• Paul Armstrong

Who wants to be a Billionaire?

It's sad that we try to be rich when what we really want is universal happiness. But many of us would still "...rather cry in a Jaguar, than on a bus."

And many of us are in business to make money, so while we should temper our ambitions, we also want to be "following the money". We need to aim high, even if we are going to be only mildly successful.

As such, I'd like to share with you the insights I have which, you never know, might make you a mild billionaire. But, you should be careful to validate what I share, with what you know. And that is the first insight. 

Super-forecasters are people that appear to have an unnatural ability to predict an outcome. How will Brexit end? And, will and when will autonomous cars take over? Just two examples of questions being posed right now that "supers" are working on and have a high probability of accurately predicting.

I am not a "super", but I can tell you that a technique they use is to start, carefully, with an outside view. The outside view is the information and facts that exist immaterial to your experience, skills, and inside information. By creating an outside view first, you create a base class or reference case which you can later measure inside information against. 

The outside view of the restaurant industry is that 90% - 95% fail in the first year. The inside view is, your brother is a Michelin Star chef and hasn't had a bad business yet. Now, predict the likelihood of your investment in him being successful. 

"Every business is a technology business".

If that is our first outside view premise, then what else do we know about the technology industry?

IT earns annually $5 trillion, globally. And while retail, is more than $12 trillion, it is nothing to be sniffed at. The single most significant piece of the technology pie is software at $3.8 trillion. So "software" is realistically required by "every business." 

In technology, there is a significant trend towards cloud computing. And, the software-as-a-service (SaaS) delivery model is the largest earner of revenue from cloud services and is growing by 17% per annum.  

On average companies use 16 SaaS solutions every day. That jumps to 541 for your average enterprise. And 73% of all organisations (regardless of size) predict 80% of all their software will be SaaS by 2020. 

Have we passed a tipping point for SaaS? If I was a "super" I might predict — there is a greater than 50% chance of almost all software being consumed through SaaS. And that will only increase. (Until another innovation takes over).

So our reference or base class suggests there is demand. But is it good business? 

The first thing to understand is that software MEANS business. Of all cloud services (including SaaS) used by organisations, 81% are for business purposes. Starting with Marketing, HR and including customer relationship management, finance and accounting. Technologists did not invent this software. Behind the success of these SaaS products are many other skills that both went into creating them and surrounding them to get to market, successfully. 

So if "every business is a technology business" is it also true that "every business can be in the business of creating technology", and not just use it?

Beyond solving business problems, SaaS is consumed differently from software that came before it. Standard software was to the IT industry what cars are to the automotive industry. You buy a car once and use it every day until it no longer works. Unlike petrol, which you consume and re-purchase every week.

SaaS has turned software into a recurring revenue business model. SaaS consumers do not buy once and use many times. They "subscribe" and pay monthly and yearly fees; for on-going use, and maintenance. 

The caution here is the average customer acquisition cost is $1.18 for every dollar you make. The upside is, to keep a client, it costs 13 cents for every subsequent dollar you earn. And 28 cents for every new dollar of new business/revenue from the same client. 

This is where your inside information has to come in. Do you have a service that can be satisfied through SaaS? And is it sticky enough to last multiple years? Then, and better still, can you also upsell other services to the same clients?

Besides this, there are many more inside facts and information which you will want to bring and validate. But as I hope I have shown there is value in considering SaaS as your transformation into a new type of business.

If you would like to download our free guide to Doing Business as a SaaS, then you are welcome to do so at https://www.tipotapp.com/doing-saas-sunny.