Posts tagged andrew gazdecki
Small Business is Big Business – Why the Next Successful SaaS Companies Will Be Those That Serve the Little Guy
There is a disturbing trend lately of SaaS companies going public before they show a profit. (I’m looking at you, Eloqua and Marketo). And what’s worse, the problem is systemic. In fact, in an article for Venture Beat, Jason Cohen clearly sets forth why a typical SaaS company that serves enterprise customers can take four years to produce even a 2.5% profit! If you want to dig into the numbers behind the trend, the gory details are all laid out here.
Mostly, this is due to the extraordinarily high up-front costs of chasing enterprise customers, and the relatively low monthly fee earned even if the chase is successful. That’s why, if Gartner’s predictions come true and the SaaS market grows by almost 20% over the next few years, we think the lion’s share of the gains will go to a special type of SaaS company:
The one that serves small businesses.
Due to three extremely powerful facts that I’ve become intimately familiar with as I grow a SaaS company serving small businesses:
Reason 1: Costs are much lower and hurdles are far fewer
When you sell to the enterprise, you need to invest heavily in a sales team. And you won’t ever reach a decision-maker right away. Instead, you’ll participate in a long series of meetings and conference calls (if you’re lucky enough to get to that point).
You’ll have to hire a lawyer to help handle extensive contracting and other matters. You’ll need to get a bunch of technical support people to train and service the customer extensively. And once you’ve done all of this, and invested hundreds of hours into the project, you’ll get dropped unceremoniously after someone you’ve never met decides there isn’t room in the budget for you.
Damn, that’s cold.
In contrast, when you sell to small businesses, you can reach a decision-maker right away. You don’t have to do the same level of marketing, sales, technical assistance, and training. You can afford to court a large number of clients at once, and the time and energy invested from first contact to closing is much, much shorter. With a rapid, low-cost sales cycle, the results are simple:
You get paid 1) quickly, 2) often, and 3) profitably.
It’s a lot easier to become profitable with a payment structure like that.
Reason 2: Product requirements are similar across customers
Each enterprise customer, even if they aren’t different from the others, can sometimes demand that everything be customized to their whims. And their whims will change multiple times before the project is complete. Much like the sales dance, you’ll spend a lot of time and effort trying to please your prospect, and it may not pay off in the end.
In contrast, small businesses tend to have more basic needs and simpler demands. They don’t need a unique solution. They need something functional, easy-to-integrate, and cost-effective. For this reason, you can design a solid product and it will fit into a wide variety of small businesses. Instead of having to approach each customer as a redesign, you’ll be able to simply provide a solution that already performs the necessary functions, and customers will like it.
There’s less hard work, and your efforts are more likely to produce returns across a large number of customers, without extra tweaking. That is, small business customers let SaaS companies max out the profitability of each solution they develop.
Reason 3: There are literally millions of prospects
Small businesses are staggeringly numerous. In fact, there are over 5 million businesses with less than 100 employees in the U.S alone. In comparison, the number of companies that have over 1,000 employees in the U.S. is only around 10,000. Therefore, the opportunity presented by small businesses is orders of magnitude larger than that presented by the enterprise.
Taken together, the three facts above present a case for why the next group of successful SaaS companies won’t be riding tidal waves – they’ll just hang close to the shore and ride the small waves in over and over again until they make it.
Andrew Gazdecki is the founder and CEO of Bizness Apps, a do-it-yourself mobile app & mobile website platform for small businesses and Bizness CRM, a CRM designed to make selling to small businesses easy.
Andrew Gazdecki is the founder and CEO of Bizness Apps, a do-it-yourself iPhone app platform that allows small businesses to easily create, edit, and manage an iPhone app online without any programming knowledge needed. He is 22, attending CSU Chico full time pursuing a Business Marketing degree, and will graduate in the Spring of 2011.
- What are you working on right now?
Bizness Apps all damn day. Twelve hour days in the office, living off coffee, and loving every minute of it. Putting a heavy emphasis on “crushing” every aspect of the business. One specific project I’m pretty excited about is our Android platform coming out soon!
- 3 trends that excite you?
Mobile is changing the world. It’s the fastest growing industry ever and shows no signs of stopping. Smart phones will soon surpass PC sales. Mobile anything gets me pretty excited.
- How do you bring ideas to life?
I just enjoy what I do. My friends literally want to kill me because I can’t talk about anything but my business anymore. I can’t help it. I love it. Anything that you’re passionate about you’re going to make happen.
I love working for myself, building products, thinking outside of the box, and “crushing” everything. I spent my entire life figuring out how to do those things and it’s lead me to where I am today. Find out what you love to do, never stop learning, and just do it.
- What inspires you?
To name a few: Elon Musk, Gurbaksh Chahal, and Jack Dorsey.
Elon Musk is just a straight boss.
Gurbaksh sold his first company for $40 million at 18, then his second company at 24 for $300 million in cash, enough said.
And Jack Dorsey’s new company Square is a personal of favorite of mine – making complicated things simple is a beautiful thing to watch in business.
Shout out to Wal-Mart! I’m all about that company.
- What is one mistake you’ve made that our readers can learn from?
I used to think I could do it all on my own. I can’t and you probably can’t either. A company’s biggest asset is the people who work for it. To build something great, you need great people. It’s that simple.
- What is one book and one tool that help you bring ideas to life?
Use SnapEngage if you do anything with online sales. It’s a live chat tool and it’s super cool. Sometimes you’ll get people on there who ask you if you can eat poop or something but it will increase your inbound sales conversions by like 5000%.
Read How To Get Rich by Felix Dennis. One of my current angel investors recommended it during a speech I saw him give before I met him. He basically said to succeed as an entrepreneur you should read this book and to not work for Enterprise Rent-A-Car. I did both things and everything worked out pretty well I’d say.
- What is one idea that you’re willing to give away to our readers?
I think someone should try and take down eBay.
Every seller who uses them seems to be unhappy with them. They’re like a giant tyrant with ridiculous policies for sellers and yet the sellers go no where else simply because eBay is where the biggest audience is. If a better product came out, with better policies, they’d move over in heart beat.
They’re BEGGING to use a different service than eBay to sell their items. Google “hate ebay” and you’ll see what I’m talking about. I don’t get how a company can be that big with so many dissatisfied customers. Trust me, that’s an industry waiting to be disrupted.
- Who is the one person you’d love to see interviewed on IdeaMensch?
- What is the most important professional quality a person can have?
In my opinion it’s the ability to learn fast and be able to teach yourself anything.
- What is some fun facts about yourself?
I buy almost everything I own at Wal-Mart, I have probably the strangest eating habits anyone has ever seen, my friends call me “simple gaz”, I have over 20 chess trophies, I used to be really good at the clarinet for some reason, and I would literally vote for Birdman if he ran for president.
There’s been a lot of talk as of late regarding young entrepreneurs and the paths available to them; PayPal cofounder Peter Theil is going as far as to give 20 teams of entrepreneurs under 20 a two-year $100,000 fellowship on which to fund their next big ideas. Unfortunately, there simply aren’t that many investors out there to fund ideas from mostly unproven young adults, so it remains up to the entrepreneur to do it on their own.
For young adults, the best place to flex your entrepreneurial muscle is while you are in college — or at the very least when you are young enough to not be bogged down with a career.
College is a great place to start your venture as you have lots of free time, access to a large pool of human capital and your school can provide much-needed support. The following six points are what I have based my college endeavors around:
1. Plan for the “bridge” between college and real life
One of my main goals as a student entrepreneur was financially bridging the gap between college and the post-college world, better known as “real life”. I made it my goal to find a way to make just enough money on my own to not need a traditional job once I’m out of school.
Once you get a job, starting your own company is much harder. You’re committed to working full-time and it’s easy to become comfortable with a steady salary. I understood the chances of hitting a home run with a successful start up was low, but also that getting a full-time job lowered the chances of ever becoming a successful entrepreneur even more.
In my teens I began creating websites for fun, and eventually turned towards making websites for profit. While the sites were functional and cash flow positive, I knew they would never get big enough to sustain me. I used these ventures successively as springboards to my next idea, gradually creating more complex and successful sites.
I knew that if I kept moving, and kept thinking bigger, I could get to the point where I am today — 22 and the owner of an angel-backed start up. The odds of you hitting it big with your first venture are stacked against you, make sure you have experience running a venture, no matter how small, before you begin investing in a big concept.
2. If you’re not technical, NETWORK!
Every campus has teachers and other students that you can learn from. Find them. Find the teachers that are willing to help you create your business plan, marketing plan, or set up other introductions. If you’re not technical, network with peers who are. Sell them on your start up idea and offer equity in exchange for their services. Stop by the computer science building and post some fliers about your project. Someone is bound to see it and catch some interest.
In my case I looked for students who saw themselves as entrepreneurs. I didn’t need someone who could do a task, I needed people who were creative and innovative. One of my team members, Andrew Chalmers, was a semi-finalist in a business concept contest for Entrepreneur Magazine, obviously this was someone who has outstanding business talent and I’m excited to have him working with me.
Also, start networking outside of your campus. For example, you could work as a volunteer at a conference in order to get free admission. I did this for the Techcrunch Disrupt conference this past fall and ended up working speaker registration. I got to meet Peter Theil, Gina Bianchini, Kevin Hartz, and many other CEOs of large companies. I doubt they remember me but it was still an awesome experience to say the least! Opportunity is everywhere, go out and find it.
3. Take advantage of the business competitions on campus
I’ve never really been a fan of business competitions, primarily because of their notorious emphasis on business plans. Your business idea will change so much it’s mind blowing — so much so that writing a business plan could be counter productive.
This year, however, I won first place in the Fall 2010 CSU Chico Business Competition for my current start up, Bizness Apps, which led to my first angel investors. Two teachers involved in the competition were so impressed with my start up that they set up a lunch meeting with my current investors. Take advantage of these opportunities – even if the first place cash prize is only $300 bucks!
You never know who will be in attendance at these events, and at the very least it gives you valuable experience in pitching a concept in a professional setting. By entering business competitions you have everything to gain and nothing to lose. Don’t worry about people stealing your idea – if you don’t win the contest why would a contestant want to steal a losing idea? On the flip side, if you win people will look to you as the person who can pull the concept off.
4. Learn outside of the classroom
Build a library full of business books and read all of them. Learn to read a book in a day or two. Scan through the parts that you’re already familiar with in order to get through the book quickly. I usually aim to read 3-4 books a week. Teach yourself everything you need to know in order to make your start up successful.
Be very selective and know what you are looking to take away from every book. I wanted to focus on effective simplicity, which led me to the book Rework by the founders of 37Signals. When I wanted to learn about the early stages of startup life, I read Founders at Work by Y Combinator founding partner Jessica Livingston, a collection of interviews with largely successful entrepreneurs.
When you set out to acquire knowledge, be sure it’s relevant to your situation.
5. Use your surroundings for business idea inspiration
It only makes sense when setting out on your venture to immerse yourself in something you are knowledgeable and passionate about. In my case I looked towards my obsession with my iPhone, and I began paying attention to how smart phones were changing the way people interacted with businesses.
It wasn’t very long before I realized that there was an enormous opportunity to help the average business owner connect with their clientele on a mobile level. While I knew that a business would love to have a presence in the pocket of their customers at all times, I also wanted there to be a significant value for the person using the app as well. By looking towards my own habits, and that of my peers, I was able to develop a solution that was beneficial to both the business and consumer.
Talk often with your target markets to be sure you’re on the right path. It is so easy to get carried away with an idea that you think is great but offers little to no real value to your clients. It seems obvious, but always pay attention to feedback and structure your decisions around what your environment is telling you.
6. Just do it
This is probably my biggest piece of advice for college entrepreneurs: just do it! There is no better time in your life to start a company. You have little to no responsibilities, you’re surrounded my people who can help you, and now is the best time in your life to take on risk!
Got a business idea you’ve been bouncing around in your head? Just do it. Don’t wait until tomorrow, next week, or next month. Start building traction today.
In my experience, the biggest hurdle of starting a business is actually doing it. When you start a business, it’s fine not to know everything or even have a ‘solid’ business plan. In fact, most companies deviate significantly from their original plan! These things will fall into place and the things you learn along the way will last a lifetime. To get to this point though, you have to stop planning and start doing.
I’m a huge supporter of the “minimum viable product” business strategy, which advocates to move quickly, get your product out fast, and improve your product with feedback. You shove your product out into the market knowing it has bugs, knowing it could be improved — but you do this to simply start building your business.
By implementing this strategy you are building traction everyday. You stop thinking and you start acting. This is the single biggest step for an entrepreneur. Just do it!