SaaS 102 #26 What Kind of People Are Most Suitable for B2B SaaS?

A lot of people were curious enough to ask me:

Seeing as global B2B SaaS has so much room for future development, what kind of person is most suitable to work in B2B SaaS?

In order to answer this question, we first need to clarify what the differences between B2B and B2C actually are.

From my point of view, the main differences between B2B and B2C are as follows:

In the rest of this article I’ll look at these four differences between B2B and B2C. Then I’ll base my answer to the question “What kind of people are most suitable for B2B SaaS?” on these differences.

Creativity vs solving specific problems

With the right spark of creativity, even industry novices can set up B2C companies. But it’s very difficult for a novice to successfully set up a B2B company.

This is because the core of B2B is solving specific problems. To solve specific problems, you need to have a deep understanding of industry scenarios and processes.

Companies in the B2C field, such as gaming or social media companies, can achieve explosive growth through creativity. Good examples are Angry Birds and Clubhouse, both of which saw very fast growth in popularity.

With the right creative idea, you can set up a B2C company relatively quickly.

But for B2B companies, it’s very difficult to set up a successful product using only creativity. What’s needed for B2B is a more honest, down-to-earth approach to patiently solving industry problems.

The problems you are trying to resolve might not be new. There may also already be solutions to the problems out there on the market. But if you can do either one of the following, then you have a chance of producing a successful SaaS product.

1. Increase efficiency: Helping customers to resolve an issue using less costs, time, or labor

For example, before our customers used AfterShip, to track a shipment they needed to use five minutes of a customer service employee’s time. But after they used AfterShip, the system would automatically track shipments and send tracking notifications. Our customers would no longer need to spend time tracking shipments individually.

2. Better results: Help the customer achieve better results with the same resources and efficiency

For example, before many of our customers used AfterShip Email, they would use other systems to send emails to their potential customers. But with these systems, only around 10% of emails would be opened. After switching to AfterShip Email, they were able to increase their email open rate to around 30%.

For a lot of SaaS companies that have just started out, the problems they’re resolving are actually problems that the product creator has faced themselves.

In many cases, the methods they use to solve problems aren’t even that original. These products can be hugely successful simply by solving problems more efficiently, and with better results, than previous solutions.

For example, let’s take a look at the case of Eric Yuan, the founder of Zoom. Before he founded Zoom, Yuan worked at WebEx, a video conferencing company, for 14 years. What he found was that although there was a lot of video meeting software on the market, the user experience for these products wasn’t good. For example, if the internet connection was weak, voice and video might stall at the same time.

So Yuan left WebEx and founded Zoom. He then made the Zoom user experience much better than for other video meeting software on the market. He did this by adding solutions such as prioritizing voice quality over video if the internet connection was weak. In the end, Zoom was extremely successful.

Or we could look at the example of Tobias Lütke, who co-founded Shopify because he wanted to open an online snowboarding shop. He went through many website builders already on the market, but found that they were all very difficult to use, and lacked options to customize website design. None of the available tools could meet his requirement to quickly build a personalized website.

So, Lütke spent two months developing his own website builder to solve this problem. This product later evolved into Shopify.

And finally, we could also look at my own example, and the reason I initially created the AfterShip product. I created the AfterShip product because as an eCommerce seller myself, I had customers asking me this question every day: “Where is my order?”

But what customers really cared about was the following question: “When will I receive my order?”

At the time, the international market still didn’t have a product which could effectively resolve this question. For many carriers, their own estimated delivery date often wasn’t accurate enough. So I made AfterShip to resolve this problem. At the moment, our estimated delivery dates are even more accurate than those of most international carriers.

User-centric thinking vs customer-centric thinking

For both B2B and B2C, user-centric thinking is very important. But for B2B, we need to add customer-centric thinking on top of a user-centric thinking foundation.

This means that you not only need to know about your user’s needs and pain points, you also need to know what will make your customer willing to buy your product.

For B2C products, often the user and the customer are the same person. People will download and use your product, and if they think it’s good they will become paying customers.

But for B2B products, your customer and your user are often not the same person.

Again, let’s look at Zoom as an example.

Zoom’s users and customers are actually different groups of people. We can understand the difference between Zoom’s customers and users by looking at the following simple table:

Of course Zoom’s users can say to their companies: “This software is great. We should buy it.”

But at this point, the customers, or the persons at the company who make purchase-related decisions, will say:

“Well, it’s good that you enjoy using it.”

But they will then ask questions such as:

“Can this software help us improve efficiency? If it can, how much can it improve efficiency by? What will our return on investment (ROI) be? Are there any security risks?”

They are likely to ask other questions, too.

You have to be able to answer this series of questions from your customer. If your customer knows that your product really can provide enough value, they will be willing to buy it.

This means that when you create SaaS products, you need to add customer-centric thinking on top of a foundation of user-centric thinking. From the start, you need to think clearly about how you will sell your product.

That is why I often say within my company: “For B2B products, the product manager shouldn’t be called a product manager. They should be called a product and marketing manager, because they’re responsible not just for creating and producing the product, but also for thinking about how to sell it.”

Monetization through third parties vs seeking mutual benefit

In B2C, you can burn through cash fast in order to gain users, and then once you’ve got enough users you can think about creating profits through methods such as selling memberships or advertising.

But in B2B, you need to think about how to create mutual benefit for all parties right from the first day.

You need to help your customers increase their profits, or they will have no reason to use your services.

You need to help your upstream and downstream cooperation partners earn money, or they will stop working with you in the future.

Once you’re sure your customers and cooperation partners are all earning more money as a result of working with you, you can start to think of your own profits.

To have sustainable profits in B2B SaaS, you need to:

• Increase profits for your customers
• Help your upstream and downstream cooperation partners to increase their earnings

If you can’t do either of these things, then even if your profit looks high at the current point in time, it is unsustainable.

But if you can help your customers and cooperation partners succeed, then you will naturally succeed yourself.

Shopify is a very good example of this. They actually collect their revenue from three different sources.

1. Subscription fees from merchants who use Shopify’s services
2. Commission charged on revenue earned by Shopify merchants and other processing and handling fees
3. Commission charged on revenue earned by app developers on the Shopify platform

Data shows that in the year 2020, approximately 69% of Shopify’s income came from the second and third item in the list above. This means that a prerequisite for Shopify’s revenue growth is that their customers and cooperation partners are able to increase the income they earn through the Shopify platform. To find out more about how to set pricing so both your customers and your own company can benefit, you can read my previous SaaS 102 article: “How to Set Pricing Models That Help You and Customers Succeed.”

Instant success vs delayed gratification

In B2C, if you have a great idea and produce an excellent product, you have a chance of seeing explosive growth in your user numbers.

One example is Clubhouse. In February 2021, after Elon Musk, the CEO of Tesla and other celebrities started using it, the app went from 2 million users to 10 million users in just one month.

This kind of growth fits with the way the B2C market works.

If you hear a friend saying a certain B2C product is great, then you might download it straight away and have a look. If you like using it, you might recommend it to other friends. If you don’t, you can uninstall it at any time.

But B2B products are completely different. Your customers will definitely not use your product just because they think it is fun. The business product purchase process includes appraising the product as a solution to business needs, checking it for security threats, gaining approval from all relevant parties, and completing the payment process.

So even if the B2B product you produce really is great, it will be very difficult for you to gain explosive growth in your first three to five years. Usually you will need to work hard for around 10 years before results really start to show.

As the research Meritech Capital Partners did into 16 SaaS companies in 2020 shows:

Most of the companies the research looked at took more than 10 years after being founded to become publicly listed. The median was 13 years.

But as B2B products usually use a subscription revenue model, as long as they can help customers to create more value, they can continuously increase their revenue. Due to the compound interest effect, the revenue of SaaS companies has the potential to increase several times over, or potentially even dozens of times over, in the 10 years after their founding.

So to work in B2B SaaS, you need a relatively strong capacity for delayed gratification. You need to have enough patience to work hard for 10 years before receiving the rewards.

Summary

From my point of view, the main differences between B2B and B2C are as follows:

1. In B2C, the focus is on creativity. In B2B, the focus is on providing more efficient solutions to specific industry problems.
2. In B2C, user-centric thinking is required. In B2B, both user-centric and customer-centric thinking are required.
3. In B2C you can provide free services to users. Once you have enough users, you can monetize your product through selling advertising rights or data to third parties. In B2B, you always need to make sure that you are mutually benefiting all parties.
4. In B2C, there are opportunities to develop extremely quickly in the early stages. B2B requires investment over the long term in order to get returns.

As a result of these differences, people with the following qualities are most suitable for B2B SaaS:

1. People with a strong industry background who can find generally-applicable solutions to specific industry problems.
2. People who can think in a customer-centric way as well as a user-centric way.
3. People who can think of good ways to create mutual benefit for all parties, and who will do so from the first day onwards.
4. People who pursue long-term value and have a strong capacity for delayed gratification.

If that sounds like you, or if you agree with the ideas in this article and you’d like to develop yourself in the B2B SaaS field, then you are welcome to follow this link and find out more about careers at AfterShip!

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Teddy Chan is a serial entrepreneur with 20+ years of experience in SaaS and eCommerce. His latest venture is?AfterShip, a SaaS post-purchase experience platform that empowers eCommerce retailers like Wish, eBay, and Gymshark to improve their customer experience, drive sales, and increase brand loyalty.

SaaS 102 is a series of articles where I share my thoughts and experience with SaaS. My fundamental belief is that a great team with an average idea will always go further than an average team with a great idea. If you want to be part of this great and growing team, check out careers at AfterShip?here—I’m currently on the lookout for superstar sales talent.

Visit AfterShip’s homepage?here.

(Article translated by?Joseph O'Neill)