Converting a €250K dev shop to a SaaS business
The last 7 years
We started back in 2013 as a dev shop and we have achieved much since. We built a great team and we had been profitable for years. We made around €250k in annual revenue in 2019, which is something I’m very proud of.
Why not just be happy with that?
I want to turn this company into a SaaS for these reasons:
-
Most of my revenue is not recurring, generating ups and downs in revenue and workload.
-
The recurring revenue that I do have is not scalable, as it is mostly engineering hours sold in various packaging.
-
Most of the value that we create goes to our clients since they mostly own what we create. If we were to implement the most amazing application of the planet, we would simply be paid for the hours we worked. It’s a fair deal, but I’d like to play a different game.
What's next
My goal is to use the skills we have in building and hosting applications into creating SaaS products. One advantage we have is that we are good at building. The disadvantage is that nobody on the team has much experience in building something for multiple customers. We mostly had to serve just one, and if they insisted on something crazy, we would just build it and they would be happy with it. This time it will have to be different.
Baseline figures
You can find our net sales from 2019 split by category on the chart above, I’ll be using this as a baseline for the future. The chart gives away, that we already have a SaaS attempt. It works and it generates some income but it has a few major product issues that make me want to just start over with something new.
Do you have experience in turning a regular business into a SaaS? If you do, please share.
You can also find me on Twitter, my handle is @MateUzsoki, I'll post small updates on my progress there.
We actually did exactly that. We built a software for a client then decided to "buy back" the IP and sell it to other customers. We went through multiple stages (single tenant, hybrid, and now going towards multi tenancy) while allowing new clients to come on board.
That's an interesting path to take. I believe my clients would freak out completely if I suggested something like that. I'm glad it worked out for you though :-)
Think about some of the big problems you see, perhaps some you already solved with custom software development and individual clients. Is there a broader market for it? Is there a no/low code SaaS you could leverage to not only bring your idea to market, but also leverage for accelerated value delivery? If you have delivered custom solutions with higher dev or recurring maintenance costs, you could pulse prior clients on whether they would replace their current solution if you could deliver the same capabilities through a SaaS model.
In the meantime, you will be learning how to build solutions on the SaaS and creating one of your own on top. This gives you a multi-way go for revenue creation.
Big names are outsystems, appian, medix, MS power platform...with up and comers like Go Prama and Unqork ready to disrupt.
"Is there a no/low code SaaS you could leverage to not only bring your idea to market, but also leverage for accelerated value delivery?"
I'm not sure I understand correctly. Are you suggesting that we create a no/low code addon and sell it to no/low code builders as a SaaS product? I have been thinking about doing that lately, I'll need to get familiar with the market though.
"If you have delivered custom solutions with higher dev or recurring maintenance costs, you could pulse prior clients on whether they would replace their current solution if you could deliver the same capabilities through a SaaS model."
That would be dangerous to me, as these customers usually have a ton of customer requests and it would be difficult to push them into a standardized solution. Our previous SaaS attempt suffered from this problem.
Thanks for the reply!
We are in a similar position, but I would suggest you start gradually shifting towards SaaS. So, I would say start with 20% of staf on SaaS product and the rest stay on contract work. Once you have a profitable SaaS you can grow the number of devs u have on that, maybe even hire new ones and keep the existing members on contract work.
Yes, I'm very careful when it comes to financial stability. We will make the shift gradually, just as you suggest.
Also, I don't plan to build a huge application. I'd rather test the market with something small and only put in a lot of dev hours once the concept proves itself. I have been around a lot of 'let's build a product' projects already that burnt a ton of money without ever being tested on the market and turning out the be utter failures.