Creating a competitive advantage for your SaaS: David Vs Goliath

Most founders get deep into building the product, trying to nail all these difficult tech aspects, but they forget about creating a competitive advantage. If you think a lower price will be your competitive advantage, rethink again. It's not gonna be your advantage unless you have the lowest cost in the market.

Why?... Because many of your competitors with lower costs will be able to offer an even lower price than you. And you will start racing down to the bottom. Don't count just on a lower price. Focus on what could become your true competitive advantage.

Why do you believe you will succeed in the market?

Quite often, I meet startups who believe in their idea and are passionate about them. But when I ask why you believe you will succeed in the market and why nobody else will outcompete you easily, then we get silence in the room...

And let me share one example. I had a conversation with one SaaS founder. They've invested more than €200,000 in building their software. They believe they will launch into the market quite soon, and within three months, they will be financially self-sustainable. They dreamed about earning enough revenue to pay their salaries, office rent, etc. Well... I'm an optimistic person, but I was skeptical in this case. We did a quick math and figured out that they need to reach at least half a million euros monthly recurring revenue to cover their ongoing costs. Crazy!

And that's not even the craziest part. When I ask, why do you believe you will succeed? Because I knew at least three of their well-established competitors in the market. I asked again: why should customers jump off current solutions and start using yours?

Again, silence in the room... Imagine the trap they got in: 200K invested in dreams about earning half a million euros in monthly recurring revenue without having a clear answer to a very simple question why should customers choose your solution over competitors?

Where to find your competitive advantage?

Now let's answer the question of how to create a competitive advantage for yourself, especially when you are in an early stage. As we've discussed, low price is not your competitive advantage. So here are a few key aspects you could use to create your competitive advantage.

You need to find at least one reason, but truly meaningful why customers should onboard to use your software or platform.

1. Tech aspects. Maybe you can create a competitive advantage through some tech aspects and specifications as a part of tech solution. Do you have an exclusive technology, algorithms, or anything your competitors don't have which can grant you a competitive advantage?
2. Higher customer lifetime value. We won't go into the nitty-gritty details but if you manage to earn more cash from one customer than your competitors can, this could be your true competitive advantage. Because you can spend more on acquiring customers. For instance, if a customer's lifetime value at a competitor's company is €1000 and, in your case, it's €1500, it means you can spend €500 more on ads to acquire users. You can literally outspend your competitors if you engineer your value proposition in a way it creates a higher customer lifetime value.
3. Related resources. So do you have any resources that are meaningful to your business? For instance, do you have data to train your AI if you create an AI solution? If you are creating a platform, a two-sided marketplace, for instance, maybe you have a large pool of users. So, what type of resources could you use in your favor to create a competitive advantage for yourself?
4. Your people and their skills. Yes, your team can become your competitive advantage if they have useful and superior skills. For example, if you have someone in your team who is extremely good at sales, this could be your competitive advantage because this person can convert leads into actual customers more efficiently than your competitors can. Therefore your customer acquisition costs will be lower. You may find your competitive advantage among your team members and their talents.
5. Better customer experience and service. If we leave apart technical aspects of your product and sales process, maybe you can make your customers feel more valued. Maybe your software or platform is easier to use, maybe they get better support, or achieve a desired result faster with less frustration, etc.

We could go into more detail about where to look for possible competitive advantages. But today, do your homework and try to analyze if you could build your competitive advantage based on technical aspects, higher average revenue per customer, resources, your team members, and better customer experience.

Remember that we (SaaS founders) are looking for our competitive advantage in providing solutions to important, urgent and repetitive problems.

Partnerships can also become a competitive advantage. Think about partnerships in two different directions:

1. Could you increase your target audience reach through strategic partnerships? Maybe you can have multiple partners promoting your special deal or your early adopter's program. So this way, you could get really significant initial traction.
2. Integrations with other tools make your product more valuable. So if I use your software or platform, and you have multiple integrations with other tools that I use in my daily and professional life, your solution is much more convenient for me because it provides me with an integrated solution and saves my time as well as keeps away from frustration.

Yes, I know this might sound counterintuitive, but your customers could become your competitive advantage. If you have a large number of users, maybe your software or platform can benefit from a network effect. The more people use your tech solution, the better the solution becomes and the higher the value each user gets. But usually, this won't be a competitive advantage for an early-stage startup.

So let's think about the user base as a possible competitive advantage on a smaller scale. If your early adopters have already tested your platform, can you get testimonials and case studies from them? Use your customer base as a competitive advantage to promote your solution via referral marketing. Ask your users to recommend your software or platform to their friends, colleagues, neighbors, or whomever they want. In exchange, offer a two-sided benefit: a benefit for them, their recommendation, and the person recommended to use your software.

Join me on a live webinar this Friday!

During this 45-60 min. the live webinar, you will discover:

? 5 reasons WHY it’s important to pre-sell your SaaS before you start building it.

? How to start developing your SaaS and get your first customers before writing a single line of code.

? How to come up with an objective “GO” or “NO-GO” decision to invest in coding your software or platform.

Register via the Zoom link to get access to the live webinar, live Q&A session, and the recording: https://openmylink.in/zoom

I hope to see you there! And bring your questions!