SaaS Marketing: The Complete Guide. Chapter 1: How to Validate SaaS Ideas

Competition in SaaS is spreading like wildfire. Which makes SaaS marketing and validating new SaaS ideas harder than ever before.

• Crunchbase boasts over 100K company records, and a quick Google search estimates more than 2M company pages on their site.
• There are between 200K and 1.2M company pages on LinkedIn with the keyword “SaaS” or “Software as a service” – an advanced Google query reveals.
• 100K+ businesses use Stripe.
• There are numerous sources and case studies like Nathan Latka’s SaaS directory (1k SaaS companies) and this research by PriceIntelligently (6k companies).

While these numbers are useless beyond a good water-cooler conversation, one thing is clear – if you’re marketing a SaaS product you’re up for a big challenge.

In fact, we all are.

It’s not you against the big bad boys like Amazon, Microsoft, and Apple, anymore.

(Although, conglomerates like these are adapting, even more, the subscription business model to tighten their already firm grip on our wallets.)

“Democratizing” software is not cool anymore in 2019.

It’s you against many other small SaaS companies struggling for traffic and customers.

It’s you against me.

On average, new SaaS companies today have more than 9 competitors.

I bet a lot more than that if you also count all the tiny, bootstrapped players that research doesn’t care about.

To make things worse:

Rampant competition is never your biggest problem when it comes to marketing a SaaS business.

Here is just a short list of problems that I’ve personally stumbled upon in my work as a marketer with dozens of SaaS companies:

More traffic doesn’t mean an increase in MRR (Monthly Recurring Revenue)

An increase in hits, leads, shares, and other vanity metrics often correlates to an increase in revenue.

However, what causes an increase in revenue is not the hockey stick on your Google Analytics dashboard – it’s the increase in the number of people that use your app multiplied by the value they get from your app multiplied by the time they stay customers.

Value is difficult to create in SaaS

Do you have short sales cycles, automated onboarding, and low price points?

Then, forget about providing behind-the-shoulder help to your customers if you want to scale.

Your product is the primary touchpoint of your business, not you. That’s why value is so much harder to create in a SaaS than a typical service business.

In fact, you have no clue what value is

What the hell is value in the first place?

Value is ridiculously difficult to pinpoint. Especially in the early stage of a SaaS.

I’m not even talking about product-market fit. I’m talking about delivering some sort of value to your customers or potential customers.

If you’re not already a marketing generalist, you have to become one

At young SaaS companies, marketers do everything. From content marketing to website building.

You don’t have the luxury to cozy up in Google Ads or your favorite tool for too long.

Your job doesn’t end with the acquisition

I don’t care how big your company is and what your team structure is.

You’re always responsible for customer churn.

Well, that doesn’t mean you’re the only one responsible for churn but don’t put the whole blame on your product team.

Working with product teams creates massive bottlenecks for marketing

Even in smaller teams of 5-20 people, there are substantial development delays that create bottlenecks for marketing.

Get used to marketing broken products and feature-lacking launches.

Your resources are (almost) always restricted

I guess you, like me, are not blessed to have Larry Ellison’s number on speed dial, and you don’t swim with the sharks in Hawaii while coming up with startup ideas. (like Marc Benioff, CEO of Salesforce.)

However, that’s totally OK. You can build a successful SaaS company with empty pockets.

All you need is a smart marketing plan and willingness to work your butt off.

Issues aside:

On average SaaS companies have a higher valuation than businesses with a one-time purchase business model.

A SaaS with less than $5M in ARR (Annual Recurring Revenue) and healthy churn of less than 4% could be sold for 24-48 times the MRR of the business. Source: Automated Customer

That’s pretty awesome in my books.

SaaS, also, have customers that pay more – higher CLTV (Customer Lifetime Value).

As Mike McDerment, CEO of FreshBooks put it, SaaS is a pretty damn good business model to be in.

“It’s the best damn business model in the world…it’s got great predictability for planning, which helps you as an entrepreneur sleep at night.”

–Mike McDerment

As a marketer, I’m super grateful to have the opportunity to work on a SaaS. And so you should be, too.

So…

What Is This Guide About?

Despite the increase in marketing tools and the lower barrier to entry, the odds of marketing SaaS companies successfully haven’t improved drastically.

If not, it’s even harder to market SaaS today.

With this material, I aim to provide a thorough systemized guide on SaaS marketing – from idea validation to scalable growth.

Since it’s literary impossible to create a “complete” guide to SaaS marketing in a single blog post (or group of posts) – at the end of each chapter, I’ve included a list of resources that expand the topic.

Let me be clear about something:

This is not a lame opinion-based guide.

While there are some theory and opinion, I did my best to keep each chapter practical. I hope you’ll find a lot of actionable advice and tactics.

To make things even more actionable, I’ve included a number of swipe files and templates for you to use.

So let’s dive in!

But before that. Subscribe to our newsletter to get an update when I publish the 2nd Chapter of this guide.

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Chapter I: How to Validate SaaS Ideas

Let’s face it:

If you’re working on a SaaS product – you’re delusional.

And you must be.

SaaS takes a lot of time to take off. In the first year (or two) a SaaS usually runs on delusion-fuel.

“I’ll figure it out” attitude is essential to get you moving from one small win to another.

Now here’s the tricky part:

Self-belief is the life of a startup. But could also be the death of a startup.

If you start believing your own hype, you won’t survive. You’ll go too far into the bubble you’ve created, and you won’t come out until you hit the wall – hard – and that bubble bursts.

Lean Analytics

That’s why you need data.

You’re probably already familiar with the Build > Measure > Learn loop made popular by the Lean Startup.

1. You begin the feedback loop in the build stage with an idea that you use to create an MVP – concierge service, landing page, mockups, etc. – to test a hypothesis.
2. You collect qualitative data from potential customers (or real customers – if you’re able to sell your idea) in the Measurement step.
3. You use the resulting data in the last step – Learn – to validate or disprove your idea.
4. Then you use the learnings to drive the next set of actions in the loop.

Now, that’s all cool, but there’s one big question that SaaS entrepreneurs usually struggle to answer. It’s between step 1 and 2:

How the heck do I get data from people?

The answer is simple:

With marketing.

Welcome The Updated Lean Startup Learning Loop (for marketers)

In the Idea Validation stage of the SaaS, you use Marketing as an instrument to build an environment for learning.

Marketing and product validation have many common characteristics.

They follow the basic transactional model of marketing communication:

Let’s take a classic example of the transactional model of marketing communication:

1. Source – You
2. Channel – Facebook
3. Message– Facebook Ad
4. Receivers – Facebook Audience
5. Feedback (data) – Click-through rates, sign-ups, likes, comments, etc.

When using the transactional model of marketing communication for Idea Validation, this example might look something like:

1. Source – You
2. Channel

• Cold Email
• Communities (Facebook groups, Subreddits, etc.)

3. Message – Your MVP landing page
4. Receivers – Potential customers
5. Feedback (data) – Qualitative data about your landing page.

You see, startup Validation is not that different from Marketing.

Hence startup validation and customer development is an integral part of the marketer’s job.

Now, let’s make things a bit more actionable.

Let’s say you want to validate a SaaS idea.

What should you do?

There are many different ways to validate a product idea – from identifying pain points with your current clients (especially, if you’re already in a service business or have paying customers) to selling discounted deals on conferences.

As a marketer, I have a 7-step framework for idea validation.

This is the exact framework I used to collect 600 targeted email subscribers and pre-sell $3950 of the SaaS idea for Encharge in 21 days.

1. Find your biggest competitors
2. Identify your ideal customers
3. Compile a list of potential customers
4. Create a winning message for your potential customers
5. Define a validation goal
6. Promote your message
7. Evaluate your validation campaign

Let’s dive into each of the steps.

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Step 1: Find and Understand Your Biggest Competitors

Purpose of this step:

• Come up with a hypothesis for a USP (Unique Selling Point).
• Gain a clear understanding of what sets your product idea apart from competing SaaS apps on the market, and alternative solutions that your customers use

Execution time:1 day

So let’s jump into that competitive research.

There are plenty of fields in this spreadsheet so let’s go slowly through all of them.

First, the sheets.

You have 2 sheets in the document:

1. Competitors
2. Positioning

Let’s start with the first one: Competitors.

I assume you already have a list of your top competitors. And if you don’t, now it’s a good time to start Googling.

Another good place to check for competitors is G2Crowd.

G2Crowd has a useful Grid for each software category. This matrix should provide you with a bird’s-eye view of your competitive landscape.

This is how the marketing automation landscape looks like:

Last, but not least, you can head out to Alexa.com, signup for a free trial and plug-in your main competitor.

I found out that the “Audience Overlap” tool provides an extremely accurate cluster visualization of relevant competitors:

In case you can’t name more than 3-5 competitors, it’s very likely that your idea sucks.

Or maybe it’s a good innovative idea.

Opinionated side note: I for once am not a huge fan of disruptive innovation in SaaS – that’s not my cup of tea. It’s difficult to build and market. (But hey, who the hell am I to tell you what to build.

A note on alternatives:

Very often you won’t find your biggest competitor in G2Crowd. Simply, because it’s not another SaaS or but an alternative.

For example:

When we started with Encharge we thought that our biggest competitor is going to be Autopilot (they’re our most direct competitor).

What we quickly found is that the majority of potential customers that we target actually use much simpler solutions – like Mailchimp.

Here are some other examples:

• The biggest competitor of HeadReach was not a lead generation tool. It was VAs from UpWork.
• The biggest competitor to Todoist is not another task management tool, it’s Excel.
• The biggest competitor to RealThread is not another eCommerce for custom T-shirts on demand – it’s the local print shops without websites.

Now, going back to the Competition Analysis spreadsheet.

Put Your List of Competitors in the First Sheet

There are 7 groups of fields in this sheet:

1. General
2. Pricing
3. Features
4. Content
5. Traffic and SEO
6. Social
7. Audience demographics (for B2C)

For this Chapter I: Validation you only need to fill in:

• General
• Pricing
• Features
• and if you’re doing B2C – Audience Demographics.

The rest of the sections I’ll leave for Chapter IV: Marketing after launch.

The purpose of this exercise is to get an overall idea of the competitive landscape – not to devise the whole marketing strategy of your competitors.

Bear in mind, that at this stage it’s very probable that you’d change your idea or enter a different market/audience, hence you don’t want to sweat too much on this. The execution time of this step is no more than a day.

Let’s move to the first group of fields:

General

URL

Nothing special here. Type in the URL of the competitor.

Headline

This one is pretty important.

This is not just the headline of the website of your competitor. It is how your competitor are positioning themselves to their customers.

It’s what their customers see in the first few seconds and very often the first touch point of the customer with the site.

Category

It’s up to you to break down your market landscape into meaningful categories. Or you can leave it blank.

Target audience

There are a couple of ways to determine the target audience of your competitors.

First, see if the competitor addresses their audience on their website. Look for headlines, case studies, testimonials and sub-pages.

At OutreachPlus (one of my SaaS clients) we have a Use cases page that clearly addresses the segments we target:

A lot of other SaaS companies like Groove for example, have their Customers page.

The other way to identify the target audience of your competitors is through BuiltWith. This only works if the software is front-end fancing – a plugin/script installed on the site.

# of customers

Pretty self explanatory. The idea is to figure out if this is the 800-pound gorilla (for example, Mailchimp), a newcomer (User.com) or a bootstrapped company just starting out (Encharge).

A lot of the companies boost their customer numbers on their website, but you can also use BuiltWith or NerdyData. Also, don’t forget that these numbers most likely include trials and churned customers

Pricing

Pricing model

Is it a classical SaaS business model or a metered billing model?

Metered billing – users only pay for the value they get.

For example, every single Credit gives you access to a single search.

Pricing URL

It’s good to have quick access to your competitor’s pricing page. Do not sweat about checking this for changes, at this stage.

Trial

Do they offer a trial? How long it is?

Freemium

With a freemium model you could disrupt your market if none of your competitors are offering it.

There are many stories where Freemium has paned out to be a good business model and marketing strategy for SaaS companies.

Plans

Nothing fancy here. You just jot down the different billing plans of your competitors.

Features

Here you outline the major features for your product category.

Don’t work yourself too much on this and don’t spend the whole day researching and testing tools.

The goal is to have a top-level overview of what your competitors are selling in terms of features. This will give you an idea of where your competitors are positioning and revel potential gaps in the market.

This is how the competitive analysis for HeadReach looked.

I did this back in 2017, so the format is slightly different but you get the just:

Audience Demographics (far to the right in the spreadsheet)

You only need to fill in this section if you’re building a B2C (Business to Community) SaaS. Think Evernote, Dropbox, Mint, etc.

Opinionated side note: I don’t see any value in having Demographics data if you’re in B2B.

The 2 go-to tools for extracting demographic information of this kind are Quantcast and Alexa. Both have free versions, although with limited information.

In Alexa, if you type-in https://www.alexa.com/siteinfo/ and the URL of the competitor. For example: https://www.alexa.com/siteinfo/evernote.com

You’d get metrics such as:

• The Alexa site rank – not a super helpful metric.
• Audience Geography – where the site audience comes from.
• What sites link to your competitors
• Audience Demographics like gender, age, etc. This one, unfortunately, is restricted to premium users only.

Premium access:

Positioning

This is the second sheet in the template:

It’s a simple two-headed arrow diagram.

On the left and right, you place 2 opposing “positions”, categories or USPs that are meaningful to your product.

For example:

Let’s say you have a SaaS idea in the category of social media scheduling and management.

A part of the competitive landscape is geared towards “social media management” – i.e., managing your channels, delegating tasks to users, seeing overall social media analytics, etc.

The other is handling “content publishing” – scheduling posts to social media.

On one side of the arrows diagram, you’d place “Social media management” and on the other “Content publishing”.

Then you’ll position your top 5 to 10 competitors on this scale based on their positioning and of course where you specifically fit in that axis.

You’ll get a diagram that looks something like this:

This is a fun exercise to do as it visually demonstrates your positioning.

It’s also an effective way to articulate your positioning to your co-founders, team members, and even potential clients.

The positions could be anything from specific features, through categories, audiences, and pricing.

You can create as many diagrams as you like to crystallize your positioning.

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Step 2: Identify Your Ideal Customers

With the competitive analysis, you should already have an idea of what market you’re dealing with.

Now:

It’s time to identify your potential customers.

Purpose of this step:

• Create Ideal Customer Profiles.
• Find out where these people hang out.

Execution time: 0.5 day

In this step, you formulate the hypothesis of who is going to buy your SaaS idea.

Many startup guys skip this step thinking it’s some sort of woo-woo exercise.

The thing is, the better you know your audience, the easier you’ll find potential customers to validate your idea with. Moreover, it shouldn’t take more than a couple of hours to start.

For a deeper dive-in into the difference between Ideal Customer Profiles and Personas, you can check this article by Hull.io.

For the purpose of this guide, I’ll refer to them interchangeably.

So let’s get to it.

Download the “Customer Personas” template below or use Xtensio user persona’s template.

The template contains the following fields:

1. Persona’s name.
   Tip: use the formula position/title + name . Make the persona’s name roll off the tongue by using the same first letters for the title and the name: Outbound Owen. Marketer Mary. Designer Dean, and so on.
2. Importance or fit
   How important is this profile from 1 to 5.
3. Bio
   Where the person works, what’s his job, responsibilities, targets, what’s his company like?
4. Potential job titles
   To be used to find relevant prospects on LinkedIn and other lead sources.
5. Character
   Extrovert or introvert? Spontaneous or reserved? Creative or practical?
6. Motivations
   Personal and business motivations.
7. Goals
   What are his or her top business/job goals?
8. Frustrations
   What he or she hates most about his or her job?
9. Brands
10. Tools
    What tools they use on a regular basis?
11. Preferred Channels
    Where they hang out the most?
12. Notes

Here’s an example for one of the profiles I fleshed out for OutreachPlus:

Outbound Sales Owen

Importance

5

Bio

Owen works as a sales manager at a medium-sized (15-20 employees) digital service agency in the US or UK. His job is to find sales qualified leads and close more deals.

Potential job titles

Sales manager, Business development representative, Sales executive, Sales specialist, Outbound sales representative, Sales director, Sales developer

Character

Highly extroverted, Owen is comfortable with talking to people. He likes going to events and always brings his business card with him.

Persistent but also helpful to his clients.

He’s pretty decent with numbers and talking about money is natural to him. He understands the value of saving time and calculates his expenses carefully.

Quote

“Finding qualified leads takes way too much time!”

Motivations

Owen has a fixed salary and bonus commissions based on his performance. His biggest motivator is earning a higher commission by closing more deals.

Goals

He has a monthly quota set by the sales department or his manager. The most important goal for him is to reach his sales quota most efficiently.

Frustrations

Prospecting and cold outreach take too much time. If not managed effectively, email outreach can take a lot of time out of Owen’s day.

Also, finding and generating qualified leads takes a lot of time, too.

Very often his is behind his monthly set quota and ultimately struggling to increase the sales of his company.

Brands

Inc magazine, books by Grant Cardone, “How to Make Friends and Influence People”

Tools

G Suite, prospecting tools, Chrome Extensions, CRM, Zoom

Preferred Channels

LinkedIn, email and Facebook groups for salespeople

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Step 3: Compile a List of Potential Customers

Purpose of this step:

• Have a list of potential prospects that you can start marketing and selling to.

Execution time:0.5 day

Now as you have the Ideal Customer Profile or Profiles, it’s time to find these people.

Based on your preferred approach for validation:

• reach out directly with cold email
• promote a landing page
• cold call them
• or something else

You’d like to either have a list of prospects with their contact details or just jot down the sites and communities where they hang out.

Here are a few strategies that I use to find potential customers for idea validation.

Sub-reddits

You go to Reddit and search for your niche.

As you probably know, good Sub-reddits have a strict no-promotion policy, so you have to be smarter than bashing your site/landing page URL or “asking people to jump on a call with you.”

“Promotion” there usually works in one of 2 ways:

• You have to provide value in the form of a post (or even better – a few posts). At the end of the post, you can share a link to what you’re doing or ask for feedback. Like this article I’ve written about our HeadReach journey.
• Check if they have any Share your startup/idea/product threads. Like this /r/Startups thread.

Facebook Groups

Facebook groups are more straightforward than Reddit.

There are hundreds of groups on pretty much every topic out there.

The best thing is you also have public access to the members of the group.

Facebook Group Extractor by PhantomBuster is currently (as of writing this post – 01 Feb 2019) the best solution for Facebook profile extractions. Do not look anywhere else.

The scrapping job happens in the cloud, it doesn’t require a Chrome extension and since you’re not using your own IP to scrape you can close your browser and turn off your computer while the scraper is working in the cloud.

As of finding emails from Facebook profiles, I’m not aware of an automated solution that works today.

Fortunately, hiring a VA off UpWork is a cheap solution to this problem – anywhere between $0.05 and $0.25 per lead.

Slack Channels

Slack public channels are another great place to find potential leads to validate your idea, especially if you’re in the B2B SaaS space.

I’ve compiled this list of Slack groups for you to join so check it out.

BuiltWith Leads

I’ve already mentioned BuiltWith a couple of times in this post.

BuiltWith is a super efficient way of finding potential leads for feedback and idea validation.

This only works if you have a competitor with a front-end facing tool. Think chats, analytical tools, help desks, bots, etc. – pretty much everything that runs on a public-facing website through a Javascript.

You select the technology (a.k.a your competitor) and BuiltWith returns a list of indexed websites that use that technology (a.k.a your potential customers) along with contact emails.

Note on emails from BuiltWith:

Emails from BuiltWith are not verified and sometimes outdated.

If you have a budget, a reliable alternative is to plug-in all domain names from the BuiltWith into a tool like Hunter.io which will return emails found for that domain.

G2Crowd Reviews

If you don’t know what G2Crowd is – it’s one of the biggest software/SaaS review sites out there.

The best thing about G2Crowd is that you can actually see the contact information of the reviewers.

Just click on a reviewer’s profile photo and tadaa:

You see information from their connected LinkedIn profile:

That’s plenty of data to help you find their email. If not that, you can easily find them on LinkedIn and send them an InMail.

Keyhole

There are social media monitoring tools like Keyhole.

You just type in a tag, keyword or a competitor name. Keyhole will return a list of Users who have posted with that keyword.

Grow an Email List

Last but not least, you can create your own audience by building an email list or by growing your social media presence.

While the rest of the tactics in this section are all geared toward building a list of prospects and outbound outreach, this one is all about attracting people – inbound.

It’s also the one tactic that takes the longest.

Obviously getting 500 people to leave their email would take significantly longer than scrapping 500 contacts (considering you’re starting from zero in both cases).

On the other hand, people are much more likely to purchase a solution from someone they trust.

I’ve personally found out that if an email subscriber opens your emails regularly, say has opened 80% of your broadcast campaigns; there’s a very high chance that they’ll purchase a product from you – even if that product is still in an idea stage.

Growing your email list is a topic that deserves its own guide, but if you’re interested in learning how I applied this tactic to validate Encharge, read till the end of this post.

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Step 4: Create a Winning Message for Your Audience

Purpose of this step:

• Create a message for your audience
• Come up with the vision of your future SaaS product

Execution time: 1-2 days

OK, so far you’ve completed:

• Step 1 – Research your competitors
• Step 2 – Identify your ideal customer
• and Step 3 – Compile a list of potential customers

By now you should already have a strong hypothesis of what problem your SaaS is aiming to solve and a targeted list of people or outlets and communities you want to target.

Opinionated side note: I’ve personally found that validating ideas is much easier if you already have a hypothesis for a problem and a probable solution to that problem.

People are much more interested in talking to you when you have something concrete to talk about.

But!

if you don’t have a hypothesis for a problem, yet, that’s not the end of the world.

What you should do instead is:

Identify a precise group of people that may share common problems (as per Step 1).

When I talk about “message”, I don’t mean a landing page, a video or an email.

Although creating these deliverables is a part of the process, the actual medium of your message is not as important as the message itself.

The message is all about your vision for your SaaS.

When you create your message, think of why you want to work on that idea and why your potential clients would buy your idea.

Since you don’t have a real product, all you can actually sell is your vision.

As people can’t “experience” your product, they’re only understanding of your product comes from whatever you convey to them with your message.

If you can’t tell a have a cohesive, compelling story about your idea, you’re going to have a very hard time getting people’s attention.

Matt Hodges, Senior Director of Marketing at Intercom

If you’ve read Running Lean by Ash Maurya, my validation framework could already seem very familiar to you.

In step 2 of the Lean Canvas, you define your Unique Value Proposition:

“Single, clear, compelling message that states why you’re different and worth buying.”

In other words, the purpose of your message is to sell someone on your story and show them how your product can solve their problem (in a different way than your competitors).

Why are you building this product, and why does it matter? People don’t typically discover and buy a product just because of its features. They buy a product because it solves a problem for them and delivers value in doing so. That’s why it’s really important to think about the end-to-end story you need to tell to capture attention and motivate action, before you build anything.

When we wanted to validate our idea for Encharge, we didn’t start by designing the landing page or creating the intro video.

We began by writing down the vision for our SaaS product in a Google Doc:

By starting with the message first, we made the whole marketing and pre-selling much easier.

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Step 5: Define a Validation Goal for Your SaaS Idea

Purpose of this step:

• Formulate a clear condition in which your idea can be proved successful or unsuccessful

Execution time: 1 hour

Before you go out and try to validate your idea you must have a specific testable goal for your validation.

Reaching or not reaching your goal should help you decide on the next course of action.

You should ask and answer to yourself:

• Is the idea validated if this goal is reached?
• What are you going to do next if you reach your goal?
• What are you going to do next if you don’t reach your goal?

A good validation goal is:

• Specific
• Measurable
• Has a timeframe
• And it’s not a vanity metric

Bad example of a validation goal is:

• Build a large audience of marketers

It’s not specific, nor measurable and it doesn’t have a timeframe.

A much better example is:

• Make 20 pre-orders by 20th of January

When we were validating Encharge we had 3 specific goals:

• Collect 1000 email subscribers by 1st of November 2018
• Conduct 50 customer development interviews by 1st of November 2018
• Collect 100 credit cards (in the form of trials or pre-orders) by 31st of December 2018

All of these are very specific and has a concrete timeframe.

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Step 6: Promote Your Message

Purpose of this step:

• Reach out your potential audience
• Promote your message
• Collect customer feedback for your idea
• Pre-sell your idea

Execution time:1-3 weeks

This is the longest and the hardest part of the SaaS Idea Validation process.

It’s where you “get out of the building” and start talking to people.

It’s where you get to be a marketer and salesman and prove or refute your Idea by reaching or not reaching your validation goal.

Before we jump in the actual validation process let’s summarize what you’ve done so far:

• Step 1 – You researched your competitors
• Step 2 – You identified your potential buyers
• Step 3 – You built a list of potential customers
• Step 4 – You created your winning message
• Step 5 – You formulated your validation goal

Now it’s time to do the fun work – validate your SaaS idea.

In my 5-year experience validating product ideas and working with early-stage startups, I’ve found out that there’s no single best way to validate a startup idea.

Different people use different methods.

I’ve personally validated HeadReach (my first SaaS) and now Encharge in two entirely different ways.

However, I’ve found that all methods (or frameworks) satisfy a common set of rules:

1. A targeted group of potential customers that share the same characteristics.
2. An acute problem that these people experience
3. A well-articulated solution (i.e., good story and message)
4. A person (a.k.a founder) who has the balls (or ovaries – to avoid being sexist) to market and sell that solution.

Here are 4 proven methods to validate your idea:

The Idea Extraction Method

Idea Extraction is at the core of what Dane Maxwell and Andy Drish teach at The Foundation.

The premise of The Foundation is that you should eliminate all risk by pre-selling your idea before you even have a product.

In an oversimplified way, the framework comes down to a few steps:

1. Come up with a very specific target audience. Very often Foundation students target offline and local businesses – i.e., yoga classes, photographers, etc.
2. Cold call these people with a blank state of mind – i.e., no hypothesis for a problem or a solution whatsoever.
3. Ask them what their biggest problem in business is – a.k.a. Idea Extraction.
4. Offer to build a solution (SaaS product) that would solve their problem.
5. Pre-sell them on the call. Alternatively, create a solution presentation.

There are numerous successful case studies on their podcast:

• Using Idea Extraction and Pre-Selling to Earn 120k in 6 Months with John Logar
• How Carl Mattiola Built a Web Business in 6 Months and Leaving Corporate America for Good

The Foundation method works exceptionally well for people that are comfortable with cold calling.

The Concierge MVP Method

Concierge MVP (Minimum Viable Product) is when you validate an idea with manual labor instead of using machines or systems. The concierge MVP is always unscalable.

For HeadReach, this meant that instead of building the software that generates lead lists automatically – I had to create the lists with my hands and shit loads of work in Excel. That way we could validate the demand without wasting weeks on building a prototype.

You can read more about the HeadReach story in my previous article.

The “Automate a Repeatable Freelance and Consulting Work” Method

SaaS, and software more generally, has been stealing work from freelancers since the beginning. Nobody wants to be in the business of reinventing wheels, so if you see a specific type of job that businesses are paying contractors to do over and over again from scratch, there may be an opportunity to build a SaaS solution. – Tyler Tringas

This is how Tyler Tringas validated the idea for his SaaS Storemapper – a plug-and-play SaaS solution for store maps.

Another successful SaaS that used this method to validate their idea is UploadCare.

The premise here is simple:

If you’re working in a service business and identify a repeatable task that could be automated, you offer your clients to build a solution for that task.

That way your service clients not only could be your first SaaS customers but also fund your product with their own budget.

The “7 Day Startup” Method

Dan Norris is not a huge fan of “startup validation”.

The approach of the 7 Day Startup is that you should not validate a startup idea.

Instead, you should build your idea.

In other words: “You don’t learn until you launch.”

There’s one small catch – you should build your idea in 7 days or less.

It’s a great approach if you have a simple SaaS idea, that is buildable in a week or less – for example, a single-feature software or a Chrome extension.

This is how Jake and Jarratt validated HelpDocs in less than 3 weeks by building “a terrible product quickly”.

The Survey Method

Another way to approach idea validation is by conducting a survey with your potential customers/leads (from the previous step).

Since you don’t know what exactly is your product going to do at this stage you should ask open-ended questions like “What keeps you up at night?”

The purpose of the survey is to confirm your suspicious about a problem by identifying patterns in the answers. Since surveys are much more scalable than in-person customer development, it’s easier to get larger volumes of data.

Once you identify a segment of people that share the same problem, ask them for an in-person interview.

The “Pre-order Landing Page” Method

This is the method we used to validate Encharge with 42 paying customers / 50 pre-orders and $3950 of pre-launch revenue.

To be completely transparent with you, it wasn’t as simple as “put a landing page with a Buy button and get people to visit it.”

We validated Encharge in 3 steps

1. We built an audience of marketers and founders 2 months before we designed the landing page. We grew an email list of 600 potential subscribers through content marketing and content upgrades.

2. We did customer development with that audience and diligently collected their feedback until we’ve identified a pattern with the problems they experience with Marketing Automation.

3. We found that the majority of marketers and startup founders find it difficult to connect their marketing stack.

1. We came up with a convincing story and unique value proposition.
2. Only then we created the pre-order landing page with a lifetime deal for early adopters.
3. And promoted that page to our audience.

In total it took us 2.5 months from when we came up with the idea to focus on marketing automation until we reached $3950 in pre-launch revenue.

Subscribe to our email list to get an update when I publish the complete, in-depth case study of how I validate Encharge:

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Step 7: Evaluate Your Validation Campaign

Purpose of this step:.

• Compare your Validation Goal with your actual Results.
• Decide what to do next

Execution time:1-3 hours

I’m happy that you’ve reached the last step in my SaaS Idea validation framework. You’re a tough guy or a gal!

If you’ve executed all of the steps in this post, you should already know if your SaaS idea will take off.

The biggest mistake I see people make at this step is to change their goal on the fly or cherry-pick evidence to convince themselves that their hypothesis is correct.

The purpose of the Validation Goal is to help you make a data-driven evaluation at the end of your validation.

It’s OK to have a scary audacious goal that you’ve reached halfway.

But if you’re far away from achieving a conservative goal, you should evaluate your idea and consider starting from scratch.

For example, our Validation goal, with Encharge was to have 100 credit cards (trials or pre-orders) by December 2018. Even though we only managed to get 50 – we had 50 actual pre-orders, not trials. Hence our validation was successful.

UPDATE: Encharge.io is live now! Register for a free account using the button below.

If you haven’t reached your validation goal don’t lose courage. Be grateful that you’re not going to waste the next 5 years of your life building something nobody wants to use.

If you succeeded with your validation – congratulations!

It’s easy from there.

Now, you only have to build your product.

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Conclusion

Validating, building and marketing a SaaS product is not for the faint of heart.

But since you’ve read a post that long, I’m confident you’re serious about this.

In this first chapter of my “SaaS Marketing: The Complete Guide” we’ve talked about my 7-step framework to idea validation and more specifically how to use marketing to validate your SaaS.

I hope you found it useful!

Continue to Chapter 2: Pre-launch Marketing for SaaS

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Resources on SaaS Idea Validation

A complete guide on SaaS would not be complete without including a list of resources.

Below you can find all of the articles, books, and presentations mentioned in this article along with a few more to expand your knowledge on validating a SaaS idea.

Books

• The Lean Startup
• Lean Customer Development
• Lean Analytics
• The Mom Test
• Intercom on Marketing
• 7 Day Startup

Articles

• Subscription Trends in the Digital Media Industry
• Copycat Your Competitors to Take the Market
• How to create an ideal customer profile & data model
• 26 Communities You Must Join If You’re a Product Manager
• Finding Micro-SaaS Business Ideas
• Which metrics validate a SaaS startup idea?
• How I failed to validate a SaaS idea before building it (and why that’s awesome)
• Create products that people love by validating your idea first
• Finding Micro-SaaS Business Ideas
• How to Bootstrap a SaaS Startup

Presentations

“SaaS Metrics, how does to leverage the subscription economy?” by Patrick Campbell, CEO at Price Intelligently

Case Studies

• 99% Of Our Users Are Not Paying — And It’s Perfectly Fine
• From an Idea to Exit: How I Launched, Marketed and Sold My First SaaS
• How We Took Our Startup from Idea to Paying Customers in 4 Weeks
• Using Idea Extraction and Pre-Selling to Earn 120k in 6 Months with John Logar
• How Carl Mattiola Built a Web Business in 6 Months and Leaving Corporate America for Good
• Zero to Validating a SaaS: A Step-by-Step Recap
• How we presold 25 copies of our SaaS for web designers with only 2 screenshots and some copy

Tools

• Xtensio
• BuiltWith
• NerdyData
• Alexa
• Quantcast
• PhantomBuster
• Keyhole