What’s stopping B2B SaaS companies from growing traction?

What’s stopping B2B SaaS companies from growing traction?

Posted on Tuesday, March 15th, 2022 by Ton Dobbe

I recently asked the question on Linkedin: What do you believe B2B SaaS companies should do differently to grow predictable traction? Why? Because too many SaaS companies can’t seem to get this right. The statistics keep showing the depressing number that only 10% of B2B SaaS businesses eventually succeed. And VCs and Investors are calculating their odds on the back of this wisdom…

But before we dig into answering the question, let’s first pay a bit of attention to a couple of essential ingredients of B2B SaaS business:

What defines a B2B SaaS company?

Let me give you my definition: It’s a company for which its core business is:

  1. The creation and delivery of a software solution
  2. that’s designed to solve a business problem (instead of a consumer problem)
  3. and are delivered as a service (instead of a license)

What does B2B SaaS mean?

To describe that, the best way to look at it is from a customer perspective. For them it means the following:

  1. A solution that solves one or more of their business problems
  2. That they subscribe to on a monthly basis
  3. And that they can unsubscribe from the moment the solution doesn’t live up to their expectations anymore

So unlike license software from the past, the risk is fully on the vendor’s side.

  1. The upfront investment is with the vendor, not the customer
  2. The customer only starts paying once the value is delivered
  3. The customer can stop the payments once the value disappears.

As you can imagine, it’s in living up to this where the problems hide for a B2B SaaS business. So back to the question:

What are the prime reasons so many B2B SaaS startups struggle

The #1 reason mentioned: the inability to gain enough traction in MRR and ARR in a given period.

It wasn’t a surprise. But unfortunately, for many of the B2B SaaS I work with, this is not their prime strength – in fact, it’s their weakness for many. So, in this blog, I want to dig deeper into some of the underlying factors that have a leverage effect on helping to create ‘enough’ traction and beat the benchmarks. 

  1. Leverage factor 1: Enough Product-Market fit
  2. Leverage factor 2: Being clear which customer group(s) perceive the value of your solution 10x of that of alternatives (segmentation)
  3. Leverage factor 3: Your ability to stand out in front of your ideal customer (positioning)
  4. Leverage factor 4: Your ability to hit the right nerve (Messaging)
  5. Leverage factor 5: Repeat – leverage your traction.

Leverage factor 1: Enough Product-Market fit

This is possibly the most obvious: To create enough traction, the first thing you need to get right is having a SaaS product that fits what the market wants and expects. 

That starts with reading market demand. If there’s no demand yet (because there’s no such thing as the product you are about to build) – this is about deeply understanding the size of the problem. According to market research from CBInsights, this is where 35% of startups find the prime reason for having to close the business: Misreading the market.

In my book The Remarkable Effect, I share a simple method to prevent this from happening: ‘The broken Triangle.’ This is about three basic questions:

  1. Is the problem highly valuable to solve for your ideal target customers, and 
  2. Is it urgent/critical to address for them?
  3. What’s your ability to exceed expectations?

If any of these questions is a ‘no’ – start over. Not balancing the triangle leads to serious traction issues: You either build something the market doesn’t need (an interesting product, not a valuable product) or worse… you build something they need but don’t want to buy from it you.

VisionX Partners elaborated shared a couple of insights that are important here. 

Building something the market doesn’t need is the consequence of not talking enough to clients/potential customers. And it’s important to do that consistently and react to what with effect, i.e., iterating and pivoting until you feel a pull from the market. 

The last point I want to highlight from their blog is this: Building something that’s not differentiated enough. And this really is about the third question above.

It’s where possibly the biggest problem resides in not being able to create ‘enough’ traction. 

And one area where your future is derailing is in the basic mistake many people make defining ‘Minimum Viable Product (MVP).’ 

Minimum Viable Product is not about building a product that does the bare minimum needed (often in response to the fear of missing out on a direct competitor.) It’s about building a product that, in its minimum setting, moves the needle in a meaningful way for the customer. That’s something different. 

Remember, the basic premise of creating traction starts with creating a motion that’s driven by a desire from the market to move. And that’s about making the basic decision: Is there enough difference in value between what I do today and what your product will provide me tomorrow? If the value isn’t significant enough – it will be very hard to convince people to move. In fact, if they do, the churn rate will be high.

So here are some questions for you to reflect upon:

  • What if instead of spending the bulk of our time on solving the interesting problem, we’d devote our energy and best people to solving the most valuable problem?
  • What if instead of focusing our attention on the Fear-Of-Missing-Out on what our competitors are doing, we’d focus on the Joy-Of-Missing-Out by doing what helps our customers make a difference?
  • What if, instead of getting obsessed with adding more analytics or AI to our suite, we’d spend time truly understanding the problem our customer dreams to solve?
  • What if instead of trying to please everyone by doing half the work, we’d focus on the special one and do the hard work?

Leverage factor 2: Being clear which customer group(s) perceive the value of your solution 10x of that of alternatives. 

I’ve had various conversations with B2B SaaS Entrepreneurs over the past months. And, as I was listening to their stories, an uncomfortable feeling crept up. Something felt wrong. They all have transformative solutions – enabling their customers to accomplish things that we’d perceive impossible 3-5 years ago.

Yet, somehow, this effect wasn’t valued by the companies they targeted. So, digging deeper, I realized that each of them was purposely focusing on winning the hearts of ‘Fortune 1000’ companies.

The idea was: Big companies – Big pockets – ideal target. 

Think twice.

Just because Fortune 1000s have big pockets, it doesn’t mean they’ll open those pockets to you. They are wired differently, care about different things (They value minimal change, low risk, something that’s proven, etcetera), and don’t want what you want for them. And that’s fine.

It’s not your job to convince them; they’ll come when the time is ready. But, today, they are better off with the competition. So instead, aim your focus on companies that do care. 

You’re looking for that market segment that values your offering at 10x of that of alternatives. The problem is: that you won’t find this by segmenting the market just by demographics. Other forces are at play here: Status, competitive advantage, self-actualization, affiliation, name it – Bain has organized 40 distinct kinds of value that B2B offerings provide customers into a pyramid with five levels. 

So as soon as you’ve carved out your segmentation demographics in your go-to-market strategy, fine-tune it by finding at least six value elements where you can make a meaningful difference.

This could mean that instead of focusing on the giant whales in your ICP segmentation, you switch to the challengers within that segment – the ‘Davids’ fighting the ‘Goliaths.’

You’ll be instantly valued because they feel the real pain; they have different aspirations, care about other things, and therefore need something different. 

This will change the dynamics, and you’ll experience that the tables will turn. So check your pipeline. 

To which deals should you say, sorry – not for you. It’s not about company size… it’s about pain size. That drives down customer acquisition cost (CAC) and drives up revenue growth.

Leverage factor 3: Your ability to stand out in front of your ideal customer 

I’ve seen a lot of SaaS businesses that get both product-market fit and segmentation right but still suffer in creating traction in monthly recurring revenue. And that’s because they drown in the noise from the market. It’s like walking on the busy Monday town market, with 100s of little booths where everyone is yelling to get attention. As a prospect, it’s impossible to see through and notice a meaningful difference. 

It’s the same in the SaaS market. Everybody is screaming for attention on social media. Across every market channel, they are all claiming to be ‘the biggest,’ ‘the best,’ ‘the leader,’ ‘the most innovative’ – and what have you – and consequently, everything blurs.

What’s the problem here is the focus. Nine out of ten vendors position themselves and not for their customers. This is not about the way Gartner, IDC, or Forrester positions you on their quadrant. Instead, positioning should be about creating a space inside your customer’s minds about something they badly need, want, or aspire to.

And that starts with empathy for your customer. Understanding what they care about and what they stand for. It’s about understanding where they are today and knowing where they want to be tomorrow. It’s in that gap where you ideally position yourself. 

So your positioning statement (and from that, all your marketing efforts) should bring three things together:

  1. The essence of what you’re best at
  2. The essence of who’d value that most
  3. The essence of what they most want

The word ‘essence’ appears three times. And for a reason. Essence is about making choices, which means saying yes to this and no to that. As I state in my book, The Remarkable Effect, this is about acknowledging that you’re not the best solution for everyone, but if ‘this’ is what you are about or what you deeply desire – then there’s nothing like it. 

As the word says: It’s about taking a position. 

Doing this will give clarity to your ideal customer. When your ideal customer hears your positioning statement, they should instantly say, ‘That’s for me!’ 

It should also detract the ‘not ideal’ customers credibly.

Last but not least – for everyone else – it should be so clear that they’ll instantly get a ‘Rolodex moment’ and start thinking about whom they know in their network that would benefit from this that they could recommend you to. That makes lead generation super easy.

Having the right positioning statement will work like magic on all your competitors. It will make them instantly irrelevant and put them 1-0 behind. It will lead to situations where they’ll qualify out the moment they realize you’re ‘in the deal.’ 

That’s the leverage you’re looking for to drive up your SaaS metrics.

Leverage factor 4: Your ability to hit the right nerve 

There’s still one aspect that is often underutilized when it comes to creating leverage towards traction, and that’s in how you resonate with your ideal buyer. What I mean with this is – how well you’ll be able to strike a nerve with your prospect – the right nerve that is.

Why is this important? Your customer will only move if you’ll be able to solve their problem.

Sometimes they are aware of that problem, sometimes not so. It’s your job to address that. 

This often goes wrong because we’re touching the problem – but not deep enough. We’re using generic language and what happens is: the conversation falls flat. 

Just some examples:

  • Their problem is not that they are “not efficient enough.” Their problem lies in the consequences of not being efficient enough: Constantly missing critical deadlines. Being seen as unreliable by their customers. High customer churn numbers, low Net Promoter Score (NPS), etcetera.
  • Their problem is not that they “can’t make informed decisions.” Their problem lies in the negative consequences: Constantly missing financial forecasts or not meeting profitability expectations.

The trick is to get super concrete. And this is about making an effort to ‘get under their skin.’ Almost like you’re pouring your finger in an open wound while adding bits of salt. I am not joking. Remember, your prospect gets not only speaking with you. They’re meeting many SaaS vendors. And after a while, they don’t even hear all the nice words anymore. 

When you articulate well what they’re actually experiencing, they will sit up. 

This requires triggering real frustrations, hidden anxiety, and actual stress – but also their deepest hopes, secret desires, and bold ambitions.

This is about empathy. And the better you know your ideal customers, the easier this will become. This is about active listening in particular around three key areas: 

  1. What’s the situation
  2. What’s changing (both inside and outside their control)
  3. What’s challenging

It’s about daring to have that conversation about their frustrations, worries, or what makes them angry, upset, or disappointed. How does it feel to be in this or that situation? 

So, it’s about going beyond understanding the basic need. That’s rarely ever what’s driving them. What you’re after is the hidden need – and even the super-hidden need. 

This means you have to keep asking the famous ‘why’ questions. Don’t settle for the first (and obvious answer). Dig deeper. Ask them to explain what’s creating that need they’ve just expressed. What’s behind this – and then…, what’s behind that. 

What happens is that you’ll get to the essence. And that essence is where the magic happens. Suddenly you hear a different language. You’ll pick up on the scenarios that do keep them up at night. The situations that could get them fired …, or promoted. 

This is the language that’s required to hit the right nerve. Once you uncover that and apply it across your digital marketing, blog posts, webinars, and sales conversations, you’ll see the following happen:

  • You’ll build trust. Visitors to your website will feel a difference. Someone that cares about them. That’s genuinely interested in helping them.
  • It will be easier to lead the sales process and set the bar to measure the competition.
  • you’ll suddenly be able to have more meaningful conversations with both existing and new customers
  • you’ll be able to trigger engagement and create positive urgency, i.e., action
  • you’ll see your negotiation power strengthens – the word ‘discount’ will disappear
  • you’ll notice your prospects will be far more inclined to pay a premium – increasing your average revenue
  • you’ll experience that it becomes far easier to win the war against the established

Everything will start to feel more straightforward – that’s leverage.

Leverage factor 5: Repeat – Leverage your traction.

This one seems obvious but is so often completely underutilized. It starts with all the tactics mentioned above and then keep iterating on that. 

Tulika Tripathi, Founder, and CEO of Snaphunt shared one of her big learnings: 

“I live by the mantra of ‘keep getting up.’ If you’re not failing, you’re just not pushing yourself hard enough. I don’t understand the concept of celebrating failure; I just accept the failures. It means I’m pushing boundaries. More importantly, is actually celebrating getting up. 

The second is taking a very iterative approach to doing things rather than a big bang approach. Think big, start small, dig deep. Try and experiment, see where it takes you and where you are getting traction. Then dig further, reassess, and roll out something else. Taking an iterative approach enables you to create this wonderful thing and have an aha moment. This creates more solid companies.”

What this can lead to is illustrated very well by this quote from Enrico Palmerino, Founder, and CEO of Botkeeper. 

“By getting market traction and becoming more widely used, we’re starting to get the IBM effect: You didn’t get fired for using IBM, and you’re not gonna get fired for using Botkeeper. 

Because of this, we’re watching our data set just increase exponentially. That’s making automation even smarter and allowing us to automate even more. So it’s like a self-perpetuating flywheel that makes it more and more difficult for competitors to enter and compete on the same playing field. 

It allows us to bring in the power of our business model and drive the pricing of our subscription to the floor, which acts as a hindrance as well. That also increases our adoption, which increases our data acquisition, which fuels itself.

This is where defensible differentiation and customer lifetime value (LTV) grows, which will help to amplify traction even more – with every launch again.

In Summary: How can your B2B SaaS company grow traction?

Nailing traction across your is critical to success. Not one time, but all the time. In every stage of your business, your SaaS business model evolves, and traction gets a new meaning. The expectations simply change. And to live up to the increased expectations, finding leverage is essential. 

Above I’ve explored five ingredients to traction:

  1. Having a product that solves a meaningful problem
  2. Acknowledging you can’t please everyone – focus on the ones that get the most value from your solution. Start building momentum there. 
  3. Get your positioning crystal clear so that you instantly get noticed by the right people and cut through the noise. That’s much easier to do when you’ve nailed points one and two.
  4. Grow your empathy skills to truly understand what keeps your ideal customers up at night – that’s where your messaging will start to resonate.
  5. Repeat – iterate on your learnings – get even more specific (rather than generic) and leverage the traction to become even more valuable to your ideal customer. This sparks adoption and customer retention.

That’s how you build your flywheel for growth.

 

How to start reshaping your B2B SaaS company for predictable traction?

The easiest way. Simply book a free call to explore if there’s a fit to do this together.

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