The holy grail. Hell, there’s even a best-selling book that carries it as its title.
This is what every investor, start-up founder, and Fortune 500 CEO is after.
I haven’t lived in San Francisco that long, but I have yet to meet one person who isn’t working, selling, or founding a SaaS business. That’s an exaggeration, but not by much.
The $202 Billion Question:
What happens when predictable becomes volatile? DiSaaSter.
It calls to mind traders who sell options on stocks. These options expire worthless 95% (debatable) of the time. What happens the other 5%? They lose their bankroll, house, and shirt.
Now I know the economics that drives an option writer to go broke aren’t the same as a SaaS business. But is it really?
It’s the lure of smooth cash flow. These ideas are not exactly what Nassim Taleb would call Antifragile.
Not all SaaS businesses are going to go belly-up when volatility comes, but I do predict a particularly fast thinning of the crowd. Warren Buffet refers to these people as “swimming naked”. The tide is going to fall like someone pulled the plug on the bathtub drain.
So the point is that if you run, work, or are thinking of founding a SaaS business, maybe it’s time to start thinking about zigging while everyone else is zagging. The customer might only buy from you once, but you already have all your profit. It takes the average SaaS business 18 months to recoup the customer acquisition cost.
What is the customer going to think about maintaining your cash flow at the expense of his?