4 opportunities for SaaS founders

SaaS founders who weathered 2008 say there are at least four opportunities you can look for. These historically crop up during downturns, and they can mean a way through scary graphs for smart founders.

“There is this notion,” Alex Hillman told us, “that economic downturns are often a good time to start a business.” (I leaned in close to listen.) Alex went on. A bad economy “...weeds out all the posers, all the fakers, all the people who are just kind of riding on the easy opportunities, which clears out a lot of the noise.” 👀

This economic weed-pulling is dismal news for some startups...but it’s exciting news for others.

Because when all the fakers and skating-by-ers have to pump the brakes and examine leaky ledgers, you can floor go on new opportunities.

SaaS founders who weathered 2008 say there are at least four opportunities you can look for. These historically crop up during downturns, and they can mean a way through scary graphs for smart founders. 👇

Opportunity #1: There are new needs you can target 🎯 #

Hiten Shah told us, “...there are a lot fewer wants when this kind of situation hits, and there are a lot more needs, and some of them might be new needs.”

To find new needs for your customer base, listen to potential buyers (and existing, if you have them!), and gather data on their behaviors. Then score those behaviors along 3 factors: painfulness, urgency, and frequency.

Three out of three is ideal, but (in most cases) you can work with two out of three as well.

But keep in mind...There’s more nuance here than we can fit into an illustration. For example, wants aren’t universally bad. Those can be powerful, too. Amy Hoy advocated, “A lot of wants are very strong. On the flip side, a lot of times we see folks who need to learn or do something — sometimes desperately! — but they A. don't know it, B. are in denial about it, or C. even do know and accept it… and still don't act.”

So, more than anything, observe what your customers do and pay for. (More tips on how to do that in this post.) 🔍

Opportunity #2: Businesses adjust their spending habits 💸 #

In the past few months, Amy has heard many first-hand accounts of bootstrappers growing their businesses. This is partly because customers are nixing default, expensive services and leaning on more affordable options instead.

Amy experienced this herself in 2008-2010. Back then, Amy and her husband were doing freelance data visualizations for big companies like Pepsi—and they were booked solid.

Amy remembers, “...the high-end darling firm that had been the ‘default choice’ until then had a huge staff and a slow, enterprise-y process which (until 2008) big corporations loved. We, on the other hand, got great work done faster and cheaper, because it was just two of us and we were very streamlined. Our hourly rate was high but our projects still cost much less. They shrank; we grew.” 🚀

Her experience illustrates an important concept: Businesses don’t stop spending in recessions. Instead, they become maximizers—they look to get the most out every dollar they spend. Tweak your positioning and services to appeal to this mindset.

Opportunity #3: Layoffs mean a large, talented hiring pool #

Don’t get me wrong, losing your job isn’t something we’d wish on anyone. But the reality of recessions is that people do lose their jobs. And if you’re in a position to hire, then you have the chance to bring on incredible talent that’s usually tied up.

Rand Fishkin remembers, “...from 2012 to 2016, I was trying to grow Moz from 50 people to a couple hundred. It was brutal trying to hire software engineers, especially here in Seattle.” Recessions make finding that talent more approachable. 🙌

Of course, this isn’t a green-light for companies to pay highly-skilled people sub-par rates or offer them crappy contracts. Please don’t infer that. Rather, it is a chance to provide a great workplace for some of the most talented employees on the market and grow your biz in the process.

Opportunity #4: Certain niche markets expand 📈 #

A recession, by definition, means there’s a decline in the total value of goods and services for at least six months.

But keep in mind, this is a picture of the overall economic forest. Historical data shows when the overall ecosystem declines, it’s probable certain pockets of trees (i.e. niche markets) improve.

For example, here are the top 10 stocks in the S&P 500 in 2008.

Several of these are what some folks label “recession-proof” industries. For example, grocery stores and health services.

Of course, every recession is unique; COVID presents different challenges than the 2008 housing crisis. But tracing what markets have performed well in the past can give context for the present day. For comparison, here’s how a few niches are doing in 2020 compared to the same week in 2019.

Healthcare, personal services, and groceries again saw improvements. So, pay attention to niches you orbit, and look for ones that are expanding.

TLDR: Sometimes a bad economy leads to good business 🤔 #

Not because entrepreneurs suddenly have the opportunity to aggravate consumers’ fears and anxieties (please, we see enough of that). But because there are healthy opportunities to:

  • Meet new consumer needs
  • Adjust to how businesses alter spending
  • Hire top-notch talent
  • Lean into niche-level growth

If recent economic headlines have you down, trust me, we get it. But keep in mind they don’t mean your new/young business venture is doomed. In fact, they may mean just the opposite.

Want more on this topic? There’s loads more good stuff in our Recession-proof Playbook.