onboarding, and much more.

Chances are, at least a handful of items on this list are things you’ve never done before. For example, if you run a digital marketing agency, actually building software is likely a new challenge if you don’t have a coding background or extensive experience hiring and vetting software engineers. Or, if you are a software engineer who has been consulting, creating a marketing strategy and focusing on customer experience and retention might be new.  

In this post, we’re going to share how you can use the Stairstep method and build a productized service to help you smoothly pivot from a consulting or agency business. Then, eventually, use that to launch your SaaS.

Follow the golden rule in business 

The golden rule in business is to build a repeatable sales process. This doesn’t matter what kind of business you start. 

While this will take work, there are three shortcuts that will make your life a lot easier:

  • Sell things that the market already buys: It is less exciting than inventing a brand new category or type of product. But, by building a better mousetrap to an existing problem your ideal customers already have is going to make your sales process a lot easier. 

  • Sell to businesses (B2B), not consumers (B2C): B2B businesses have an economic engine already in place and are generally willing to spend more and require less support than consumers. 

  • Remember sales 101:  Help your potential customers get more of what they want.  

Build a productized service first 

If you are already a consultant or have an agency, a productized service is a nice middle ground between your existing service business and a SaaS. It is essentially a hybrid between a product and service, which makes it easier to sell than a custom solution (usually) and infinitely more scalable. 

Here are some examples of business areas where you can build a productized offer:  

  • Business operations and automation 

  • Dashboards and reporting 

  • Training 

  • Graphic design 

  • Writing 

  • Link building 

  • Social media marketing 

  • Search engine optimization (SEO) 

  • Online reputation management 

  • Marketing automation 

  • Video marketing (especially around editing and Youtube SEO optimization) 

In essence, anything that you can build a relatively repeatable process around can be a productized service. 

The key to repeatable income is to have a repeatable process with a repeatable outcome. And this outcome needs to be visible to your customers. 

Focus on building a viable business model first 

Chances are, if you are reading this, your real desire is to automate all the things and build a SaaS. However, a much better approach is to build the business first and then write the software later. 

A good but ambitious target to shoot for you in your first year is $12k MRR.  Assuming you are charging enough (Read: Raise your prices!), this should be enough to cover your overhead (team and software expenses) while still leaving you enough that you are no longer paying yourself the scraps. 

Create your productized service playbook 

Here is an actionable strategy you can use to get your productized service off the ground: 

Building a productized service playbook (in this order)

  • Create a simple landing page

  • Produce three artifacts to demonstrate your expertise 

  • Set up a sales page for the offering

  • Create a free drip campaign that educates prospects, offers a ton of value, and ultimately sells the offering

  • Set up a premium lead magnet to get people to opt into your email campaign. 

  • Sell the actual offering

Make sure your process is repeatable 

Many agency owners, in particular, get stuck at this part. They have a tendency to customize and tweak the offering for each new customer.  This makes it much harder to build a fully repeatable process around, which makes scaling harder. 

The key is to turn this into a routine in that you can plug individual people in your team into each part of the process and still get the same outcome each time. 

To do this, follow this process:

  • Do it once yourself. 

  • Write down what you did.

  • Do it according to the SOP / script you wrote. 

  • Hire and train others based on this SOP.  

  • Then, start automating all of the parts you can. 

Automate the repetitive parts of the process 

Now, it is time to start automating the more repetitive tasks like pulling data for a weekly report or updating your project management software or a spreadsheet. This will likely start by duct-taping things together using tools like Zapier and Make.   

Pro Tip: never ask a customer to do something for you that a computer is better at. 

Eventually, you might start building out your own integration(s). You might build a Slack add-on or a custom Chrome extension that makes your productized service a lot more efficient. 

Remember the fundamentals of recurring revenue business 

Whether you have a membership site, a productized service, or a SaaS, the fundamental theory of recurring revenue businesses is: 

Revenue = Customer Acquisition x Conversion Rate x Price / Churn 

The biggest levers you can pull early on in your business are to optimize for price, acquisition, and churn. And, don’t worry about your conversion rate until you have a lot of customers or you have an extensive CRO background.

For instance, one tactic you can do once you have a handful of happy customers is to optimize for word of mouth by writing onboarding and marketing emails that are designed to be forwarded to other people. 

Other tactics to drive more inbound leads are SaaS SEO, content marketing, and B2B influencer marketing. 

***
In sum, trying to jump right into building a SaaS is playing on hard mode. It can be done, but it is going to likely take more money and time than you think. Often, a better approach is to build a recurring revenue business that is a little easier to start, like a productized service.

Looking for more insights into how to take the leap from selling one-off services to bringing in that sweet recurring revenue? Check out this now-classic MicroConf talk from Patrick McKenzie.