Article: The Perils of Productising SaaS as a Digital Marketing Agency

articles Jun 10, 2022

READ: 2 minutes
AUTHOR: Janusz Stabik

With eye-watering revenues and stellar-fast growth, it’s no wonder that entering the software-as-a-service (SaaS) sphere is a desire shared by many of our agency clients. Add to that the lure of sitting back and accruing regular profit via subscription fees, SaaS appears to be a stress-free halcyon compared with the pressures of delivering service-based digital businesses. 

But…

Read on for why software-as-a-service is less holy grail and more poisoned chalice - and where the real focus of your efforts should lie. 

Super SaaS 

Since 2015, the SaaS industry has grown from $31.5 billion to almost $172 billion. (Statista, 2021). 

And the growth will continue…

As work patterns, changed during the pandemic, consolidate into new hybrid and remote forms, cloud-based solutions ensure workforce distribution does not become fragmentation - and are increasingly fundamental to productivity. 

In the UK, the SaaS industry is expected to almost double between 2020 and 2025 (Reply). SaaS software such as CRM, accounting tools and marketing platforms are allowing companies of all sizes to provide better products and services to their customers: and do so with remote teams, hooked up with effective comms software. 

Unsurprisingly, the biggest players in this industry are household names -  Zoom, Slack, Canva. These companies have become so synonymous with work, that their services have been elevated to verbs: to zoom, ‘I’ll Slack you’.

These brands are not just software, they’re fundamental to operations.

They’re HOW WE GET THINGS DONE. 

Hence why so many of the agencies we coach harbour a desire to get in on the game. But the figures above - although seemingly tantalising - highlight the first reason why you should stay on the sidelines: the market is saturated. 

  • There were software 8000 solutions being marketed as of April 2020
  • In 2022, the US tops the global chart with 16,000 SaaS companies 
  • The UK in second place with 2000

…are you certain you're equipped to compete? 

 

Speaking from Experience

We’re not naysayers nor doom-mongers, but simply armed with experience…and the quest for SaaS success rarely has a happy ending. 

More attempts fail than succeed. 

Of all the agencies we’ve worked with - 400 in broad terms, 60 intimately and on the 8 boards we (currently) sit/advise on - we KNOW NONE that have developed a piece of software and been successful at accruing substantial revenue from it. 

We know more who have killed, or seriously harmed their agency trying. 

One agency trying to run SaaS off the back of their agency put down an 800K initial investment - and sold two licences. A couple of hundred GBP return on over three quarters of a million outlay. 

 

SaaS Stress: Why doesn’t it work?

You’re running an agency, that’s tough enough - and this is a totally different business: a different sales-model, customer base, requiring different marketing, using different skills, and demanding massive investment to make it world-leading. In the example above, the company realised that the finance required to support ongoing product development - as well as service any customer base - would triple their development costs. They walked away, but the venture took down their agency. 

If you want to run a SaaS business, great. But instead of, rather than at the expense of, your bread and butter service. 

In fact, one of the features of the highest performing agencies is that THEY’RE REALLY HAPPY BEING AGENCIES - they don’t want to be a software company; they know who they are and what they do; they’re comfortable in their own skin. 

So convinced are we by the near impossible challenge of running these two disparate businesses successfully, that we can’t with integrity take on coaching agencies who wish to try. 

 

The exception (if you insist!)

If you’re adamant that SaaS is a space you want to occupy, build a tool that makes your agency better: more productive, more profitable, systemises or streamlines your service. 

Identify a need within your business, set aside time to build the fix and reap the rewards of that investment on the day to day of your own business first. 

If word gets around and you can licence it to other agencies, bonus. If you can list it as a piece of IP as an asset with intrinsic value on your balance sheet, great. 

 

But your business is best served by being your singular focus: build your service-based business better than your distracted competitors. 

 

For more advice on what the highest performing agencies DON’T DO as well as what you should emulate, read about our Mastermind groups which discuss these topics in their monthly mastermind sessions.