Intro: If you’re running a software development agency, it shouldn’t be too hard to grow. Welcome to Managed Coder podcast. Tune in every week to find out how to grow your software development agency and help you to solve your day-to-day problems with 20 plus years experience running an agency, please welcome your host Shahed Islam.
Shahed: Hey TK. Welcome, again on Managed Coder. Now I met you a few years ago, I think almost three years ago before the pandemic, and it’s wonderful to see you on here. So welcome again to our podcast. Tell me a little bit about yourself and then we’ll start.
TK: Yeah, thanks for having me. It feels like yesterday we were having lunch in New York City. But it was actually pre pandemic. So at least two years ago, maybe two and a half at this point. I’m TK. I have been in the SaaS industry for about 15 years now. Started a couple companies, sold a couple companies. Now I run a YouTube channel on how to grow SaaS companies. And I work with about 250 founders globally on helping them with their go-to market and how to get from idea all the way to upwards of 100 million in revenue.
Shahed: Thank you TK. So one of the podcasts I was listening or on YouTube video, I listen from you that you said every Excel file is a software. Eventually it’ll be. The reason I’m telling you is because our audience, which is mostly software development agencies. They may be questioning whether they should be sticking with these [01:41 inaudible]. Sometimes they are thinking that this bill may not be good enough, or there is no future. But for me, when I think about it, the software is going to control the word. That means we are required to be here. What is your perspective on that? Or what are the messages you want to tell people about that? How much is required and what will happen in future?
TK: Yeah, well, I mean, I think, I work with a lot of CEOs, founders of services agencies that then want to go into SaaS. So I come across this pattern a lot and I think one of the things that people get confused on is really we’re talking about delivery model. Ultimately you have customers and they have a problem and they want solutions. And what I found, whether you are in the services agency space, or you are in the pure play product space, is really a function of how you’re solving the customer problem. And in a spectrum, on one end of the spectrum, what you have is tell me what problem you have and my engineers and I and my team will build you a solution and it’s custom every time and it’s different every time and you’re just trying to solve for them.
And you’re just doing your best and it’s pure services. On the other end of the spectrum is a product. A product is tell me what your problem is. If it matches with what my product solves, I will sell you the product and you’ll get what you need. And that’s really coveted because every net new customer requires no net additional cost because the product is already built. So you have two ends in the spectrum. In between and there’s never really a true SaaS product. And there’s never truly a pure play just services company. Really it’s in between where the spectrum is. For example, if you move over a little bit on the spectrum, as a services company, you can have productized services. It’s like, look, we do these three problems and our services will actually solve for them.
And that way every new customer that comes on, your team kind of knows, is it widget A, widget B or widget C that we’re going to use or playbook A, playbook B, playbook C that we’re going to use to solve the customer’s problem. And then if you go a little bit more to the side, you essentially have a product and the service where you’re solving majority of the problems for the customer using a product, but then you also have services augmenting it for customizations and extensions and integrations. And that’s the spectrum. And I think that as soon as founders on the product side and founders on the services side stop obsessing over, am I a services company? Am I consulting company? Am I a SaaS company? Am I a product company? They start thinking more about what is the problem we’re solving and how do we actually move along this spectrum so we can more efficiently deliver the solution that they want, the more efficient of a business they’re going to be.
And in my opinion, there’s no such thing as a pure place services business because that’s not as efficient. There’s no such thing as a pure play product business, that’s not efficient either. In the middle is where the money’s made and the companies are built. And I think that as soon as founders start to think about it and those terms, they’re going to be more successful.
Shahed: Wonderful. I mean, this is where I also believe that our job here is to make clients successful. A lot of agency owners, I talk to, they’re talking too much about hourly rate, whether we can charge them more money. I think the business owner from perspective, especially when I’m talking to the startup company owner, over the years, I have started maybe thousands of customer and one of the areas where I see my success for my agency and other people that we think about client success. So what are the areas you want to give advice to people, agency owner? How do they change their mindset on that service model that they’re continuously thinking about hourly rate. And what are the solution and what way they can train their team member. It is easier to be saved than done. Honestly, even within my team member, I cannot change their mindset because they always think about, Hey, I have members who can work for 40 hours, how many hours that they’re being productive or built to the client, but instead of how do we change the mindset of the people that they need to think about client success and eventually the money will come.
TK: Yeah. I think, I’ll give you two examples on this. Just drawing for my own experience. The first example is let’s just take our mutual friend, Ronnie. Ronnie runs unapologetic foods. That’s where we were getting lunch. Last time we were both in New York City we were getting lunch with him and he runs two, three of the most coveted restaurants in New York City right now. It’s amazing. If you actually look behind each restaurant, Ronnie’s following a very standard blueprint that he’s created for himself on what creates award-winning restaurants. He’s saying, look, the people want this kind of thing. And we are going to figure out what are the set of principles that delivers that kind of thing, which is why he’s able to do two or three different restaurants serving seemingly different verticals, different offerings, but they win every time.
And the reason he is coming from a place of principles of what do people want, what are the common patterns and how do I actually deliver that in new restaurants every single time. So he is not going into a restaurant saying, how do I create a new restaurant? And what do people want in this block? He’s saying, what do I know about what the market wants and how do I productize that and deliver that? It’s still a restaurant in the end, but the way he gets to the answer of what the restaurant should be, how it should operate, how it should be marketed. It’s a common playbook that he’s created for himself across all his brands. And I think that that’s the kind of thing that agency owners need to start thinking about, it’s not about how many build hours can I do? It’s what is the demand for a certain type of problem and solution in the market? How do I standardize on solving that and solve that for as many customers as possible, versus trying to say, how do I just land as one customer and bill as many hours as possible.
One, you’re just solving for one customer and the other you’re trying to understand what are the macro trends for the market and how do I solve for that in a scalable way? The second story I’ll share with you is I spent time in Bridgewater. Bridgewater is the largest hedge fund in the world. Ray Dalio is very well known now. When I was there I was probably like the 300 something employee. We had about 200 billion under management, tiny company, huge amounts under management. And the biggest thing they taught us was how do we think principally, it’s not about solving this one thing. It’s not about just one thing that we’re doing. It’s about what is the class of things we’re doing and how do we solve for that, that way we get leverage?` And I think that if you’re trying to convince your team to operate more like Bridgewater, or even like our friend, Ronnie you have to start teaching your team about common patterns and finding leverage. Leverage is the thing that makes for a successful business. If you are just trying to win a certain number of billable hours for one customer, it’s very little leverage. If you are saying there are 500 of these type of customers, they want these five things. How do we equip our team to solve for those five things in a leveraged way? And we charge them for the value we deliver, then you’re actually using the leverage that is available to you because you’re tapping into the principles that exists.
Shahed: So you talk to a lot of fair founder and one of the challenging things for them, I know that the industry has moved away a little bit from having full-time employee. I was talking to you earlier also that a lot of companies are okay, hiring consultant and bring them inside team permanency. And a lot of my team member work like that. But I have seen that struggle. A lot of agency owner things that they cannot actually be profitable by working with [09:40 inaudible] because they are not mature. They don’t have enough money. I know that bigger business, you work with fortune 500. And from their perspective, what do you think you can suggest agency owner, they should do to make, work with SaaS business or a startup, I would say?
TK: Yeah. This is something. We work with SaaS founders as well. The thing is SaaS is very popular right now. Everyone wants a SaaS company. What people don’t realize is when you are building a SaaS business, you’re essentially investing time resources and taking a lot of risk on an asset. And that asset will either appreciate in value or not. And that’s a very different play than saying, hanging up your shingle and saying, Hey, I will code for you. Or I will build this for you. Services you can very quickly start turning revenues if you’re reasonably good at what you do and there’s demand for it in the market. Whereas with SaaS business, you have to actually invest into that asset, build up the foundation and then hope that it starts to create money over time. The beauty of that is you hit a certain inflection point with the SaaS business and then every net new customer doesn’t cost you anymore, but yields revenue. So tons of profit, whereas with services, you just have to keep going.
You have to keep earning that next dollar. So services really great because almost immediately you can start generating revenues. SaaS, very different you have to invest in the asset, the foundation, build it up and then you can start renting out the unit. It’s almost like an apartment building. Knowing that, I think the biggest advice I have for agency owners is to understand if this customer realizes that they’re building an asset. If they are not sufficiently capitalized, they’re not going to win anyway, they’re not going to be successful. And so you can maybe build them a product they’re going to fail because they’re not sufficiently capitalized. And then you don’t have a successful client story. And so you are better off not wasting time with a founder like that, who doesn’t realize that SaaS businesses require actual investment.
And you’re better off focusing on the founders that realize that, because guess what, if you do that and you build a great product, you’re going to be more successful, they’re going to be more successful. And you can actually turn that into a success story and you’re going to get 50 more founders who are like, I want what you did for them. And I think that again, it’s about thinking about that chess game versus just playing checkers, thinking about, well, who are the right founders to work with? Like for example at Unstoppable we have probably 200 episodes completely for free. And what we hope is that you go watch 200 of those episodes and you make a ton of money. We hope you do that. And then we have very expensive coaching programs. Why are they expensive? Because the person that is not willing to spend that money to join that program are not going to be successful in SaaS.
We know it. And so we have a minimum threshold. If you’re not willing to spend this money, you’re probably not going to be successful. We’re not going to work with you. So what we end up getting are people that use all the free episodes, make a bunch of cash, raise more money, and then go invest in us. And then we work together and make them more successful. We make them more successful. We get 50 more founders because they’re like, I heard you did great work for those guys. I’m like, yep, come on in. So we are essentially repelling away the people that don’t know that they have to invest to win in the SaaS game and attracting the people that are like, yep, this is an asset I’m going to invest in it. And I think that’s what agency owners should do as well.
Shahed: No, that’s great advice. Talking about SaaS and I know that a lot of people follow and I personally follow, and one idea where last few years I have spoken with a lot of our agency owners that their biggest struggle is that they also want to get into the product side of it. That means they want to become, they see a problem and they can bring an idea and make it SaaS. But it’s harder than you think. Let me tell you what I personally faced. One is the mindset. So I built a team. I thought that my leftover resource, which is not used, I can just put them and create a product. I end up making a product, which nobody wants it. And then we go back to work and then this is completely failing. So we finally started doing a dedicated team, complete different team, but that is still not good enough. The problem is that their mindset is service mindset. So again, just giving you the feedback I receive from other agency owners similar things. Do you have go to market strategy or an advice you think that minimum, if an agency become like a base camp, that they can eventually become a SaaS company, where should they start? What are the advice you can provide them?
TK: Yeah. I work with a ton of agency owners who are going through the transition to being a product company. And so we have this program called the launch program. The launch program is how do you go from idea to revenues and what are the steps that you follow? And the biggest gap that I see for agency owners is they’re capitalized, it’s not like they’re poor. Like Hey, I have capital that is deployed to build an asset. They realize that SaaS is an asset. So check, check, those are good things. They also know how to build product. So that’s also great. They also have domain knowledge in the market they’re going after, because they work with so many clients. That’s also a check. So a lot of these things check off where they typically go off is they don’t have the product strategy knowledge.
When you are in the services space, clients are coming to you and saying, here is my product requirements document, or here is the product I want to build. They’ve already done the math on what does the market need? What is the urgent important problem? How do we communicate it? How do we message it? And they’re like, here’s the product we want and you go build it. And you’re seeing just that sliver of a window. It’s really one of three core pillars in a SaaS business. And what I spent a lot of my time on with service business owners is teaching them, Hey, here’s product, got it. Here’s market and here’s go to market. And a lot of the time, what we spend on is you already know how to build a product, but let’s align that with how to think about your market strategy and your go to market strategy. And those are two blind spots that exist for service business owners, transforming over to becoming CEOs of SaaS companies.
Shahed: Perfect. that’s very well said. Thank you TK for your time today. And I really appreciate it. How do people contact you? Do you want to provide any information?
TK: Yeah, absolutely. The way it works is people that work with me to build and scale their SaaS companies. Typically binge watch 10 hours of our free content and then work with me. So it’s completely free. We have hundreds of episodes, we drop a new one every Sunday on exactly how to grow SaaS companies. So all I need to do is just go to tkkader.com/youtube, and you’ll get access to all of our free stuff. And if you want to work directly with me, just go to getunstoppable.com and you’ll see the programs that we offer on how I work directly with you to build and scale SaaS companies, depending on your stage. But YouTube is hands down the best place to start. It’s completely free. And we do fresh content every Sunday. What my hope is you get a ton of value from the free content, and then the programs that you join become a no brainer for us to work together.
Shahed: Thank you TK.
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