A few months ago, I was able to miraculously build and launch my own SaaS business - Hawk Prospecting.
Although I feared the idea of launching my product to the world, it was a surprising success right out of the gate.
Within the first month, we managed to collect $1500 in revenue, which carried on to the next month.
This rapid success was the reason I was featured on Startup Story, and why I wrote my article, 'Idea To Paying Customers In 7 Weeks.'
Traffic was steady, responses were positive, and it seemed as though I had finally found what I was made to do.
The idea all started from a personal problem I faced while prospecting - it's true that some of the best business ideas you get are those you personally deal with.
However, after those first two months, things started to go downhill - the business no longer sparked the same light of hope it did within its early days.
Usually, many people don't like to discuss their failures with the world - especially when there's a chance that thousands, even tens of thousands of people will know about it.
I believe that part of my mission on this blog is to help you learn through my own failures and successes alike, after all, you can't just learn from success, you need to experience both ends of the spectrum to truly be successful.
See, there was a dark side to Hawk Prospecting that I was scared to talk about until now.
Despite the rapid early growth, the revenue, and high profit margins, I focused too much on the vanity metrics, as Eric Ries coins them in his book 'The Lean Startup,' that I didn't see what was happening all along.
User engagement was low, free to paid plan conversions was... VERY low, and refund rates on Appsumo were high.
Instead of growing, the business was slowly dying and there wasn't much I could do but let it go.
In this article, we're discussing the 5 key reasons why my SaaS startup failed, and the lessons I learned from it.
Didn't find product/market fit
The most important reason Hawk Prospecting failed to flourish to the height it could have reached is because I failed to reach product/market fit.
Prior to starting the SaaS business, I owned an agency for almost a full year and so I came around to learning all about the frustrations we all faced.
One of the biggest problems was the ability to find and reach qualified prospects - prospects that really needed our products and services.
The common path a lot of agency owners take is to simply reach out to any and everyone who was in a particular niche and hopefully book in some calls.
However, this rarely ever worked, and all the solutions that were available were inevitably flawed.
- Weren't accurate
- Were expensive
- Covered less information than one needs
- And more
With that said, I understood exactly what the 'perfect' product should look like, and so I made it my mission to build it.
The best practice in the startup world is to build an 'MVP,' the simplest version of your product that can be launched to the market to collect feedback and act as a roadmap for future development.
After 3 weeks, I was able to build a simple and effective software tool that chews social media URLs and spits out key information like:
- Social media links
- Business Info
- Personal Info
It was exactly what I needed when I ran my agency, and so I thought I had succeeded.
It was a great competitor to some of the biggest prospecting companies I knew of and had used in the past.
However, every time I looked at customer feedback, it seemed as though people didn't agree with that completely.
Many people were confused about what the product does and were not bought into how this could help their business scale.
One of the most important things when it comes to a startup is reaching product/market fit - which means 'being in a good market with a product that can satisfy that market,' according to Marc Andreessen,
Although I knew 'how' to reach product/market fit, there were some key factors as to why I couldn't make it happen, reasons which we'll get onto a little later on in this article.
Bad timing (on my end)
The reason I started Hawk Prospecting was more because I found a deep interest in the SaaS and technology space.
Right before moving onto SaaS, I was working on Condensr - an app that summarises books.
The idea was inevitably ditched because I realised that to bring a vision as big as that to life, I'd need a pretty big and talented team - something I didn't have the money to build.
During this timeframe, I was extremely interested in how SaaS and technology businesses worked in general.
I was really intrigued about how software can be created once and resold infinitely, essentially creating a profitable loop of growth where you find customers, make money, and reinvest it into the business.
There are a ton of SaaS businesses in the world, and they're all extremely successful - Amazon AWS, Amazon's software side, has a profit margin of over 60%.
When we compare this to its retail side, which has a margin of 6.3%, almost 10x smaller, we can see why SaaS businesses are attractive.
Due to this large profit margin, it can be much easier to scale SaaS businesses than it is to scale other businesses.
You need to ensure you maintain a good product, then market the living heck out of it.
Besides all of this interest, there was one big problem I faced. I didn't have a clue how to build software.
This was a massive challenge for me before I built Hawk Prospecting and after, when I realised that some big changes will have to happen, or else Hawk Prospecting might be no longer.
Yes, I could have hired people who knew a lot about development, however, this would have likely cost both money (10s of thousands) and time (months or even years).
Starting a SaaS business as your first 'real' business when you have no clue how software works, or what a single line of code means is not the smartest decision.
While building the tool was difficult, the maintenance was a complete nightmare, something I personally thought was not worth my time.
Was not built scalably
So how did I build a complete SaaS solution from scratch without any idea how software development works?
How did I build and launch a software-intensive SaaS solution and profit from it within 7 weeks?
Well, I used a no-code platform to build the backend and front end of the software.
Ironically, a few before I started developing Hawk Prospecting, I jumped on a meeting with an entrepreneur who told me how they ran a no-code agency that made a ton of money every month, building no-code (scalable) software for enterprise clients.
This immediately lit a fire under me, and so I wanted to explore this possibility.
However, instead of building software for others, I realised that this might be the answer I was looking for all along.
Instead of paying $50K+ for someone to develop this for me, I can easily just build it myself using this software!
And that's what I did, I spent 3 weeks learning and building Hawk Prospecting.
What I didn't know at the time is that the software I was using to build my SaaS business was far from intuitive enough to build exactly what I needed.
Therefore, I was stuck using an expensive API provider to power the back-end, the part where all the data comes from.
See, the data is the most important part of what I was building, it's the reason people used (or didn't use) the software.
After launching and realising the reality - that this is not what people are exactly looking for, I later found out that to build what it is that people want will be possible, however, I'd have to take a massive hit with profit margins.
The way I collected the data, through the API, was already expensive enough - and to add a lead generation feature would have possibly turned my profits negative.
The entire reason I started a SaaS business - the easily scalable, high-profit model was no longer a reality with the way I was building the current tool.
A lot of people might say, 'there's always a solution' and there sort of was.
It was to use what I have made so far and reinvest it into building out our own data aggregators to replace the API.
However, collecting and aggregating data is no easy feat.
It takes years to build a powerful database, and hundreds of thousands of dollars, dollars that I couldn't afford to put into the project.
Building the tool, I had thought that the solution I was currently sitting on was enough.
It turned out that my assumption was wrong and that the SaaS was far from scalable in its current state.
Lost my passion for it
The marketing agency was most likely the one thing I've stuck to the longest so far in my (almost) two years of being an entrepreneur.
Prior to that, I had done eCommerce, which lasted a few months.
I then ventured into forex trading, which I quickly realised was not what I thought it would be.
There were then 'phases' I went through where I tried a different thing, but found it very hard to stick to.
However, the marketing agency was the one thing I thought would last forever - for 8/9 months I tried and I tried.
Hawk Prospecting was going to be a great way for me to bridge the gap between SaaS and the marketing agency, however, it didn't last.
One of the main pieces of advice I used to hear is 'do something you're passionate about.'
"Do something you wouldn't mind doing for free."
I hated this piece of advice, I thought it was stupid - not everyone has something they're passionate about.
Even if they did, they'll end up hating it when they realise that it's not producing any income for them, after all, no one wants to work for free.
I'm still on the fence with this piece of advice, however, when it comes to SaaS (and now NFTs), I'd go as far as to say I'm passionate about them.
The idea of building a software and watching as the number of users rises, revenue rises, marketing expands, products are added, etc, was a very interesting concept that I wanted to build.
Every day, I worked from morning to midnight, building the software and getting users for it.
However, as I started to witness the downsides - a large number of refunds, the lack of returning customers, the extremely low free to paid conversion rate, my passion for the project started to wither away.
It got harder to spend the same amount of time every day, doing what I knew I needed to do.
It got harder to smile when I saw a new subscription, it got harder to smile when I checked the dashboard and saw we moved from 100 to 120 users.
When you lose passion or interest in something, it becomes much harder to give it the same level of attention as you used to.
Luckily, I was able to discover NFTs right after SaaS, however, for a lot of people, they're unable to keep going after an event like this.
No effective marketing strategies
A successful business leverages (at least) one of the three engines of growth below:
Hawk Prospecting is a business that is supposed to leverage the first two - sticky and paid engines of growth.
As a SaaS business, Hawk Prospecting is supposed to deliver results for existing users so that they don't leave us for another software - this is where the sticky engine comes in.
On top of that, given the high profit margins a SaaS business normally has, you're able to leverage the paid engine of growth by running profitable ads that lead to new user acquisition.
There's a cycle that follows where users are acquired via paid advertising and they stick around due to the sticky engine of growth.
With Hawk Prospecting, we were unable to leverage either engine of growth.
Although we could have reached product/market fit, it would have been extremely difficult to leverage the sticky engine of growth at the early stage the business was at.
On top of this, it's not smart to invest in paid marketing when you're still unsure your business is able to attract and keep customers.
Although this might be a strategy for eCommerce, building software is a lot more expensive and time-consuming than buying and testing a few products in a Shopify store, so it wouldn't have been the best use of resources.
In the early days, marketing was very primitive.
I followed a specific, daily strategy that led to results but didn't lead to scale.
I was following Brian Chesky's, of Airbnb, advice, 'do things that don't scale.'
Every day, I would wake up and start reaching out to people on Facebook and LinkedIn.
I would reach out to marketing agency owners, asking them if they ran/worked at an agency, and then asked some follow-up questions talking about outbound prospecting, which was what my software helped with.
After this, I would answer 10-15 Quora questions regarding prospecting and outreach.
From here, I'd speak to some of our current users to get their feedback, which was always a menial task.
I also tried to write a weekly article on finding clients, but my lack of creativity took that idea nowhere.
There was quite a bit more to the strategy, however, I couldn't find the strategy anywhere to recall it.
Although what I was doing was good enough for the stage I was at, it was far from scalable and effective for reaching the next stage.
Those were the 5 key reasons why my SaaS startup failed, and the lessons I learned from it.
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