Going from zero to $5000/mo is definitely great as that means you've created some value somewhere. But $5k is not really sustainable as a business for three people. It's a great side-job for one person, or good total income for one person who lives in a low-rent / low-cost area.
But for a team of 3 people, you can do much better than $5k just selling your time in consulting.
It's not clear how you'll get from $5k/mo (nice side-job income) to $50k/mo (Good bootstrapping income for team of 3) to $500k/mo (ok, now you have a business that scales).
I'm not being critical here -- It's just that SaaS math has me scratching my head wondering if all that work for all those customers with such small amounts to show for it is worth it.
Would you rather service 200 people for a total of $5k a month with 3 bodies to support or one solid consulting customer @ $5k+/month with just yourself to support?
I'd imagine that you'd want more revenue so you can have a business and not just lifestyle income to support one person. Going from 0 to $5k is one thing -- the advice here is good for that. But getting from $5k to $50k, where you need to be to have sustainable business for 3 people, will require much more substantial effort that's not clear you can achieve with these methods. Indeed, it is not even clear what your margins are at the $5k/mo revenue point and whether that will even be sustainable given the amount you'll need to spend on Customer Acquisition, Customer Support, and slaying the Customer Churn demons to retain your necessary high monthly subscription rates. This is where most SaaS companies die -- trying to achieve this necessary transition.
This comment, though polite, is quite dismissive of their accomplishment. I think you read the post and wrote your comment as if the $5/mo was the goal. Going from 0-$5k/mo is a huge step towards their very clear goal of building a larger business.
I agree, and I don't mean to be dismissive. The point of my comment is that the post here is useful to get to $5k/mo, which is certainly laudable and better than many can do, but unfortunately it won't help much to get to the larger business goal. Indeed, many SaaS companies die precisely at this stage - they have decent single-digit thousands per month revenues that can't really support the business and have trouble making the transition to the larger, and necessary, double-or-more digit thousands per month revenue. Which in many cases is not even possible given the constraints of the market, churn rate, acquisition, and support costs.
As bryanh mentioned, $5k isn't the goal. It's the first milestone. Agree that getting from $5k to $50k will be a completely different undertaking so you'll see another post like this one once we get there
Thanks for the response and kudos to you for making it to this point.
What I'd be curious to learn is your margins, customer acquisition cost, support cost, and churn rate. And how this changes as you go from $5k to more than $5k/mo. This is where most SaaS companies falter.
If you can, you should talk about how you plan to market to reach the larger required revenue rates. This will necessarily require higher customer acquisition costs as your lowest hanging fruit will be quickly exhausted.
Good call. All of those metrics are fairly low right now. Mainly a small salary overhead. 0 churn so far. Right now, we're still in the process of figuring out what those repeatable processes are for customer acquisition
The point of recurring revenue is that you don't have to work to earn the $5k each month. Depending on how long they have been working on this, it's definitely a good investment of their time. If they wanted, they could now go and consult (at a higher rate) AND get a small pocket money each month.
Unfortunately, for these sorts of SaaS businesses, the income is rarely passive in nature. Startup companies, which form part of the basis for the market for this app, have a naturally high churn rate. This means that you need to acquire customers continuously just to keep up with churn, and higher yet to achieve growth.
These needs for high acquisition rate drives up high customer acquisition costs, which eats at the margins. $5k in revenues is good, but the profits are not mentioned. Going from $5k to $50k will not scale margins linearly. Indeed, the need to multiply customers by 10 will necessarily increase customer acquisition costs (low hanging fruit will no longer be available) and increase overall churn (the "natural" churn rate applies).
If you wanted to make money in consulting, it certainly would be easier to just offer consulting services, and both margins and sustainable revenues would be higher. Perhaps you can use your SaaS app as a consulting marketing tool, but I don't see this app being used that way.
But for a team of 3 people, you can do much better than $5k just selling your time in consulting.
It's not clear how you'll get from $5k/mo (nice side-job income) to $50k/mo (Good bootstrapping income for team of 3) to $500k/mo (ok, now you have a business that scales).
I'm not being critical here -- It's just that SaaS math has me scratching my head wondering if all that work for all those customers with such small amounts to show for it is worth it.
Would you rather service 200 people for a total of $5k a month with 3 bodies to support or one solid consulting customer @ $5k+/month with just yourself to support?
I'd imagine that you'd want more revenue so you can have a business and not just lifestyle income to support one person. Going from 0 to $5k is one thing -- the advice here is good for that. But getting from $5k to $50k, where you need to be to have sustainable business for 3 people, will require much more substantial effort that's not clear you can achieve with these methods. Indeed, it is not even clear what your margins are at the $5k/mo revenue point and whether that will even be sustainable given the amount you'll need to spend on Customer Acquisition, Customer Support, and slaying the Customer Churn demons to retain your necessary high monthly subscription rates. This is where most SaaS companies die -- trying to achieve this necessary transition.