(We've got some catching up to do since the work I've done on Cogsy in the last month has happened behind the scenes. So I'm retracing a few of those initial steps as we catch up to real-time again.)
I most fall in the camps of "ideas are a dime dozen" and that great execution will almost always beat good ideas.
But not all ideas are created equally. (As I learnt when I had to shut down PublicBeta in-between WooThemes & Conversio.)
Once I settled on the decision to build a new SaaS business, I had a clear framework or set of requirements with which I evaluated new ideas. Here's the initial notes from my notebook about this:
For those that can't read my handwriting, here's the requirements I listed:
- Higher Annual Contract Value (ACV), ideally $5k or more
- Built-in expansion revenue
- Ability to sell to my friends**
- Remote (team)
- Diverse senior team
- Ability to add app store distribution
**You'll see that I also reference "Dan's Models" at the bottom. These are specific frameworks that my business partner, Dan, teaches in SaaS Academy and the initial ideas I explored where in the realm of product marketing / engagement. I did quite a deep dive into this field, since I figured that I have loads of friends that are also SaaS founders and if I could build something that all of them could use, I would have an unfair, early advantage. Cogsy ended up ticking all of the boxes except the "Ability to sell to my friends" box.
My requirements evolved a little from those initial notes, but here's how I ultimately settled on the idea to build Cogsy:
1) Founder/Product-Fit
"What makes me uniquely qualified or positioned to build this exact idea?"
I think the best ideas are those where the founders have some unique relation or unfair advantage to the idea they're pursuing. As a start, Cogsy ticks four separate boxes for me in terms of skills and past experience:
- I've build two software / SaaS businesses before;
- I've done so in the Ecommere space and know the ideal customer;
- I actually have an accounting degree; and
- I've experienced the problems we're hoping to solve first-hand in assisting my wife in building her Ecommerce business.
If you take that unique mix of factors, I'd argue that there are very few people in the world that can come into a similar idea to Cogsy with similar resources. Whilst I don't think this is make-or-break in terms of anyone's ability to execute on this idea (just like my past here does not guarantee I'll execute on this), it does make the idea way more compelling.
Beyond skills, experience and market knowledge though, I also look at the things that can ensure that an idea is life profitable for me. In Cogsy's context, I knew I wanted to be able to build a remote team again for example. I also knew that I needed an idea that would stretch me, challenge me and force me to learn new things. These are the kind of qualitative things that needs to be present regardless of the monetary potential of the idea before I can commit to it.
2) Higher ACV's
Across both Woo & Conversio, I have become accustomed to building products predominately for the SMB segment which means sub-$100pm ARPU.
Building for the SMB space is something I'm hugely passionate about. A big part of the genesis of Woo back in the day was about democratizing powerful functionality at a cost-efficient price point for our customers. And this philosophy isn't one I'll completely shake any time soon.
What I have learnt in the last couple of years is that just like margin solves many problems for Ecommerce brands, so does higher ACV's for SaaS businesses.
There's just more breathing room in the budget (especially marketing and customer success) when ACV is higher for example. And retention tends to be better too. One also doesn't suffer that much from involuntary churn or churn from businesses closing down.
Whilst Cogsy is by no means aimed at The Enterprise, I did want to make sure that we can build something that justifies (and exceeds) higher ACV's from the start.
3) Sales Motion Flexibility
I'm all-in on product-led growth. (If you haven't read the book, I can highly recommend it.)
What I wanted from a new idea though is the flexibility to implement a "horses for courses" process where we had the flexibility to move our sales motion between free product / freemium / trial / demo.
Whilst it is impossible to perfectly plan everything on Day 1, knowing that we'd have the flexibility to switch our sales motion as we learn was important to me. And having different possible sales motions also meant that we could use the right one for different customer segments.
4) Pricing Optionality
In my original notes I mentioned that one of the requirements needed to be that the idea could support built-in expansion revenue.
When looking at new ideas, I wanted to ensure that we'd have different levers to pull or add in future where we could introduce (and stimulate) expansion revenue.
The way I have imagined this is two-fold:
- Having a draft of what a future roadmap could look like and how those bigger / strategic releases could influence pricing and packaging in future.
- Can we have multiple value metrics in which we could possibly tier our plans? (Here the competitive landscape is important. With Conversio, we tried to introduce two new value metrics in our space and this hindered our growth materially.)
5) Unsexy
The last part of evaluating an idea was all about picking something that wasn't considered to be very sexy or shiny.
Conversio for example fell into the broader category of "marketing tech" and it is probably the most congested space in all of SaaS. The problem with sexy solutions is that there is always a new kid on the block that is demanding attention from customers and prospects of your thing.
So I ideally wanted something that is less sexy. Something that will change slightly slower. Something which most other founders won't consider getting into. Something that can just sit in the background, creating value without the scrutiny of new releases on ProductHunt.
I considered going more niche, because niches generally aren't very sexy either (compared to bigger markets). Ultimately though there isn't a specific niche that I can define where I would feel like I have enough knowledge to identify a very specific problem that I could solve.
As designers will tell you: the best designs are not about what you added, but what you left out.
There are three things that I've seen others include in their evaluation of new ideas which are just not that important to me:
- Total Addressable Market (TAM). Whilst I'm ultimately building Cogsy in a big space (let's call it "ecommerce"), trying to figure out TAM isn't something that is high on my radar. All I need to know is that the market is there for me to be able to execute well and build a business that is significantly life-profitable.
- Competition. I did my research and I understand the competitive space well, but what the competition has done or is doing doesn't materially influence my evaluation of ideas. As long as I believe that there's enough space for me to incrementally tackle a known problem with an unique perspective, I'm happy.
- Customer validation. Shock! Horror! Gasp! As was the case with Conversio, I'm taking the first steps of Cogsy without speaking to a single, prospective customer. The idea is born out of the challenges that my wife & I've had in her business and Cogsy today is based on a sample size of one. I truly believe that customer feedback matters, but I also believe that it's sometimes necessary to build a V1, draw a line in the sand and then iterate from there. (This is not an approach I suggest for first-time founders though.)