Issue#12: Building $1K-$10K MRR micro saas products around SaaS Referral Software
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No fluffy content. If your goal is to build a $100m ARR business, this is not the right post. Here I am are NOT going to talk about building the next Facebook or Twitter. If your goal is to make a $1K to $10K MRR, continue reading.
This post will cover one SAAS area and talk about multiple niches in this space. This post also explains more on how to do tech implementation, do market analysis, how the current players are doing, and also ends with a cost analysis to understand the overall cost for 100 users.
There is no better recommendation for a product than a friend(or somebody you know) recommending it. That is the basic premise of a “Referral program”. Any saas/software that facilitates this process is termed as “Referral software”.
Some current players in this space:
ReferralHero : Imagine growing your business 5%-10% a month through referrals.
Launched in 2016. Currently at $20K+ MRR in about 4 years.
ReferralCandy : Grow your sales through word-of-mouth marketing. Reward your customers for referrals and watch the sales and shares roll in. Making $10M USD/year.
FriendBuy:Referral Marketing for Growth Marketers
Smile.io : Turn your hard-earned sales into repeat customers. Founded in 2012. Revenue $10m USD.
Viral-Loops:Referral marketing made easy for everyone. Crossed $60K+ MRR.
GrowSurf: Grow your business overnight, every night.
SaaSQuatch: Loyalty, Referrals and Rewards Launch promotions in minutes, not weeks. Create, manage and track intelligent special-offer, referral and loyalty programs all from one place. Crossed $100K MRR.
New players:
WaitlistAPI : Quick and easy waitlist with built in referral.
Negative Nancy says - “Most people don’t like to advertise products to friends/strangers to make money. So, the Referral system never works”
Me - Well, users don’t have to force a product on their friends or on the internet. If a user likes it, the user can just endorse it as a referrer. Referral software makes millions of dollars in profits enabling companies to get more paid users.
Negative Nancy says - “It is tough to integrate Referral programs into existing saas/company and most existing companies may not use my Referral software”
Me - It was tough to integrate Referral programs into existing saas/company a few years before. Butnot anymore with the news saas referral tools. There are a lot of referral tools that just warp up everything in a simple widget. All the customer has to do is to place the widget on their page. Start with a simple addon/script and a simple API that can create referral links.
Deep-dive & Some niches
Let’s see what these companies are primarily doing.
A referral tool helps you generate a unique link for each of your customers.
Customers share their unique link to friends/social media/newsletter
A new user signed up by clicking on the shared link will be considered as a valid referral.
There are different categories of valid referrals.
Some major
A new user may not be joining right away after clicking the link for the first time.
Most users signup to the product may be after 10 days of actually clicking on the link
So, the Referral software may need to have a cookie placed to track if the user has come via the shared link. This can be done by tracking using the user IP but each company has its policy against tracking users by IP vs Cookies.
Once the user signs up, the referral software should do required validations like - “if the user has signed by before the valid data as per referral program”
In most referral software, anyone clicking on the link and joining/signing up in 30 days is considered a valid referral.
Let’s see some niches around this.
Pre-launch waitlist Automation Referral System: This is gaining a lot of attention these days. Implement a micro saas solution that handles the waitlist activity for new saas companies. Most saas companies want to create a multiplier effect by asking to subscribe to get early access and keeps users on the waitlist. As the user shares the invite to more people, his/her waitlist number improves. For example, if a user signs up for early access and is on a waitlist queue with 400 people before him/her. This will act as a token number while waiting in line for access. If the user shares his/her unique invite link and lets more people join from his invite link, the user gets moved up in the queue from 400 to 200. Building a simple micro saas around this functionality can bring in a lot of attention as this creates a viral effect. See Waitlist API for inspiration.
Referral Programs with automated payments: Create a referral program software (as a micro-saas) that pays the referrers. The direct monetary benefit is more attractive. Have a system like Paypal or Stripe to make money transfers. For example, if there is a saas that charges a customer about $150/m, that would be $1800/year. Assuming each customer stays 2 years, the LTV(lifetime value) of each new paid user would be $3000 - USD 4K. In these cases, some B2B companies would like to pay monetary benefits, and having an automated payment system based on a referral system is a clear winner. This model is close to an Affiliate system model.
Referral Programs that can auto promote to a Paid plan: Create a referral program that can handle the referrals and also create a simple web hook/API that can be called to upgrade the user plan. This works well with small-time players who can give a paid plan for free when a user brings in a few users with his referral link. Here the incentive would be “upgrading the free plan to a paid plan” for the referrer. While most companies can build this by themselves, integrating this with existing saas may not be possible. So, create a simple webhook that actively listens to referral data, and once a certain present threshold is reached, call an API to the customer’s saas to upgrade users plan and based on the API response initiate an email on behalf of the customer that the plan got upgraded.