Key Metrics For a SaaS Owner | With Expert Ankit Dudhwewala

What is— so if there's another bootstrap SaaS startup in the early stages, what is a number one metric to focus on to maintain profitability while still maintaining growth? So going back, what were you really— paying attention to in the early stages and why?

So in the early stages, we were very focused about return on investment. Now we are not that— I mean, we are still focused on return on investment, but we do a lot of experiments now. But in the early stage, I was very focused about return on investment. I would not do an experiment until I understand how the experiment is going to give my money back. So we will do very controlled experiments. we will spend less on those experiments and unless we start understanding those experiments very well and unless we are sure that this experiment is going to give us our money back in 6 months, 3 months, whatever time, we will not scale those experiments. I think as a bootstrap organization you are— so there's a lot of talk in funded organizations, they run multiple experiments and they really don't care if 90 out of 100 experiments they run go bad. And in fact, VCs and investors give them money to run those experiments. The objective of having that much of money is to run hundreds of parallel experiments. And even if those 10 experiments go good, the VC gets his money back. But when you are a bootstrap organization, you cannot run hundreds and hundreds of parallel experiments, which I think is a mistake a lot of bootstrap organizations do. You have to be very selective and very choosy about the experiments which you do. And even in those experiments, you have to be patient with those experiments. If you're not patient and if you're running a number of experiments, you will run out of money very soon.

Right. Makes sense. So unlike VC-funded companies, they have plenty of cash to burn and test out. How else should a bootstrap SaaS startup manage to structure their limited capital, whether it's acquiring new clients, efficiently run expenses such as sales and marketing and other costs, still keeping growth, right? Like, how do you have to think about that? And where would you focus your energy then? Is it more product or focus on marketing?

So I think product, people can build product. I mean, I think there are a lot of products there which have been built, but the founders have not been able to reach audience there. I think marketing is the most important thing. The founder should focus on marketing, they should focus on selling and getting the first customers and getting the 10 customers and getting the first 100 customers. Engineering can be managed. I'll not say engineering is easy, but engineering can be managed. As a founder, if I have to do it again, I will focus 70-80% of my efforts on getting my first dollar of revenue, then getting my 10th customer and getting my 100th customer. I mean, I don't know why, but maybe because I'm in India, we have operations out of India. I think getting engineering resources is easier than getting a marketing and sales resource. If you have to control your cost, you can get a good engineering resource at a lower cost than getting a marketing and sales resource who can actually turn things and can actually sell and can actually generate good leads. So I think as a founder, you should spend your time there. It is a better return on your time.

Yeah, yeah, makes sense. So just kind of adding to that, you know, when you're initially building a team, you know, you're hiring for both critical and, you know, non-critical roles. How did you approach that? Because, A, I don't know if you've worked with this engineering team that you went to and said, hey, build this product, or was it just, you know, how do you assess that? Because I know, you know, if I'm based out of the US or Canada, I want to hire a team out of India or any other company. What's your thinking? How would you help them kind of work through that to make sure they get good quality and deliver it?

So when we hire people, I mean, before that, we are hiring continuously. We are currently a 180-people team. And if anyone is looking out, please send us an email. Now coming to your question, we are very focused on HR round. So our interviews are more, or whenever I have a discussion, it is more about Are we connecting with that person? Do you see that person work for life? So we have a very clear policy that we don't work with anyone if I don't want to work with that person 20 years down the line. So every time we add a person to the team, all my team members or even I am supposed to answer the question that do you want to work with this person 20 years down the line? If there is a check there, we— we hire that person. If there is no check there, if I don't want to work with that person 20 years down the line, we don't hire that person. So this particular question has been our philosophy from the very first day. And I think because of that, we have team members who have been working with us for 6 years, 6 and a half years. So the engineering lead of Callipo has been with us for about 3, 3 and a half years now. In the last 3 years, his salaries have grown by about 10-12 times. what he joined us. So if you ask me how, and we follow this for critical, non-critical, both resources. Critical, it can be critical, it cannot be non-critical resource, but we make sure of, I mean, we try to answer one single question. Do we want to work with this person 20 years down the line?

And so you've experienced, you know, 3 different startup journeys. You now encounter different situations and numbers, but so far, One important part of the SaaS company is managing your user churn. I think you want to talk a little about that in order to maintain your MRR and growth, your growth budget and whatnot. How do you suggest bootstrap startups start dealing with that? And how do you approach managing user churn?

So, Akeel, this is something which we learned very recently. So we have very low user churn in Software Suggest, customer churn in Software Suggest. In Software Suggest, we have companies who have been working with us for the last 6 years, 6 and a half years. Once they start, We hardly have customers in software sales who actually drop or stop advertising or stop working with us. We started facing this issue of churn in CallHippo. For the first 2 years, we were growing very fast and we never thought of churn. It was only in the last 6 months we started thinking about churn and we realized that churn is a major concern for most B2B SaaS companies and it needs to be controlled. So what we did was we went back to the blackboard and we We started understanding what our ICP is, we started figuring out who were the customers who were sticking to us, what were the type of customers, what were the industries who were sticking to us for a longer period, which type of customers were giving us higher NPS. And we figured that out and then we started building only for that segment of customers. In the initial days we were going all out, we were telling anyone would come to us and we'll say that we are building for you and There is no one in the world and we used to— I used to listen to interviews and I used to listen to other founders who were very successful and they will say that we are very focused and we're building for only these type of organizations. And I would think that, I mean, they were doing like $100 million, $200 million of revenue, but I was very stupid to think that those guys were not very smart and I was the smartest one who was building for everyone and who was— was not telling no to any customer. But eventually when churn started hitting us and we realized that churn is a serious problem, then I could actually understand and decode what they tried to say. 6 months back we did this entire process and now things have started looking much better for us. I mean, our churn numbers are going down.

Smart.

We're now almost hitting cash flow positive— net negative cash flow— net negative churn. We're almost reaching there. We have started telling no to a lot of customers. In fact, sometimes it happens that we tell no to a customer and they go and give us bad feedback on platforms like Softus or there's Capterra and they even go to our Facebook page and give us bad feedback. But we're very clear about that, that we don't want people who don't fit ICP. I think that's the way to do it. I mean, if I have to do it again, I will go back and I will just build for ICP. I mean, even when I'm zero revenue, I will try to figure out what my ICP is and I will try to build for ICP. With engineering standpoint, what we do is— now how the ICP discovery has changed is that now we build features which are focused on these particular ICP. So we have a couple of features which are these particular— which are focused on these particular ICP. When you compare it with my competitors, you will not find those features in my competitor. Because my customers don't find that feature in my competitors or a feature they don't tend to churn on them. That's how we try to control our churn in this organization.