SaaS and I have known each other for a long time.
For the last four years, I’ve been growing SaaS startups.
So when I finally decided to venture into entrepreneurship, why didn’t I stick to what I knew best?
First a little bit about me…
I began my career in Amsterdam's fast-growing tech scene. I spent three years at a high-growth SaaS startup called Bynder, before moving across town to head up the marketing team at Crowded.
Now I'm working on my own business called LUMES which sells computer eyewear.
In this article, I’m sharing why I chose to start a physical product eCommerce business—not a SaaS one.
If you’re considering starting a business and you’re not sure which road to take, I hope this article can help. I've tried my best to clarify some of the key differences that I've found between SaaS and eCommerce so far.
Why I cancelled my SaaS subscription
After working in SaaS for so long, I feel pretty well-acquainted with the ups and the downs. Here are some of the main reasons why I decided to start an eCommerce business instead.
The end of “How do I log in?”
Now, don’t get me wrong, I’m not saying that as an eCommerce founder you’re free from customer service duties. Far from it. But from my experience so far, most questions can be directed to a simple FAQ or shipping page. In fact, when I decided to add a live chat widget to the site, only one visitor started a chat over a two month period...
When I compare this to my time working at a small SaaS startup—where I was in charge of answering incoming live chat requests—I was often dealing with five to ten support questions per day. And nine times out of ten, the questions were trivial, such as “where do I log in?” and “how do I change my profile picture?”
Of course, you can always solve this with a customer support hub or knowledge base. But as an indie hacker, do you really have time to write a comprehensive guide on how to use the product? And even if you do, most customers would still rather reach out to you than scroll through pages of technical support.
No more feature requests
Which brings me to my next point: feature requests. Indie Hackers, how many times have you been asked about a feature your product doesn’t support? Even if you have the most simple product in the world, you’ll probably still have “success gaps”—when your product’s functionality does not satisfy the customer’s desired outcome.
That’s why most founders have to navigate constant requests for new features and improvements. And believe me, even at startups with a whole product team, it’s almost impossible to build every feature improvement request that comes in.
In the end, I didn’t want to have sleepless nights trying to decide which new features to build or get bogged down in product development instead of growing my company. Having said that, I still get a few requests for prescription glasses—which I don’t sell currently. But it’s much easier to say “sorry not yet” and leave it at that.
Pricing that doesn’t give you a headache
During my time at Bynder and Crowded, I was working on two freemium products. And both times, the most difficult part about getting the product to market wasn’t the customer journey or messaging; it was pricing.
That’s because there are so many variables at play: Which features should you hold back for the paid version? Is the upsell incentive enticing enough to convert users? How big should the jump from free to paid be? Will the paid accounts make up for the cost of acquiring and serving free and paid users?
Unless you hit the virality of Dropbox and Slack, achieving profitability with freemium model is challenging—especially if your free users are eating into your time and resources.
It’s ten times easier to put a value on an eCommerce product. As Julian Shapiro previously wrote in a discussion on Indie Hackers, “eCommerce is easier to grow because you’re comped against existing products in the category. So people already know what’s reasonable to pay. So you’re just competing on value.”
It’s true. After one Google search, I was able to find out what my (successful) competitors priced their blue light blocking glasses at, and come up with a price that was competitive and made business-sense.
Developers are expensive
No matter how talented you are, there will come a time when you need help on the product side of things.
Whether it's technical expertise or additional resources, finding a suitable developer isn't always an easy process.
In fact, from my experience, finding talented developers is notoriously difficult (yes, even in one of Europe's major tech hubs). And when you do find that developer, be prepared to pay a lot for that expertise.
If you can launch without needing to hire, that's great. But when you land your first big client, your revenue will increase, and so will your technical workload.
eCommerce has its challenges too...
I’m not trying to convince you to drop your SaaS side hustle and sell a physical product. I just wanted to explain the thought process behind my decision to move from SaaS to eCommerce. As much as I love the challenge of growing LUMES, there are still a few limitations to running an e-Com business. Here are few:
Taking time off isn't always easy
Having a physical product business is a bit like having a pet; let me explain before you brain runs wild with that implication…
You love your cat or your dog. You also like going on holiday now and again. If your pet can’t come along, you need to find someone to take care of them.
Having an eCommerce business is no different. Unlike most digital businesses where you can work from anywhere with an internet connection, running a bootstrapped e-Com startup ties you down to a single location—if, like me, you’re packing and sending the goods.
You can always offload fulfillment to a third-party company, but be wary as there are additional costs involved that can easily add up if you’re not generating enough revenue.
You’re more reliant on third-party services
Running an eCommerce startup means that you have to put your business (and trust) in the hands of third-parties, such as manufacturers and delivery companies.
This means you have less control over critical areas of your business: inventory and delivery times. And when you’re competing with Amazon same-day delivery, getting your product there really quickly matters.
With LUMES, just finding out which delivery company to use involved a lot of trial and error. After trialling four services, I finally settled for one.
Subscriptions = runaway
When you’re not selling a product with repeat purchases and upfront subscription contracts (like Dollar Shave Club or HelloFresh) you can easily run into cash flow issues. Which means you’re constantly under pressure to acquire new customers to reach “ramen profitability” every month.
It goes without saying, that it’s much easier to achieve recurring revenue with a SaaS product—if you get it right.
With a physical product you have to ride out the initial months where you won't be making a lot of money. Whereas a few early SaaS subscriptions can provide runaway—and pay you a basic salary—for the next few months.
At first, you're just building momentum and setting things up. That's why I'd always advise keeping another source of income in the early days.
So, should you invest in bootstrapping an eCommerce startup rather than a SaaS startup? The answer stems a simple cost/benefit analysis: is it personally more beneficial to invest in eCommerce than it is to invest in a SaaS? Maybe you just can’t deal with the “expected features” of SaaS, or maybe you really need that flexibility in schedule that eCommerce just can’t afford you; it’s all about finding what fits best for you. For me, it was eCommerce.
Hopefully this pros-and-cons analysis has helped you form a better understanding of your own personal preferences. If you scoffed at some of these aspects (on either side), or said “pssh, that’s not that bad”, it sounds like you’re in the right place. If you thought “yeah, that really is a pain in the ass, I hate that”, then I would take a step back and reconsider what what you’re investing in. Make sure it’s what you want and your best fit.
If you have any questions or want advice just reach out in comments below.
By Nicolas Deskos (https://www.indiehackers.com/NicDee)
Founder at LUMES Eyewear