Micro SaaS: What It Is and Why It's the Best Option for Your First Startup

Here's the big question though.
What is a Micro-SaaS business
and where does Micro-SaaS, as a strategy, really shine,
and were you doom to fail if you actually follow it?
So in this episode,
I'm gonna dig through the three principles
that you absolutely need to know about Micro-SaaS,
about when to follow this strategy,
and how to be successful with it.
Intro! (upbeat music)
What's up, everybody.
Welcome to Unstoppable, I'm TK.
And on this channel,
I help SaaS founders like you,
grow your SaaS businesses faster
with an unstoppable strategy.
Now, if you're new to this channel, welcome!
I drop an episode every single Sunday
with actionable strategies
on how to grow your SaaS business faster.
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That way, you will get notified
every single time I drop an episode
with the TK energy.
Now, if you're already part of this channel,
if you're part of this community,
if you're part of my SaaS,
go-to-market and launch coaching programs,
my people, welcome back.
It's really awesome to see you over here.
Now, I'm gonna date myself here, but that's okay.
I remember the first software I ever sold.
I was about at 14 years old
and I taught myself how to code,
and I built this little tool
for my dad's consulting business.
He consulted other people
on how to build prepaid calling card companies.
In prepaid calling cards,
you really had to figure out
what was your wholesale rate,
and your retail rate,
and you need to calculate the difference
and figure out how you could get to a break-even point,
and also how to maximize on profits.
And so I built this little software
because we were doing that
for our own prepaid calling card business.
And I built this little software.
And I remember that first time I sold that software
on a CD-ROM for $50.
And it was like the most amazing moment,
'cause I was like,
"Oh my God, I can build code, I can write code,
I can build something.
It solve a business problem
and people will pay me for it."
And back then,
those little pieces of software,
you could download off of websites And BBSs,
I know I'm dating myself,
and it was called Shareware.
That's what really got me into my love for software.
Fast forward 15 years after starting
and selling to companies,
helping sell to more companies that bought my companies,
now, you know, I'm deep in software.
But it always brings me back
to those original days
when those little tools I used to download and try out,
and I never paid for it 'cause I didn't have any money
to spend on software,
but the software that I built and charged for $50
made me realize that old is new again
and new is old.
Micro-SaaS businesses are all the rage now.
And they're just like those little pieces of software
that you used to be able to sell online
or on a BBS,
and people would pay with their credit card,
$30 or something for a license.
That is true again.
And so on this episode,
given everything that I know,
and being in SaaS, being in software
for probably way too long,
than I should admit to right now,
I'm gonna walk you through
the three principles you absolutely need to know
to be successful with the Micro-SaaS strategy.
So if you're excited to dig in,
go and smash that Like button for the YouTube algorithm,
and let's go to principle number one.
So the first principle to think about
is when should you use micro-SaaS and when should you not?
And the best way I like to think about it
is based on TAM, Total Addressable Market.
The market you're going after
and the size of it
can really help you figure out
whether Micro-SaaS is a good idea or not.
So if you are going after an a immense TAM,
a really, really big Tam.
It's a huge market, a massive, massive market,
the chances are you're better off with a VC-backed play.
The reason is,
other people will realize it's a massive market
and there's a huge opportunity,
and they will raise VC funding.
So it becomes an arms race
and you will have to be able to compete at that level.
This is also the type of business that VCs love.
The only thing VCs really care about
is really large, fast-growing markets.
So if your TAM is massive,
don't try to do a Micro-SaaS,
at least I wouldn't,
because the competitive dynamics
will not help you win there.
Then you get into the middle size, right?
Let's just say it's a medium-sized bootstrapped market.
A medium-sized total addressable market,
not necessarily just bootstrapped.
If you're going after a medium-sized market,
almost automatically,
the best VCs in the world will opt out of that.
They'll say, "Look, this market's just not big enough.
It's not getting big enough."
Sometimes they might be wrong
and sometimes they might be right.
In the early days of Uber,
VCs saw that market wasn't big enough,
but they expanded their TAM.
But it may very well be that the market's big,
but not big enough for VC.
These are cases
where bootstrapped companies can thrive.
Bootstrapped companies,
the best bootstrapped companies that I've seen
actually have cash flows from another business
that they reinvest into a bootstrapped software company.
Sometimes, they have cash flows from another business
and customers from another business
that they can go sell their software too.
So they fund it with the cash flows and the profits,
and then they sell it back to the people
they got the cash flows from,
the profits from.
Those are some of the best bootstrapped businesses
that I see out there, especially in SaaS.
And for those bootstrapped businesses,
they tend to go after medium-sized
total addressable markets.
Number one, because VCs don't wanna compete in there,
so you don't have unfair competitive dynamics.
And number two,
there's a clear market
and there's some huge upsize in profits
that they can realize
because the market's big enough or medium enough.
Then, if you go to the smallest side of market,
if you go after a very niche market,
a very small total addressable market,
automatically VCs will not be interested.
Bootstrapped companies may not be interested
'cause they're like,
"Why are we gonna take our cash flows,
which we can get 15% on this S&P 500 or 9%,
this is not investment advice,
just, you know, ballpark numbers.
"Why would we invest into this business
that just doesn't yield that much?
We'll put it in a software company
the market's medium-sized enough."
And so this is where Micro-SaaS businesses,
smaller self-funded businesses,
something maybe even you do as a side project,
going after a very specific market,
a very small market,
is worth it because you're not experiencing
any sort of opportunity cost, right?
You're just putting in your own time,
your effort, maybe a little bit of your savings.
And you're building out
these tiny little software companies
that actually just print money.
Then it doesn't have to be a million dollars a month.
It could be thousands of dollars a month
or a couple hundred thousand dollars a month.
And that could still be considered a really good business.
A small business in a Micro-SaaS space.
And so that's principle number one.
You really wanna think about
what your total addressable market is,
and Micro-SaaS,
the Micro-SaaS strategy tends to do better
in this more niche market,
in the smaller markets.
If you're in the larger markets,
then it may be too competitive,
or the dynamics may be too competitive,
or you might not have enough of an arsenal
to really compete and win with the Micro-SaaS strategy.
That's principle number one.
Now, you might be wondering,
okay, cool, if I have a very specific market
I wanna go solve a problem for,
what does Micro-SaaS look like
and how is it different
from a traditional SaaS business, for example.
The biggest thing I could tell you,
sometimes, you know, with Micro-SaaS,
it's almost self-explanatory,
and I don't wanna be like Captain Obvious,
but obviously, a Micro-SaaS
is more of a tool rather than a platform
or a full solution.
It's a software,
and you can sign up for it,
you can pay monthly for it,
maybe there's a premium.
All those things are true,
but it tends to be more of a tool.
Something that you,
it's got a single purpose utility
versus some big solution, big platform.
That's what Micro-SaaS tends to be.
But as you're thinking about Micro-SaaS,
you may also wanna think about the second principle,
which tells you exactly what defines a Micro-SaaS.
Micro-SaaS companies tends to be niche specific.
So we already covered that.
It's kinda builds on principle one,
where you wanna go after a very specific segment
of the market.
Very, very specific market.
It's very niche.
It also has a clear ROI.
There's lots of SaaS products out there
where it's a big transformation.
It's a big solution.
It's got a big promise,
and maybe a big investment.
Micro-SaaS is the exact opposite of that.
And so they're like,
"This will help you do this."
Boom, done.
I have this one small Micro-SaaS that I built
over the holidays,
and we really put it together,
and it's been really cool.
It's a go-to-market grader.
The go-to-market grader,
you can check it out, gtm-grader.com.
it's a Micro-SaaS.
And it just does one thing.
It grades your go-to-market machine.
Like, you put in the numbers
and it generates it for you,
it gives you the training.
It's like super simple.
That's a Micro-SaaS.
It's got a clear ROI.
There's no big, huge transformation.
There's no big onboarding.
It's super simple and easy to get into
and use and get value from.
And that's what a Micro-SaaS is best at.
And also, Micro-SaaSs tend to be product-led.
Given the dynamics of the small market,
the small deal sizes,
the very clear ROI,
that it's a tool,
you know, you really can't charge
a whole lot of money for Micro-SaaS companies.
And so for those tools,
you have to be product-led.
It has to be driven by the software
doing the selling versus a salesperson.
Also, what I've seen with most Micro-SaaS companies,
is they almost always leverage a marketplace.
Whether it's a Shopify ecosystem,
or a WordPress plugin,
or a Chrome extension,
or a Salesforce plugin,
that's very small,
they're almost always hooking in
to some broader marketplace,
and then using that
as their product-led growth model
to actually drive revenues.
Instead of spending a whole lot of money on marketing,
because you really can't spend
a lot of money on marketing
because your margins are not that great
and your prices are not that great.
Now, I might be saying this in a way where it likes,
sounds like I poo-pooing on Micro-SaaS businesses,
it's not true.
I actually really like Micro-SaaS companies,
and I experiment with those kind of products all the time
whenever I feel like I can build something
that helps people in our audience
or in our community or the founders that I serve,
which is why I created that go-to market grader.
These are the principles that I follow
for a really successful Micro-SaaS products.
If you're gonna do it,
make sure you go after a very niche market,
make sure that you have a clear ROI,
make sure you're following a product-led growth model,
and make sure you can figure out
if there's a marketplace
that you can hook into to be successful.
Now, before I go to principle number three,
let me just pause here for a second.
I start to get the power of this.
I start to get the power of how Micro-SaaS is so exciting,
it's so interesting,
especially the broader SaaS ecosystem,
as we continue to get bigger and bigger.
And here, we're starting to see
how for certain strategies,
for certain plays,
Micro-SaaS is absolutely amazing strategy to use
if you're solving a very specific problem
for a very specific niche,
for a very specific market,
and you can get a clear ROI.
If you're starting to see the power of this,
can I just get a Yes in the comments below,
and also smash that Like button for the YouTube algorithm.
It really likes it when do you do that.
Also, if you're in the pre-revenue stage,
and you're working on that part
where you're really trying to figure out your idea,
and you're trying to get to initial revenues,
maybe you built a little product,
you know, and you're like,
"Well, how do I like really get this going?"
I run a webinar every single week
that walks you through some detailed principles
on how to go from idea and initial product
to initial revenues.
And it's completely free.
I run it every week.
Just go to tkkader.com/webinar.
You don't have to go right now.
I'll also link to it below.
I'll tell you more about it.
And then in this episode,
let's go to principle number three.
Let's smash the Like button if you haven't already,
before we go to principle number three.
Principle number three is,
okay, if I know the market,
if I know type of product I'm building,
well, how do I do this?
Like, how do I put it into play?
The most important thing to understand about Micro-SaaS
is you should have fun with it.
You should play around with it.
Sometimes, founders overcomplicate starting SaaS companies.
And if you're,
this is your first product, first company,
if you're really getting into it,
and we've got founders in this community added my programs,
anywhere from pre-revenue,
all the way to hundred million there are and more.
And so I wanted to do an episode
about people just starting out.
That's why Micro-SaaS is a great way to start.
Micro-SaaSs are great
because you don't have to have a lot of coding experience,
you don't have to know a lot about the software business
or SaaS companies.
All you need to do is just solve a problem
and make a small little thing
and really get it out there.
And a lot of times, what I've found,
is that opens up doors to bigger things
and bigger ideas,
once you start getting your feet in there.
This works a lot better than companies and founders
that are trying to do this one big thing
as their first company and get it right.
The best founders you see out there
started with almost like a little toy
and then grew from there into bigger and bigger things.
And so if you're getting into Micro-SaaS and you're like,
"Cool, this is the strategy I wanna follow,"
then principle number three is about how you implement it.
So here's some pointers.
How you implement it,
you could look at building a plugin.
Sometimes Micro-SaaS works best
when it's a plugin to a bigger platform.
It could be a WordPress plugin,
a Shopify plugin,
it could be a Salesforce plugin,
a HubSpot plugin.
What that allows you to do is hook into existing customers
and solve a very, very niche-specific problem
with a clear ROI,
then you can hook into their marketplace.
So plugins are a great way to start a Micro-SaaS product.
The other thing you can do
is you can use no-code tools right?
There are a lot of no-code tools,
Bubble is one of them.
I haven't dug into them enough 'cause I code,
to really know which one to recommend,
but I hear good things about Bubble,
and there are other ones out there.
If you have a favorite one,
put in the comments below for others to see.
But you can use no-code tools
to build your initial micro SaaS product.
And that can get you a lot out there,
just to get it moving,
and see what's out there.
And remember, if you get a hit,
you get a really successful Micro-SaaS product,
you can always take the proceeds from that
and invest it to rebuild a version two
that's not based on no-code tools.
So you can always reinvest to make it better,
but the first version can be kinda dirty
and like very clear on like,
"Here's all it does.
It's not that great, but it's pretty good,
but it's a game changer in who it's for."
It could go a really long way
to help you validate the market.
And then the last piece
is you could also just build it on a single page app.
It's amazing how much you can do get done
with just a React front-end and a Firebase back-end.
There's a lot you can do,
and it can be very agile,
it can get stuff out there to really test it.
And that's really powerful.
So you can do it in a single page app.
And again, then you can revamp it over time
if you've got something.
Those are the three principles I had for you
in terms of a Micro-SaaS business.
Number one, principle, number one, let's recap.
You wanna think about TAM.
Micro-SaaS has to do better with smaller markets,
whereas if you go after a really large market,
you'll be competing against VC
and overfunded competitors.
And maybe that's not the best way to play.
Number two, you wanna be niche specific,
you wanna have a clear ROI,
you wanna follow product-led growth model,
and you wanna hook into a marketplace,
so you get as much free marketing as possible.
And number three,
don't try to build a monolith.
Really think about it as a plugin
or build it at no-code tool
or build a single page app just to get your start,
give that clear ROI for that very specific group of people.
And who knows,
a lot of times, Micro-SaaS companies
can graduate to much larger companies very easily,
very quickly, because they realize,
"Wow, that TAM is bigger than we thought,
but we gotta bulk up to really serve these people."
So don't be ashamed about a Micro-SaaS.
Don't be shy about a Micro-SaaS.
Just own it and get in there,
especially this is your first product, first company.
And then you can always grow it over time.
And so, now you know my three key principles
on how to build a Micro-SaaS,
and how to think about it,
and what is the right strategy,
but what you may not know
is how do you go from that initial idea
or that initial product you've built to initial revenues.
And so this is why I run a webinar every single week
that goes into detail
on how to go from that pre-revenue stage
to initial revenues.
And so if you wanna watch that,
it's completely free,
just go to tkkader.com/webinar.
tkkader.com/webinar.
Go in there, you put in your info,
and we'll put you right into the training.
It's super awesome.
It's very detailed.
It's a lot of step-by-step pieces
that you wanna think through.
And it really is the next double-click to like,
"Okay, if you wanna do a bootstrapped idea,
or a Micro-SaaS idea,
or a SaaS idea, period,
how do you get from that product phase
or that idea phase to initial revenues.
I'll link to it below.
Just go to tkkader.com/webinar.
Now, if you liked this video,
if you got value for this video,
please smash out like button for the YouTube algorithm.
It really likes it when you do that.
And also, I drop an episode every single Sunday
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So if you have it already,
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And lastly, remember,
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When you are with us,
yours, it's gonna be unstoppable.
I'm TK and I'll see you in the next episode
or inside of that webinar,
tkkader.com/webinar.
Link also below.
(uplifting music)