S5E9 – From Agency to SaaS: Strategies for Growing Your SaaS Side Hustle with Chris Out

Many agency owners dream of transitioning from service-based businesses to creating their own Software as a Service (SaaS) products. The appeal is undeniable: a scalable business model that generates recurring revenue and offers greater autonomy. However, making the shift from running an agency to building a SaaS isn’t a walk in the park. It demands careful strategy, meticulous planning, and a clear understanding of both the challenges and opportunities ahead.

In a recent episode of the Grow Your B2B SaaS podcast, host Joran sat down with Chris Out, author of the bestselling book Structuring for Extreme Revenue Growth and a seasoned expert in growth hacking and agency management. Chris shared his valuable insights on how agency owners can successfully pivot to SaaS, drawing from his own experience, including his exit from a growth hacking agency in 2020.

In this episode, you’ll get a deep dive into Chris’s journey and learn actionable strategies for building a SaaS business while leveraging the strengths of your existing agency. From the foundational steps to avoidable pitfalls, Chris lays out the roadmap for turning your SaaS dreams into a thriving reality.

The Agency Dream: Moving from Hours to Scalable Revenue

For many agency owners, the ultimate goal is to move beyond the constraints of service-based business models. Agencies typically rely on billing clients by the hour, which can quickly become overwhelming as your client base grows. More clients mean more employees, more management, and more complexity. The idea of transitioning to a SaaS model offers a way out of this cycle. Instead of selling hours, SaaS businesses offer the possibility of recurring revenue, automation, and scalability.

Chris shares that one of the primary motivations for agency owners to build a SaaS product is the potential for higher business valuation multiples. While service-based businesses are often valued based on earnings, SaaS companies can command higher multiples due to their scalable nature, subscription models, and recurring revenue.

However, this dream comes with its own set of challenges. Transitioning from an agency to SaaS is not just about developing software — it requires a mindset shift, careful planning, and a structured approach. So, what does it take to make this transition?

Building SaaS from an Agency: Aligning with Your Ideal Customer Profile (ICP)

One of the most critical mistakes that Chris warns against is building SaaS products for markets that are completely unrelated to your agency’s current client base. While it might be tempting to create a SaaS product for a new, untapped market, Chris emphasizes the importance of aligning the software with your agency’s existing Ideal Customer Profile (ICP).

By doing so, you can avoid the need to double your marketing and sales efforts for a completely new audience. Instead, you can leverage your agency’s existing relationships, expertise, and brand reputation to test, validate, and sell your product. In essence, the SaaS product should solve a real problem for your current clients, making it a natural extension of the services you already provide.

Chris shares an example from his own experience where his team tried to develop SaaS products for clients outside their ICP, only to find that the product-market fit was lacking. The lesson learned? Building software that your current clients need can significantly reduce the risk and increase the likelihood of success.

Foundational Steps for Agencies Looking to Build SaaS

Before diving headfirst into SaaS development, it’s important to ensure that your agency is on solid financial and operational footing. Chris stresses that the agency should be stable and profitable before venturing into SaaS. This includes having predictable revenue streams, a strong team in place, and processes that can run without the agency owner being indispensable for day-to-day operations.

To put it simply: your agency needs to be self-sufficient so that you can dedicate time, resources, and attention to your SaaS venture. If the agency is not profitable or is struggling with its internal processes, it may be best to wait until things are more stable before making the leap into SaaS.

Additionally, Chris highlights the importance of measuring key metrics such as “untouched revenue,” which represents the revenue that comes in without heavy involvement from the owner. This is a sign of a business that has strong systems in place and can afford to explore new ventures like SaaS.

The “Dog Food” Approach: Automating Internal Processes to Build SaaS

One way to get started with SaaS development without a huge risk is to focus on automating internal processes first. This concept is often referred to as “dog fooding” — essentially using your own software internally before offering it to the public. By automating tasks that your agency already performs, you can create a tool that streamlines operations, improves efficiency, and reduces costs.

Once the internal tool is running smoothly and providing real value to the agency, you can then look at turning it into a full-fledged SaaS product for external customers. This minimizes the risk because you’ve already validated the software within your own organization.

Chris also suggests that agencies can work creatively with clients to co-create and fund SaaS projects. By involving your clients in the development process, you can ensure that the product has market fit and avoid building something that no one needs. This approach not only helps reduce financial risk but also increases the chances of developing a product that truly resonates with your target audience.

Marketing and Sales: The Real Challenge in SaaS

As Chris points out, the biggest challenge in SaaS is not necessarily product development — it’s marketing and sales. Unlike traditional agency services where you can rely on word of mouth, referrals, or personal relationships to close deals, SaaS products require a more strategic approach to go-to-market.

Before committing significant resources to building a SaaS product, Chris advises agency owners to pre-sell the product or validate the idea with potential customers. This could involve running surveys, testing the concept with a small group of clients, or using landing pages to gauge interest. By getting customer feedback early, you can ensure there’s demand for the product before investing too much time or money.

Additionally, Chris emphasizes the importance of crafting a compelling go-to-market strategy. Agencies can leverage their existing network, client base, and marketing channels to generate buzz around their SaaS offering. However, the key to success lies in building a sales funnel that focuses on educating potential customers about the value of the product and nurturing relationships over time.

The Mindset Shift: Ego and Control in SaaS Development

One of the most significant changes Chris highlights when transitioning from an agency to a SaaS business is the shift in mindset required. In the agency world, business owners often hold onto a lot of control over projects and processes. However, with SaaS, there is a greater need to be adaptable and open to feedback from the market.

Chris draws an interesting parallel between public speaking and SaaS development. Just as a speaker must listen to the audience’s reactions and adjust their message accordingly, SaaS founders must listen to customer feedback and be ready to pivot based on what the market demands.

This transition requires letting go of the ego and embracing the idea that the product may evolve in unexpected ways. As Chris explains, the best SaaS products are often the ones that solve real, pressing problems for customers, even if that means the product strays from the original vision.

Growth Strategies for SaaS Companies

For agencies just starting with SaaS, the focus should be on customer satisfaction. Chris suggests that early-stage SaaS companies should be willing to deliver additional services alongside their product to ensure that customers are happy and getting value. Whether it’s through consulting, training, or hands-on support, providing an exceptional customer experience in the early stages can lead to long-term customer loyalty and positive word-of-mouth.

When it comes to scaling, Chris emphasizes that agency owners must understand their ultimate goals. Are they building a SaaS business with the intention of selling it for a significant exit? Or are they focused on creating a lifestyle business that generates steady, passive income? Understanding the end goal will help guide decisions about scaling, funding, and resource allocation.

Final Thoughts: Your Roadmap to SaaS Success

Chris Out’s insights offer a comprehensive roadmap for agency owners looking to build a successful SaaS business. By aligning your SaaS development with your existing client base, ensuring your agency’s stability, starting with internal automation, and focusing on go-to-market strategies, you can navigate the transition with greater confidence.

Building a SaaS product while running an agency is no small feat, but with the right mindset and approach, it’s entirely possible to scale your business in a way that offers more freedom, more revenue, and long-term growth.

For those considering this journey, remember to be patient, iterate based on feedback, and always prioritize your customers’ needs.

Key Timestamps

(00:00) – Unlocking Agency Growth: A Quick Intro to Revenue Insights
(00:54) – Meet Chris Out: Growth Expert and SaaS Visionary
(01:26) – Setting Up a SaaS Empire: What Agencies Need to Know
(02:45) – The Dream of Building SaaS: Breaking Free from Hourly Billing
(03:59) – SaaS Pitfalls: What Can Go Wrong in the Transition?
(04:15) – Agency vs. Non-Agency: The SaaS Building Dilemma
(05:18) – Top Mistakes Agencies Make When Venturing Into SaaS
(06:49) – Lessons Learned: Chris Shares Personal SaaS Development Struggles
(08:18) – Foundation First: What You Need Before Launching a SaaS
(09:44) – Untouched Revenue: A Vital Metric for SaaS Success
(11:11) – Revenue Targets and Team Building: How to Set Yourself Up for SaaS Success
(12:14) – Finding the Right SaaS Fit: Does Your Agency Have the Ideal Product?
(13:19) – Dogfooding: Why Agencies Should Test Their Own SaaS First
(15:25) – Automating Services: Turning Internal Tools into SaaS Gold
(17:00) – SaaS Development Hacks: Strategies for Fast-Tracking Your Success
(18:03) – SaaS Growth Secrets: The Real Marketing and Sales Challenges
(19:20) – Ego in SaaS: Why Letting Go Is Key to Success
(20:52) – Simplifying Your Agency Services for a Smooth SaaS Transition
(21:47) – SaaS Success Stories: Real-World Examples to Inspire You
(23:00) – Co-Creation: Minimizing Risk and Maximizing SaaS Success
(24:08) – Structuring Creative Deals with Clients to Fund SaaS Projects
(25:06) – Client Relations: Proactive Communication for SaaS Success
(26:39) – Learning From Mistakes: How to Pivot and Recover in SaaS Development
(27:48) – Balancing Act: Managing Both Agency and SaaS Growth
(29:38) – Dogfooding for SaaS Growth: What Chris Learned Along the Way
(30:27) – Growing Your SaaS: Insights Beyond the Early Stages
(31:21) – Validating Your SaaS: Ensuring Customer Satisfaction Early On
(32:01) – Growth and Exit: Planning for the Long-Term Success of Your SaaS

Transcription

[00:00:00.000] – Chris

If more than 75% of the revenue is untouched by you, then you are opening up the possibility to work on other stuff. What I also say, as an agency owner, if you make less than 120K per year, go freelancing, because the amount of risk you’re taking versus the upside, it’s not worth it. If you want to be successful with your SaaS, the building of the product, that’s in most cases not the biggest challenge. The biggest challenge is It’s always marketing and sales, so go to market. If you as an agency owner want to build a SaaS company, want to prioritize things, you need to make sure that a big chunk of the revenue that’s being generated falls into that banking app story. You are not necessary anymore to deliver it, to sell it, but you have to build a mechanism, a team that can do it for you.

[00:00:54.380] – Joran

In today’s episode, we’re going to talk about how to start a SaaS while running an agency. It is how a lot of SaaS companies got started. But how do you actually do this? My guest today is Chris Out. He’s the author of the Structuring for Extreme Revenue Growth book. Chris had a growth hacking agency himself, which he exited in 2020. Chris specializes in helping companies innovate, align teams, and create accountability, achieve exponential growth. He does this via consulting, but he would also invest into companies, so he’s putting his money where his mouth is. Welcome to the show, Chris.

[00:01:26.310] – Chris

Thank you very much, Joran. Great to be here.

[00:01:29.320] – Joran

Nice. We’re We’re going to just dive right in. I always love to start with the basics. So from your point of view, we’re going to talk about how agencies can set up a SaaS business. How can they benefit to develop a SaaS alongside the services they offer?

[00:01:43.700] – Chris

I think it’s a very great question. I used to have an agency myself. I speak to a lot of agency owners, and a lot of agency owners have this dream when they start an agency that one day it’s not only service anymore, but they have built a service company to a certain level to give them the freedom so they can build products, build new services, and basically build things that can run without them. An agency owner should consider this because it’s most of the agency owners their dream. But if you look at it from a more tangible perspective, so let’s say financial, if you want to sell at some point your agency, and if you have your own proprietary software that you use for your service delivery, for example, the multiples you can get are significantly higher. Instead of selling your agency for five times EBITDA, you can sell it for seven, eight, or nine times EBITDA. At the end, when you have a bigger agency, that can mean millions of extra money in the bank.

[00:02:45.920] – Joran

Is that the case? Is it a dream for every agency to not sell their hours, but to have a product, have the higher multiples at the end, but more as in not selling hours for an agency?

[00:02:58.140] – Chris

Well, the fun phrase I always hear from agency owners is the more revenue I get, the more people I need to hire. And basically that correlates for 100% into more shit, more paying, more people to manage. And when you look at the type of people that have the foundation for great agencies, are the people who are really good from a technical perspective at their work. So developers, designers, creatives, online marketeers, they were so good themselves that so many people wanted to hire them. They started to grow, and somehow they now have to manage a team of a couple of people. And there’s all kinds of troubles coming in where when they started out, they didn’t know that this was the dream that they were going after. But it’s a dream slowly turning into a nightmare. And they think they have this perspective that if I can turn this agency into SaaS, all my problems will go away and I can actually do what I really love. Yeah.

[00:03:59.140] – Joran

And we will keep the answer to the problems actually go away until the end? But I think I know the answer of building a SaaS. But one more question, real basic. How is it going to be different building a SaaS as not having an agency versus when you already have an agency?

[00:04:15.280] – Chris

I think if you look at what’s the essence of business, that’s always the question I like to answer in these type of settings, is your SaaS or your agency is basically a mechanism to get your client from point A to point B. If you already have an agency, people are already paying for services that get their client from point A to point B. And the biggest mistake I see with a lot of SaaS companies that start out basically with a big pile of money to build a product is that they get so in love of the mechanism that they build something that nobody actually needs. I’ve made that mistake with my first business, built an amazing product, one year gone, nobody wanted to buy. And that’s if you start out from a perspective that you’re not in an agency context yet, people are already paying you. Because as I always say, in an agency, if you do it the right way, you’re basically getting paid for doing market research. I think that has a much greater perspective. You can build much better products. It also has its challenges, but I think that’s the right way.

[00:05:18.540] – Joran

Then if we’re going to talk about these challenges, what are the common mistakes our agencies make while trying to build a SaaS company?

[00:05:25.550] – Chris

The biggest mistake is not aligning your SaaS with the ICP you’re already serving. Let’s say in my old days, we had a growth-hacking agency where we were serving a certain type of clients, and then we built a software for a completely other demographic. Let’s say your main clients are now B2B SaaS, and then you build a software for pet owners, for e-commerce stores for pet owners. It doesn’t make any sense because you have to set up twice the marketing engine, twice the sales engine. Well, if the SaaS your building is basically an upsell or a cross-sell or a more deeper layer of your service, then you only have to do the sale one. You only have to do the marketing ones. So I think no ICP overlap results in doubling the cost of acquisition. You can’t boost lifetime value because I think that’s a great thing. If you can add a SaaS to your agency, you can really boost lifetime value. So I think that’s a very big mistake, and it’s also a very costly mistake because If you think about selling your agency at some point, and you can sell it for five times EBITDA, if you spend 200K per year on building your SaaS, which doesn’t resonate, you’re actually spending more than a million on it.

[00:06:44.730] – Chris

The opportunity cost can be very big if you don’t do it the right way.

[00:06:49.550] – Joran

Yeah, and I’m curious because you did it, you made that mistake, right? So you had some convictions that you had to go to a different market. If we dive a little bit deeper, what were your thoughts around it? And then how can other people avoid making that mistake?

[00:07:05.970] – Chris

I think the agency context I was in is at some point we were working with two agencies on six different software initiatives. And I think in essence, why we did Why we did that is because we were all so in love with the perspective, with the dream of at some point having something that could run without us. But at the end, what we all missed is that step one is making sure that the agency, your platform company, is already profitable enough, self-sufficient enough, gives you the time that you can work on these things. Because if you’re all doing it at the same time, if you look at books about essentialism, doing the one thing, these type of things, scattered focus will bring you nowhere. So you have to reach certain milestones, build some freedom for yourself, also build a way to finance that freedom. Because if you do it from that perspective, chances of Our success are way higher.

[00:08:01.490] – Joran

When we go even deeper into this, when agencies are thinking about their dream and they are thinking about building a SaaS company, what has to be in place before they can even do it? You mentioned profitability, you mentioned that things have to be in place with the agency. What is the foundation which needs to be there?

[00:08:18.500] – Chris

During the SaaS summit in Amsterdam in 2024, I spoke about the concept of untouched revenue. That’s, in my opinion, one of the KPIs that give you a cold, hard truth of where you are. And what do I mean with untouched revenue? As an agency owner, as agency management, how much of the revenue that is being generated is not touched by you. So you weren’t part of the delivery, you weren’t part of the sales process, you weren’t part of the marketing. But basically, the two most important ones are the sales and the delivery. If more than 75% of the revenue is untouched by you, then you are opening up the possibility to work on other stuff. And what I also say, as an agency owner, if you make less than 120K per year, go freelancing. Because the amount of risk you’re taking versus the upside, it’s not worth it. So as an agency owner, you need to make at least 200 100K per year because then you are doing things in the right perspective into relationship with how much risk you’re taking. So if you have that set up, you can manage your agency with one day or less per week in terms of what you’re really necessary for.

[00:09:29.230] – Chris

So it doesn’t It doesn’t mean that you don’t have to work 40, 50 or 60 hours on your agency because you love it. That’s what people always can do. But it’s what’s really necessary that if you don’t do it, things will burn down. I think that’s what people need to be very aware of.

[00:09:44.230] – Joran

Yeah. Maybe then I have a misconception, but don’t agencies always are involved in sales and deliverability? You can’t purchase something from an agency without actually talking to them and them selling to you, right? Or am I wrong here?

[00:09:57.170] – Chris

The distinction that I want to make is Who within the agency is doing the selling? I always share this story that at some point I was speaking abroad, and then I opened up my phone and I saw my banking app, and I saw a payment coming in of €3,630. And it was a payment by a company I didn’t know, which I thought that was a true tipping point because it meant that the sale was made by somebody else, the delivery was made by somebody else, and actually it was good enough that they paid for it. And what I What I mean in this context is if you as an agency owner want to build a SaaS company, want to prioritize things, you need to make sure that the big chunk of the revenue that’s being generated falls into that banking app story. You are not necessary anymore to deliver it, to sell it, but you have to build a mechanism, a team that can do it for you. If you look at team size, for example, the bigger the team, the easier this should be. But I would say when you are at a team of 10 people, then chances are pretty high that you can start to make that tipping point, because then it’s big enough that you can have somebody to manage the entire team, and you’ll make 200K per year with it.

[00:11:11.620] – Joran

So if you have to put a revenue number on it, team size and revenue size, it’s going to be 200K.

[00:11:16.570] – Chris

200k of EBITDA, I would say, or a seller discussionary earnings, so management fee plus the dividends. And I would say, aim for a million plus in revenue. I have clients that have revenues of six, 700K per year, and they take home over 300K. But still, they are necessary in an extent that is still too much to transition towards a SaaS company.

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[00:11:57.870] – Joran

Let’s say there’s A lot of agencies listening to this and they fit the criteria. We also talked about fit it to your ICP rights, so don’t go abroad. How can agencies define what SaaS they should go for or any tips for next steps here right now?

[00:12:14.550] – Chris

I would say the building SaaS is like a muscle that you can train. It’s a skill set. There are a lot of problems you will encounter that you’re not aware of. What in a lot of cases happening is that they basically take a chunk of their profit and they reinvest that in themselves to basically build a SaaS company. For example, a development agency is creating something. Hopefully that somebody else can sell it. So that’s a way, but that’s a very expensive way because you’re doing the most advanced version at the start. So what I always recommend is start with the dog food SaaS. And you have this saying, an innovation in lean startup, eat your own dog food. I think a great example is a former client of mine. They built an influencer marketing platform years ago, and the product was this, influencers could tag the products that they have in the picture. And then if they were tagging these products, they could earn an affiliate commission, which sounds nice on paper because they make a photo and then they can make money out of it. But what I already saw, it was way too difficult.

[00:13:19.430] – Chris

So I told them, Hey, do this 1,000 times yourself. Just do it for them, which is like an agency component. And what they learned after doing this 343 times, that the head of growth said, You know what, Chris? This is so stupid. How can we ask people to do this? These are lazy influencers who want to make easy money. They will not do this. So they transitioned into selling campaigns. So they actually went from SaaS to more a hybrid model of SaaS plus agency. So to answer your question very specifically, I think the best way to start is to be very process-oriented in how you deliver your services and then automate these services. With the intention of we are now automating stuff that if it works for us, you basically have your own SaaS company for yourself, that you could either white label or make it a standalone company to sell to somebody else. First, step one, basically try to destroy yourself by building a SaaS company for your own services.

[00:14:26.540] – Joran

That makes a lot of sense because when you come back to the beginning, you said You’re helping clients in the agency going from point A to point B, and now you’re trying to automate it. You can build a SaaS around it, or you should figure out if a SaaS actually makes sense in this stage.

[00:14:42.200] – Chris

I’m now working, for example, a client of mine is an agency, and they are in the UCG content creation. So doing video shoots, but also getting influencers to create videos for products. And they are in the e-commerce space. It’s crazy how much you can automate in that sense. They If we have built a process where they can charge a fifth of the price of somebody else. They can still deliver it with higher margins because everything is automated. But they’re doing that with the intention of if we have this working and we can make some with the agency. But if we can package this in a way and sell this to other agencies who are trying to do this, then we’re not necessary anymore on a daily basis.

[00:15:25.110] – Joran

Because that’s the next question, right? You start with automating your services, then you probably start with your own clients first. Steps after, once you have the SaaS and you’re selling it like a fifth of what the others are offering, so it’s a lot lower than the services you’re probably offering, what should they do next? You mentioned already going to other agencies. How can they start growing it?

[00:15:46.090] – Chris

I think the new ones that I want to make is that you have automating your process and you have automating your process with the intention, with the viewpoint, to some day somehow create a SaaS company out of And I think not enough agencies are already doing the first thing, just be smart in automating stuff. But the really smart ones, they automated with the intention to someday create a SaaS out of it, because those are the entrepreneurs I work with, the entrepreneurs that want to build a portfolio of companies. And if you do it step by step, you first have your dog food SaaS, then you see that’s working. If you see that the opportunity is big enough, you can either white label it, sell the framework work with somebody else, help them with the implementation or repackage it. But if the opportunity is so big, you can make a stand-alone company out of it. There’s not one good way or wrong way, but it always is Playing between how much risk you want to take, what’s the upside, what’s the contact your agency is already in. But dark food, white label, self-funded, the more you go to the right, the more risk, but also the higher rewards in the long term.

[00:17:00.820] – Joran

Yeah, nice. When we talk about building, again, a SaaS next to the agency, any other processes or maybe strategies they can follow or they can develop to really be successful with their SaaS?

[00:17:13.430] – Chris

In essence, if you want to be successful with your SaaS, the building of the product, that’s in most cases not the biggest challenge. The biggest challenge is always marketing and sales, so go-to-market. I’ve seen more SaaS fails because the go-to-market wasn’t there, first is tinkering the product. I was speaking with a SaaS company to acquire them or get a big chunk in them. These are guys that are already working for four years on a product, but they could already sell it. And I’m a very big fan of Dane Maxwell with the Book Start from Zero, where he shares a very nice framework on how you can basically pre-sell the SaaS without writing a line of code. So that’s really also part of my philosophy. First you sell, then you build. And if you are not able to sell it, don’t waste time building it.

[00:18:03.820] – Joran

Is that what’s a lot being the issue that they are able to develop a product, but they’re not actually to sell it?

[00:18:11.730] – Chris

Yeah, because it’s very logical also. You are in love with your product, you’ve built something. And then if you share it with people, the chances are higher that they think it sucks compared to that moment when they are like, holy shit, this is amazing. I think that’s also a very big difference between services and SaaS or how I would say in my world, the biggest difference between public speaking and writing a book. If I’m doing public speaking, if I’m doing a workshop, I can immediately adapt based on the feedback that I see in the audience, which stories I share the tonality. So there’s always like a… You have the opportunity to improve yourself on the spot. While with a book or a SaaS, this is it, this is the code, this is the written word, you’re not able to adapt it on the spot, which It means it needs to be really good to turn into a ha-haha moment for people. And if you have to sell and something is not good enough, it means you need to thinker, which feedback are you taking into account? A lot of SaaS entrepreneurs that failed weren’t willing to have a bruised ego at the start.

[00:19:20.830] – Chris

But a bruised ego can be very valuable.

[00:19:23.280] – Joran

Is this problem bigger with agency owners? Because they might already have a big ego. No offense, but you’re already running a really good business, right? If you’re following the structure you mentioned, so you already have really running good business, you might already cut down to four days, as you mentioned. So you might have this ego already, we’re doing really well.

[00:19:43.320] – Chris

If you take the line of thinking that agencies are being hired from an expert perspective. An agency can do something that the client can do. So they hire the expert to help a strategy and execution. If you follow this line of reasoning, the more expert you are, the tougher it is to turn it into a very simple product. A story I always share with people who are structuring their agency in a way that’s the most profitable for them. They always say, We want to be a partner for growth for our clients. And then I tell them, Be careful what you wish for, because if you want to be a partner for growth, it means your people have to be very strategic, which means you have to hire very expensive people, which means you’re competing with a certain type of other agency, with the big consulting companies. But if you say, We are the best analytics agency, and you have a certain framework on how you do Google Analytics audits, where your entire team can do it. It’s maybe less sexy, but it’s way more profitable and way easier to turn into a SaaS.

[00:20:52.200] – Joran

So I guess here the advice would be if you are a bit more niche with your SaaS or already have a clear positioning, then it’s It’s also easier to figure out where can you start building it.

[00:21:04.630] – Chris

Yeah, and the shift from agency to SaaS is also from ego and having a lot of control on how it’s adopted within the client, compared compared to the situation where your ego should be completely gone, and you’re constantly thinking, No, that’s not how I build it. That’s not what it’s intended for. But you have to submit yourself to how the market is eating it and using it. But that’s also where a good SaaS entrepreneur can really make the difference. Because if you look at successful companies, for example, like Slack, that didn’t start out as a communication platform. There was a communication platform within a video game. The video game sucked, but the communication platform, that was where the value was.

[00:21:47.400] – Joran

And to talk about this is a really good best practice on a company which pivoted. Any best practices on SaaS which are coming from agencies or maybe even from clients where people can learn from?

[00:22:02.090] – Chris

I always try to think in terms of principles, because if you master the principles, then you can use it for the rest of your life. And I think the best SaaS companies that came out of an agency saw that a client was underserved in some way, or that they could optimize and automate their service delivery in a smart way. Instead of telling them like, Hey, this is how we’re going to do it, they were co creating it with their best clients. And once they saw, Hey, this is really good, then they created spin-outs into white label, into self-funded. But then it’s all about removing your ego, let the market tell you what they need. Because if you really pay attention to the subtle signals that the market is giving, you can either adapt your service, create a new service compared with the SaaS, or you have a SaaS offering which can be stand-alone and that works really well.

[00:23:00.850] – Joran

Yeah, and in this case, you’re also minimizing the risk, right? Because if you’re going to co-create it with clients, then you already have some buy-in and you’re not just developing something people don’t want.

[00:23:11.510] – Chris

And from a funding perspective, get 300K from an investor and lose 20% of your business or get 300K from a client who basically funded the building and you still have all the equity. Because this is all about creative deal structuring. You can say, Hey, to build this, it’s going to cost 300K. But that means for the next three years, you can use it for free or at an 80% discount. I know companies in my direct surrounding who got started like this, who said to potential clients, Hey, we can build this for you, but it’s a 250K investment. If you prefund it, then in the long run, it’s going to be a great deal for you. And in essence, if clients are willing to prefund that, it’s a very strong signal that you are solving a problem that’s really painful. But it’s harder at the beginning to You get money up front, and it’s easier to sit in your dorm and create some code, and hopefully somehow, someday, clients will appear.

[00:24:08.660] – Joran

This goes in the example, again, don’t write one line of code, set it first. And this is a perfect example here.

[00:24:14.070] – Chris

Definitely.

[00:24:15.450] – Joran

Then pre-funded, you mentioned giving discounts. Any other advice on agencies who now have an ID, they already have clients? Maybe make it super practical. What would you recommend them here? They would pitch the ID maybe with a pitch deck or with a PowerPoint.

[00:24:30.060] – Chris

I would say, go into a conversation with them and try to ask for the money. That’s basically because everybody will tell you it’s a nice deck. But at the end, you get the honest answer when you say, Okay, it’s going to cost you 80K. Then the real objections will come. Yeah.

[00:24:49.130] – Joran

And real practical, because we haven’t written one line of code yet, and to develop, I guess the MVP probably takes a couple of months, if not longer. How do you keep them satisfied? And how do you make sure that they already paid for it? So probably they can’t get out of it.

[00:25:06.940] – Chris

Then the game that a good agency is in the game of communication. So I always told my team, if a client is coming in and is asking you for a status update, you’re already way off. So I think if you want to manage this process in a smart way, be very proactive in your communication. Tell them what’s working, tell them what’s not working, because at the end, that’s how you can make a very big impact.

[00:25:29.600] – Joran

Yeah, so be super proactive and not reactive on questions from the clients.

[00:25:37.070] – Chris

Proactivity, that’s what will work. That’s the biggest thing.

[00:25:39.980] – Joran

I always love this question, because you mentioned already you had one fuck up where you were building a SaaS right out of your ICP. Any other fuck-up you can share from your journey?

[00:25:49.660] – Chris

Yeah, it’s not ICP, no access to the market. It’s like when you’re building something and you don’t even know who’s going to buy it, but you just think, Hey, this is a nice It’s a nice tool, for example, building a tool for boosting employee engagement. It’s super vague, but it was a nice idea. I think the context is there was already some software platform who had a template, and basically, if we would restructure the template a little bit, we thought we could sell something. But then at the end, we were playing with it, and then the company said, Okay, if you want to use this commercially, it’s going to cost you 10K per year. And we were like, Okay, we don’t even have clients. It’s all start with clients first, sell and then build. If you are an agency, that’s a context where you can already do that.

[00:26:39.060] – Joran

Exactly. In that case, you’re in a luxury position because you already have the clients, so you can already work with them. You can already have to pre-fund the product.

[00:26:46.490] – Chris

Yeah, and you’re training yourself to really listen to what customers want. Because that was when I reflect on my agency journey, one of the biggest lessons I had to learn is clients are not buying what you not what they think they need to buy, but what they want to buy. So if you listen to them, you’re able to rephrase it in their own words, you are able to meet them where they are. That’s when you can do the sale, and that’s where you can learn and co-create together. I think starting a SaaS out of an agency, make sure that the costly mistakes that you will inevitably learn as an entrepreneur are being made and being learned in a much less risky context.

[00:27:28.800] – Joran

Maybe one final question before we dive into the revenue-related questions. Is it also a risky thing for agencies? Because most of the revenue is coming from their services, right? I don’t know how this goes in English, but in Dutch, we say. It’s basically a thing which doesn’t really generate that much money, so you’re not going to put too much effort into it.

[00:27:48.780] – Chris

Yeah.

[00:27:49.580] – Joran

Is that also a common problem that, okay, they have a good idea, they did co-created something with clients, but it’s not really driving that much revenue, so why would we focus on that? Because if we It’s just focused on the services. It’s just going to drive a lot more money.

[00:28:04.020] – Chris

Yeah. Well, in the agency context, they always talk about feast and famine. So it’s either you have a lot of money on the bank, clients prepaid, and everything is great, or you haven’t sold enough, you have a team to pay, and you’re not able to make payroll in a couple of days. In that first instance, it’s much easier to then focus on the SaaS, compared to the second one, where you’re all about surviving. To solve that problem, you need to make sure that your agency is predictable in terms of sales it can generate, in terms of delivery, that your team is stable enough. Because if that’s the case, it makes everything else easier. It’s very logical that in a lot of cases where it’s not stable enough yet and shit hits the fan, the SaaS thing that is not making the real money yet, you put it away. But if you start from a vision with a perspective of we want to build multiple ventures, then it can be the It’s the most costly thing to do to put it away.

[00:29:01.770] – Joran

I think that really goes down to the foundation has to be before you’re going to think about building a SaaS.

[00:29:08.160] – Chris

Or, and that’s what I said, it’s not very black and white. It’s all about nuance. But let’s say you have a small agency, but you already see a great dog food opportunity, and it takes you one or two days to create it, go for it. Because the return on it can come very quickly. But it’s the same as investing. If you invest €10, and you get an 80% or an 8% return, The absolute amount is not that big compared to if you would invest 1 million. But you have to start somehow. Exactly.

[00:29:38.360] – Joran

And as long as if it’s dogfooding, at least you’re already using it yourself. So you’re going to get value out of it, as you to like right away once it’s done.

[00:29:46.960] – Chris

Yeah, and I think that’s a very good nuance because value creation, a lot of people miss this. I had a lot of instances where I built something and I didn’t I make any money out of it. But the lessons that I learned from it repackaged in a new service, that’s where I made the money. Or because I tried to build something, I went to the conversation with people, didn’t sell them anything, then I had another offer, but I already knew these people. Then I tried to sell them again and then it worked out. I call this the derivative effect of value. If you are creative enough, you can always turn something into something valuable.

[00:30:27.710] – Joran

You just have to start somewhere. Nice. When we We’re going to take the conversation a little bit more broader. If we’re going to talk about growing a BTB SaaS in general, what advice would you give a SaaS founder who’s just starting out, either from an agency or not? That doesn’t matter for this question. It’s growing to 10K monthly recurring revenue.

[00:30:46.790] – Chris

The most important thing, it’s not validated yet, so don’t get in love with your mechanism. Just make sure that clients are really happy to transfer you that money. And if that means that 5% of the mechanism that you serve is SaaS and 95% of the mechanism that you serve is SaaS and 95% is service, that’s already a great start because then you can transition towards how can we do this delivery with more SaaS and less service. But the most important thing, it’s not validated yet. So make sure people are really happy with what you serve because that’s the foundation you need to grow further.

[00:31:21.700] – Joran

Yeah. So really doing the things that don’t scale, especially at the beginning.

[00:31:26.810] – Chris

Yeah, and don’t feel yourself too great or too big or Let your ego get in the way, because in essence, you don’t have anything. The market is giving you the feedback based on this information, what we got, how you’re selling it, how you’re marketing it. It’s not valuable yet. But there’s always hints in the market that can help you to make it valuable. And then getting to 10K in a structured way is already a great first step.

[00:31:51.960] – Joran

Let’s assume now we pass the 10K MR and we’re going to make a huge step towards 10 million ARR. What advice would you give SaaS founders here?

[00:32:01.500] – Chris

I would say, really start with the end in mind. So are you boosting it to 10 million ARR to get a next round of funding, and a round of funding after that, and a round of funding after that? Or are you going to build it to 10 million ARR as a lifestyle business, where you make a healthy profit and you structure your team in a certain way. So I think that the road towards 10 million ARR is really dependent on how is the 10 million going to serve you in context of which goal are you doing that? And I think that’s where a lot of founders make the biggest mistake, because they’re growing for the sake of growth. They’re building a big company. They make a very big exit on paper, but all the investors and everybody makes money, and they didn’t make any money. If they would have grown it a little bit slower towards 10 million and take home one or two million in profit every year, they would be free for life.

[00:32:57.370] – Joran

Yeah, so really know, I guess, why you’re growing it towards 10 million and what do you want to get out of it?

[00:33:03.120] – Chris

Also what type of person you need to be for that, because the type of leader, the type of contacts you’re going to get yourself in, it’s going to be very different depending on the end game you’re playing. And are you willing to make that change? Are you willing to turn into that person? Because at the end, I think that’s the biggest difference between a SaaS company doing 10K MRR or a SaaS company doing 10 million ARR is the type of person that the leader is. Because eventually, and I think that’s also a very big theme in my book, business growth is always a result of personal growth. Makes sense.

[00:33:39.390] – Joran

I’m going to try to summarize. I guess a SaaS is an agency dream, have something run without them. As an agency often is, more revenue is more shit. Multiples are going to be higher with a product, and you already have people paying for the outcome. So building a SaaS for it is a great way. Mistakes you can make, do align the ISP with your SaaS. So make sure that you’re focusing on the same type of clients. When you start building, figure out how much untouched revenue do you have right now. So as a founder, I guess 70 %. You don’t want to be involved in sales delivery anymore. Make sure you have more than 200K EBITDA. Your agency has to be predictable. It has to be stable enough to actually start a SaaS. And if you want to get started, start with a dog food SaaS. So automate your services with the intention of creating a SaaS out of it or co-create something with clients, have them pre-fund the product, and then from there, you can actually wide label it or make it a standard home product. Developing the product is often not the problem, but the GTM will be the problem because the more expert you are, the harder it is to develop a simple product.

[00:34:42.090] – Joran

So make sure you put your ego aside. It should be actually completely gone, as you mentioned. And then when we talk about building a B2B SaaS company, 10K MR, make clients happy, don’t care about fully SaaS, do services, do whatever it takes to make them happy. And then we talk about 10 million AR. The road is different based on the exit intent. Are you growing an exit? Are you growing towards an exit, or are you actually trying to build a lifestyle business? I hope I summarized it well.

[00:35:10.400] – Chris

I think it really covers a lot of what we spoke about, so that’s great.

[00:35:14.910] – Joran

Nice. If people want to go deeper on this topic and want to reach out to you, how can they do?

[00:35:19.790] – Chris

Connect with me on LinkedIn, Chris Out. I’m also in the process of writing a book about this, so probably a lot of people will learn a lot about this in the foreseeable in the future, but we’re still figuring out how we’re going to dog food this, but it’s going to be great.

[00:35:35.300] – Joran

Nice. That’s actually your third book then right now, right?

[00:35:38.620] – Chris

Yeah, third book. The second book that I fully write myself, but the third book I’m involved in.

[00:35:44.040] – Joran

Okay, cool. What we’re going to do is we’re going to add a link towards your LinkedIn. We’re going to add a link towards your book, which is called Structuring for Extreme Revenue Growth. We’re going to add a link towards your site so people can find you. For people listening, make sure you leave us a review on the platform you’re listening right and fill out the poll we’re going to add to this podcast. Thanks for coming on, Chris.Thank.

[00:36:05.380] – Chris

You, Jorn.Thank you.

[00:36:06.760] – Joran

Thank you for watching this show of the Grow Your B2B SaaS podcast. You made it till the end, so I think we can assume you like this content. If you did, give us a thumbs up, subscribe to the channel. If you like this content, feel free to reach out if you want to sponsor the show, if you have a specific guest in mind, if you have a specific topic you want us to cover, reach out to me on LinkedIn. More than happy to take a look at it. If you want to know more about Reditus, feel free to reach out as well. But for now, have a great day and good luck growing your B2B SaaS.