Need to build your SaaS company into a go-to-market machine? TK Kader is the man for the job. For 15+ years TK has been deep in the SaaS world.
He’s founded and sold venture-backed companies, advised CEOs, run strategy, and today coaches SaaS founders and operates his popular YouTube channel.
What’s TK’s secret to helping SaaS companies succeed? He’s perfected the art of taking audience insights and turning them into revenue.
As part part of our Wynter Games virtual event, TK shared his startup wisdom.
Why most startups fail
Early in his startup journey, TK noticed something significant: only 4% of startups make it past the seed stage. This means that only 4% of startups raise Series A funding.
What’s more, of the 4% of startups that secure funding, only 70% go on to generate consistent revenue.
“That's a very, very high bar,” TK said. “There's more seed-funded startups than ever before, but only 4% of them will actually raise an A.”
The obvious question became, why? Why were only 4% of startups succeeding? And what were those 4% doing right?
TK cited a CBInsights report that analyzed 101 failed startups. The goal of this post-mortem was to understand why those startups did not succeed.
That study was boiled down to the top 20 reasons startups fail. TK chose to go deeper, looking closely at the top nine.
What he found was interesting.
The #1 reason startups fail was “no market need.”
You would assume that lack of funding would clock in at the top, but instead lack of funding came in at #2.
“The majority of the reasons that startups fail had to do with their go-to-market. It's not their product,” said TK.
What that means is that you can have a cool name. A great logo. A slick website. A great blog.
You can be doing social posts and running ads. You can have an MVP and an SEO strategy. You can raise millions in seed money.
And you can still fail because you don’t have enough market traction.
Once he identified go-to-market as the Achilles heel of startups, TK looked at how SaaS companies could approach go-to-market from a place of strength.
He summarized his knowledge into the three “pillars” that every startup must have in order to be successful.
Those pillars are:
- A ripe market
- A great product
- A scalable go-to-market machine
If one of these three things is missing, your startup will fail.
If you have all of them, you’ll join the 4% of winning startups that optimize for all three.
The importance of picking a market cannot be overstated. In fact, your market is actually more important than your product itself.
How can that be? Just look around you.
Many mediocre products are out in the world, and the companies behind them are doing very well financially.
Meanwhile, many companies with beautiful products crash and burn.
The difference is the market you choose to go after.
“You can have the best product in the business, the best, most amazing, beautifully designed product, perfectly scalable."
"But if it's in a crappy market, it will not matter,” TK said.
“You can have the best team building the best product."
"If they're in a crappy market, it won't matter. Markets are what matters the most when it comes to successful startups.”
The importance of audience research
Picking a great market doesn’t happen by chance. It happens as the result of meticulous audience research.
Doing research means that you have to do much more than ask your potential customers if they “want” your product or service.
Because many people who tell you ‘yes’ will never actually shell out the money to pay for your product once it’s live.
According to TK, B2B SaaS businesses buy things for three reasons:
- To save money
- To grow faster
- To reduce risk.
So before you even start down the research path, make sure that you are checking off those boxes.
“If you're not one of these, you can do thousands of hours of research and they can tell you they want it. They're probably lying to you,” TK said.
“If they're not getting paid through your software, they're not going to buy your software.”
The market checklist
The next thing to do when considering a market is to go through TK’s market checklist.
He drove home the need to consider the following things:
- Urgent and important problem - a pressing problem people are willing to pay money to solve.
- “Appropriate” TAM - companies raising venture capital will need a large TAM, while bootstrapped businesses don’t.
- “Close to revenue” - the closer you are to making revenue and helping businesses save money, the better off you're going to be.
- Macro trend - what major patterns came up during your audience research? Tap into those macro trends.
- Serving awesome people - clearly define and document your ICP (ideal customer profile) based on data.
- Underserved segment
“The best market has money to spend,” said TK.
“And they're early adopters because they're willing to try startups.” As Internet marketers often say, “the riches are in the niches.”
After your market, the second major consideration is your product itself. Naturally, you want your product to be great.
How do you make sure that’s the case?
The answer is that your product should solve that urgent problem that we discussed above.
“Here's the thing. People don't care about software. They don't want to use software. They don't wake up in the morning and say, ‘I really want to buy some SaaS software.’
They don't do any of those things,” said TK.
“If they have a problem, they want to get to a resolve and they want to figure out how many clicks does it take to get to that ‘aha’ moment.”
Get customers to the “aha” moment
The faster you can get your customers to the “aha” moment, the more successful you will be. That’s becuase people are impatient by nature.
They don’t want to stick around and wait and see if you will solve their problem. They want to know right away.
“You may have an amazing product that can do all kinds of things, but they'll never stick around to actually realize that,” said TK.
There are three major categories for SaaS products, and you want to make sure your audience can quickly identify which one you are.
If you're building a SaaS business, your service will likely be one of the following:
- A system of record
- A system of engagement
- A system of decision
According to TK, these are ordered from most successful to least successful.
Companies that can be touted as a system of record are the best, while those that are a system of decisions are the least profitable.
Pursue “single-player” products and avoid extra features
You also want to pursue what TK calls “single-player” products. This means that value is apparent immediately from the level of one individual user.
“If I have to go invite five more people to get value out of your product, then the ‘aha’ moment is too far away. I will not probably get there,” TK said.
“And so you want to make sure I get value out of the product, get to an ‘aha’ moment on my own. And then you earn the right for me to invite other people into the product.”
The more people you can get to take action quickly, the more that drives your market strategy forward. So reaching that “aha” moment early on is paramount.
You should also be running away from the trap of extra features.
It’s all too easy for founders to fall into the “one more feature” trap.
Customers are quick to recommend additional features during the interview process, or to claim that they find additional features attractive.
But at the end of the day, features don’t pay the bills. The success of the core product does.
“The thing is, there's always gonna be that one more feature. And you need to get out of the one more feature track,” said TK.
“You need to figure out what is the core loop that gets people to buy. And until they're swiping the credit card, you'll never really know if they're telling you the truth. And that's why go-to-market is more important than ever.”
Your go-to-market machine
You can do everything right when it comes to identifying your market and product...and still fail when it comes time to go-to-market.
TK walked us through the common traps and pitfalls that plague startups in this final stage.
Go-to-market traps include:
- Channels allowing you to sell through other companies may be attractive, but are hard to leverage.
- SEO is affordable, but organic traffic takes 12 months to actually pay off.
- Ads may allow you to email thousands of dream customers, but payoff is not guaranteed.
How do you overcome the above traps?
You understand that you need to take time to strategize before you execute.
“Most people jump to execution instead of strategy from their audience insights,” said TK.
Value proposition and strategic narrative.
You need to take the time to have a clearly defined value proposition and strategic narrative.
“Those things often get skipped over and people just start running ads, start testing. They're like, we're going to AB test it! But they haven't done any of the strategy work."
"They haven't taken their audience insights and articulated it,” said TK.
Only once you establish the strategy can move into execution mode, targeting your ICP and marketing to your ideal customers.
And if all of your hunches about your audience research were correct, the money will start rolling in.
As part of his coaching business for SaaS founders, TK focuses on helping them see this process as writing a manifesto and creating a movement.
“SEO takes too long. Blasting emails won't work unless you're very strategic about it. So we teach you how to actually write a manifesto that's the strategic narrative, how to actually position your product based on that."
"Then we teach you how to hone in on your messaging and actually the most ripe segment of the market,” said TK.
Audience based go-to-market machine
When you build a go-to-market machine that is based on your audience, the results can be unstoppable.
That’s why TK has coined this framework the “unstoppable sales funnel.”
It’s all about fleshing out your ICP and coming up with a showstopping narrative that speaks directly to them.
“When you do this, everything becomes clearer,” said TK. “It makes sure that you create the strategy. And then you do the execution.”
Nothing beats pricing strategy
The final piece of the puzzle for successful startups is a smart pricing strategy. As a company, your goal is always to aim for a positive net retention rate.
How do you do that?
Part of it relates to your product strategy. But the real variable is your pricing strategy.
Asking people for money is the moment of truth.
If people agree to pay you money, you know that the things you heard your customers say during the audience research phase were true. If not, they were false.
Keeping your product aligned with your growth potential means tweaking your pricing strategy in the right way.
Smart businesses start out by charging customers one monthly flat fee.
Then, they start charging more over time based on usage, features, and continued growth.
The sooner you find a way to start asking customers for money, the sooner you’ll be able to validate your audience research.
And as soon as you’re able to start testing those hypotheses, you can feed the results back into your go-to-market machine.
If you want to scale successfully, look at why companies fail.
Did you pick the right market? Is your product great?
Did you skip go-to-market strategy and jump right into execution?
The answers to these questions can help guide you on the path to success.
Watch TK talk about the topic here!