SaaS is not worthy of small niches


SaaS is not worthy of small niches

I’m a software engineer who likes to automate the manual processes in your business.

I’m doing this for a long time and 3 years ago I started my own company that solves exactly this problem. You have a company, with many manual processes that repeat every day/week. Your employees get frustrated doing a lot of work and feeling bored. That’s the case, contact us, and we talk, discover the friction, and propose a solution. We redefine the edges for that solution and you’re fixed.

Offering services is so great. With every project, you learn new things, from different industries. The type of things that you never thought about before hitting you in the face. And that’s satisfying.

But with time you want to diversify, so here I am building SaaS for B2B. I love B2B so I would like to fix more businesses with automation.

My first SaaS was Customenu, a digital menu app for restaurants. Pretty basic, and pretty wild, you can find it for free now here. But failing with this one, in the middle of the pandemic situation didn’t make me stop.

The second SaaS is ManagerFlota.ro. It helps car-hailing fleets manage their finance with ease. The manager input the reports from providers (Uber, Bolt, Splash, etc). And the platform generates a report with all the money you owe weekly to the drivers.

The market is 6900 companies registered at ARR, but most of them manage less than 2-3 drivers. So the real market is somewhere around 200-300 companies.

From the remaining amount, some of them don’t trust technology. So they don’t want to fill their reports on any digital product or computer. They’re refusing to discuss with us about the benefits. Invoking that we’re working with government institutions.

Another category is people who manage the reports themselves. Don’t need this platform because they either use Excel or manual work.

Some fleets decided discuss about how the platform can help their daily processes. Many have issues every Monday, spending almost the full day making calculations.

Now you’ll say that’s no sense. Why would someone don’t want to make a subscription to a service like this, if they have the issue? The pricing is big enough? And no, that’s not the case, the subscription currently is 20€/month.

The product is only one month old and is not trustworthy yet. But the early adopters look pretty happy with our solution and use it every week.

Is nothing strange here, only a small amount of the total market decides to buy from you. But what happens when you’re the only competitor in the market? The market is still very small.

I would like to create more products. But I’m questioning if I should serve a small market in the future if the price is too small. It makes sense to have only a few clients and get a lot of cash. Because you bro my them a lot of value on the table and they realize it. But if the license cost is very cheap, is it worth it?

I’m looking to expand this business because is valid, we have a few paying customers right now. Someone tried to build something for their own fleet and decided to sell it to a few others. But their product was not so great. The method used to identify drivers in the reports was ineffective. And not the last one, I got an initial request to negotiate the business if I’m interested to sell.

At this moment I have in Todos new modules: manage the cars, export bank statement to pay, lifetime reports per driver and per fleet, and other small improvements. But I decided to take a break from adding features and take care of marketing.

We prepared a campaign on Facebook, targeting the audience, and I’m waiting to see how it performs. Because I already contacted every fleet manager via WhatsApp DM.

On a Tuesday evening, I was going out with my girlfriend to Mcdonald’s. There I had a gorgeous idea to expand ManagerFlota.ro to the food delivery market. I was looking at the couriers who are coming and leaving the restaurant.

At the initial look, both businesses share a similar model. So I was thinking that I can reuse most of the code. And only create new parsers for the new providers: Glovo, Tazz, etc. It was different than I expected. I would discover this lesson a few weeks later.

For a short period, I saved a note in the GitHub project and spent time improving the actual project. Not knowing the market! I tried to network with clients of ManagerFlota if they have a food delivery fleet or if they know someone else. I’ve got a few promises, but nothing at the end.

I decided to call a previous potential client of my agency. We’ve talked about a similar platform in the past. But they wanted it for internal use only, with different functionality. Took the phone and called, and we had an interesting discussion. I propose they help me build the platform and in exchange, I can offer them a longer trial. They had no interest, but here’s the catch. The market is not as much bigger as I expected. Because there are many companies that handle this type of business. On top of all these companies are only a few who have direct contract B2B with the delivery platforms. All the rest are contracting services from these agencies.

I go deeper and asked about pricing, and here’s the issue. They see a lot of value in the platform. They already confirmed that by contacting us a few months ago to build their own version. But don’t have the budget for now.

Having into consideration the complexity of the project and the time they reduce using such a platform (at least 1 man work per week), reducing human errors, complex reports for the agency and each individual fleet under the agency, for each courier, it seems the price cannot be only 9.99€/ months, but around 200€ or above.

They denied it and said the greatest price acceptable will be around 50€/month. Here’s a big issue, they have a pain, they are able to pay for that pain, and we have the expertise to build the project. But the market is very small, under 20-30 agencies. So that means if we get 10 clients ( which is a very tough target ) the ARR would be 6k euro. The development costs are above 10k, so it needs more than 2 years to break even. And I didn’t add monthly costs and maintenance.

So here’s the big question mark. Is possible to find extra add-ons that can add extra income, not knowing them currently. But always arise new ideas. But there are possibilities to find something or not. So if I only consider the current business model, it tells me don’t do it.

What would you do?

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