Dan Martell - Build a SaaS Product Within An Existing Business

00:00:00.000 Hey there.

00:00:00.500 I'm Dan Martell, serial entrepreneur, investor,

00:00:02.380 and creator of SAS Academy.

00:00:03.960 In this video, I'm going to teach you

00:00:06.160 how to essentially extract and build a SAS business

00:00:09.400 from within your company without going broke.

00:00:11.960 And be sure to stay to the end where

00:00:13.840 I'm going to share with you how to get access to my migration

00:00:16.440 method training that breaks down the three

00:00:19.080 P's of doing this within your business.

00:00:30.000 So the other day, I get a text message from my buddy, Pete.

00:00:37.000 Okay, he's pumped, he's excited.

00:00:38.600 I get on a call, I say, what's up?

00:00:40.360 He's like, hey man, I think I have a SaaS.

00:00:42.900 And I'm like, do explain.

00:00:44.940 He starts walking me through the idea

00:00:47.060 to build a software solution within his large company.

00:00:49.560 I mean, the guy ran like a five million plus,

00:00:51.300 it's probably even bigger today, business.

00:00:53.900 And he's seen an opportunity to create some tools,

00:00:56.940 not only for his own clients, but for his team

00:00:59.100 to be able to deliver their service better, which

00:01:01.300 is the best place to think about creating a SaaS

00:01:05.820 from your own solution.

00:01:08.140 However, I've seen this play out many times in the past,

00:01:12.400 where people get inspired.

00:01:15.480 I call it pillaging your P&L, where essentially you

00:01:18.460 have a very successful business, and you

00:01:20.340 spend all of your profit building this new software

00:01:22.540 business.

00:01:23.280 You keep investing in it.

00:01:24.540 You never launch it.

00:01:26.400 There's all these things that you don't do.

00:01:28.860 And then I'm the guy that gets the call

00:01:30.660 because a friend of a friend recommends like,

00:01:32.460 oh, you've got a problem with your software product?

00:01:34.800 Call Dan.

00:01:36.100 One day, I got a call.

00:01:37.140 The guy was $7 million in.

00:01:39.420 I can't even make this up.

00:01:40.820 It was a health pro.

00:01:43.560 They were a physical biotech company

00:01:47.220 that decided to build this SaaS business.

00:01:51.740 And it was three years in.

00:01:53.960 They had literally almost lost the other business

00:01:57.420 because they focused on this one,

00:01:59.160 and they asked me what they should do.

00:02:00.520 And it was really almost like you're

00:02:02.460 going to have to start over.

00:02:03.500 So what I want to share with you in this video

00:02:06.400 is the principles that I shared with Pete

00:02:08.660 that I've helped hundreds of other founders use

00:02:11.740 to avoid making all the critical mistakes

00:02:14.200 that companies that are trying to go from a service or a retail

00:02:18.400 business to a software business.

00:02:21.040 Number one, solve your problem first.

00:02:23.880 One of my favorite examples, one of my coaching clients,

00:02:26.180 Daryl, he's got a company called Flexpay and he had a very

00:02:29.780 successful eight figure business that he was working on and he

00:02:32.820 built the tool for himself in that company that became Flexpay.

00:02:38.460 Why is that important?

00:02:39.820 Here's what I told Pete, is if you're going to build a

00:02:43.060 solution that could be assessed to other people,

00:02:46.040 make sure that you solve your own problem first because very

00:02:49.040 often one of the coolest things about software is that even if

00:02:52.640 nobody else uses it, if you do it right,

00:02:55.440 the value you're going to get as a business owner

00:02:58.160 is going to be incredibly impactful

00:03:00.940 to the communication flow of your team,

00:03:02.760 to the workflow, to the profitability,

00:03:04.580 to your logistics, whatever it is that you're

00:03:06.600 solving for yourself first, even if nobody else,

00:03:09.480 if you do it right, then you will be better as a business.

00:03:14.020 So the ROI can be positive just on solving your own problem.

00:03:18.680 And it allows you to stop thinking about, oh,

00:03:21.520 and we could add this, and we could do this,

00:03:23.320 and we could do all this stuff and really just focus

00:03:25.420 on your own problem, build the tool, keep it simple,

00:03:28.620 keep it compact, and start there.

00:03:30.760 Number two, constrain the resources.

00:03:33.760 What this means is, look, you might have half a million dollars

00:03:37.960 sitting in a bank account and go, look,

00:03:39.700 I could put this in a GIC, money market account,

00:03:42.780 an index fund, angel invest, give it to my uncle Sam

00:03:47.280 to do something with it, whatever your idea

00:03:49.380 of investing that money.

00:03:50.660 Or you could go build a software business.

00:03:53.160 That being said, you don't want to be the rich uncle.

00:03:55.880 Because here's what I've learned.

00:03:57.080 I was actually helping one of my friends out.

00:03:59.080 They had a very successful digital design company at LA.

00:04:03.600 And they wanted to take the tool they built

00:04:06.480 to automate some of their work and offer it

00:04:09.520 to some of their clients.

00:04:10.300 Because they actually indirectly was already doing that.

00:04:12.380 It was almost like a Trojan horse where their clients were

00:04:14.460 using this software.

00:04:15.800 But they realize if those people find value,

00:04:17.780 maybe there's a market.

00:04:19.540 And at first, they literally just went all in

00:04:23.300 on doing this other thing.

00:04:24.840 And what I want to suggest is you set some parameters, right?

00:04:28.640 Because if you literally become the rich uncle

00:04:30.740 and you just keep funding and funding and funding

00:04:32.840 and there's no constraints, there's no date that you say,

00:04:35.440 hey, we're going to have the first version

00:04:36.840 launch on this date, we're going to get some pre-sales,

00:04:39.040 we're going to have x amount of customers by this date,

00:04:41.940 then it's really easy to just have the thing snowball.

00:04:45.900 And people say, well, how can somebody

00:04:47.640 build a $7 million software tool and not even launch.

00:04:52.240 It doesn't happen on day one.

00:04:53.900 It's literally quarter over quarter.

00:04:55.880 It's $150,000 at first.

00:04:57.600 Then, oh, you want to add this new thing.

00:04:59.160 It's $250,000.

00:05:00.420 Oh, then we got to add this.

00:05:01.860 Oh, we have a big potential customer.

00:05:03.660 We got to spend another half million dollars

00:05:05.280 to build the feature set for this potential customer.

00:05:07.300 And it goes and it goes and it goes.

00:05:09.360 And then you end up with three years of your life

00:05:12.180 and a huge bill.

00:05:12.800 So what you want to do is you want

00:05:13.900 to constrain the resources, the people, the capital,

00:05:16.400 and the timeline so that you launch something that really

00:05:20.000 works.

00:05:20.400 Again, go back to step one.

00:05:21.860 Solve your own problem first.

00:05:23.340 Constrain it, resource the, or constrain the resources.

00:05:26.720 Number three, don't overbuild for some day into the future.

00:05:31.520 So here is the thing.

00:05:32.520 It was fun talking to my buddy because Pete

00:05:35.220 had all these incredible ideas.

00:05:36.600 It's like if we do this, we can do that.

00:05:38.300 And then someday we can do this, and this, and this.

00:05:40.260 And maybe what I need to build is this whole workflow.

00:05:43.660 And my feedback to him was, dude, build the thing

00:05:47.640 that you need for today, don't build for someday.

00:05:50.560 Too often, we as creators, as entrepreneurs,

00:05:53.980 we get excited, we get motivated.

00:05:56.900 It's almost like a fuel source for us,

00:05:58.540 the passion to create that we just want to come up with ideas

00:06:02.740 and then help the team design it and get them to build it.

00:06:05.920 But the reality is, is we don't know if what we're building

00:06:09.880 today is going to be interesting to the market.

00:06:11.780 We don't know how the market wants to solve that problem.

00:06:15.380 With innovation, that's always been the case.

00:06:17.620 It's a two-sided problem.

00:06:19.480 You have the problem of can the technology actually solve the

00:06:22.180 problem, so there's the technology risk,

00:06:24.120 and then there's the market risk.

00:06:25.320 Does the market want our solution the way we want to build it?

00:06:29.140 It's not that they don't have the problem.

00:06:30.940 Understand this, they have the problem.

00:06:32.940 They want to be better at communicating.

00:06:34.540 They want to get more leads.

00:06:35.480 They want to deliver better for their customers, et cetera.

00:06:38.580 So they have problems, but do they want the solution the way

00:06:41.740 You want to build it.

00:06:42.940 So it's very dangerous to start thinking about,

00:06:45.140 we can do this, this, and this, and build for someday.

00:06:47.580 What I would say is, again, go back to step one and two now.

00:06:51.320 We want to constrain it.

00:06:52.320 We want to build for ourselves, and we

00:06:53.620 want to make sure that we build only for what we need next.

00:06:56.120 Number four, hire someone external.

00:06:58.720 So this is my recommendation, and it's not true ongoing.

00:07:02.720 In the beginning, especially if you have an agency,

00:07:05.400 a service business, it's better to hire a developer

00:07:08.940 to work on this external.

00:07:10.600 where you're paying them to build it,

00:07:12.840 even if you have people inside your business

00:07:14.980 that can build this yourself.

00:07:16.000 Why?

00:07:16.600 Because you're like, well, I've got an intern.

00:07:18.840 I've got a guy that's only working 50% on client project.

00:07:21.760 I've got this resource.

00:07:22.840 I'm going to allocate it.

00:07:23.740 Why would I spend dollars to somebody else?

00:07:26.680 Here's the reason is you want to make sure

00:07:29.740 that whatever you've scoped out, that you've set as a timeline,

00:07:32.740 that the constraints are set, that that person

00:07:34.900 can do it independently.

00:07:35.980 This is how Basecamp started.

00:07:37.660 A lot of people don't know the early days

00:07:39.880 when Jason found DHH, right?

00:07:42.840 He was, I believe, a, he might have been outside of college

00:07:46.060 working at a company, but it was 10 hours a week.

00:07:48.620 And he paid, like, they could have did it in-house, right?

00:07:51.160 But they decided to pay somebody as a contractor, external,

00:07:54.600 because what happens in an existing business

00:07:57.500 is you might get a big deal.

00:07:59.060 And all of a sudden now, it's all hands on deck.

00:08:01.500 We need to work on this work.

00:08:02.900 We, you know, the client needs to get the result.

00:08:04.940 And all of a sudden now, the software project

00:08:07.100 it puts on hold.

00:08:08.140 I mean, that is the other flip side of things.

00:08:10.240 I can't tell you.

00:08:10.900 I had one client that I was coaching.

00:08:13.420 They had a primary software business.

00:08:15.640 And just through conversations, they

00:08:17.620 said, yeah, we actually built something

00:08:19.080 like that in the past.

00:08:19.880 And I'm like, what?

00:08:20.680 You built something like that?

00:08:21.680 But you have this?

00:08:22.220 Yeah, we just thought it was a good idea.

00:08:23.980 So did you build anything else?

00:08:25.120 He goes, yeah, we actually have these three other things

00:08:27.420 that we built that we don't really talk about.

00:08:28.900 And I'm like, show them to me.

00:08:31.640 They were fully done websites, trial processes, actual software.

00:08:36.760 three different, from different industries, literally.

00:08:39.520 I'm not even going to call them out

00:08:40.800 because you might figure out who it is.

00:08:41.980 But it was hilarious that people would do this.

00:08:45.200 But why?

00:08:46.160 Because they started it, and then they

00:08:48.660 got busy with the client work.

00:08:50.000 And then they didn't have time to market it properly.

00:08:52.460 Then they had another idea, so they started that one.

00:08:54.880 They got busy with client work.

00:08:56.100 They didn't have time to market it.

00:08:57.100 And it just keeps happening until finally, luckily,

00:08:59.820 one client pulls your software forward

00:09:02.060 because they're help funding the development.

00:09:03.720 And you're like, OK, maybe I have two, three, four potential

00:09:06.160 clients for this tool.

00:09:07.420 You want to hire somebody external.

00:09:09.480 Set the constraint.

00:09:10.660 Pay the money.

00:09:11.980 Know that it's costing you money because it's more than just

00:09:14.440 dollars.

00:09:14.980 It's lack of focus, right?

00:09:16.600 So we want to make sure that you know that and that you

00:09:18.880 hold that person accountable to getting those results.

00:09:21.400 Number five, talk about it.

00:09:23.860 One of the biggest opportunities for you

00:09:26.440 to truly learn from the market and collect feedback

00:09:29.300 and validate, do true validated learning,

00:09:32.060 is to talk about your idea.

00:09:33.580 Too often, I'm not even joking.

00:09:35.360 I get the emails, hey, Dan, I have this world-changing idea.

00:09:38.120 I'd love to share it with you, but can you please sign an NDA?

00:09:41.600 I appreciate how excited you are about your business,

00:09:43.820 but I will say that there is a 0.001% chance

00:09:47.500 that it is truly, fundamentally, that different

00:09:50.980 that I need to sign an NDA.

00:09:52.160 And truthfully, if it's at that level,

00:09:54.080 it's probably some level of algorithm

00:09:55.920 that you don't should tell me, you shouldn't tell me,

00:09:58.600 and I wouldn't even understand if you told me.

00:10:00.940 So that is the very small exception.

00:10:05.140 What I would suggest, and do it as loud and as often as

00:10:08.820 possible, is talk about the idea, socialize the idea.

00:10:11.880 I have another video that you can find on my YouTube channel

00:10:14.040 that talks about why you should share your idea

00:10:17.960 and the arguments for that.

00:10:19.100 I'm not getting into that.

00:10:19.940 But what I'm going to say is, if you

00:10:21.500 want to build your own software tool,

00:10:24.400 you have current clients that might be users,

00:10:26.620 talk to them about it.

00:10:27.700 I made the mistake when we built Flowtown

00:10:30.060 that I did, we actually launched as an agency.

00:10:33.500 We said we're going to get 15 clients, I believe,

00:10:35.720 and we're going to get them all to pay us like $1,000 a month

00:10:37.900 and we're going to solve their problems and we're going to

00:10:39.120 validate and we're going to learn and we're going to build a tool.

00:10:41.520 Our mistake was is we actually never gave our clients the tool.

00:10:45.560 We used the tool for ourselves, but we were trying to build

00:10:48.260 a solution for them so we actually never got any feedback

00:10:52.000 from the market about our solution, right?

00:10:54.800 Now we could have avoided that whole step and just talk to them.

00:10:58.100 So I'm going to encourage you.

00:10:59.460 That's what I told my buddy Pete.

00:11:00.960 Do you have customers?

00:11:01.920 Do you have potential customers for your solution?

00:11:04.800 Talk to them.

00:11:05.720 How would they want to see the problem solved?

00:11:07.760 And this is the key.

00:11:08.880 Go back to step one.

00:11:10.800 Solve your own problems first.

00:11:12.300 Take the feedback and advice they're giving you

00:11:14.840 and then filter it through, oh, that

00:11:16.900 makes sense for my business.

00:11:18.280 Because again, don't build for someday.

00:11:20.960 Build for yourself.

00:11:22.120 So they might give you inspiration

00:11:24.040 from really great ideas, but they might not

00:11:26.100 be things that you could use useful today.

00:11:28.400 So filter through that.

00:11:29.780 Build, again, a solution for yourself.

00:11:31.700 Plan for today.

00:11:33.020 But learn, socialize it.

00:11:35.120 And if you want to learn how to pre-sell your software

00:11:37.520 before you even build it, go search that on my YouTube

00:11:40.620 channel.

00:11:41.120 You'll find a whole video on how to do that.

00:11:43.040 Because that, to me, is true, true, true customer validation.

00:11:47.080 And how you avoid building a software business

00:11:50.760 from within your business without going broke.

00:11:53.520 So quick recap.

00:11:54.860 Number one, solve your own problem first.

00:11:57.140 Number two, constrain the resources.

00:11:59.580 Number three, don't overbuild for someday.

00:12:02.440 Number four, hire someone external.

00:12:05.080 And number five, talk about it.

00:12:07.560 So as I mentioned at the beginning of this episode,

00:12:09.180 I want to share with you, I think, one of the best trainings

00:12:12.960 I've ever put together for founders that are looking

00:12:15.460 to extract a SaaS business from their existing business

00:12:18.620 called the migration method.

00:12:19.960 I go over the three P's that you need to know

00:12:23.260 to truly understand how to focus your attention,

00:12:27.180 focus your investment, and focus your resources

00:12:30.400 so that you can have an increase, the highest

00:12:32.600 probability of being successful.

00:12:34.740 Because it is a challenge to go from an existing business

00:12:38.600 and pull out another business, because technically they're

00:12:41.400 different, they probably serve a different customer,

00:12:43.320 they have a different go to market.

00:12:44.660 So you can click the link below to watch that training

00:12:47.660 absolutely free.

00:12:48.560 It's my gift to you.

00:12:49.860 And if you find this video useful and there's somebody

00:12:51.820 you care about, feel free to share it with them directly.

00:12:54.180 Click the like button, subscribe if you're new here,

00:12:57.400 and by all means, I want to challenge you

00:13:00.000 to live a bigger day, and a bigger life,

00:13:02.300 and a bigger business, and a bigger everything,

00:13:05.260 and I'll see you next Monday.

00:13:09.480 Outtakes, outtakes.

00:13:12.200 I gotta make it to the end of the videos.

Dan Martell - August 19, 2019

Build a SaaS Product Within An Existing Business

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