Why I chose ‘service as a service’ for my startup

When I sold my web agency 18 months ago, I vowed to never touch a service business again. I was burned out.

I was sick of explaining the same things to clients, sick of not being able to scale the business, sick of offering the same thing that every other local web agency was offering.

I should have sliced away the parts of the business I didn’t like and only keep the valuable parts.

I didn’t have the courage to do this – so I sold the agency and started building a new business.

Why my project-based business sucked

I set about building a software startup called Web Control Room. I didn’t want to:

  • Be the go-to guy. My days were often filled with grey area tasks that only I could do – this kills growth.
  • Hit scale issues. Scale would be built directly into the business model. SAAS businesses can grow infinitely, as long as the market is there.
  • Get bogged down by staff costs. I could get there with affordable staff, not expensive local staff like I did with my agency. That escalated stress levels and ruined profits.
  • Experience the financial roller coaster of a project based business. It would provide consistent, growing revenue so I could have a reliable and normal wage.
  • Have the feeling that I’m doing the same thing as everyone else. I could operate in a less competitive space with a unique point of difference.

I ran out of options

My startup bombed and my numerous efforts to work out a software business model failed.

I ran out of time and had to make drastic changes to avoid getting a job. I was 2 weeks from going back into corporate slavery.

‘Service as a service’ or a monthly recurring service was my only option and I’ll explain how I arrived here shortly.

Hindsight is 20-20 and it’s worked out to be a great option.

What to look for in a business

I didn’t want to start any old business. I shared my ideas and asked questions in forums, but a lot of people didn’t understand why I didn’t just go back to building sites for people.

The runaway success of WP Curve has validated this decision as the right one, which has worked out well – because I had a lot of requirements to meet:

  • Short runway. I was out of time, I had to generate revenue quickly.
  • No sales, no project management. I don’t like the ‘hard sell’ and having sales staff throws costs through the roof. The expectation of local individual project management was out too, it’s simply too costly to hire staff to do it.
  • Scalable. When you offer a product or service delivered by affordable contractors, then the business is much easier to scale. A local web design business is very hard to scale because there is ongoing back and forward with the client, which has to be done by you or someone like you.
  • Large market. I’m not into niches. I wanted to make sure that whatever I started could be a $1,000,000 business in a few years. I wanted people to talk about it and appeal to everyone in our audience.
  • Building an asset. I wanted to build an asset long term, because I learned that project clients were worth very little when I sold my last business. The website and the recurring clients were transferrable assets. The historical revenue from project work wasn’t worth much at all.
  • Recurring only. There are so many benefits of recurring businesses, with predictable revenue being the most obvious. The hidden benefit is the ability to grow and scale something that is very simple. With a monthly recurring business, you get simple metrics, simple goals, easy to see growth and sources of growth, all built to use the power of momentum. Recurring, compounding revenue growth is a powerful beast.

There aren’t many business models that fit this criteria. Here’s a list of businesses that I considered, but scrapped:

  • Product – the runway is too long.
  • Niched-down product – my market was already proving too small.
  • Project-based – not a recurring model.
  • Enterprise – looong sales cycle.
  • Specialist web work – difficult to scale.
  • Content marketing – difficult to scale.
  • Conversion optimization – difficult to scale.
  • Design – difficult to scale.
  • Consulting – doesn’t build an asset and is time intensive.

A community would go close, but they are difficult to build into a significant asset. There aren’t too many $1,000,000 communities, plus the successful communities are run by entrepreneurs with huge followings.

They don’t scale particularly well and most have churn which affects growth.

So I came up with the idea for a recurring web development service… while I was at a hobby farm, looking at miniature horses.

Benefits of service as a service

If you can get Software As A Service (SAAS) business working, then it’s the ultimate business model. It’s a big IF. There is also a strong case for service as a service.

1. Easy sell and immediate value

Since day 1, we’ve found it very easy to sign up customers to WP Curve. We signed up 7 in the first week and over 20 in the first month and every month since launch. Services provide immediate solutions to problems, so it’s not hard to get people to pay for them.

Working out how to get your software to solve immediate problems is much harder than it sounds. If you have funding and time on your side, you might be ok. Without it, it’s tough and you need some luck and brilliant execution.

2. Quick or no validation

I like businesses that don’t require validation. Validation is a troublesome process and if you can launch a business in 7 days there’s no need to validate it. Launch it, see who signs up and continue to improve.

3.  Grow quickly

Since you can move quickly, it also means you can grow quickly. SAAS can grow quickly as well, but only after you find momentum. That may take a long time or never happen at all.

In under 7 months our business has grown to $130,000 in annual recurring revenue, growing by more than 15% every month. The next point is so important, it needs a quote:

We have signed up more customers in 7 months than my last business did after 7 years.

4. Serve huge markets

It’s extremely difficult to enter a huge market with a software idea. If you entered the WordPress market, you’d have to come up with a must-have plugin or a better CMS than WordPress. Good luck!

If you enter the help desk market, you’re competing against companies that have had teams of very smart people building their app out for years.

Some people ‘niche down’ and create something for less people. This is fine, but their growth is stunted and it’s hard to grow from a niche business to a large one.

With services, you can attack a huge market (like WordPress support) with a slight point of difference and you are good to go.

5. Less competition for innovative ideas

The software startup space is intensely competitive. I had quite a few ideas for software, some I built and some I didn’t. Because there are so many ideas out there, you need more than just a good idea to stand out.

Your competitors might be funded and can afford world class people and facilities. There isn’t nearly as much innovation in the service space and  I feel with a slight twist, we were able to stand out and get noticed very quickly.

6. No need for freemium or free trials

Freemium and free trials can kill early startup growth. Why?

The distance between making a customer use and founder learning is so big. Freemium customers might take months or years before they vote with their wallets and show you what they value.

Free trials mean waiting a few weeks to see if your changes had an impact. Add a few of these cycles in and all of a sudden, you are a few months in and you haven’t learned much about what your users want.

With services you know from day 1. No free trial, no freemium, just pay now and we’ll get started. When we finish the job, let us know what you liked and what you didn’t like.

7. More personal

A service business is a lot more personal. It’s great to help people out directly with their issues and help them grow. It was unusual running a software business for the first time – you hardly ever hear from your customers!

That can be a good thing, but it’s also nice to get to know the people you are solving problems for. It’s hugely motivating to be constantly told how much you are helping people.

I can say with 99% certainty that I’ll never get into any kind of project based services business again.

Your thoughts

Would you consider a ‘service as a service’ model for your next business? Why or why not?

Tell me in the comments.

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About

Dan Norris is a co-founder at WP Curve and a passionate entrepreneur with an obsession for content marketing.

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