What is SaaS and why is it the best business model in the world



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What is SaaS and why is it the best business model in the world with Jonathan Markwell

Chris OHare: [00:00:00] Welcome everyone, and thank you for joining. We'll just wait a few minutes before we start, but please say hello in the chat. How has your day been? Put your name, your business name and the comments. And don't forget. You got an expert on tap here? Who knows everything about software as a service? It's a, don't forget to put those questions in the chat and we'll get to those at the end of the podcast.

[00:00:26] Welcome to the Quick Win CEO podcast. And the aim of this series is to talk to businesses and entrepreneurs and experts help you understand key concepts for your business. Along with three Quick Wins that you can take away and apply to your business today. And every week we'll be finding out about the entrepreneur and diving into a different but important topic.

[00:00:50] And if you haven't checked out the podcast already, Please do there's seven episodes up already. And this is the eighth episode and the episodes include How to go Paperless with Josh Wallman, What is Streaming with Tom Young

What is Coding, with Melenie Schatynski. If you want to get started with coding and you've got How to Prototype with Spencer Ayres. Perfect if you want to get started with looking at prototyping an app, you've got what is Cloud Accounting with Darren Fell from Crunch. You've got How to Create content with Toby Moore and most recently, What is a Podcast by number one podcast owner Alex Chisnall. But today this week, we will be talking about SaaS. What is SaaS otherwise known as software as a service?

[00:01:37] And that's the question we'll be answering with serial entrepreneur, Jonathan Markwell. Now Jonathan's business Planescaling advisors, businesses, on how they can implement SaaS with impressive results, such as helping three businesses go from zero to 1 million pounds in annual revenue including serving over two and a half thousand businesses.

[00:02:00] And employing 20 people along with several SaaS, businesses of his own under his belt. Now don't know if it's the resume certainly demonstrates his credentials, but not only this and you might have heard of The Skiff, but Jonathan established The Skiff for co-working spaces in central Brighton with what over 100 members.

[00:02:21] And they've been supporting entrepreneurs throughout the pandemic. But also a bit of a side hustle. He established a new initiative called Kind Ops, and that initiative was to help businesses, put people first supporting the wider community and prioritizing the planet. Now, this is going to be a great live episode, finding out why SaaS is going to be the best business model of the world and is already the best business model in the world.

[00:02:49] So here we go. Jonathan Markwell. Hey, how are you doing Jonathan?

[00:03:01] Jonathan Markwell: [00:03:01] Hi, Chris. Hi Everyone.

[00:03:06] Chris OHare: [00:03:06] So thanks for coming on the show, Jonathan, how are you?

[00:03:11] Jonathan Markwell: [00:03:11] Very good. Thanks.

[00:03:12] Chris OHare: [00:03:12] Good. Good. Let's get stuck in, straight into the questions. Firstly, tell me the last thing that you read or watched that kind of left an impression on you and it could be anything, right? So it could be a Netflix series, a funny video, a book, you read a quote you heard anything.

[00:03:32] Jonathan Markwell: [00:03:32] Right. Well, I keep a few books on my desk, which I really like to dip into occasionally. And this one's one of my current favorites. I really like it. It's called Your music and people by Derek Sivers, it's a whole bunch of very small lessons that he learned. Yeah. When he was in the music business. I mean, he Derek's was well-known for creating the online store called CD baby, which was a great place for independent musicians to sell music.

[00:03:57] But this book isn't really about that. It's about his a lot of what he learned as a, as a professional musician. And and I just like it because it's really interesting looking at a different take on business from a completely different industry and one that I'm really not that familiar.

[00:04:12] Chris OHare: [00:04:12] Oh, I was going to say, are you a musician yourself?

[00:04:15] But it doesn't sound like it.

[00:04:16]Jonathan Markwell: [00:04:16] No. And I've got a cello in the corner here, which I use very rarely, but I'm a very long way from being anywhere you know, even aspiring to be a professional musician.

[00:04:25] Chris OHare: [00:04:25] But it sounds really interesting. Why, why cello? Why did you pick that?

[00:04:31] Jonathan Markwell: [00:04:31] Hmm, I'm not sure. I mean, you're asking a question, a decision that was made 30 years ago.

[00:04:39]I do like, I like cello music actually. Yeah, so maybe I just there was some tunes that I quite liked.

[00:04:45] Chris OHare: [00:04:45] Yeah. Okay. Well that's really interesting about that book though. I mean, taking a different perspective, like from, from a more creative perspective, the a musician is it's an interesting one and what it can do, it can give you the kind of like those, those edges that you might be able to apply to your business that you just wouldn't have thought about quite outside the box.

[00:05:06] Would you agree?

[00:05:08] Jonathan Markwell: [00:05:08] Yeah, there's some really interesting alternative perspectives on things. There's one store IRA, quite like your neck or just about pricing and how, when he was touring and doing gigs at different universities around the States may have a fixed rate for, I don't know, a two hour set or something like that.

[00:05:29] And I think it was $1,500. And the person that he was he was trying to do the booking with set on, and it was quite expensive if you do. If you do a one hour set, can we pay half that? And he said, if you want me to do one asset, I'll charge you $2,000. And and this is a really nice story about, you know, the reason why, which he then explained to this Booker was that you know, I've got to travel all the way there, and I really enjoy playing music.

[00:05:57] If I'm only going to go and get half the enjoyment from the experience, and I want more money instead, and I can really see how you know, I can feel the same when I'm doing you know, some coaching or consulting. And if it's, you know, really, really tiny engagement, I like to get really into it and really understand a business in a, in a, in a shorter engagement is can be less, less fun, less rewarding.

[00:06:21] Chris OHare: [00:06:21] Hmm. That's really interesting. And it's exactly the same for me as a consultant, because like, I like the bigger projects I can get my teeth stuck into and actually make a difference and make a change because you know, it's not, it's not always about, you know, financial incentives that we do, the things we do.

[00:06:38] Right. We, we do it because we want to make a difference or we, we love what we do. So I might have to pick up this book myself. So I'll definitely. Check that

[00:06:46] Jonathan Markwell: [00:06:46] out,

[00:06:47] Particularly recommend the audio book as well. It's really easy listing. He's got. A perfect voice for the, the radio and phone calls and things really, really nice to, to listen to our dog.

[00:07:00] Chris OHare: [00:07:00] Okay. Well, that's going to be on my book list, right? So in your own words, give me an understanding of what it is that you do and kind of what your business does.

[00:07:11]Jonathan Markwell: [00:07:11] So I guess the start time. A software developer. I spent most of this morning and most of yesterday writing code. So, you know, that's my my profession.

[00:07:21]But I've always been interested in, in section of that with with learning businesses in different forms. And so Most recently I tend to make more, my income. My business is, is is advising people who are making software businesses and providing both the technical and, and business take on that.

[00:07:42]I guess the short version shortish version.

[00:07:45] Chris OHare: [00:07:45] So give me an idea of the, kind of a couple of years SAS businesses that you've got running.

[00:07:53]Jonathan Markwell: [00:07:53] My self, I have one that's very early stage called Good reflect kit, but the ones that are, are more impressive at the moment the, the, the three big ones that I've worked on are coverage book and arms the public, which were both with the team that propelled on that.

[00:08:08]So I started working with them back in 2013, I think, to begin with, and they had a great agency that was very profitable team. Around 50 people. And they decided, you know, what's the, what's the next step for them. And and they tried lots of things to, to sort of get into doing, doing software and a few, a few false starts and.

[00:08:32] Decided that they'd like some assistance with it. And and I I, I kind of ran an internal accelerator and we experienced through a few ideas and eventually at the end of it, long story short again is these two businesses coverage book, which is a tool for public relations professionals to, to create their reports for showing the outcomes that they produce for clients.

[00:08:53]And and the other is onto the public which is a sort of concept marketing research tool is one way of looking at it. If you stick a keyword into the public.com and it comes back and gives you a sense of all the things that people are searching for. So it's like supercharged way of partially typing things into Google and seeing, seeing what comes back.

[00:09:12]And yeah, both of those businesses are doing, doing really well with a pretty small team, far more profitable than in the agency. And yeah, it's it's taken that business to a completely new place. Yeah.

[00:09:25] Chris OHare: [00:09:25] So, I mean, that's amazing that you can take like an agency model and turn it into this massively profitable software company.

[00:09:33] Now, essentially you're, they're a tech company. And we'll cover like the benefits about that later. But, well, I remember about pro propeller now, what is the famous for me when I was you know, knowing about the agencies in the in the, in Brighton, and especially with that. They have these, these dreams that they put in a machine and then every, what was it like employee of the month or something would get a dream.

[00:09:59]And it would come down the shoe and it would basically, they could do anything they wanted. Was it literally anything? I mean, did you see this in action?

[00:10:08] Jonathan Markwell: [00:10:08] Yeah, I, I, I saw it in action. I'm not sure we ever had a dream bill when my name was in it, because I, I I was mostly on the, on the outside, but I was very privileged to be able to be in in those sort of end of quarter round of end of year meetings when we hit the milestones that we wanted to hit.

[00:10:24] And and someone that someone got to have their dream ball drop. And there, you know, there's a wonderful thing about working with Propellernet that is that they've got this value set and it's mentioned, which is all about making life better. And and finding ways to do that for their, their employees and learning community.

[00:10:42] And and yeah, the, the the dream ball machine Basically kit came out when I think we, most of the time when I was involved, at least it was a sort of fixed to a revenue per head milestone. And so as an agency they kind of struggled to go between 80,000 pounds per year revenue per person, per full-time person, or getting out to a hundred thousand.

[00:11:08]And they got close to a hundred thousand and when we'd sort of do five or 10,000 pounds leaps, and, and in that growth, then it would be time to to release a dream ball and, and share that we've when everyone in the, you know, a couple of guys got to go to the world cup in Brazil. Alan so when I worked with he hadn't actually been in the company very long when he was lucky enough that that has his book came out the machine and he got riding a motorbike across Africa was his it's his dream.

[00:11:34] And so the company helped him get him get a motorbike And yeah. And, and, and go off on an amazing adventure, another a woman she always had a dream of, of putting a kitchen on wheels and making food round in different countries and company helped her buy a car and converted, I think, a caravan to, to have a go.

[00:11:53] With that and there are all sorts of other great things as well.

[00:11:58] Chris OHare: [00:11:58] Yeah. I just remember it. I mean, not only was a good company, a motivator but also it gave the, the kind of marketing out there because everyone knew about it. Right. Everyone heard about it and I thought this, this is so clever. I mean, especially you know, considering all they do and it, it, it made a lot of sense.

[00:12:15] But if if anyone hasn't heard about this, you should definitely check out this process. And this, this country,

[00:12:23] Jonathan Markwell: [00:12:23] it's another one of the books I have on my desk is Nikki Gatenby who was the MD of Prapellnet at the time. It's it's, it's filled with stuff like that. The dream ball is just a part of one chapter, I think, in this book.

[00:12:36]And and you can find out all the different things that, on that got up to on that, on that mission to put people first.

[00:12:43] Chris OHare: [00:12:43] Oh, I'm glad you mentioned that. Cos I've forgotten the name, but anyway, super, super engaged is the name of the book. Yeah, super engaged. Nikki Gatenby. I'm sure you can get it on Amazon.

[00:12:56] So what drives you as an entrepreneur? What gets you out of bed in the morning? What's what's that hunger in you?

[00:13:03] Jonathan Markwell: [00:13:03] I guess it's I like like making things, so I've, I've got to specific to getting out of bed at the moment. I'm I've, I've got a current routine to try and balance childcare and the lockdown where I get up at literally five 30 light shaft, I slept in a bit this morning.

[00:13:20]And I'm working until 12 and I try and mostly write code. For that time. Well, I've got a project I'm working on. But the thing I find most satisfying is it's writing software that I know that people are going to use. And I've got some people that I'm working with specific and use it and they're going to use it with their clients.

[00:13:36]And and yeah, and if I can, if I can put some work in that lots of people can, can benefit from. That's pretty awesome. And then the, the sort of secondary to that is a little bit of a mission to just make work better. It's been inspired by propelling that was make life better. It, a as a sort of sort of guiding idea, and I'm really into the idea of making work better.

[00:13:58] There's lots of ways that work can be better for. People. And in some companies it's easier to make work veteran than others. And part of that sort of betterness can be, and what we as businesses do for, for, for employees, so that the dream bowls bit with that but also activities that we can do to support our communities or the rest of the world and, and the, and the planet.

[00:14:22] And so that's sort of what spurred me into creating kind ops is it's me basically. I was already collecting little ideas of of things that I see businesses like my businesses do. And thinking that's what I'd like to save for later, because I'd like to try and do it. And, and actually a lot of these there, lots of businesses that I know they're in a position where they could try it now, others, they can sort of put that in their back pocket for, for later.

[00:14:49]And it, and sometimes, you know, some of the best businesses aren't doing particularly exciting. Things like sort of businesses that that, that are easiest to grow, get most customers. And I've worked with some people that find it. You can find it therefore challenging to sort of really get excited about a project.

[00:15:08]I think there's a bit of a movement with calling it unsexy. Startups.  But you know, if you, if you can do that that work and it creates some value, but then we've you're able to do it in such a way that you can do other things that, that can have an impact a wider impact. Like if your, if your businesses is helping.

[00:15:28]Widely PR companies, although I should, I found it quite easy to get quite excited about doing that because if you're meeting people and you see the impact that you're having on them, that, that that's great. But if, if you're not really particularly excited about making the PR industry better, you know, what, if you're making your profit for the business and you know, we've we've lots of great things going on for it that give you the the resources to be able to.

[00:15:52] Do you more for your employees than you might otherwise be able to do or to, to make big charitable donations or to By a forest or tree somewhere to, to really seriously go carbon negative. Then you know, that, that can be stuff to get excited about. It's definitely a movement especially with the younger generations that the people are doing more of this, or they're looking for employment and companies that are thinking about this.

[00:16:18]Chris OHare: [00:16:18] I remember listening to a podcast with Bulb the cofounder of Bulb and he basically. Has this mission that, you know, he wants to be able to sell energy cheaper, but also the buy renewable resources. And I think that's, that's it's quite trendy the way it's quite fashionable to care about the planet and that, and I love that.

[00:16:40] What a, what a kind of full circle we've come round, but talking about motivations. You probably don't know this, but I first met you on the start-up Sussex competition. Do you remember you were a judge on that competition?

[00:16:54] Jonathan Markwell: [00:16:54] Do you remember Chris? Yeah.

[00:16:55] Chris OHare: [00:16:55] Yeah. What was it? Five years ago?  probably over five years ago.

[00:17:01] Yeah, yeah. Yeah. It was 2015 and and I was a very much young entrepreneur kind of had this SaaS business or started with my first SaaS business and that kind of migrated into an agency. And then but. I just remember looking at what you did and what you, you kind of stood for. And I think at the time you were doing the skiff and everything, and I just felt that this is what I want to do in my future.

[00:17:29] And actually you probably don't know this, but you were quite pivotal in, in. Deciding what, what I'd want to do after the agency or within the agency was to be a SaaS expert like yourself and, and kind of build SaaS businesses and, and grow. So thank you for that, Jonathan. Appreciate that.

[00:17:49] Anyway. We've we've spoken about you as an entrepreneur, your business, and you've got this amazing business and you're helping all these other businesses. So let's talk about, more about the topic, which is what is SaaS. I mean, do you have like a go-to definition for SaaS or software as a service?

[00:18:08]Jonathan Markwell: [00:18:08] I guess it's it's it's software that is Usually remotely hosted and and therefore can be delivered almost in a way that you might finance something.

[00:18:19] So, so I guess I should have practiced this this response, but It's software that you can buy without having to buy it outright. So you don't have to put all the, all the money in as a customer upfront to buy it. And then B start equipment. And and it's. Usually hosted on the internet so that you don't have to install it anywhere.

[00:18:41] I'll look after it as a customer. It's, it's looked after for you while you use it. Other people have better definitions of SAS than that. No, I think I, I think you pretty much nailed it. So to be honest, I mean for me, so SAS is is, is it. It was a new movement, right. Moving away from software that was installed on PCs, but basically creating this ubiquitous Ability to have software anywhere in the world, because it was browser base and it's very much internet based.

[00:19:12]Chris OHare: [00:19:12] And it wasn't. So them by the devices that, that they had to work on, right? I mean the software that you have to put on your PC and that's it, and there's nothing you can, you can do, but you can literally go anywhere in the world and take that software with you because all you do is rely on the internet.

[00:19:28] And the thing is.

[00:19:32] Jonathan Markwell: [00:19:32] You could say that the thing to contrast it with is for those of us who were around back in the nineties, buying software off the shelf would be would be a big contrast. And also, but nowadays like apps for your iPhone we're we have some exceptions you're downloading those you're buying from usually outright.

[00:19:50]And and then running them on your device rather than having someone else run them for you. Yeah. Yeah. I mean, it's, it's very much different to that. But. I think SAS became really sexy from Silicon Valley. Right? I mean, they're the ones that kind of really pushed this down our throats and said, yeah, there's a new way of doing these things.

[00:20:12] Chris OHare: [00:20:12] And I think that the way, like you mentioned earlier that the funding was lower cost and there was like no setup fees. You could basically just, yeah. Pub pay for a month. And then after that month, if you don't want to use it again, that's it. You can kind of let it go. Yeah, I think, I think there were, there were some Silicon Valley firms with lots of caching and marketing pounds put behind this, the, the.

[00:20:35] Jonathan Markwell: [00:20:35] Best example is probably Salesforce who Mark Benioff sort of leaving Oracle where he worked before, which was more of a traditional selling licenses company to hosting his CRM, Salesforce in the cloud. And and charging people a monthly or annual fee to, to use it. And they I remember their marketing had they used to give out stickers with no software written on them and sort of, you know, rent a sign of a cross through it.

[00:21:08]They're probably not the ones that inspire me the most because they we've we've said I can, buddy. Companies, they often require huge amounts of cash to build up their position. Like certainly coming out of Oracle building that and. They had a lot of cash behind them to, to, to, to build Salesforce.

[00:21:25] And you know, not, not that many years later, the one that's sort of become more of the the sort of guiding light, I guess, in the circles that I'm in. It's not say base camp. I was going to mention, but it's literally going to say that. Yeah. I mean then, I mean, it's the first software as a service.

[00:21:43]But they showed that they had a great demonstration of and we're very public about, they were an agency and they built this as a side project to scratch their own itch. And yeah. They put it up online and on a single server and started training their audience about it. And and, and people came in and it became profitable very quickly.

[00:22:04]But without any external funding to get them. That far, and they're actually local examples of, of this as well. Create.net or actually one of my clients as well. They, they they're a build your own website service and they're over 19 years old now. So actually I think it might be older than.

[00:22:21] Base camp or certainly older than base camp software, if not the, the company that started it. And and yeah, they've been, they've been helping people with their software, selling it month by month or year by year and hosting it for, for all that time. And and Simon, when he first built it, he was doing contract work.

[00:22:40]So that funded it, they never took external funding to do it. I'm looking forward to talking to Simon, he's going to be on our podcast in the next couple of weeks. So I'm going to find his, yeah. His story is quite remarkable considering, you know, almost like a pioneer and you know, early two thousands to kind of go down this route.

[00:23:00] Chris OHare: [00:23:00] So we're really looking forward to that one. I think. What are the benefits then for creating for a SaaS business model? I mean, should businesses consider implementing a SAS business model?

[00:23:15]Jonathan Markwell: [00:23:15] There's lots of different ways to look at this. Well, I'd start with the customer's benefits first. Which they, they don't have to spend as much upfront as they, as they would normally.

[00:23:26] So it's much lower risk and they usually depending on exactly what they're buying, they're not locked in. So they, if they decide it doesn't work for them, they can leave. But also they don't have the burden of. Maintaining it, or keeping it up to date. If anyone's worked in a large corporate and knows about, you know, licenses expiring and the amount of pain that that can cause with having to get servers, updates, and licenses renewed on, on things to keep call centers running or whatever, it's honestly a nightmare.

[00:23:54] But if you're if, you know, if you. Find that software software as a service. That's not something you have to worry about. It gets updated. People make the decisions and look after the security and all the rest of it for you so that you're not bringing them up burden into your company, along with, with the software.

[00:24:10]It's not some benefits of customers, also the customers the way it should work. And, you know, with, with the better software providers it does is that if they, if they continue to pay and they show that they're getting value from it, the people that they're buying from have the means to continuously improve it.

[00:24:25] So that software does get better and better over time, rather than it just stagnating and people not being interested in updating it because they've already sold it to you. And now they've moved on to something else. And then from from a business perspective and I guess, you know, getting to that question of why it's such a great model for, for, to sell it is that may it's the it's the business model really shows that you're creating value month in, month out for your field customers.

[00:24:55] And you're rewarded for that. It's very easy to predict Changes in revenue be that growth, or if you get to the point where it's it's leveling out or where it's going to start declining, you get a lot of warning about that. By having lots of customers paying you relatively small. Amounts of money on a, on a recurring basis.

[00:25:18]So it can be, it can be very resilient. I know lots of SAS businesses. I was in touch with, through the pandemic when, you know, when we had a crisis time in March and April, where lots of people were stopping paying for things. And yes, most of the SAS businesses I know saw are a bit of a dip because people got a bit, a bit tighter.

[00:25:37]But for, for most of them were. Where some exceptions that are very specific, they were able to, to come back from that and they had enough margin built in that their businesses have really largely been unaffected. Some of them are actually benefits from from, from the way that the market changed through that.

[00:25:54] But these changes don't happen super fast because you're doing lots of small debt deals that compound to enter more, more revenue over time. Yeah. I mean, that's, that's a really good point that consistency of income from the recurring revenue and, and I like the fact that you are constantly improving the software with the, with the features.

[00:26:19]Chris OHare: [00:26:19] And whereas before it would be kind of very staged releases and you'd have to buy the upgrades. But also as a business, you can better predict how much income you're going to come in and on the growth and everything, because it's, it's a lot more sustainable. It's not like. Big chunks of work or, and it's, it's, it's just incremental very much.

[00:26:38]Moving forwards on a, on a weekly basis, as you implemented features.

[00:26:43] Jonathan Markwell: [00:26:43] Yeah. And one thing I really like about it is even in a very small scale business that maybe has more or, or or a dozen people it becomes a system with some numbers that you can look out that give you the health at quite a high level, you can see where the business is going, how, how it's doing.

[00:26:58]And you can, you can depend quite a lot on, on that. And you've got their system of customers coming in for, for trials through. One end. And then I pushed her, those converting into, in span of paying customers and eventually hopefully a small portion of them. Finding that time with the software is over and then moving on to other things, but they're all numbers that you can track.

[00:27:22] And once you've got a reasonable number of. If customers say a hundred plus or more they're all words of stable and you can go and just pick one part of that system and do some work on it. And it has a positive impact on. Or it can have a positive impact and everything else.  Which kind of reminds me of computer games that I play as a kid.

[00:27:43] You know, if it's SIM city or those sorts of strategy games, you can, you can build these little systems. To, to incrementally improve different parts of your business and you can measure the impact on them. Whereas if you're running an agency and you're only doing a couple of deals a month, or or sometimes even, even fewer than that, but big ones, it's very difficult to get, have a feedback loop where you can see whether or not it was just luck that got you that past deal, or if it was actually the system that you've put in place, that's working because you need the.

[00:28:15] Then volume of of customers and users to be able to see those numbers and really work with them, manage them. I love dies. It's like an engine, right? You're creating an engine that, that, that is constantly perpetual in terms of its motion. And you're looking at all the stats and investors must love this as well.

[00:28:33] Chris OHare: [00:28:33] I mean, it's one of those things that if you can see all these numbers, you can see that the lack of risk, the investors, we must love, love a good SAS business as well. Right. Yeah, it's changing investment for the better than other SAS is a very mature model and, and people have a very, very good sense of what, what a good SAS looks like.

[00:28:56]Jonathan Markwell: [00:28:56] People that would be you know, that have money to invest in relatively high risk ventures can actually look at a SAS that's doing, you know, relatively small amounts of money, maybe a thousand pounds a month or a thousand dollars a month and say the fact that they got to that stage. You know, we've, we've got enough data to know that that's probably possibly the hardest bit to, to get through.

[00:29:16] And so if we put some cash in at this point, it's a lot though arrest and taking some kind of a bet on growth on an idea stage or something, that's just just a prototype. And so they really wanting to put cash in on, on better terms. We've got to expect we've we've lower expectation on high rewards.

[00:29:33] Like you don't have to turn that into a billion dollar company. If the risk is. Lower for, for them to be able to see the returns that they're getting. So it's creating some interesting. Alternative forms of investment, which I'm find much more interesting where I've gone for a pair of myself. I've just being completely anti the world of of investment because with, you know, other kinds of models or earliest stage investing you know, just buying lottery tickets and hoping that one of them will become a massive, massive success rather than just a decent success for the founders.

[00:30:08]And the result was of that is that if you don't done that path of taking VC money, your, the investors don't have an expectation that you will do everything you can to grow at that pace that they need you to, to, to grow out or just die completely so that they can then get the tax benefits of you.

[00:30:25] Have you been dismantled? Yeah. So I think it's just it's making it a healthier way of looking at an investment that's open to a wider range of people. And you know, there's still obviously room for high risk stuff, but for people that don't have that appetite you don't, you don't have to be going in that direction to, to get some external funding if you need it.

[00:30:50] Chris OHare: [00:30:50] VCs are not something that will be taken lightly. And I've read plenty of books about this where lost and founder. The, the guy who founded Moz was very vocal about this. So if it doesn't have a book, everyone should read. I'm really enjoyed that one. Definitely. Rand Fishkin. That's the one.

[00:31:12] Jonathan Markwell: [00:31:12] Yeah. And he's actually in, and a lot of this new movement of investment that I was talking about and that his latest company's about Toro. He decided to raise some, some money for but he came up with a completely new kind of term sheet was quite. Quite different compared to what professional investors are used to whereby essentially, instead of saying that he's going to have this amazing growth, he said, now the, this is exchanges there.

[00:31:37] So what we'll do is we'll cap our salaries as, as founders to market rate. For software developers in Seattle, I think they said, and as soon as we make more money than that, where if we want to take more money out of the company than that, then we'll consider that a dividend and start giving you cash back as investors.

[00:31:54] So most tech investors expect that they only get a return when the company is sold or it floats on the stock market or another investor buys them out in some other kind of way. And so his different approach we should probably, you know, Not many miles away from what lots of industry has been doing for a long time is to say, no, no, we're going to make a profitable business sooner.

[00:32:15]Take some of the risk out of it, you'll be able to start getting returns on it when we get returns out of it as founders. And and that'd be investment organizations, the most obvious one, there is a tiny seed, which is, has a set of terms that the founder friendly times like that, that are derived directly from the approach that, that Rand Fishkin took with, with his investors.

[00:32:39] Chris OHare: [00:32:39] Yeah. I remember him saying that he wasn't the most highly paid member of staff in his company. And I, and I just, honestly, I felt. This is crazy. This is, you know, he should be rewarded for his hard work and his risk and his energy into this. And I remember he turned down an offer to, I think it was HubSpot and he wished she'd taken that.

[00:33:01] But I'm definitely a book everyone should read. We've got a question here from other a marketing. Is it best? Because it maximizes efficiencies. So I think there's two folds to this. So there's the, probably the whole performance of the actual software itself. It kind of scales itself. It manages itself in, in some respects and therefore saves you time, but also maximizes efficiencies, I would say in terms of what you're offering as a service.

[00:33:32] So you don't have to do it. A machine is doing it for you almost you know, turning, if you were turning yourself into a robot, this is what the robot, you know, Chris would do. What's your, your opinion? Yeah. It's It's it's, it's a business that's easier to make profitable with selling your time as an alternative, mostly with what you and I are talking from an agency positions or consulting positions.

[00:33:59] Jonathan Markwell: [00:33:59] You know, there's, there's a bit of a limit. Maybe, you know, some people might argue is a bit of a psychological how much you can sell a unit of your. Time for, and agencies feel that, especially if they're working with large organizations that have of what the maximum amount they're expected to, that they're willing to pay for the timers and with When you're selling something, any other kinds of products and software being one of them that the time taken to produce it is taken out of the equation.

[00:34:25] It's much more about an exchange of value. And so you know, you can, you can boil all your. Decades of expertise into in, in, to a software and and sell it in a way that's both affordable to your customers. And also over time can, can compensate you feel more aligned to the amount of value that you've created.

[00:34:47] For for them. And so you end up you know, when, when you're successful at doing that and everything else lines up you can, you can create a business that, that can make you hundreds of thousands of pounds per employee per year. Whereas an agent agencies often get stuck at that sort of maybe a hundred thousand pound limit, depending on what industry you're in and where in the world you are.

[00:35:14] Chris OHare: [00:35:14] Yeah. I mean, it's the quest cause you have time and time means the money, right? It's not, you're not prioritizing what you're offering as such and therefore it doesn't scale. And there's probably a lot of listeners here that don't necessarily have software or even considered making software there's there's there's consultants who probably wants to turn the business into a, more of a I an automated SAS type business.

[00:35:38] So therefore, I mean, should these kinds of people create software, but it was your opinion on that?

[00:35:46]Jonathan Markwell: [00:35:46] Very carefully. Like it's not, it can seem wonderful when you look at the financials of other people's SaaS businesses, but the reality of SAS can be can be quite hard work. You've got Software to build there's loads of unknowns and building software, and the less, you know, about building software, the less equipped you are to deal with some of those just purely technical challenges.

[00:36:10]Then the actual, the biggest problem in, in, in SAS. And it might even answer what the biggest. Mistake, my SaaS startups make, which is one of the questions in here is that the you know, at least 50%, maybe more than 50% of the problem of creating a successful software as a service business is your distribution of that.

[00:36:32]Of the value that you've created. So assuming you've created something that is is valuable, maybe, you know, it's valuable because it's scratching your own itch, where you have one or two customers that are paying you for it. The next biggest problem is finding enough other customers to be able to turn it into into, into a profitable business and too many people.

[00:36:52] You know, that's, that's an afterthought and you get very excited about building the business or building the software first, rather than figuring out how you're going to distribute it. I mean, I've always said to companies that your tech should be 10% of your budget and your marketing should be 90% because it's the case again.

[00:37:12] Chris OHare: [00:37:12] Now the naturally yeah, if you look at these big companies, they spend massive amounts of money, getting it out there. And so if you can't afford that kind of level of budget, then you know, you shouldn't even consider it. And but I definitely think. I might have to cancel that a little bit. I mean, that's an extreme view.

[00:37:34] Jonathan Markwell: [00:37:34] I mean there are that, that could work really well. But you need to have a bit of balance and part of the reason that you need to, I would say a bit more balanced than that is the realities of the the software industry at the moment is that there are not very many people for it for a whole lot of.

[00:37:53] Jobs. And so you need to developers end up being extremely expensive. And, and just looking after and maintaining software. Ends up being extremely expensive. So I don't, I don't want to scare people off entirely by, by, by by saying that 90 to 59 to 10%, what we probably should say is that as a founder that's non-technical is, that's probably where you need to be spending it.

[00:38:15] Time is 90% on the, on the marketing and distribution. So you have a a reliable channel and 10% on the, on the product. So that, so that, yes, it's an attention thing maybe rather than a budget thing. Yeah. So for me, it's like, if, if you're not prepared to put in the effort or the value into getting out there, then there's no point it's basically what I'm saying.

[00:38:38] Chris OHare: [00:38:38] Like it's like building a website and then hoping people just turn up. It's, it's that kind of thing that you need to solve a problem, right. And a problem that people are willing to pay to solve. And that's another big. Thing that people don't really take into account when they go into to a SAS business, have they truly understood the problem.

[00:38:58]But I mean, that's really interesting in terms of the way you see the kind of the technical part of it is that, you know, it's only software developers are expensive, but also there's other ways of creating software. Right? So, I mean, How, if you were going to make a prototype tomorrow, what would you be start building in other than if you weren't a technical founder, what would you do?

[00:39:23] What's your next steps? I think one of the things I'm kind of doing them might relate actually to another question I can see popping in here about thoughts on off the shelf products like mighty network. I don't know, mighty networks specifically. I have a big idea what I think it is, but maybe a community platform or a newsletter letter platform.

[00:39:46] Jonathan Markwell: [00:39:46] And, and and would you just, what I would advise. You do is start to build an audience and create some value in a, in a different way. So yeah, and it might be about building out specific to something that can only be sold with, with a product. But if you can't get people to sign up to a newsletter that is relevant to the people that you're aiming at, then you're going to have much harder work getting people to, to, to buy some software from you.

[00:40:14]This is another big challenge for software it's like people are actually pretty reluctant to spend money on subscriptions. They much, you know, people will be I'm sure some research of the specific numbers has been done on this, but it's like, you'll be much more likely to buy something for a hundred pounds.

[00:40:28]As a one-off then maybe even that 30 pound subscription, even if you know that you can cancel it. So you've got more work to do to sell it because people understand what they're committing to. So you want to test that you can, you can get those little commitments from, from people along the way.

[00:40:47]So, yeah. So, so building the audience, we've maybe mighty network of that's, what that does or, or something like convert kit as a, as a newsletter platform. And there are various others yeah. And then the other thing to do, if you're non-technical let's do is to build more of an appreciation of what was involved in creating software.

[00:41:05] And there's lots of ways of of trying that now from HTML tutorials to actually, you know, Some people are most that kind of thing they've done and which is very technical, is creating like a Google spreadsheets template. And there's a market for the Google spreadsheets templates. If you can make a spreadsheet that is so, so great that you can give it to other people and, or sell it to other people and they can copy it.

[00:41:29]And along the way you find out about. You know what some of the pains that you have to overcome to just sell a spreadsheet to someone you know, that that's a great experience when you can level up again and use a lot of no-code tools. There are people that have worked out ways to distribute spreadsheets, using things like Gumroad to do, trying that make the transaction happen and then Zapier to send the right signals to different places, maybe to get people access to a Google sheet.

[00:41:56]Maybe another service like air table also has sort of. Functionality that you can, why things together like that. And then the leveling up again, you might use a no code tool. I think that you've had someone talking about no coding prototypes before something like bubble or or workflow maybe where you can start to have something live on the internet that looks and feel it starts to look and feel more like a, like a SAS.

[00:42:20]And and there are some sashes out there that are made like that. And you just wouldn't know that what's behind it as someone that's not a developer. That's nice to couple together, a few different services. So exposure mentoring with those things will give you an appreciation of what's involved, such that, you know already nice outcoming.

[00:42:43] So even if all you've created a prototype, you don't think it's fit for anyone to actually buy. You've got something that's. Excellent to show a developer that a developer will be far more motivated to create because they know they can see all the problems and they know how to, to fix them. And the only thing that's going to motivate that developer is the fact that you've not only put that much work in, but hopefully you've already got people using it in some way.

[00:43:06] Chris OHare: [00:43:06] Yeah. Getting traction is really key to this because no, I mean, Th th you potentially have money coming in. It proves to yourself that it's worth investing in. But it also proves to other people that it's worth investing in. But the other kind of key point is that you can iterate and improve. So if you've got people who essentially telling you what they want from the products, you can kind of take that feedback and advice and keep key that coming in.

[00:43:32] And before you spend massive amounts of money on a. On a developer. I mean, talking about getting a a developer on board, say you are at that stage. I mean, would you prefer to get co-founder or would you, would you prefer people? I mean, getting a co-founder is quite obviously tricky in terms of having the same motivation or would you say just make enough money and get investment or bootstrap until you can afford a developer yourself?

[00:43:59] What would, what would you say.

[00:44:02]Jonathan Markwell: [00:44:02] It depends on lots of things. It depends on, you know, what your current situation is. You know, we've prepared that, for example when they decided they wanted to get into this they had one long-term employee that had taught himself how to code. It was extremely professional, even though that wasn't his main job and he really wanted to do it.

[00:44:23]And they also hired someone out of university. Who had only recently learned how to code, so sort of come in and he was, you know, super motivated as well. And so part of my role was, was kind of coaching the two of them to make commercial software for the first time. But they, they ultimately, we looked back and it was like, Like a full year's worth of profits that they invested into that by taking those, the team of people involved off some client projects and spending money on other things like me to, to make it work It's going to depend on the investors that you have as to what they are prepared.

[00:44:59] They are happy for you to spend money on it. Be surprising if you were to, you know, you you're going to have to have had something pretty special going on, likely some pre-sales or a massive community or something of some sorts to be able to get external investment before you've got a developer that's fully on board, helping you with.

[00:45:18] If you, if you were going to be dependent on, on software to, to build what you need to build. Yeah, so I don't answer that question is there's a, there's a better way. It's going to be a case by case thing. And you know, you should absolutely. You know, talk to people about, about what you're, what you're working on and and get to know different developers.

[00:45:39] And it might just be that some stars align somewhere and you meet someone that's that has the technical skills and is excited about what you're doing. If you don't have the cash to hire them or, or maybe they're yeah. That, that they might be interested in working in a way, which, which you can Afford to pay for, but there are, there are very few developers around that or work for free or just equity only on this sort of thing, unless you get them extremely excited somehow.

[00:46:07] And developers are in general quite difficult to get excited when, especially when they're on users involved or, or, you know, something exciting going on. No, I completely agree. And I, I, I like the fact that you're being very real, that it's a case by case basis, right. It depends entirely on what, what it is that you're trying to do or the, what your business is doing at the moment.

[00:46:32]Chris OHare: [00:46:32] And. And that's the kind of advice I would give as well. Like depending on, on what, what I heard from them. How you, I feel, I mean, cause, cause some people are completely not novices in technical fields and they, they need a guiding person to kind of help them go down that road. And that's where maybe a found a co-founder will probably make more sense, but.

[00:46:56] Finding that person is, is very difficult. But I really liked the idea of just building the business without the technical element are at the heart of it. And that you're using all these different, you know, combinations of software and no code platforms. And. The like, to kind of really prove out the model.

[00:47:16]And it's something maybe young developer, self Mt. Myself would not have really thought about. I would just get straight, stuck into the code. But now I'm looking at it. I'm going well, actually, I've still got to maintain, I'm still going to work on it. Still going to add features. What's the easiest way of proving out this model before?

[00:47:37]I kind of commit myself to a journey that. I said she don't don't have time for. And so therefore I'm looking at these other things to kind of prove that out and convert kit is actually one of them that I've been starting to use. So I'd love your advice on that. So everything we've spoken about today, let's, let's cover kind of what your quick win recommendations are.

[00:48:00]If we had three of the bits of advice that you would recommend, what, what, what's the three things that you would give us? Yeah. So the it's, it's still going back over what I've already shared. It's like build build that audience of some sort, make sure you're, you're started to build relationships with the people that could be your staff, what software company customers, one day.

[00:48:24]Jonathan Markwell: [00:48:24] And and do what you can to solve their problems as soon as possible, and really get to know them and know what their problems are and be open-minded because you might find out that the thing that you could create that's of most value to them is not the idea that you have to sell to them. And so getting to know them earlier and and helping them in smaller ways first can can de-risk everything that you're doing.

[00:48:46] Significantly number two would be learn to how to go learning to code in some way or, or. Undertaking some kind of technical activities. So and this is particularly if you're not, not a technical person, because then you have more empathy for technical people when you end up working with them when your SAS gets, gets to that stage.

[00:49:11]And you know, I've, I've worked with with people that you know, very light skills in HTML and they, you know, they put together a couple of their own websites before quite quite crudely, but it was wonderful working with them. And and we got them to you know, we, we were able to teach them as we're going and show them how to use, get as a version control system, for example, and, and level up.

[00:49:30] And they were able to go in and change some copy in the app and do that first commits and that, you know, but you can. Yeah. Having that as a goal, as a founder, to be able to contribute in some way alongside the other technical people that you want to work with rather than trying to distance yourself from it is gonna, is gonna make you a much better position to be a software business owner.

[00:49:53]The next final third thing is to start selling in some way, sell something, get used to. To doing that. And I mentioned Gumroad to, to sell a product like I've, I've too many kinds over the years where I've said this one in and they're often reluctant to do it, but the ones that are most successful at some point end up writing an ebook anyway and, and selling it even when they don't need the money from selling it, because they realized the value exchange from doing that and how it creates a completely different dynamic with your audience.

[00:50:26] So. Getting used to selling things online where something like Gumroad, or, or even if you make something, you know, the simplest version of your SAS using something like Stripe which is a harder thing to integrate the moment that we'll get that we'll get easier. And and I actually personally use puddle, which is a slightly different way of selling software, where they handle all your taxes and everything for you.

[00:50:50]Using one of those free tools. Other ones like mighty network might podia is another good sort of platform for just selling things online, building up an audience and and learning all those skills that are required wherever you're building a SAS, or if you're selling an, but there's some basics that you need to need to be comfortable with.

[00:51:12] Chris OHare: [00:51:12] Okay, great. Kirk Windsor. And he loved those. People are going to get lower value from those quick wins to focus on. Cause that's a lot of thing, right? The whole world of SaaS is so big. And so if people wanted to learn about SAS, what, where would they go? Well, what resources would you recommend that they look at?

[00:51:32] Jonathan Markwell: [00:51:32] The the very best sort of comprehensive primer on this is written by Patrick McKenzie at who works at Stripe now. And if you search for the business of SaaS on Google, it's it'll be on a stripe.com domain, but I'm pretty sure up at the top thing that that comes up. And it's got, you know, all the detail areas is fantastic.

[00:51:53]Yeah. So I want to go for that. And you're very welcome to ping me if you if you have an idea that you want to chat about, I'm working on some things which are with the intention of making this stuff easier. For, for people that are non-technical, I'm working with three coaches slash consultants at the moment that they've got audiences built up of their own already.

[00:52:14] And the idea is to. To, to create the assess that it's a good fit for, for them and their customers that doesn't have quite the maintenance costs of building your own firm from scratch. And it's got all my stuff in it that I've learned from the last 10 years or so, if you're interested specifically in that you can go to reflectkit.com.

[00:52:35] Well, you wouldn't see very much, but you can put your email address in a box and I'll get that to you.

[00:52:40] Chris OHare: [00:52:40] That was really interesting. I was going to say, how can people contact you reflectkit and where else can they, they go?

[00:52:47] Jonathan Markwell: [00:52:47] Yeah. You can find out a bit about me at jonathanmarkwell.com or you can follow me on Twitter at J O T, which is what put that name on screen there.

[00:52:57] Chris OHare: [00:52:57] Okay. And and am I right to say that you're one of the first people in the UK to use Twitter?

[00:53:05] Jonathan Markwell: [00:53:05] Apparently I was, I have the earliest Twitter account among Brits. I have a very low user ID number and I'm one of the national newspapers sent that I was in one of the, in the top, in the, among the first hundred and 40 that were still active.

[00:53:21] And that was a few years ago. So it was like a bit of a trivial, trivial claim to fame. Cause I was that interested in software developments back in 2006, I think that was.

[00:53:32] Chris OHare: [00:53:32] Right, right. It just shows you, I mean you know, you've, you've clearly seen a trend there and you've, you've got onto it before it became a big thing.

[00:53:41]So it's clearly someone who knows what to look for when it comes to software, but thank you for your time. Really appreciate that Jonathan people are gonna get a lot of value.

[00:53:52] Jonathan Markwell: [00:53:52] Thank you, Chris. It's been great.

[00:53:57] Chris OHare: [00:53:57] So, what did you think about that was quite an episode to learn all about SaaS and thank you for joining today. And I hope you found that as valuable as I did. And remember, there are other podcasts that you can go and listen to. And talking about prototypes. I especially recommend How to Prototype Spencer Ayres.

[00:54:17] You can learn a hell of a lot when it comes to starting your first app, if that's something that you want to do, and you can find that on Apple podcasts. On Spotify and YouTube. All the videos are up on YouTube now. So if you don't feel like listening, you can go to YouTube. And if you're there, I'd be really grateful if you'd go subscribe.

[00:54:36] And if you're on the podcasts write review too, and it really makes a massive difference. But if you have. Any questions, you can connect with me on all the social media with @haredigital. You'll find me around with that username at digital, but until next time, I'm your Quick Win CEO signing out.

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