Building a SaaS company requires more than just technical skills. Being creative and having a strong vision are just as important as knowing how to write code and add features. From inbound marketing, SaaS debt funding, and product development, making a software people would want to use takes a lot of experience and wisdom.
In this episode, Marcel Petitpas shares all the experience and wisdom he gained from launching Parakeeto. From marketing to technical coding, he offers practical advice SaaS start-ups can use today. He also talks about how they started the company with minimal cash and SaaS debt funding. Marcel dives deep into product development and attracting users. He also details the common pitfalls and challenges SaaS start-ups will inevitably go through as they build the company.
Tune in to this episode to borrow his best practices when starting your own SaaS company.
Click here to read transcript
[03:15] So, for the folks in my audience who aren’t familiar with you, let’s start there. Who are you? And what do you do?
- My name is Marcel Petitpas. I’m the founder of a company called Parakeeto. And I’m also an agency profitability expert, which means I help service businesses make more money with the existing team and overhead and business that they have.
[03:34] And so one of the ways that you’ve done that is with a SaaS application that’s Parakeeto, correct?
- That’s right. Yeah. Parakeeto is really a solution to the problem that we kept uncovering as we worked with our clients when we were doing a lot of consulting, which is that a lot of service businesses don’t put enough emphasis on actually estimating the work properly before they go ahead and do the work. And that is a gap that needs to be closed if we’re to create a business that can scale profitably.
[04:02] And so Parakeeto helps them solve that problem?
- That’s right. Yeah. It allows them to essentially take information about the past projects that they worked on and use that to drive estimates for new projects and compare their estimates for new projects to historical data. So they can get a guidepost, essentially, for whether or not what their assumptions are actually realistic.
[04:20] Got it. Okay. Makes perfect sense. And your target customer is boutique agencies because I think you had or have a boutique agency, right?
- Yeah. I had an agency. That was my first business. We did real estates virtual reality service and quickly got out of that because of these issues. Because we’re having trouble with cash flow with margins and the real estate market at the time that I was in, real estate agents were just really stingy on the pricing. And then I’ve worked as a COO in several boutique agencies, most recently in Gold Front, which is an agency out of San Francisco where I’ve been doing this kind of work. This is just a market that’s, I think, very underserved when it comes to tools to actually help them run the business. Enterprise agencies, large agencies, they have all kinds of systems for this enterprise software licenses. But for a small agency, you’re generally going to be relying on spreadsheets. And I think that’s part of the reason that most people don’t put enough emphasis on this stuff, because it’s tricky to actually do.
[05:21] Yes it is, as many things in business are. So, my hope with this interview is for someone who’s listening who might be aspiring to have a SaaS business, because it is . . . I’m a SaaS founder as well. It’s a very, very good business to be in, although it is not the simplest business in the world to be in. I’m hoping that we’re going to give them some insights into what it took you to get your product developed and your business off the ground. So, let’s start with the elephant in the room: how much have you spent on development so far?
- So that’s a really interesting question. And I’ll answer that with the number that it would have been if everyone was getting paid their market rate. And I think we’d definitely be north of a quarter million dollars, probably closing in on closer to three or $350,000. But thankfully, we started this as an internal project with a business partner of mine, who runs a software development agency. So, a lot of that time, of course, was an investment in the company. And then our co-founder today, who writes a lot of the code, obviously, has taken a huge salary cut in order to be a part of the company and to do this work. So, we’ve been able to, from a cash perspective, not have to spend that much money. But that is probably objectively the all-in cost of the software if we were to put a dollar figure on it.
[06:37] Okay. And you generated cash. How?
- Well, we started actually . . . So, this is an interesting thing. I don’t think a lot of SaaS companies do this enough, but our minimum viable product was our service offering. So, we said, what’s the first thing that we can do to validate that people are actually willing to spend money to solve this problem. And so, we developed the consulting offering. And we were able to start working with clients—building their spreadsheets, helping them interpret the data. And that allowed us to, number one, get intimate with the problems that we’re trying to solve because it is a fairly complex problem. Number two, generate cash. And number three, actually prove that there is a pain here that is valuable enough to solve and valuable enough to charge money to solve.
[07:20] And how did you go about getting those first few customers when there was no software product? Were they already clients or did you run ad campaigns? What did that look like?
- Yeah, we use podcasts. Not unsimilar to your story. We just saw that there was a lot of podcasts in the agency space. Agency owners liked listening to podcasts to help them understand how to grow their business. But very few people were actually talking about operations. A lot of the podcast content had to do with how to get new clients and how to basically find more work for your agency. And not a lot of people were talking about what you’re supposed to do after you figured that part out. And so, we said, “All right. Well, there’s a gap. Let’s build the podcast that is all about process, operations, and profitability.” We did that and we started to develop some thought leadership in the space. And we started to generate inbound leads through that. And then, it was just a question of switching out what was at the bottom of that funnel because the target customer was largely the same for both products. It was just a question of having a service on the front end and then slowly transitioning that into a product.
[08:21] How did you promote the show when it was in its infancy? Did you get the guests that you had on to promote it? Or are you running ads for it? Or a combination of the two?
- Yeah. We stayed away from paid ads for some time. And, actually, just leveraging the audience of our guests was a big way that we got the show exposed in the beginning. And a little bit of SEO, a little bit of keyword ranking . . . That’s largely where most of our traffic has come from up until now. We’ve only recently really started to invest in paid ads because the bottom of the funnel was scalable enough to really support [unintelligible 00:08:51] of that. But yeah, that was key—was just getting great guests with a great network that was engaged and having them kindly share that, got us exposure to their audience. And naturally, a percentage of them were interested enough in the subject matter to stick around and subscribe.
[09:07] How many episodes have you recorded so far?
- We’ve recorded 54, I think at this point. And I think we’ve released somewhere in the mid-40s of that. So yeah, the show’s been rolling.
[09:20] And how many people are on the email list as a result of the ones that have been published so far?
- We’re closing in on a thousand email subscribers now. But the email subscribers are only the people that have actually downloaded a lead magnet or a resource from us. Our subscriber base on the podcast is probably closer to three.
[09:39] Okay. So not huge numbers, but large enough. And this is why I’m asking these questions because I want people to understand that you don’t need to have 50,000 people on a list to be able to launch a product like you did. So, you have a fairly small list of engaged subscribers. And then you made them an offer for a service that ultimately would become software. But there was no software at that point in time?
- That’s right. And I mean . . . This is the thing that I think is important to drill into here because we’re very, very much solving a niche problem, a niche market. And so, the numbers don’t have too big for us to actually get the results that we want out of that marketing effort. To your point, we’re not the most popular podcast on iTunes. It’s not a volume play. But the subject matter is so specific that our conversion rate from people that land on the website and download the lead magnet is really high. The rate of people that download the lead magnet and then become interested in the product is high because we’re very, very specific about who we’re serving and what problem we’re helping them solve. And I think that’s a big part of the reason why we’ve been able to get these results without having to create a podcast that—to your point—gets 50,000 downloads a month or anything like that.
[10:48] What was the price point for the consulting engagement that you were offering before the software came to be?
- Yeah. So, we had a couple more productized offerings on the front end. So, we would do like an audit usually on the front end. And that was usually around $1,500. And we played with the pricing a little bit, especially in the early days. It was one of those things where it was like, “Let’s just pick a number out of a hat for this call and see how they respond to it.” And then for longer-term engagements, we want to have some recurring clients that we can go deep with. And that started at around 3K a month. And it was kind of like a fractional COO-type of offering that we did. So, we had lots of turnover on the audit. So that was nice. That was a nice front end for us. And then we usually kept a roster of a handful of clients on retainer. But of course, we cap that because we didn’t want it to become a distraction for the business. The nice thing is, though, the podcast brought in enough leads that we never really had an issue keeping that roster full. In fact, we turn more people away than we brought on at one point.
[11:44] Okay. So, now we’ve got to the point where you’ve . . . how you build your audience, how you generated some cash, but you’ve got to build some software. So, you had, much like me . . . it sounds like you have a technical co-founder who’s kind of “been there, done that” before?
- Yeah. So, I was very fortunate from the very beginning of this company to be surrounded with technical people who really know what they’re doing. So, thankfully, I didn’t have to go learn how to write code. The business would have died a long time ago if that was the case. Yeah. So, our first product, actually, we’ve been playing with this for some time. I mean, we’ve been trying to develop the software for the majority of the time that we’re doing the consulting. And I think the first product was very much reflective of some of the internal things that our first co-founder, Jared, was dealing with in his own agency. And I think the challenge that we had with that first product was that we probably tried to over-engineer it a little bit. We tried, I think, to build something that was too large and complex out of the gate. And I think that just came from not having enough clarity on exactly where the problem began and what the sequencing was to kind of solve the larger problem of agencies not having visibility into their profitability. So honestly, that’s a big part of the reason why that dollar figure I gave you earlier in the episode is as high as it is: because we spent a lot of time building things that, ultimately, when they made contact with the market, there wasn’t a fit there. There was too much friction. And we spent a lot of money and time, honestly, on learning those things. And unfortunately, that’s an expensive way to learn. And then eventually, that led us to discovering that we need to start in one simple place. And that simple place is estimation.
[13:23] And as your co-founder, you mentioned that he’s the one who writes most of the code. Have you employed overseas developers or is it pretty much been one guy writing code?
- So, in the early days, it was two or three developers at the agency that we kind of started this inside, called Royal J, and they were writing most of the code. They were doing a great job. And then we eventually transitioned to kind of bringing on a full-time technical co-founder. His name is Ben. And he came over from the second fastest growing start-up in Canada, right behind Shopify, called Jobber. He was their VP Engineering. Don’t ask me how I convinced him to join our company. I still, to this day, don’t really know. But he was gracious enough to come in and become our CTO. And now he’s basically writing and managing the entire code base, which I think is part of the reason why he was actually interested in this. He was an executive at that company. And he just want to get back to building stuff because he’s an engineer at heart.
[14:16] Yep. Yep. Understand. So now that you are fully into the throes of writing code, developing new features, dealing with bugs, what are some of the most challenging aspects of the technical part of running a software company?
- Yeah, this is like . . . Man, I could talk about this forever. I think one of the biggest dichotomies of building software is there’s this constant tension between features and complexity and speed. Or you’re always having to kind of balance these different priorities. You, as a CEO—right—and as somebody who wants to serve your customers, you’re constantly pulled into adding more features, adding more features. And there’s this narrative, I think, that’s really easy to develop, which is like: We’re going to move faster if we build these features. More people will use the product; people will be more engaged; we’ll be able to rapidly expand who we can serve. And a lot of the time, that’s probably actually the wrong direction for the business. Because what I’m learning from my very wise technical counsel is like every line of code that we add potentially becomes debt. It can slow us down. It makes the complexity often of building additional features a lot more difficult. It makes the complexity of changing existing features a lot more difficult. And it ultimately slows us down. So, we really have to be cognizant of where are we, Like, what stage are we at as a business? And how much sense does it make to add additional complexity until we’ve kind of proven out what we have? And that’s been a really interesting challenge. It’s a conversation we have almost every day of every week . . . is kind of assessing our metrics, looking at how successful people are inside the product, looking at our engagement funnels, figuring out where people are dropping off, and really trying to be very focused and disciplined. But where we’re putting our energy so that we’re not trying to just basically pile toppings on top of an ice cream that doesn’t fundamentally taste good enough to warrant being a dish, if that makes sense. That’s a really strange analogy that I just came up with off the top of my head, but I hope it made sense to everyone.
[16:19] Made perfect sense. In other words, it doesn’t matter—to use another bad metaphor—doesn’t matter what toppings you put on your hamburger. If the meat’s not any good, it’s not going to be a good burger
- That’s right. So, today, we’re really at the stage where we’re still very much focused on making sure that that core experience of logging in, connecting your historical data and generating an estimate is a beautiful experience. And once we’ve really nailed that, then we can kind of think about adding more integrations, adding more advanced features. But that’s still very much where we’re paying attention.
[16:50] How many users are on the software, as of now?
- I think—as of—we just opened it up for trials a couple weeks ago. So, I think we’re at about 50 users on the platform. And a handful of those are logging in daily. And that’s honestly our big focus is how do we get more of those people actively coming back and reusing the platform and re engaging. So, it’s still fairly small numbers from that perspective. And part of the reason for that is, we only integrate with one-time tracking tool today. That time-tracking tool is Harvest. So that has narrowed, unfortunately . . . It’s cut our amount of people that were interested, that are actually able to use it today down to probably a quarter, if not a little bit less than what could or should have been initially.
[17:31] And how are you driving new trials, new trial users? Is it predominantly still the podcast? Are you running a dedicated ad campaigns?
- So, the podcast does generate like pretty decent amount of leads. Unfortunately, the challenge with that, of course, is since we’re niched into Harvest, only a handful of those leads are actually using the correct infrastructure. So, we’ve now started running some very specific PPC campaigns around keywords that are specific to Harvest. We started to do a little bit more work to rank for some terms, specifically for Harvest. We should be released in the Harvest app store. Hopefully, this . . . I mean, they’ve been saying, “You’re going to be released this week” for the last three weeks. So, we’ll see when we get released there, but we’ll be in there. And that we have also started doing some Facebook campaigns. And we were able to use SparkToro, which is a great tool by the way, to identify lots of really good interests that correlate to or like Harvest user, specifically. And that’s actually turned out to be quite fruitful for us so far.
[18:28] So, I actually had . . . oh no, I’m zoning on is . . .
- Rand Fishkin.
[18:33] Rand. Thank you. He’s been on my show twice. And recently we had Rand on to talk about SparkToro and how he raised money for his company
- Got his book Lost and Founder right here. What a great dude.
[18:44] Rand is a very clever guy. If you are interested in hearing that interview, just go to the search box on Bright Ideas and type in Rand Fishkin or type in SparkToro. You’ll find it. If you are looking for a very interesting funding method. There is now called the SparkToro funding method. And Rand open-sourced his documents that he used for that funding method. So again, if you’re a founder, and you’re looking for more information about that, just go to that interview, and there’ll be links in the show notes for you to be able to go and get all that good stuff. Or you can just Google SparkToro Funding Method. Rand has a big, long blog post that shows up. I’m pretty sure number one. You’ll be able to get all that info. Well, Marcel, before we close out, is there anything else that if you were interviewing yourself, at this stage in your journey, you would ask yourself to share something valuable with the audience?
- Yeah. I would say—just kind of speak to what I spoke to earlier—the most common mistake that I see a lot of folks make is when it comes to building software is, number one, they don’t base it on what the market wants or needs. A lot of time it’s coming from an internal need, and that is a great place to start a company from. But it’s a really, really easy way to build a product that just doesn’t find product–market fit quickly. And I’m saying that from experience. So, don’t be afraid to test your assumptions. You really should be challenging your assumptions as early as possible. And don’t be afraid to make the first version of your product, something that’s low-tech or no-tech. And that could be the best way for you to get paid to learn along the way. And when it does come time to build the software, you’ll have answered so many important questions that are going to save you a ton of time and money in the long run. And I would say just be patient with that and try not to rush into trying to build the most amazing, beautiful, crazy, complex piece of software in the world right out of the gate. That’s a pretty good way to light a lot of money on fire, in my experience.
[20:38] It is and I’m thinking of another interview I did a while ago, and I don’t remember her name off the top of my head, but I’ll put it in the show notes. And that’s one of the things she does is works with SaaS founders to make sure they don’t go—because people get really excited about their own ideas—without testing to see if there’s a market of people willing to pay. And then they go and spend all this money if they haven’t. And they lose it because they realize they built something that nobody else needs or wants to pay for. And that’s a real shame when that happens. Cynthia Del’Aria. That is her name. So, if you type her name into the search box, you can hear the interview I did with Cynthia as well. So excellent advice. If there’s any, any way at all, you can figure out how to pre-sell it or sell the service or, in some way, get people to vote with their credit card before you ever spend a dime, it’d be far better off as a result.
- That’s such an important piece right there too is asking for the dollar. My experience, all the golden feedback and the acceptance criteria, so to speak, for the market comes after you ask them for a buck. Because up until that moment, most people are just gonna be friendly to you and kind of tell you what you want to hear for better or worse.
[21:43] Yeah, absolutely. All right, Marcel. Well, thank you so much. When you get to say somewhere in the neighborhood of $50,000 a month in revenue, make sure you look me back up and we’ll do another episode with you.
- Sounds good. I look forward to it. Hopefully that’s very soon.
Marcel Petitpas’ Bright Ideas
- Offer a Low-Tech Prototype
- Find Gaps in the Market
- Build an Organic Following
- Evaluate Before Adding Features
- Know Your Market
Offer a Low-Tech Prototype
Some people believe you first have to build your software before even releasing it to the market. However, every software is not a finished product but a work in progress.
Marcel implemented the same strategy with his company, which allowed his team to fit Parakeeto to the market’s needs. He believes that not enough SaaS companies do a minimum viable product as a service offering.
“Don’t be afraid to make the first version of your product something that’s low-tech or no tech. That could be the best way for you to get paid to learn along the way,” he said. “Just be patient with that, and try not to rush into trying to build the most amazing, beautiful, crazy complex piece of software in the world right out of the gate.”
Aside from getting immediate feedback and solutions to future problems, releasing the early stages of your product will save you money.
Marcel said, “When it does come time to build the software, you’ll have answered so many important questions that are going to save you a ton of time and money in the long run.”
One of the worst situations a SaaS company could be in is getting too excited, rushing development, and ending up with a complete and expensive product that nobody wants to pay for. Thus, offering initial versions and testing all the time is a practical and logical strategy.
Find Gaps in the Market
You can invest all your time and effort into the best application ever, but if no one wants to pay for it, you won’t be profitable.
As harsh as it sounds, the customer is always right in software development. After all, your target consumers are the end users of whatever you develop.
“The most common mistake that I see a lot of folks make is they don’t base it on what the market wants or needs. A lot of time it’s coming from an internal need,” Marcel said. “That is a great place to start a company from, but it’s a really easy way to build a product that just doesn’t find product–market fit quickly.”
With this in mind, the best way to start a SaaS company with a viable product is through the following steps:
- Employ a blue-ocean strategy. Less competition means higher growth potential.
- Find what the market needs. Ensure that your product has a great fit with consumers.
- Differentiate yourself. Thrive by positioning yourself well in the industry.
Build an Organic Following
Marcel believes SaaS start-ups should produce useful content and rely on inbound marketing. Paid ads aren’t as effective when what you really need isn’t random impressions but long-term followers and users.
Initially, Parakeeto created a business podcast. They found that most podcasts focused on how to get clients and not how to retain them and remain profitable. This podcast’s audience then grew, and they tapped the following of their guests when it was time to launch Parakeeto.
Their email list also grew substantially. Although it wasn’t a relatively large audience, what mattered is that each person was very engaged and interested. This proves that when it comes to having a following, you don’t need big numbers. You need the right people.
“The nice thing is the podcast brought in enough leads that we never really had an issue keeping that roster full. In fact, we turn more people away than we brought on at one point,” Marcel said.
Evaluate Before Adding Features
Every hamburger starts with a patty. Every house starts with a foundation. No matter how many toppings you put in a hamburger or how much you decorate an unstable house, they won’t work if the base is fundamentally flawed.
In the same way, an excellent software isn’t about the extra features and the nice-to-haves. If the basic characteristics of an application aren’t present, it won’t live up to its potential.
Marcel says, “You’re constantly pulled into adding more features and there’s this narrative which is like, ‘We’re going to move faster if we build these features. More people will use the product; people will be more engaged; we’ll be able to rapidly expand who we can serve.’ And a lot of the time, that’s probably actually the wrong direction for the business.”
Based on his experience, every line of code added is a potential debt. It can also slow them down and make building additional features even more difficult. Don’t over-engineer. There is a trade-off between complexity and speed.
Know Your Market
Parakeeto may not have the most users yet, but all of them are active and very engaged. In starting a SaaS company, this is crucial.
Understanding your market and what they want is the key to their continually integrating your software in their work life. Thus, you need to challenge your assumptions about them as early as possible.
Furthermore, your existing user base will provide you with the most critical information you need to improve your software.
“All the golden feedback and the acceptance criteria for the market comes after you ask them for a buck because up until that moment, most people are just gonna be friendly to you and kind of tell you what you want to hear for better or worse,” Marcel said.
What Did We Learn from This Episode?
- Utilize SaaS debt funding to offer a minimum viable product.
- Know what the market needs and test your assumptions.
- Evaluate first before adding new features to your SaaS application.
- Be creative with your marketing and offer free knowledge to gather a following.
- Focus on quality over quantity to have recurring customers and a long-term engaged audience.
[03:40] — Marcel talks about Parakeeto
- During their consulting work, Marcel observed that service businesses don’t put enough emphasis on estimating work properly.
- His SaaS app allows information from past projects and historical data to drive realistic estimates for new projects.
- They target boutique agencies because they are an underserved market.
[05:53] — Parakeeto’s SaaS debt funding, developments & expenditures
- The SaaS start-up would have spent a lot more if not for the sacrifices internal founders made to reduce expenses.
- They raised money by offering consultations to their initial customers and helping them through their problems.
- They also noticed that podcasts often talk about how to get new clients, but there was a gap when it comes to talking about operations and profitability.
- Creating the podcast allowed them to generate inbound leads and transition the bottom of their funnel into customers of their new product.
[08:30] — How Marcel promoted and launched Parakeeto
- They stayed away from paid advertisements and focused on generating an organic following.
- Most of their traffic comes from the audience of their show guests. They have about 1000 subscribed to their email list, but their podcast has about 3000 subscribers.
- You don’t need a lot of following to launch a product. You need the right connections and an engaged audience.
- In solving a niche problem in a niche market, you have to focus on quality over quantity.
[10:54] — The SaaS application’s price point and cash flow
- They would do productized offerings on the front end, priced at about $1500.
- There was a lot of testing and trial and error involved in determining the price.
- They handled longer-term recurring engagements on retainer, and the podcast generated leads for them.
[12:00] — Technical aspects & challenges
- Fortunately, the founders were technically skilled in programming.
- Their major challenge was they over-engineered it and made it too large and too complex too soon.
- They realized they needed to start from a place of estimation.
[13:33] — Coding strategy
- In the company’s early days, they only had a few developers writing the code.
- They eventually brought in their technical co-founder, and he now writes and manages the entire code base.
[14:37] — Most challenging aspects of a SaaS company
- There is a trade-off between features and speed. Therefore, you need to balance and evaluate your priorities.
- When serving customers, it’s easy to fall into the trap of continuously adding features.
- Every new line of code makes the application complicated, slow, and increasingly difficult.
- It is important to be conscious of whether or not it makes sense to add more features.
[16:53] — Attracting Parakeeto users
- They have about 50 users on the platform, but most of them log in every day.
- Their biggest focus is to get more active users who reengage and reuse their software.
- They are niched into a time tracking tool called Harvest, so they run specific pay-per-click campaigns for its users.
- They also run Facebook campaigns and use SparkToro to have a comprehensive understanding of their leads’ interests.
- SparkToro has an interesting SaaS funding method other companies can learn from.
[19:35] — Marcel’s tips for SaaS start-ups
- The most common mistake software developers make is that they neglect what the market needs and wants.
- Test your assumptions about the market continuously and as early as possible.
- An internal want is a great place to start a company, but it sets you up to make software without a product–market fit.
- A low-tech initial product is the best way to generate potential customers and get paid while gaining experience.
Marcel Petitpas is the Co-Founder & CEO of Parakeeto, which helps agencies and consultancies automagically create accurate, data-driven estimates for their projects in seconds using historical Harvest data. Marcel helps creative agencies & consultancies figure out who their “Mrs Harrison” clients are – and spend more time working on the stuff that makes them PROFITABLE.
As a keynote speaker & consultant, Marcel helps service-based businesses understand the fundamentals of their economic model and learn how to measure and manage the simple numbers that determine their profitability. At Parakeeto, Marcel and his team are building software that will empower every small agency and consultancy to see the insights only the big guys had access to in the past… all without wasting time on spreadsheets.