5 TRAPS YOU SHOULD AVOID BUILDING A SAAS BUSINESS
Keynote presentet on SaaStock
by Dr. Ricco Deutscher
Trap #5: Lack of Scalability
Dr. Ricco Deutscher:
“Scalability means process automation. When should a process be automated for a start up? Obviously, at the beginning, we have very little processes and you can’t automate all of them at the very beginning. So, the question is when is too early? When is too late?”
Dr. Ricco Deutscher:
“It’s definitely too early if the process is not stable yet and the business volume is insignificant. It’s too late if the process becomes a bottle neck to your business and if the process costs take a significant share of your whole cost structure. Let’s take a specific example about recurring payments. When we talk about recurring payments, in Europe, there are five major payment means.”
Dr. Ricco Deutscher:
“It is mobile payment, PayPal, credit cards, SEPA, and on-account. “Zahlung auf Rechnung” in German. And that chart shows you the share of these different payment means for different payment amounts in the subscription business. I’ll give you two examples. If you have a B2C business with an average payment amount less than 10 Euro per month, you are on the left-hand side. Then PayPal is the most important payment mean for you and maybe followed by mobile payments, in-app purchase with Amazon, Apple, Google. If you are in the B2B business for mid-sized companies, your average payment per month is maybe around 1,000 or higher, then SEPA direct debit, on account, and credit card are the most important payment means. Okay. Let’s look how we automated the processes within billwerk.”
Dr. Ricco Deutscher:
“We have three major processes. Recurring billing, recurring payment, debtor management, and dunning. Obviously, we use our own platform to charge our– to bill our customers. So recurrent billing and for debtor management we use billwerk. Obviously, it’s automated. We followed the eat your own dog food. I think that’s always good for a SaaS company. But for the payments, we decided not to automate it at the very beginning. Therefore, we did not offer credit card and SEPA and on-account payment via our bank. This was a mistake, to be honest.”
“We did not expect customers from outside Germany which required credit card and as the customer base was growing faster than expected, the whole manual payment process was a pain. We quickly decided to move to a payment service provider and automated these payments as well. The only remaining process which is manual today is on-account payments which we will automate in the future. My advice to you is don’t wait for your processes to be mature.”
Dr. Ricco Deutscher:
“If you have a fast-growing business, automate these processes as soon as it’s stabilized. Okay, I guess this was my presentation. Thank you for your attention. If you want to download the charts, just scan the QR code and you can download it.” [applause]
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Dr. Ricco Deutscher:
“We have time for questions. 8 minutes. Are there questions?”
Question from the audience:
“What’s your biggest challenge running a SaaS company in Germany?” [laughter]
Dr. Ricco Deutscher:
“If you compare the SaaS ecosystem in Europe or in Germany compared to the US, you see a huge difference. The SaaS market in US is about 10 years ahead of us. So, they have a bigger ecosystem, they have bigger investors and they have more experienced entrepreneurs. And it’s 10 years difference. We were in the discussion before there, my keynote had a nice episode where we were enforced to switch our email provider because customers insist not to use Mailchimp for data protection reason and we looked for an alternative in Europe. The best mailing provider in Europe, we found was Mailjet in France and we’re working now with them but to be honest, the service levels are not that good and high as with Mailchimp. I would say the state of the European and German SaaS ecosystem is not so good developed and it’s tough – we would like to cooperate with European and German SaaS businesses, but sometimes it’s hard to find the right partner. I hope that answers your question. So funding is definitely not a biggest challenge for us.”
Question from the audience:
“Can you comment on your challenge of accepting SaaS solutions in Germany over time?”
Dr. Ricco Deutscher:
“Oh, yeah. Good question. That changed a lot. About 10 years ago, I had discussions with bookkeepers and asked them, “Would you ever be willing to outsource your or to put your financial data in to the cloud?” And they said, “No. No way.” Today, it has completely changed. It’s because the generation changed. They started the question the other way around. Why should we not take a cloud based bookkeeping system instead of DATEV? Well, I see a very strong change in mind in Germany enforced by the change of generation.” [music]
