Building a SaaS product? Steer clear of my mistakes.

Hey, it's Amir, with my first ever issue of non-linear.

In case you forgot what you signed up for, this is a newsletter focused on me sharing my insights on building businesses and things I find interesting.

Now that's out of the way, let's get into it.

I want to share what I've learned so far building my SaaS, which will be helpful if you're building yours or planning to.

Pricing Strategies

When it comes to pricing your app, it's crucial to think strategically from the beginning. Whether you're offering a free plan or charging $9, remember that your higher-paying customers will eventually cover the acquisition costs for all users. I learned this the hard way. Over the past year, I've realized that our $9 plan and free tier weren't sustainable. Our $19+ plans, however, are not only profitable but also cover the costs for our free and lower-tier users. So, take the time to consider your pricing strategy, infrastructure costs, and how scaling will impact your bottom line as you develop your product.

Frictionless Sign-Up and Sign-In

Reducing friction in your sign-up and sign-in process is crucial. Implementing Google SSO (Single Sign-On) can make a significant difference. When we switched from passwords and email authentication to Google Auth, our conversion rates increased notably within three months.

If you use email authentication:

- Add shortcuts on your sign-up page to facilitate easier access to Gmail.

- Create dedicated sign-up pages for different inbound channels. For instance, we have a personalized sign-up link for Webflow app users, complete with tailored social proof.

Leverage your sign-up and sign-in pages to showcase as much social proof as possible. This strategy has helped us achieve a 30% conversion rate from sign-up to account creation.

The Free Trial Dilemma

We've switched from a free plan to a 30-day free trial. Our A/B tests showed that skipping the credit card requirement boosts initial conversions. However, those who provided card info are more likely to become subscribers after the trial.

Data: Capture Now, Analyze Later

Early on, don't stress over data analysis. Focus on capturing vital metrics: homepage visits, sign-up rates, conversion rates, retention rates, and activation rates. Keep an eye on customer acquisition cost (CAC), lifetime value (LTV), and average revenue per user (ARPU).

My admin dashboard tracks all key business and product engagement metrics. I zero in on 3 critical metrics:

1. K Factor

2. M1-M6 Retention

3. Activation

Growth Loop: K-factor increased by X

The K-factor is a metric used to measure the virality of a product or service. It represents the number of new users that each existing user brings in.

- A K-factor greater than 1 indicates exponential growth, as each user is bringing in more than one new user on average.

- An increase in K-factor by X means the product has become more viral, leading to faster user acquisition.

For example, if the K-factor increased from 0.8 to 1.2, it would mean the product went from sub-linear growth to exponential growth, significantly accelerating user acquisition.

Retention: M1-M6 retention increased by Y

This metric refers to user retention over the first six months after acquisition.

- M1 retention is the percentage of users still active after one month

- M6 retention is the percentage still active after six months

An increase in M1-M6 retention by Y% indicates that more users are continuing to use the product over this critical initial period. This is crucial for long-term success, as it's often more cost-effective to retain existing users than to acquire new ones.

Activation: Trial activation increased by Z

Activation refers to the percentage of users who take a specific desired action after signing up for a trial or creating an account. This action is usually one that indicates the user has experienced the core value of the product. An increase in trial activation by Z% means that a higher percentage of users who start a trial are reaching the "aha moment" and experiencing the product's value proposition. This is a critical step in converting trial users to paying customers or active long-term users.

These three metrics work together to paint a picture of a product's growth and user engagement:

- The K-factor measures how quickly the user base is expanding

- Retention shows how well the product is keeping those users engaged over time

- Activation indicates how effectively the product is demonstrating its value to new users

Improvements in all three areas suggest that the product is not only attracting more users, but also doing a better job of engaging and retaining them, which is crucial for sustainable growth.

Here is what our internal dashboard looks like to track product engagement - I have a clear view on our general business growth, key user behaviour, and financial health.

When it comes to product development, go for smaller, frequent updates over massive overhauls. We learned this the hard way after months spent on multiple features and a refactor, only to lose customers because of infrequent updates.

This approach to product development aligns seamlessly with our focus on key metrics and data-driven decision-making. By implementing smaller, more frequent updates, we continuously enhance our K-factor, retention, and activation rates.

This strategy leads to sustainable growth, improved user satisfaction, and a more agile response to our customer wants, ensuring that our product remains relevant and valuable to our users.

If you found this helpful, share it with a friend so they don't make the same mistakes I made.