When a Product Works but a Business Doesn’t

An entrepreneur emailed me recently asking for advice about his Software-as-a-Service (SaaS) business. After several years of working on it, and signing up hundreds of customers paying a small amount of money, it became clear that it wasn’t a viable business. That is, by all accounts, product-market fit was reached but no matter how hard he tried, there wasn’t a repeatable customer acquisition process that could scale it to a multi-million dollar revenue business and make it worthwhile. This is one of the most challenging cases: years have been invested, customers clearly want it, and there’s no sustainable business in its current form.

Here are a few questions to ask when a product works but a business doesn’t:

  • Are there any adjacent markets or opportunities that can use the expertise developed with the first product?
  • How excited is the team about the opportunity? Has any fatigue set in from the current product?
  • Is the product a must-have or a nice-to-have? What would it take to make it a must-have?
  • Can you sunset the product or wind it down such that customers have time to switch to a different product?
  • How much effort does it require to keep it running while moving to a different product? Can focus truly be put on something else without worrying about the first product?

Products that work with business models that don’t actually happen more often than expected. Inevitably, some ideas aren’t economically viable even though they look great from the outside looking in. Even though it’s hard, sometimes the best approach is to stop throwing good money after bad and pivot or iterate into a better opportunity.

What else? What are some other questions to ask when a product works but a business doesn’t?

5 thoughts on “When a Product Works but a Business Doesn’t

  1. Maybe it is OK that some businesses do not become huge enterprises. These can be simple lifestyle businesses that provide an entrepreneur freedom to work when they want and on what the want.

    They are not getting rich per se, but they are not miserable working for someone else, have freedom and time to spend with kids and family, and can work on something they care about.

    If that is not enough for this person and they want a larger business — look to sell the business.

    Sell it to someone that is more looking for a lifestyle type of business, then take those funds to start the new idea.

    I think some SaaS apps are just built better for very long term clients (less churn), while others (even if excellent) are always going to be more short term. Sounds like maybe this is part of the problem here.

    • I agree with Kevin. I think the most important thing is to for the entrepreneur to define what kind of business he is looking to run. A small example, I recently needed service on an air conditioner that I had installed a few years ago by a crew sent by a local company. To my surprise the owner of the business himself showed up and did the work. I asked him what happened to all his workers. He replied that he let them all go. When I expressed surprised he told me that he is making slightly less than when he employed 20 workers but he is much more relaxed without having to worry about hiring, firing making the payroll etc.

  2. Two ideas:

    (1) What if the pricing went up significantly? Would customers understand the circumstances and be willing to pay much more?

    (2) Is there any other company that covets relationships with these customers that might buy (or sponsor) the company?

  3. Sounds like faulty logic. I wouldn’t classify a product as a “fit” if the cost of delivering a device/product is less than the price the market is willing to pay. Clearly, not knowing more information limits my ability to discuss. What data or feedback is being used to suggest that the market clearly wants the product?

  4. This is very much what happened to Kapost. We were targeting the media industry and had a product that had a good number of paying customers (maybe 40-50) such as Time Inc, Fortune, Consumer Reports, Gannett, Mashable, etc.. However, they didn’t want to pay that much as their businesses weren’t doing well. But they loved our product.

    We then saw that an adjacent industry was rising – that of content marketing – and we switched to focus on that instead. As a result, we took off and now we’re growing faster than ever.

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