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HiTech
8 minutes read

The Rise of the Micro SaaS

By Robert Kazmi
By Robert Kazmi
HiTech
8 minutes read

Micro SaaS ideas look very promising. In a maturing SaaS market, new Software as a Service business models are constantly being devised to get a foothold of a sometimes saturated market.

The industry has already seen SaaS “unbundling”, where a core service is offered as an independent API or a small set of tools. The large, full-featured SaaS companies have fallen out of favor with some because not everyone needs the full extent of services offered by a SaaS. Smaller micro SaaS businesses can offer a service more focused on a particular set of needs.

In this post, we explore the growing trend of building “micros SaaS businesses”. We will discuss what a micro SaaS business means and what is the benefit of building one.

What Is a Micro SaaS?

The term “micro SaaS” seems to go back at least a decade ago. It is most often associated with Tyler Tringas, whose own company, Storemapper, represents the definition of the term.

A micro SaaS business, paraphrasing Tyler, is one that targets a niche market. Ideally, a micro SaaS business is led by one person or a very small team. As a result, many micro SaaS businesses operate with small costs, a narrow focus, a small but dedicated user base, and no outside funding. Thus, a micro SaaS business is very attractive from a team perspective.

Micro SaaS businesses have the ability to be location-independent, have low overheads, high margins, and relatively low risk for the company. With no outside funding, many have bootstrapped from next to nothing to grow a viable business. Part of their success lies in the fact that they operate in a focused market, with minimal resources, and with predictable recurring revenue.

Storemapper is one of many micro SaaS examples. It fits the bill as a micro SaaS business because it provides a very basic service to solve a clear problem. It is a micro SaaS that solves a very specific problem through analytics to monitor which stores are getting the most traffic. The app can be installed very quickly on a website to create a store locator service. There is no coding required, so basically, anyone can handle it. That’s it. 

Why Are We Seeing More Micro Saas?

It isn’t hard to see some of the benefits of creating micro SaaS businesses, and that is why many entrepreneurs are considering it as a lifestyle business. One of the first things these business owners often say is that they can get the benefits of monthly predictable recurring revenue, just like a full-fledged SaaS, but without the myriad hassles that can go with running a large platform. Of course, keep in mind that a micro SaaS business’s recurring income is usually proportional as well.

Where a large SaaS needs to build up to big teams to keep them running, often with costly overheads and office space, micro SaaS businesses can easily be run by one person. The smaller monthly income doesn’t matter so much when it only has to provide for one person. 

The case of Tyler Tringas is one of many examples of lifestyle business micro SaaS ideas. He ran Storemapper while traveling the world and was the sole team member, up until hiring a few extra people. The business still remained small, but hiring team members allowed him to unplug for weeks at a time while traveling.

Tringas also likened building micro SaaS solutions to honing a craft, much like an artisan would over time. There is some satisfaction to be had from providing the best possible solution to a narrowly focused problem – something which you can be the expert on.

Some micro SaaS businesses have been founded that way deliberately, while others have come about as their founders sought to solve a problem they had themselves elsewhere. A great example is Drip founder and serial entrepreneur, Rob Walling. He formed the basis of Drip while seeking to find a way to improve conversions for HitTail. When he found that his creation increased HitTail’s conversions by 30%, he knew he had a marketable product.

What Makes a Good Micro Saas?

While the basis of a micros SaaS sounds simple enough, finding something that will work well in this space is not necessarily easy. The difficulty of building micro SaaS solutions may vary depending on the industry.

Tyler Tringas describes a rule he has: “be five times better than customers currently pay.” As he says, there are two parts to this rule. Firstly, potential customers should already be spending money to solve the particular problem that you’re aiming to solve. Where people are usually solving that problem in some kind of way for free, even if it’s not particularly convenient, it can be difficult to convince them to start spending money on something which they weren’t spending on previously.

Secondly, by his estimation, you should either be five times cheaper, or five times better-performing than their current solution. There are still many opportunities out there where businesses are either forced to pay a lot of money for a solution, or they’re using rickety old software that just doesn’t do a great job.

Building micro SaaS solutions with this rule in mind should make it easier. It’s a bit like the SaaS unbundling phenomenon – sometimes a business segment is small enough and huge startups don’t want to target them, but they are significant enough that they need a more specific solution. Often, those big, bulky SaaS packages are just too much software for them.

When building micro SaaS apps, the prevailing view is that some existing competitors are a good sign. This likely means that there is a decent market for the service, although you’ll probably want to confirm this with your own research. If there are already too many competitors covering your idea, it’s time to look at something different.

Having a clearly defined market for your idea is another factor in how successful you are likely to be. Those who try to market their idea to everyone often end up attracting no one, because it’s too difficult to target the messaging just right. Make sure to have a clearly defined target audience

Not all SaaS businesses remain “micro” in the sense of only having a small team. Many have grown to become a medium SaaS, or have been acquired by larger companies to add to their own suite of products. Drip grew to a considerably bigger size with more features than when they began as a micro SaaS. Then, they were acquired by Leadpages in 2016.

Finding Your Fit

The idea of a micro SaaS is something that is regularly talked about in SaaS circles. The thing with a micro SaaS, and Software as a Service in general, is that it will be something that you as a founder will have to spend the next few years, or at least many months, building up, with a lot of the work being done by yourself. 

Dan Norris of WP Curve refers to “enjoyable daily tasks” and describes the idea. He says that there is no sense in doing work you don’t enjoy, so it is best if you think thoroughly about what your business tasks will be and visualize yourself doing this.

Final Thoughts

The rise of micro SaaS businesses has made developing and building up a SaaS company a seemingly more accessible achievement for more people, but it also is worthy of note by the bigger players out there. A small Software as a Service business owned by just one person is no longer just a hobby. 

If you are in the large or medium SaaS market, watch out for micro SaaS businesses. These are the players coming up to nip at your heels. They will most likely take care of a segment of the market that you are not doing the best possible job of serving yourself. These micro-businesses are good at building strong customer retention and recurring monthly revenue, making them attractive prospects for anyone looking to acquire one or build one.

Building micro SaaS solutions shouldn’t be hard, although doing so with an experienced app development company usually helps. With multiple examples of successful micro SaaS already, we think that this will be a trend for some time to come.

Koombea helps companies build highly successful SaaS and mobile apps. Talk to us about how we can help you today.

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