Scaling a SaaS Business in 2023 might not be as easy as it used to be. Here’s why
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The tech market took a massive hit at the end of 2022. After scaling like crazy during the pandemic, it plummeted, causing investors to lose $7.4 trillion due to factors such as interest rate spikes and inflation.
These issues have made it more challenging for companies to access capital and have made future profit projections less valuable. As a result, the era of cheap capital and endless funding rounds came to a grinding halt.
For years, the goal for many SaaS businesses was to acquire users as fast as possible to get to the next funding round and repeat the process. This led to quick-and-dirty tactics and a growth-at-all-costs mindset.
However, this scaling approach is changing as interest rates are going up, and venture capitalists are becoming more cautious with their money. This means that scaling won’t be as easy in 2023 as it used to be.
Scaling too fast often results in over-hiring, which drains the company’s resources quickly, and struggling to meet customer expectations, which negatively impacts the company’s reputation.
So, in 2023, SaaS business owners need to shift their mindset from hasty and short-term scaling methods to more strategic and sustainable ones.
Now, let’s talk about how you can scale a B2B SaaS business in 2023.
What does “scaling” mean?
Before I get any further, let’s define what “scaling” means for SaaS businesses.
Scaling a SaaS business can mean different things depending on its growth stage, but the ultimate goal is to increase margins by decorrelating operational costs and revenue.
Small SaaS businesses often think of scaling as growing their customer base. This is because they are still in the early stages of building their business and are focused on acquiring new customers and generating revenue.
On the other hand, successful SaaS businesses may think of scaling as getting to the next revenue stage faster, such as from 7 to 8 figures, or simply accelerating their growth.
But ultimately, scaling a SaaS business means finding a sustainable way to decorrelate the increase in revenue from the increase in costs.
And, from experience, I know that that’s where most businesses get stuck and hit a plateau of growth they struggle to overcome.
In this guide, I’ll approach “scaling” as “breaking through your current plateau”, which is the case for many SaaS businesses regardless of their growth stage.
Back to basics: the problems you solve
Let’s get back to basics for a second.
It may seem like taking a step back but bear with me because this is actually the foundation of everything else we’ll be talking about later on.
Whether you’re a well-established company or just starting out, the fundamental business principle remains the same. It all begins with identifying a problem your target audience has and helping them solve it.
Ultimately, it doesn’t matter how big or small of a problem you’re solving for your audience as long as you’re able to provide a solution for it, and people are ready to pay for that solution.
The issue is that, as they grow, many companies tend to forget the very reason why they exist: to solve problems. This can be a dangerous path to take, as it can lead to losing sight of your goals and losing touch with your customers. A prime example of how a company has lost sight of the problems they solve is Hubstaff.
The Hubstaff case study
Hubstaff has been around since 2013 and started as a time-tracking tool. Here are the features they offer now:
See the problem?
There are too many features, some being very far away from the original solution (time-tracking platform) and the original problem (lack of an efficient way to track the time spent on each task).
They went from time-tracking to productivity, project management, invoicing, payroll, monitoring, etc.
The problem is that they’ve watered down their services so much that they don’t excel anymore at the one thing they set up to excel at: time-tracking.
They’re losing customers to other, more specialized tools, such as Everhour, that offer better time-tracking features.
That’s an issue for Hubstaff because they’ve become a generalized platform that caters to fewer people, and the tool isn’t as good as before.
All because they forgot what they set out to achieve and got blindsided by their desire to “scale.”
If you compare Hubstaff to other time-tracking platforms like Everhour and Toggl, you’ll notice that these specialized tools are doing a much better job catering to the specific problem they solve.
In Everhour’s case, this means “tracking time where people work”, by providing a tool that allows you to track within your project management software (ClickUp, Asana, etc.)
Unlock growth by reconnecting with your market
A good way to set the stage for growth and scaling is to reconnect with your market.
Can you guess how?
Yes, that’s right: by re-focusing on the problems your product solves. Directly or indirectly.
In the time-tracking tool example we’ve discussed above, the direct problems it solves are time tracking, invoicing, and tracking billable hours. The indirect problems are increasing productivity, measuring project profitability, and creating time reports in your project management tool.
All of the above-mentioned problems are exactly what customers are looking to solve when they look for a time-tracking tool.
Therefore, as a time-tracking tool, re-focusing on these problems will help you become better aligned with what the market wants from you rather than what you want to build.
Doing this will inevitably help you scale faster.
It will help decorrelate operational costs from revenue because you’ll only be limited by the number of people with that problem - not an industry, a vertical, etc.
Everhour isn’t trying to be “the time tracking tool for freelancers” or “the time tracking tool for SMEs” - they’re not thinking segment by segment.
They are the time tracking tool with integrations. Everyone who tracks time and uses a PM software (i.e. most companies around) has a problem they can solve.
They don’t need to build new features, maintain a complex environment or hire tons of new people to scale.
They just need to find people with that problem and show that they can solve it.
What you need to figure out to scale a SaaS business
When trying to scale a SaaS business, it’s easy to get carried away.
I get it. Scaling can be an exciting process. However, if you want to succeed, it’s essential to take things slow and approach this process carefully.
To successfully scale a SaaS business in 2023, you need to create effective strategies in some key areas, such as marketing, conversion, sales, product development, and customer service.
And I don’t just mean developing surface-level strategies and hoping they’ll work.
I mean going really deep into understanding your customers’ problems, pain points, and expectations and aligning your tactics with your findings.
The issue is that the majority of businesses create their entire strategy based on assumptions and guesses - rather than focusing on uncovering what their customers really want from their product.
There are three ways to do that:
Analyzing your company's reviews to look for patterns and problems solved,
Conducting customer interviews to gain a deeper insight into their way of thinking, and
Using the jobs-to-be-done framework to identify the main reasons why customers choose your product.
Only once you understand what your customers need and want from your product, can you start thinking about creating strategies focused on scaling - and investing money into them.
That’s when you can start developing a conversion strategy, growing a sales team, and optimizing your processes. I’ll explain how to approach the scaling phase later in this article.
At this point, you also need to ensure your product meets your potential customers' expectations, which means hiring a customer service team to handle customer inquiries and improvement suggestions.
The list goes on.
And the tricky part?
All of these areas need to blend into one cohesive scaling strategy - and all of them can go wrong really easily.
Why scaling your SaaS Business can go wrong
It's no surprise that many SaaS business owners get so fixated on scaling that they rush into it for quick results, successfully ignoring what can go wrong.
Scaling may seem like the holy grail, but knowing the challenges and pitfalls is essential to achieving long-term growth.
You’re trying to scale too soon
In my experience, this is probably the most common reason why SaaS businesses fail to scale. They’re just trying to scale before they’re ready.
If your products aren’t ready for scaling, doing so too quickly may negatively impact your business.
Before attempting to scale, you need to have a deep understanding of your product and what your customers are looking for.
As I mentioned in the previous section, identifying your customers’ problems is key. If you want to scale successfully, that’s where you should start.
The problem here is that most people want to grow fast. And putting in the work to understand your customers’ problems isn’t a quick process.
Companies trying to scale usually focus on fast acquisition - with tactics such as cold outreach via email or LinkedIn.
Now think for a second about how many emails you get per day from people trying to sell you something.
How many of them do you actually reply to?
Yea - you need to be better than them.
You don’t have enough cash on hand
Let’s be real.
Scaling always requires investing.
And while the appeal of the SaaS business model is that it can super profitable, taking it to the next level of growth means spending money.
Not having enough cash to support the necessary investments, such as marketing tools, customer service teams, or further product development, can bring your scaling efforts to a halt.
Or, even worse, completely destabilize your finances if you inadvertently invest beyond your capabilities.
The popular saying remains true here: you have to spend money to make money.
Even if the end goal is to decorrelate spending from revenue, your CapEx is going to suffer initially.
You don’t have a true Product-Market Fit
It’s much easier to scale when your product does all the heavy lifting instead of your marketing and sales efforts.
This is what people call “product-led growth.”
Relying on your product’s features and performance is more likely to guide your growth when it’s in alignment with the market expectations.
The product-led approach focuses on creating a great product that naturally drives growth by encouraging customers to become paying users or upgrade to a premium version.
The premise of this approach is super simple: if what you’re offering is exactly what your customers want, they’ll buy without you having to push them with marketing campaigns and sales tactics.
This way, you can build a stronger, more sustainable business that scales faster.
When you solve a problem that people have, you don’t need to convince them to buy.
We’re running out of doctors everywhere. They don’t need to advertise their services because everyone wants to feel better when they’re sick.
You don’t have enough resources to execute
You can’t scale if you lack the resources to execute.
This can be a major challenge for SaaS startups and small SaaS businesses that aren’t yet established enough on the market to pour money into their growth.
If you have limited resources, you must carefully evaluate what’s more beneficial for your business based on your existing situation: whether it’s to build a bigger in-house team needed for scaling or outsource the necessary tasks to third-parties.
What happens to B2B SaaS trying to scale
Now that you know what you need to figure out to scale and where it can go wrong, it’s time to get familiar with the challenges of scaling a B2B SaaS business.
And there are many challenges - but don’t despair!
Let’s dissect what happens to SaaS businesses when trying to scale and how to successfully overcome those inevitable challenges.
The MVP stage
The first growth stage for SaaS companies is gaining their first users and testing their products. Usually, companies knock up their growth through initial tactics, such as:
Product Hunt launch,
Marketing on Reddit,
Linkedin networking and marketing,
At this stage, everything depends on the product.
If the product is good, gaining a few initial users isn’t hard. This approach isn’t scalable, nor is it sustainable long term, but it’s the first necessary step.
This is your opportunity to test your product with real users. It allows you to improve your product based on user feedback, fix bugs, and implement the most requested features.
This is the initial MVP or PoC stage, where you get to validate the performance of your product.
The growth phase
Once you’ve improved your product and have successfully found product-market fit, you’ll start generating profits to invest in further growth.
Depending on how well things go at this stage, you may even be able to raise funds.
Now, it’s time to grow.
Once things start to move forward, you’ll want to make your first marketing hire. This person will be responsible for growing the business through various channels, including ads, partnerships, and more.
In addition to your first marketing hire, you'll want to invest in a more complex, easily scalable lead generation system. This system will usually include things like:
Acquisition is the name of the game at this stage.
Your costs will be higher because you have more staff on hand, so you need to be able to keep revenue flowing.
It’s also really important to start figuring out retention, as high churn can pressure your cash flow.
The scaling phase
Finally, we’ve arrived at the scaling phase, which is what this is all about.
The main issue most successful SaaS brands face: hitting a glass ceiling after a certain revenue threshold.
This is when paid acquisition methods stop working, and you need to take a more holistic approach to marketing. It’s time to create a cohesive brand with an engaging narrative and a strong positioning.
The idea behind this approach is quite simple. Here’s what you need to do:
Create a marketing system that allows you to stay top-of-mind in front of your entire TAM.
Show people that you understand their problem and can help them solve it.
But wait a second, how do I show people that I understand their problem and can help them solve it?
My conviction is that the best way to do so is through content.
No big brand has ever been established on the market without content. They're all known for their various forms of content, including ads, social media, blog posts, e-books, and reports.
Content is what helps you build trust with your audience, establish yourself as an authority in your industry, and stay in the top of your customers’ minds.
Content marketing can also help you reduce your customer acquisition costs drastically.
If your content is genuinely helpful, it'll lead to natural conversions. You won't have to convince people to buy your product with expensive marketing. Your content will do the selling for you.
How to scale your SaaS business with content marketing
Most SaaS business owners I talk to are already producing content. The problem is many of them are getting tired of content marketing because they aren’t seeing the results they signed up for.
If that sounds like you, let me tell you something: content marketing isn’t the issue here. It’s your approach to content marketing that is.
You’re probably following the generic advice you’ve been given, wondering why it’s not helping you scale.
Let’s talk about the right approach.
Adopt the "they ask, you answer” approach
This is a very simple approach:
Your users come first.
It’s about the people. Not about the keywords, the search volumes, or the Google rankings.
It’s about answering the questions your users, customers, or subscribers are asking in a genuine and transparent way.
This approach to content writing will help you show your potential customers that you understand their problems and have a solution. It’ll help you build trust.
Use customer research data to create helpful content
I’ll say it again: your content should be all about your customers.
To figure out what content to create, you first need to understand what your customers want from you.
And to understand what your customers want from you, you need to use your customer research data as efficiently as possible.
Creating helpful content that actually has the potential to turn readers into customers - and bring you more revenue - starts with user research.
This is a very important step, as it helps you get inside your users’ heads and ideate content they’ll want to read.
I know you’re probably wondering at this point how to do user research, but I’m not going to explain the details here. You can read about it in this article.
Upcycle your content
Most SaaS companies think that they need to create hundreds of content pieces for every single marketing platform.
Blog, LinkedIn, podcasts, YouTube videos… When you think about creating original pieces of content for all these platforms, no wonder you start hating content marketing.
The best way to avoid that?
Repurposing your content.
This is a more efficient approach, which will help you avoid getting saturated with content creation and still create content for multiple platforms.
Let’s take this blog post, for example. This article is full of great advice that I can turn into at least 3 LinkedIn posts and a podcast episode. I can also record myself while I make the podcast and use this material to make a YouTube video.
Isn’t that easier?
The recipe to scale a SaaS in 2023
I won’t lie to you: there’s no cookie-cutter approach to scaling your SaaS business.
Especially not in 2023 and beyond.
Even though the ideas presented in this article seem easy to implement, they aren’t. It’s easier said than done. In reality, if it was this easy to scale to a million-dollar business, everyone would own one, and you wouldn’t be reading this.
And yet, the concept to scale your SaaS business past your current plateau is pretty straightforward:
Get to know your audience. Like, really get to know your audience.
Build a product that solves their problems.
Create a marketing strategy that resonates with them.
Put out content that helps them solve their problems. Even just a little.
Build a great offer.
Put together an efficient team.
Deliver stellar customer support.
Sounds easy, right?
The thing is, 95% of those who read advice on the internet won’t take action to implement it. You can be in the remaining 5%.
In the end, what matters from this article is to remind you to focus on the fundamentals: knowing your audience, identifying their problems, building a product that solves those problems, and building a brand that resonates with them.
Oh, and don’t listen to the advice you find online - most people don’t know what they’re talking about.
Except me. I do. I do.
Or do I?
I'm the CEO & founder of ScaleCrush. You can often find me ranting way too much about BS marketing advice, fluffy and regurgitated content, and calling out gurus. I also happen to have my very own unoriginal thoughts about the stuff we're going through.
Marketing gurus are lying to you. Am I?
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Consider the per active user pricing as an alternative to the per user pricing model. With this approach, customers pay for the individuals who actively use the product. This resolves the concern of your customers about purchasing
Feature-based pricing, a popular SaaS pricing model, allows companies to set prices based on the level of functionality provided. This approach is often used alongside tiered pricing, where more features come at a higher cost.