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What is Micro-SaaS and What do You Need to Know About Them?
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What is Micro-SaaS and What do You Need to Know About Them?
Presented By
Black Pearl Matrix
Points that Make a Micro-SaaS Project Unique:
- Niche Focus and Small User Base
- Accelerated Time-to-Market and Less Bureaucracy
- Quick to Build and Deploy Applications
- Pay-As-You-go Subscription Model
Knowing your customers is essential to get the way you communicate with them right and define the right approach to attract them to your business.
But it is quite common for some companies to forget this point and focus only on selling.
But, focusing on selling at any cost, without practicing consultative selling, is a mistake that can bring not very pleasant results.
That’s why you should know the Customer Lifecycle to understand the best way to meet their needs, depending on the relationship phase the companies are in.
1- What is Micro-SaaS and How Does this Startup Model Work?
The internet has made it easier and has allowed more people to start a business.
In this movement there are strategies for the creation of these businesses, among them the Micro-SaaS that we will talk about later.
This model is focused on facilitating the creation of SaaS businesses that are competitive with the market, even with little investment and structure.
2- How Can We Define Micro-SaaS?
Tyler Tringas was the first person to define what Micro-SaaS is. He is the creator of Storemapper, the first project we can handle in this model.
Its definition of a Storemapper is as follows:
The StoreMapper app allows merchants to build a store location service on their website without any coding, so anyone can use it.
This is an example of this model, and with that reference, we can define Micro-SaaS as:
“A Micro-SaaS is a niche-driven business, managed by a very small person or team, with low costs, a narrow focus (niche), a small but dedicated user base, and no external funding (bootstrapping).”
Looking at this definition, we can see that Micro-SaaS tends to become a business that does not follow the conventional model of other companies.
See below some points that make a Micro-SaaS project unique and what are the benefits of using this model.
3- Niche Focus and Small User Base
The first item and probably the main characteristic when we talk about a company in the Micro-SaaS model.
The main idea of the concept is that we must find a niche to operate that does not necessarily have a large customer base.
So, instead of developing a product that is an all-in-one (all in one), that is, that solves all problems for all people, one should choose a specific area or problem.
A practical example would be building a financial planning system in a specific niche like artists. Thus, a system would be developed that would solve the problems faced by artists in financial planning better than any other.
This is clearly a limiting factor in terms of user base size, but when it comes to Micro-SaaS this is an expected result.
Using a niche is a way to differentiate yourself from the competition, showing that your product is more adapted to the customer’s needs. This of course also makes it easier to find product fit in the market.
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4- Try 5 Times More
One thing that is not a rule, but a recommendation, is to try to be five times more in one aspect than your competitor.
Thus, there are two main items that can be chosen:
Having a product five times better than the competition, more complete in features and that better meets the customer’s needs, is an advantage. It is important to emphasize that a product in the Micro-SaaS model should not be inferior when it comes to products.
“Micro” is a reference only to the size of the audience served.
Having a product 5 times cheaper is a good idea, and this is possible for 2 main reasons in this model.
• The first would be the question of the scope of the product being smaller, since it is not necessary to develop several functionalities, only those that help customers in the chosen niche.
• The second is that if the business has only the founder or a small team, its costs are much lower, since in most cases, salaries are the biggest expense for the company.
These two points allow for a cheaper product or a higher profit margin.
5- Accelerated Time-to-Market and Less Bureaucracy
Micro-SaaS goes beyond the MVP concept in terms of product launch and development. It is not just limited to the scope of the product, but also to the performance of the business as a whole.
Focusing on a niche, it is not necessary to develop functionalities that generally serve the largest number of people. It should only have the features that cater to the chosen niche.
Also taking advantage of the issue of having a smaller structure, with a possible lower investment, it is not necessary to invest a lot of time in the financial planning of the business, team structuring and other HR issues and many other formalizations that a non “micro “needs in the company.
All of these points reduce development time and the number of tasks, thus making it possible to bring the product to market faster.
And to clarify, Micro-SaaS does not replace MVP, which is still used in product development.
6- Proximity to Customers
When we talk about having a smaller customer base, it means that we can even know each of our customers in a unitary way and be closer to them.
Maybe have a 1-1 conversation, understand their industry/model and the issues they face.
7- Product Construction Models
A very common problem in product development in the Micro-SaaS model is to take advantage of an existing structure or audience on a platform/marketplace.
We can categorize the models as follows: platform dependency model and platform independence model.
7.1- Platform or Integrated Model Dependency
These are products developed as plugins or extensions. They are developed to add new features to platforms.
The positive point of this model is that you can rely on the ecosystem that the platform already has. The business model is already validated and already has a customer base to be explored.
Good examples of these platforms are:
• E-commerce platform;
• Marketing, sales, communication and other software;
• Social media.
Dependent or integrated, the relationship between the product and the platform can be described in two ways.
In the case of “dependent”, it integrates only on that platform and adapts to the format of the platform.
Below are examples:
• Extension for a direct message chat;
• Functionality for an e-commerce platform;
• Metrics panel for a social network.
If the product connects to more than one platform, it becomes “integrated”.
Below are examples:
• Aggregator of conversations from several direct messaging platforms;
• Extension for e-commerce that works independently of the integrated platform;
• Aggregator of metrics from various social networks.
7.2- Platform Independence Model
In the platform-independent model, product functionality is not intended to add features to a platform.
But in this case, it is not possible to rely on the platform’s user base and business validation. I emphasize that this is not necessarily a negative point.
On the other hand, not having the benefits that platforms and marketplaces bring can make things difficult at first. On the other hand, the business is not hostage to the rules of the platform, the evolution of resources and also the growth of the platform to win new customers beyond the current base.
So even if the standalone platform is the hardest model to start with, in the long run it can be a healthier strategy for the business.
But there is also no way to stop, to transform a dependent product into an independent one, if that is possible in the context of the product.
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8- Distribution Channels
There is no point in having an excellent idea and not having the ability to execute it, that is, the ability to turn your idea into a software product that has no bugs, has an excellent interface, performs very well and has no security and privacy.
However, there is also no point in having an excellent product if no one takes notice of it.
Therefore, it is very important to have efficient distribution channels. A distribution channel is a way for customers to learn about your product.
There are two main types of distribution channels.
Outbound channels, through which you actively reach out to customers. For example, through ads on Google, Facebook, mailing lists, etc. Although less common in the case of small systems, you can also hire salespeople to contact potential customers of your micro-SaaS.
Inbound channels, through which the customer searches for your system and website.
This happens especially when you invest in content marketing, for example, creating a blog with articles about the problem your system solves. Customers can then come to your articles through Google searches. In addition to blogs, it is possible to generate content by creating podcasts, YouTube channels, e-books, etc.
Additionally, a freemium model can also help you acquire customers, assuming they have already learned about your product and visited your website. In this model, customers can test the system for a while for free.
9- Other Responsibilities
In addition to building, maintaining, and selling the product, founders of a small software company are responsible for other functions.
Such as:
• Take care of the operation part. However, this task has become simpler due to the availability of cloud computing systems that allow you to create virtual machines with all the basic software installed.
• Take care of billing and receipt of signatures. However, today there are also third-party services for this.
• Taking care of customer service and support. For this, it is important to automate and document all processes and also to use low-code systems, such as Zapier.
10- Growing the Company
When a software micro-enterprise is successful and attracts a larger number of clients, it is natural that the enterprise also grows, mainly in terms of customer service structure. And this can also be done in a self-financing way, with the resources of the service subscriptions.
An interesting case is the Less Annoying CRM system for managing customer data. As the name implies, its goal is to be a simpler CRM (Customer Relationship Management) system than competing systems from large companies such as Salesforce. On the other hand, the subscription to the system is also cheaper.
Less Annoying CRM was created in 2009 by two founders. In 2013, the company reached 1.5K customers, with just one more employee. In 2021, it has almost 24,000 customers and 19 employees, most of whom work in customer service.
A second example of a SaaS company that started small and grew a lot, but maintaining the self-funding model, is Balsamiq, which makes a tool for creating low-fidelity wireframes. The company, located in Italy, was founded in 2008 and, in 2020, had revenues of US$ 7.3 million, with 33 employees.
Creating a Micro-SaaS can be very lucrative. But like every business, there are tips that can facilitate this whole process, alerting you to possible mistakes and guiding you along the right path to achieve success. Interested in knowing what they are?
FAQ – Frequently Asked Questions About Micro-SaaS
1. What is micro SaaS?
We can define this concept in the following way: Micro-SaaS is a small, self-funded software venture, completely managed by 1-2 developers and that serves a specific need.
2. What are SaaS tools?
SaaS, or Software as a Service, is a way of making software and technology solutions available over the internet, as a service. With this model, your company does not need to install, maintain and update hardware or software. Access is easy and simple: only an internet connection is required.
3. What is a pipeline?
The pipeline is a map of the steps that make up a company's sales process. Each deal is moved through the sales pipeline through stages such as first contact, proposal and negotiation, with prospects being moved to the next stage as they move through the deal process.
4. What is SaaS market?
They are considered SaaS, a term from the English “software as a service” used to designate businesses that make their services available through applications over the internet, whether by computer or mobile devices.
5. What are SaaS companies?
Some of the best known are: Netflix, Google Drive, Analytics, Adobe, Zendesk, Salesforce, Dropbox, PayPal.
Conclusion
As we can see, the strategy of creating a Micro-SaaS product makes it possible to create new businesses with competitive advantages against the big unicorns and without the need for a large team or rounds of external investment.
In addition, Micro-SaaS breaks down many entry barriers for new entrepreneurs and small Startup growth.
When setting up a micro-SaaS, you must focus on a real problem that affects a relevant number of users (your market); then you must implement the best system that solves that problem (your product); and you must also find the best distribution channels that will allow your audience to get to know your product.
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