Can you walk me through the thought process of why a competitor existing means you abandon this idea? Are they so central to your industry that they can immediately lock up 100% of the market? Are they going to be cross-selling from something which is more widely distributed in your niche than say Quickbooks or Microsoft Office?
Don't compete on price. Enterprise customers care about it a lot less than you do, and enterprise customers are not motivated to purchase by "We saved a few thousand bucks and I lost my job because the deployment blew up in our face." I'd be far more worried about that sales objection than the existence of a competitor.
You can probably compete on many other axes. One of my competitors has 400 employees, at least 20 of whom answer phones with customer questions. I have 0 employees, intentionally don't have a routable phone number, and self-assess at mediocre in terms of responsiveness to email. And I win sales dogfights with that company, occasionally, because prospects believe I'll offer them better CS. (The winning argument, which I've stolen fragrantly from Jason Cohen, is "You can call them up at any hour, day or night, and instantly speak to someone who can't solve your problem. Or you can drop me an email, and it may take me two days to get to it, but your email will always be answered by the guy who built the system with his own hands. Your call who you want in charge of your questions when it is your business on the line.")
There are other options, such as competing on market segmentation. Your competitor, for example, might serve primarily a healthcare market. If the same need exists outside of healthcare, you can target your marketing/development over there, and make a product which really sings for those other audiences. Is their product generic? Make yours hyper-specific. Is their product hyper-customized? Make yours the "It only does 10% of what the other guy does, but it is the right 10%, and it actually works out of the box."
How do they market/sell it? Is it one of those "Ask for a quote and we'll let you speak to a sales rep?" type of deals. Consider selling via a lower-touch sales model. Worse comes to worse, you learn why high-touch sales is so darn popular.
Also, to impart on you as early as possible the Voice of Pained SaaS Founder Experience: pause building for a moment and verify that you can successfully sell this. If necessary, you can have mockups or a minimally functional prototype to support the sales conversation. There are many worthwhile SaaS products which cannot be sold by a single founder into particular enterprises, so knowing whether your product is saleable or not given your constraints is a useful sanity check on whether to spend the rest of the schedule building it out.
Selling SaaS which doesn't exist is fairly straightforward. Find a customer. Ask them to buy it. Note why they tell you "No." Adjust until you have gotten a "Yes." Now, repeat at least 5 times. Then, finish building it.
If you cannot find a customer, or you can find the customer but can't get the right decisionmaker internally to get the time of day, or your customer doesn't consider this a hair-on-fire priority, or your current conception of the product doesn't match things they budget for, or any of a thousand other things systematically happen to block sales, then building the software does not in itself cure those sales problems.
Incidentally, the number of enterprise deals which you have to close to have a very good living as a solo founder is somewhere between one and twenty. Their billion dollar valuation might be sustained by a team of stab-their-own-mother-for-a-commission-check reps being fed the Glengarry leads from the best marketing operation in enterprise software, but even they don't win every deal. Table scraps are delicious if the table is very big relative to the dog.
One thing to add, is that if you have a big market, and they get 90% of it, 5% of it to you, might be enough to be successful. You are worrying too much about their product instead of improving your own.
As Patrick also said, go out and talk to customers. Often you don't need a finished product. What we did, was actually quite different, we talked to a bunch of customers _before_ we began developing the product. We did that for two reasons.
1) Get to know your customers, and learn about their pain points. Try not to fix all their issues, but if you can find a few common issues and fix 80% of their problems, you are in for success.
2) By talking to them you got your first beta testers. Let them in before your are finished (You shouldn't have any errors, but you might lack some features (we didn't have a change password for starters)).
This relationship will make it easier to sell to the customers, because you have listened to their issues, and actually fixed their problems.
I do not necessarily want to fight on the Price but that is the only variable I can think of and start attracting smaller customers (who cannot afford my competitors pricing structure). This competitor seems to have brought in all the bells and whistles alongside the core of the product. My plan was to only focus on core pieces and get to side features as I start getting customer interest. Besides that, the customers buying their flag-ship product will find it useful to buy this product alongside. They both will complement well. I do think their vision seems to be different from mine where they are focused on various categories and I am on one niche.
Thanks for all the various options you've highlighted. I do feel compelled to try building out the core services to see if I can compete in certain markets. My biggest concern being unable to dedicate myself full-time unless it starts bringing in revenue I need to pay up for my bills.
If you do not mind, I would like to send you a PM with info of my product site.
I do not necessarily want to fight on the Price but that is the only variable I can think of and start attracting smaller customers (who cannot afford my competitors pricing structure)
Going after people who are systematically excluded by a competitor is not necessarily "competing on price" even if you happen to have lower average account sizes as a result. That can work fairly well. My largest competitor basically tosses you from their sales process if your account is worth less than $1k a month. Most of my customers are worth <= $200. It isn't just a pricing decision, though -- it informs how I do sales (high-touch vs. low-touch), what markets they go after vs ones I go after (healthcare vs. a bit more eclectic for me), feature decisions, etc.
Feel free to send me an email. If I don't get back to you, it wasn't anything you said, it was just my newborn daughter keeping me busy.
Support (try calling google) and analysis (how to implement, how it could fit within their existing processes/systems). Your commitment (much like the pig regarding breakfast, you're committed to this). Speed/flexibility (how quick can a bug be fixed, how quick have new features been rolled out). Fit/complexity (less bells and whistles means less ways to go wrong, aka one thing really well). And I'm sure there's more... but I'm out of coffee :)
Developer's often see price as a big factor when it's not. Will the solution work and will I get promoted/fired for picking a solution are often far higher on the list than price.
This competitor seems to have brought in all the bells and whistles alongside the core of the product
I'm using a SaaS product that offers a lot of bells and whistles. However they seem to be (and I'm sure were) added to the product to meet one customer's needs. So they are not bells and whistles I need, and they complicate functions that should be simple. A form that has 20 fields, 16 of which I learned I can ignore, added a huge congnitive load as I was trying to learn the software.
Do not feel you need to build out bells and whistles or even the complete vision you have for the core product before you try to sell. Identify one pain point your customers have and solve that well. That will get their attention and you can have the conversation about other core features to come.
in my product offering, we focus on the core features and making them rock solid versus a larger competitor who has all the bells and whistles. you will lose some to the whole "they have it all" but a lot of logical people will see it as a better business decision to purchase something that the stakeholders will actually use.
we're actually more expensive then our competitor and bring professionals over to our offering all the time due to simplicity and most of all, availability. we win on customer service/support and enterprises (especially ENTERPRISES) are willing to pay for it.
I can't explain how many times we walk into the next enterprise and ask for more per user and astonishingly, they don't bat an eye. one day, we'll hit the price point of "wait what?" and we'll come back down but it blows our minds how much you can charge because your product clearly adds value.
As far as typos go, it's a great one. "Flagrantly borrowed" is a cliche. "Fragantly borrowed" is a fresh turn of phrase. Did he sent Jason flowers for using this example?
Comments
Can you walk me through the thought process of why a competitor existing means you abandon this idea? Are they so central to your industry that they can immediately lock up 100% of the market? Are they going to be cross-selling from something which is more widely distributed in your niche than say Quickbooks or Microsoft Office?
Don't compete on price. Enterprise customers care about it a lot less than you do, and enterprise customers are not motivated to purchase by "We saved a few thousand bucks and I lost my job because the deployment blew up in our face." I'd be far more worried about that sales objection than the existence of a competitor.
You can probably compete on many other axes. One of my competitors has 400 employees, at least 20 of whom answer phones with customer questions. I have 0 employees, intentionally don't have a routable phone number, and self-assess at mediocre in terms of responsiveness to email. And I win sales dogfights with that company, occasionally, because prospects believe I'll offer them better CS. (The winning argument, which I've stolen fragrantly from Jason Cohen, is "You can call them up at any hour, day or night, and instantly speak to someone who can't solve your problem. Or you can drop me an email, and it may take me two days to get to it, but your email will always be answered by the guy who built the system with his own hands. Your call who you want in charge of your questions when it is your business on the line.")
There are other options, such as competing on market segmentation. Your competitor, for example, might serve primarily a healthcare market. If the same need exists outside of healthcare, you can target your marketing/development over there, and make a product which really sings for those other audiences. Is their product generic? Make yours hyper-specific. Is their product hyper-customized? Make yours the "It only does 10% of what the other guy does, but it is the right 10%, and it actually works out of the box."
How do they market/sell it? Is it one of those "Ask for a quote and we'll let you speak to a sales rep?" type of deals. Consider selling via a lower-touch sales model. Worse comes to worse, you learn why high-touch sales is so darn popular.
Also, to impart on you as early as possible the Voice of Pained SaaS Founder Experience: pause building for a moment and verify that you can successfully sell this. If necessary, you can have mockups or a minimally functional prototype to support the sales conversation. There are many worthwhile SaaS products which cannot be sold by a single founder into particular enterprises, so knowing whether your product is saleable or not given your constraints is a useful sanity check on whether to spend the rest of the schedule building it out.
Selling SaaS which doesn't exist is fairly straightforward. Find a customer. Ask them to buy it. Note why they tell you "No." Adjust until you have gotten a "Yes." Now, repeat at least 5 times. Then, finish building it.
If you cannot find a customer, or you can find the customer but can't get the right decisionmaker internally to get the time of day, or your customer doesn't consider this a hair-on-fire priority, or your current conception of the product doesn't match things they budget for, or any of a thousand other things systematically happen to block sales, then building the software does not in itself cure those sales problems.
Incidentally, the number of enterprise deals which you have to close to have a very good living as a solo founder is somewhere between one and twenty. Their billion dollar valuation might be sustained by a team of stab-their-own-mother-for-a-commission-check reps being fed the Glengarry leads from the best marketing operation in enterprise software, but even they don't win every deal. Table scraps are delicious if the table is very big relative to the dog.
Fantastic answer!
One thing to add, is that if you have a big market, and they get 90% of it, 5% of it to you, might be enough to be successful. You are worrying too much about their product instead of improving your own.
As Patrick also said, go out and talk to customers. Often you don't need a finished product. What we did, was actually quite different, we talked to a bunch of customers _before_ we began developing the product. We did that for two reasons.
1) Get to know your customers, and learn about their pain points. Try not to fix all their issues, but if you can find a few common issues and fix 80% of their problems, you are in for success.
2) By talking to them you got your first beta testers. Let them in before your are finished (You shouldn't have any errors, but you might lack some features (we didn't have a change password for starters)).
This relationship will make it easier to sell to the customers, because you have listened to their issues, and actually fixed their problems.
I do not necessarily want to fight on the Price but that is the only variable I can think of and start attracting smaller customers (who cannot afford my competitors pricing structure). This competitor seems to have brought in all the bells and whistles alongside the core of the product. My plan was to only focus on core pieces and get to side features as I start getting customer interest. Besides that, the customers buying their flag-ship product will find it useful to buy this product alongside. They both will complement well. I do think their vision seems to be different from mine where they are focused on various categories and I am on one niche.
Thanks for all the various options you've highlighted. I do feel compelled to try building out the core services to see if I can compete in certain markets. My biggest concern being unable to dedicate myself full-time unless it starts bringing in revenue I need to pay up for my bills. If you do not mind, I would like to send you a PM with info of my product site.
I do not necessarily want to fight on the Price but that is the only variable I can think of and start attracting smaller customers (who cannot afford my competitors pricing structure)
Going after people who are systematically excluded by a competitor is not necessarily "competing on price" even if you happen to have lower average account sizes as a result. That can work fairly well. My largest competitor basically tosses you from their sales process if your account is worth less than $1k a month. Most of my customers are worth <= $200. It isn't just a pricing decision, though -- it informs how I do sales (high-touch vs. low-touch), what markets they go after vs ones I go after (healthcare vs. a bit more eclectic for me), feature decisions, etc.
Feel free to send me an email. If I don't get back to you, it wasn't anything you said, it was just my newborn daughter keeping me busy.
Ohhh, hey Patrick, congratulations on a new addition to your family! :)
I've been following your writing for quite a while now, and i love it :)
Heartiest congratulations again :D
Support (try calling google) and analysis (how to implement, how it could fit within their existing processes/systems). Your commitment (much like the pig regarding breakfast, you're committed to this). Speed/flexibility (how quick can a bug be fixed, how quick have new features been rolled out). Fit/complexity (less bells and whistles means less ways to go wrong, aka one thing really well). And I'm sure there's more... but I'm out of coffee :)
Developer's often see price as a big factor when it's not. Will the solution work and will I get promoted/fired for picking a solution are often far higher on the list than price.
This competitor seems to have brought in all the bells and whistles alongside the core of the product
I'm using a SaaS product that offers a lot of bells and whistles. However they seem to be (and I'm sure were) added to the product to meet one customer's needs. So they are not bells and whistles I need, and they complicate functions that should be simple. A form that has 20 fields, 16 of which I learned I can ignore, added a huge congnitive load as I was trying to learn the software.
Do not feel you need to build out bells and whistles or even the complete vision you have for the core product before you try to sell. Identify one pain point your customers have and solve that well. That will get their attention and you can have the conversation about other core features to come.
in my product offering, we focus on the core features and making them rock solid versus a larger competitor who has all the bells and whistles. you will lose some to the whole "they have it all" but a lot of logical people will see it as a better business decision to purchase something that the stakeholders will actually use.
we're actually more expensive then our competitor and bring professionals over to our offering all the time due to simplicity and most of all, availability. we win on customer service/support and enterprises (especially ENTERPRISES) are willing to pay for it.
I can't explain how many times we walk into the next enterprise and ask for more per user and astonishingly, they don't bat an eye. one day, we'll hit the price point of "wait what?" and we'll come back down but it blows our minds how much you can charge because your product clearly adds value.
Besides that, the customers buying their flag-ship product will find it useful to buy this product alongside
Is the reverse of this also true? That is, is your competitor's (new) product _less useful_ if I don't have their flagship product?
Is that a large enough niche for your to be targeting?
Is there a big competitor to their flagship product? Could you target your product at companies that have chosen that suite?
Nitpick, but I think you mean "flagrantly" not "fragrantly".
As far as typos go, it's a great one. "Flagrantly borrowed" is a cliche. "Fragantly borrowed" is a fresh turn of phrase. Did he sent Jason flowers for using this example?