Micro SaaS: An Attainable Dream for the Average Joes and Janes🔗
If you are keeping tabs on news from the software business, you must already know that the no-code world is buzzing with activity lately: New products being launched every week, venture capitalists signing seven-, eight- and even nine-figure checks to get on the bandwagon and co-founders giving interviews like victorious generals. For someone receiving daily newsletters on technology and software industry, it is like watching the movie stars passing by on the red carpet before the Academy Awards.
However, there is a catch. Almost none of the SaaS businesses are turning a profit. They manage to attract funds thanks to their exponential growth rates, but almost all of them, including the media darlings such as Salesforce and ones with a cult following like Spotify, are bleeding money. Because the spotlights are so bright, it might be difficult for us to truly grasp the financial situation these giants are in. Once you understand how deep your pockets should be in order to be able to survive with operating margins of -50 or -100 percent, these companies lose some of their glamour. The figures are so high that a regular person can have a hard time relating to those stars of software and their stories. Is the startup business really an all-or-nothing game, in which you either conquer the world or go bust? There must be a more human side to software entrepreneurship.
That side happens to be micro SaaS companies. They are the middle ground for regular people who do not have deep pockets to invest huge amounts or charisma to attract investment right away. People of modest means pursuing modest goals. People who do not dream of a world empire but would be more than content with a small plot of land they could call theirs. Let’s take a closer look at this more relatable breed and their endeavors.
1 - What is micro SaaS?🔗
Micro SaaS, a term coined by the entrepreneur Tyler Tringas, refers to a small SaaS company run by a solo entrepreneur or a team of less than five people. These businesses focus on solving a particular problem for a small customer base, which means that they address a small, underserved niche in a larger market segment. The business idea that is central to their efforts could be as simple as a new calendar app, an online local grocery service or an app to keep track of your personal finances. This core idea is executed so effectively that customers get hooked immediately. Micro SaaS apps tend to be lean, shying away from offering a plethora of features that result in a bloated feeling. The micro SaaS business model is the embodiment of the famous maxim by Paul Graham:
“It’s better to have 100 people [who] love you than finding a million who just sort of like you.”
Micro SaaS companies aim to build a devoted customer base by offering them the perfect solution for their pains and then capitalize on their devotion to drive sustainable and predictable growth. In that regard, the almost manic interest big shot SaaS companies show in increasing user numbers is non-existent in their little brothers. Customer retention comes to replace growth as the key goal for micro SaaS companies. This requires keeping a more personal communication with customers, removing friction as much as possible and being more accessible to them whenever they face a problem.
Lacking funds and human resources to scale until they become sustainable businesses, micro SaaS companies have to leverage the SaaS ecosystem to solve their problems. Today, services like hosting, payment processing or email marketing are readily available in the market and all one has to do is pick and choose according to the needs of the business.
2 - Pros of micro SaaS🔗
No need for outside funding: Micro SaaS ideas are not as ambitious as the ones who set out to transform the way the world operates. The idea here is to start a business with the means you already possess and drive organic growth at a more leisurely pace. Most of the time, you won’t have to spend months or years on your micro SaaS idea before it takes off and you start to make money. The return on your modest investment will bear fruit more quickly than a big SaaS project, which will boost your motivation to achieve bigger things.
Better fit for beginners: Because of the modest level of money involved, the pressure to succeed is not too big with micro Saas companies. Additionally, customer base is more tolerant towards mistakes as long as the effort is there to make up for them. Hence, inexperienced beginners have a chance to learn and grow with their business unlike SaaS giants where a single mistake can cost millions of dollars.
Greater autonomy: Some micro SaaS projects start as side hustles and only turn into full-time jobs when they prove their worth. A slowly growing micro SaaS business that generates enough income can save an entrepreneur from his office job and afford him flexible work hours and more freedom as to wherever he wants to live and work. It may even serve as passive income since it won’t demand frantic attention to every detail like bigger SaaS projects.
3 - Cons of micro SaaS🔗
Limited customer base: Micro SaaS companies owe their success to how well they understand their customers. The small size of their customer base make it easier to talk to customers, understand their jobs-to-be-done, perfect the solution devised and solve problems as soon as they arise. However, the limited size of the customer base also works against these companies by putting a cap on their potential. Doing away with this strategy and expanding into different segments naturally means the loss of that personal touch, which makes these companies so special in the eyes of their customers.
Limited revenue potential: Lack of exponential growth means that it is unlikely for a micro SaaS to reach the heights some SaaS giants have scaled. Still, there are many examples that have reached five- or six-figure MRRs, like SuperLemon and Storemapper, respectively.
Weighing the risks and opportunities, taking into account the ROI and the effort it would take to build a micro SaaS and get it up and running, one cannot help but think that it will only get more popular among white collar people in the future. Reevaluating their life choices since the beginning of the global pandemic, these people will find in micro SaaS the purpose they feel they lack in their lives. And then there is the promise of five- or six-figure monthly income, which wouldn’t be too bad for someone coming out of his 9-5 work schedule. Not too shabby for us regular folks, is it?