Dan Martell - How To Build A Successful SaaS： 5 Business Functions To Master

00:00:00.120 Hi there, I'm Dan Martell,

00:00:01.200 serial entrepreneur, investor, and creator of SaaS Academy.

00:00:03.320 In this episode, I'm gonna share with you

00:00:04.960 the five business outcomes that you need to improve

00:00:08.240 and master to build a world-class software

00:00:10.840 as a service SaaS business.

00:00:13.120 But truth is they apply to all businesses,

00:00:15.360 so you're gonna wanna check this out.

00:00:16.600 Be sure to stay at the end.

00:00:18.000 If you've ever been curious, what I call software curious,

00:00:20.400 you wanna learn my specific strategies

00:00:22.600 on how to pre-sell and build

00:00:25.000 and finally launch a software company,

00:00:26.800 I'm gonna tell you exactly how to get access

00:00:28.840 to my free Idea to Exit course, but let's get into it.

00:00:45.120 So one of my philosophies in business

00:00:47.400 is to study wide, but go deep.

00:00:50.280 So oftentimes I like to be inspired by different industries.

00:00:53.220 I mean, we're talking real estate, self-storage,

00:00:55.900 commercial, airline industries, service businesses,

00:01:00.720 online, you know, drop ship, e-commerce, crypto,

00:01:04.320 you name it, I study it.

00:01:05.620 And the reason why is I'm always looking for patterns

00:01:08.280 to adopt and bring into my software businesses.

00:01:12.580 And, you know, even though when I started off,

00:01:14.700 I didn't know anything about business.

00:01:16.320 I was a programmer, I would just code,

00:01:18.360 stay up till two or three in the morning,

00:01:19.660 and I would just build,

00:01:20.580 and I keep building and building and building.

00:01:23.080 And then over time, after two failed companies,

00:01:24.920 to realize the only way to be successful in business

00:01:27.700 is to understand the game of business.

00:01:29.540 What are the key frameworks or outcomes

00:01:33.260 that if you master, you can apply it

00:01:35.220 not only to the current business,

00:01:36.540 because this is the cool part,

00:01:37.540 you can apply it to every business

00:01:39.440 you might be involved in in the future.

00:01:41.580 So what I wanna share with you

00:01:42.600 is kind of these five areas that I've learned,

00:01:44.980 reading over a thousand business books,

00:01:47.440 doing tens of millions online in SaaS sales and revenue

00:01:51.720 to show you the opportunity in your current business

00:01:55.040 that you can invest in to get a disproportionate return.

00:01:58.420 So let's get into it.

00:01:59.640 Number one, upsells, okay?

00:02:01.600 So if you don't know what an upsell is,

00:02:02.940 if you don't know what average order value is,

00:02:05.080 this is the concept, is whatever you sell as,

00:02:09.020 oftentimes called a front-end offer,

00:02:10.840 some people call it a tripwire,

00:02:12.420 essentially it's your initial sale.

00:02:14.120 You want to ask yourself,

00:02:15.660 if somebody's struggling with this problem,

00:02:17.560 what's the other problem that unlocks once they solve that?

00:02:20.620 and then you can present that as a potential upsell.

00:02:23.720 And the reason why you wanna do this

00:02:25.380 is because in today's world where the advertising platforms,

00:02:28.560 I don't know if you've been involved in Facebook lately,

00:02:30.700 every ad platform over time gets more expensive.

00:02:33.640 So the person who can spend the most to acquire a customer

00:02:37.160 is gonna win their market.

00:02:38.740 And the best way to do that is through upsell.

00:02:42.060 So I have a client called ClickFunnels.

00:02:43.660 Some of you guys may know who they are,

00:02:45.120 but I've been working with them for a long time

00:02:46.880 and they've built the platform

00:02:48.940 around essentially creating funnels

00:02:51.240 and the ability to upsell and downsell.

00:02:53.400 But this strategy, when I see most businesses out there,

00:02:56.860 especially in SaaS,

00:02:58.120 they don't even have any concept of this.

00:03:00.860 They might think of, well, hopefully someday

00:03:03.000 the client will migrate to the next package

00:03:05.700 or buy one of these add-ons

00:03:07.700 and then that's called expansion revenue.

00:03:09.600 But the truth is, is in your acquisition,

00:03:12.400 when you acquire a customer,

00:03:14.020 you have so much opportunity

00:03:16.120 in the upsell downsell process to monetize,

00:03:18.740 it's gonna allow you to spend more money

00:03:21.080 to acquire more customers.

00:03:22.780 And that's the difference between winning a market

00:03:25.220 and losing in a market.

00:03:26.400 So if you haven't thought strategically about

00:03:28.900 what are some of these other things that we can sell,

00:03:31.020 I want you to Google upsells for SaaS

00:03:33.480 and go deep down this rabbit hole

00:03:35.040 so you can help monetize those initial customer engagements

00:03:38.440 so that you can reinvest in your marketing.

00:03:40.480 Number two is use cases.

00:03:42.140 Now I have a video on use cases,

00:03:44.240 check it out from last week,

00:03:45.820 but most businesses, especially in SaaS,

00:03:48.540 don't do a great job at capturing customer case studies.

00:03:53.600 And the use case is really trying to teach a buyer,

00:03:56.940 a prospect, how people use your product.

00:04:00.040 So if you're making the customer or the new user

00:04:03.540 try to figure out all the different ways

00:04:05.520 your product can create value for them,

00:04:06.860 you're making them work way too hard.

00:04:08.740 What I would recommend instead

00:04:10.120 is outline the three to five use cases

00:04:12.800 that you've got going on for how people use your product

00:04:15.180 and then use a customer case study

00:04:17.860 to exemplify how to do this.

00:04:19.780 A product called Drift does this really well.

00:04:22.480 One of my clients, Chris and his brother Jonathan

00:04:24.980 at trainual.com does this incredibly well.

00:04:27.480 All their content is focused on use cases

00:04:30.140 of their products, featuring customers,

00:04:32.120 getting results, having impact.

00:04:34.320 So if you're not doing that, double click,

00:04:36.620 go on the, you know, search around use cases

00:04:39.500 for how you can produce the best ones for your product

00:04:43.080 and then just literally show the customers,

00:04:45.540 this is how people get value

00:04:47.140 so you don't make them work so hard.

00:04:48.600 Number three, activation.

00:04:50.600 So activation is the process.

00:04:52.160 Think of it like level one in a video game.

00:04:54.460 So when somebody, you know, signs up for your product,

00:04:56.940 you know, it's that first initial experience.

00:04:59.200 Sometimes it's called the first time user experience

00:05:01.360 or the fatui.

00:05:02.540 But the whole point is to get a customer

00:05:04.960 to go from like problem to a solution as fast as possible.

00:05:09.960 And one of the ways that a lot of my clients do this

00:05:12.380 is using challenge funnels.

00:05:13.780 I teach a framework called the Challenge Funnel Builder

00:05:15.940 that a lot of clients, you know,

00:05:17.380 I just mentioned ClickFunnels,

00:05:19.240 but I literally have dozens of clients

00:05:21.780 that use challenge funnels.

00:05:23.220 And the reason why is from an activation point of view,

00:05:25.960 it literally moves the activation of your product

00:05:29.340 outside of your product into a marketing campaign, right?

00:05:32.140 So if you do a seven day challenge

00:05:33.620 for how to get your first hundred emails

00:05:35.880 and then you're an email marketing solution,

00:05:39.180 that's your software product,

00:05:40.600 then all of a sudden getting customers activated

00:05:43.240 gets moved outside of the product.

00:05:44.660 it's a marketing funnel and then you can get

00:05:47.220 in the marketing funnel for the challenge funnel.

00:05:49.420 You literally use your product

00:05:51.240 as the product you recommend for everybody

00:05:53.160 to go set up their subscription boxes

00:05:55.780 and their forums on their websites

00:05:57.720 and all that crazy stuff, right?

00:05:59.420 I had a client, Kane, he had Coach Catalyst

00:06:01.900 and they used to do seven day challenges all the time.

00:06:05.560 Again, to activate clients.

00:06:07.280 If you've never heard this term before,

00:06:09.180 double down on it because the speed,

00:06:11.820 we call it the time to first value,

00:06:13.440 the speed you can go from signed up for your product

00:06:17.280 to receiving value from your solution for a new customer

00:06:21.380 and that average keeps going lower and lower and lower,

00:06:23.740 that's where you're gonna see disproportionate growth

00:06:26.680 because if it takes normally 14 days

00:06:29.000 for somebody to get value from your product

00:06:30.340 and you bring that down to three,

00:06:31.840 well, A, most people aren't gonna stick around for 14 days

00:06:34.920 and B, if you do three days instead of 14 days,

00:06:37.900 you're just gonna increase the cycle time

00:06:39.880 and that's why you're gonna have a disproportionate growth.

00:06:42.120 So be sure to focus on activation.

00:06:44.720 Number four is product, you know,

00:06:47.420 and a lot of times entrepreneurs,

00:06:49.560 I was actually speaking at a very well-known,

00:06:53.120 these guys do 40 million a year,

00:06:55.040 they have a software product,

00:06:56.320 they're also like one of the top coaching companies

00:06:58.740 in the world and they asked me to come down

00:07:00.960 and help them kind of look at their whole engine

00:07:05.080 and figure out where the bottlenecks were

00:07:06.860 and one of the areas that I seen was product,

00:07:09.800 product leadership.

00:07:10.680 And the reality was is they had never heard this term before.

00:07:14.000 They didn't understand what does product actually mean.

00:07:16.560 So, you know, I'm not gonna go down

00:07:18.160 into the deep aspect of it,

00:07:19.760 but to me it's the what do we build area

00:07:23.240 that the product manager, and usually it's a CEO,

00:07:25.960 but maybe the CEO is the worst person to be the product

00:07:28.100 because product is really there

00:07:29.940 to make the engineering team more efficient.

00:07:31.940 So if the product manager is the CEO

00:07:34.520 and they're busy doing other stuff in the business

00:07:36.340 and they're not showing up and producing

00:07:38.680 the kind of assets and leadership and management

00:07:41.240 that's required to make the engineers more productive.

00:07:45.320 And they're not managing priorities properly.

00:07:47.260 I mean, I had one of my clients was bragging

00:07:49.420 because they have like a voting system for their clients

00:07:52.460 to vote on what features they should build next.

00:07:54.540 And the engineering team just literally takes things

00:07:56.900 off the top of the voting system and just builds it

00:07:59.120 with no clarity, with no strategic roadmap,

00:08:02.480 with no positioning or future pacing.

00:08:05.720 Like literally that is the worst way to build product.

00:08:08.720 And it actually uncovers this challenge

00:08:11.020 called the build trap, right?

00:08:12.260 So Melissa Perry's got a great book.

00:08:14.160 She's actually spoken at our SaaS Academy intensive

00:08:17.160 and it's called Escaping the Build Trap.

00:08:19.340 So if you feel like you're one of those owners

00:08:21.860 or product managers where you just feel like

00:08:23.560 you're keep building and building and building

00:08:25.500 and it's creating a bunch of bugs

00:08:26.980 and you don't have real strategy

00:08:28.140 and you got competitors coming out

00:08:29.460 and they're taking away your customer base,

00:08:32.100 you're gonna wanna read Escaping the Build Trap

00:08:34.040 you may be stuck into this product death loop of just feature-itis, building stuff for marketing

00:08:40.680 purpose or because customers are asking for it. But the truth is, is when you analyze who's asking

00:08:46.400 for it, are they the perfect fit for you? Is this strategically important? Could you have accomplished

00:08:50.600 this feature with integrations? I could sit here and talk about product all day long, but I just

00:08:55.500 want you to know, spend some time there. Becoming a great product thinker, product strategist,

00:09:01.100 product mind is a very important place from a dollars and cents point of view to grow your

00:09:07.200 SaaS business. And number five is pricing, okay? Here's a question I love asking my coaching

00:09:13.160 clients. Number one is, if somebody buys your business, what's the first thing? What's the one

00:09:17.240 or two things they would change, okay? First thing. They know your industry, they buy your business,

00:09:20.940 what's the one or two things they would change? And then the next question I ask them is, well,

00:09:24.600 why haven't you made that change yet? Here's the reason I ask that is because it's usually the fear

00:09:30.100 of making those changes that are stopping people

00:09:32.080 from having disproportionate results for effort.

00:09:36.140 Now, what's interesting about asking that question

00:09:38.240 for all my clients is that price is never on their list.

00:09:42.140 Typically it's not, for maybe 10% it is.

00:09:44.700 Yet, if you ask me,

00:09:46.220 because I know a lot of private equity people,

00:09:48.220 including myself, I do buy companies

00:09:49.880 through high-speed ventures,

00:09:51.420 what's the first thing a company that buys your business

00:09:54.720 is gonna do to increase the value?

00:09:57.100 And it's simple, it's pricing.

00:09:59.040 because most founders do not continue to update

00:10:04.280 the price value that they've created in the market.

00:10:07.540 So I'm not gonna be able to dive in.

00:10:09.360 I've done a ton of videos on pricing,

00:10:11.980 but if you wanna know some of the people I admire

00:10:14.220 that I've invited into my world to coach my clients,

00:10:17.480 guys like Patrick Campbell at Price Intelligently,

00:10:20.100 we've got my coach, Marcos Rivera,

00:10:22.600 who's got an incredible book coming out,

00:10:24.800 and pricingio.com is his website.

00:10:29.960 And then also my friend Alex Hermozzi

00:10:32.280 wrote an amazing book called A $100 Million Offer.

00:10:35.420 In there, he has a lot of pricing psychology

00:10:38.660 and arguments that if you're still sitting on the fence

00:10:41.720 and you haven't pulled the trigger

00:10:42.880 and you don't feel comfortable putting your prices up,

00:10:45.160 I would highly recommend you read Alex's book

00:10:47.300 because that is the number one thing.

00:10:49.340 I call it chocolate broccoli.

00:10:51.140 It's not that much chocolate.

00:10:52.660 It's not desirable to change your prices

00:10:54.520 because it scares the bejesus out of a lot of people.

00:10:56.820 However, from a pure ROI, time spent value

00:11:01.900 to unlock resources to be able to invest in your business,

00:11:05.400 maybe go hire people to lead some of the other areas

00:11:07.580 I just mentioned, you can't beat pricing.

00:11:11.700 So quick recap on the five business outcomes

00:11:14.540 to master to be better in SaaS.

00:11:16.580 Number one, upsells, increase your average order value,

00:11:19.380 front-end offers, et cetera.

00:11:20.300 Use cases so that you can allow customers

00:11:24.160 to see exactly how you can add value.

00:11:27.200 Number three is activation.

00:11:28.760 Challenge funnel style is my favorite.

00:11:30.980 Four is product and five is pricing.

00:11:34.780 As I mentioned at the beginning of this episode,

00:11:36.360 I wanna share with you my idea to exit mini course.

00:11:39.800 This is the exact process I've used

00:11:41.820 to launch multiple companies, pre-sell the product

00:11:45.160 using clickable prototypes,

00:11:47.460 build the team off of the dollars I've collected

00:11:50.080 from pre-selling and eventually launch

00:11:52.260 and scale the company, raising venture capital and exiting.

00:11:55.880 So it is all there.

00:11:57.340 I know it's a big promise,

00:11:58.360 but if you click the link below,

00:11:59.540 you can get access to that.

00:12:01.220 It's the idea to exit mini course.

00:12:03.260 It goes over all that and more.

00:12:05.000 So just click the link below to download your copy.

00:12:07.620 And if you liked this episode,

00:12:08.800 be sure to subscribe to my channel,

00:12:10.940 click the like button,

00:12:12.000 and please leave me a comment.

00:12:13.620 Let me know below what was the one thing

00:12:15.360 that you needed to hear the most,

00:12:17.340 what you liked, what you felt just was the biggest insight.

00:12:21.340 Leave a comment below.

00:12:22.260 And as per usual, I want to challenge you to live a bigger life and a bigger business.

00:12:25.600 And I'll see you next Monday.

Dan Martell - February 21, 2022

How To Build A Successful SaaS： 5 Business Functions To Master

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