In this article, I look at Microsaas products and I answer the question, are they actually profitable? Stick around until the end, where I’ll talk about the place I would go to find almost endless inspiration for new Microsaas ideas.
To begin, I’d like to define Microsaas. You probably know that SaaS is software as a service. But Microsass is a little different. Microsass is a little corner of of the SaaS space.
And there’s a few factors that I use to define Microsaas. I don’t believe there’s a generalized definition, but this is how I think about Microsaas.
In This Article:
Small TAM
As someone who’s been knee deep in the SaaS space for about 15 years, the first feature of Microsass is there’s usually a small tam or total addressable market.
This means there are only so many customers who will ever use your product.
Growth Ceiling
You’re gonna have a growth ceiling.
That’s the point of Microsaas, is that it’s easy, easy to get in, it’s easy to start growing.
And you’re gonna know that somewhere around $20,000 - $30,000 a month, you know, these are not million dollar companies in terms of annual revenue. While that ceiling may sound like it’s a bug, it’s actually a feature.
It means that super large companies that need to be able to build a business into, let’s say 7, 8, 9 figures in order to dive in.
They’re gonna stay far away from these markets. And so that leaves it to folks like yourself, bootstrapped and mostly bootstrapped founders who want to grow an incredible lifestyle business.
Another way I think of Microsaas is it’s usually almost like a single feature, more than a full piece of software. And the nice part about that is oftentimes they don’t require a ton of maintenance. Because you can build the feature, folks get value out of it, you get paid, and that’s it.
Aside from fixing bugs and minor updates, you’re not constantly in a feature race with a bunch of other competition. That’s another element of Microsaas, is there usually isn’t a ton of competition. It’s not like building an email service provider or customer relationship management software, where there are literally hundreds of other players.
Sometimes you might be the only game in town because the space is so small or other times you might have one or two competitors, but it’s not as competitive as these larger SaaS markets.
Another element of Microsaas is they usually, not always, but usually have a single organic marketing channel. So this is something like ranking high in Google, ranking high in an app store like Shopify or the WordPress plugin repository.
That’s great, because you don’t have to spend all the time to invest in marketing to try marketing approaches. And you don’t have to spend all the money to market like a lot of fast growing SaaS companies do. In addition, most of the Microsaas that I’ve seen really don’t have employees.
There might be a few freelancers or contractors that are around to help with development updates, or to help with support, or to help with just some minor things that come up, but you often don’t need any full time employees because again, the app itself is small, the footprint is small, and the marketing kind of takes care of itself
Lifestyle Business
I really do think of Microsaas products as the essence of a lifestyle business. This is a business that you build that either gives you an amazing side income while you work a day job and it’s not a ton of time to build or to maintain it, or it allows you to quit that day job and build an incredible lifestyle for yourself, where you can seek that freedom and the purpose of having a company without having to deal with all the headaches of constantly growing and building and competition and shipping the next feature.
You know, there’s so much that goes in to building what I’ll just call it a normal SaaS or a standard high growth SaaS company that a Microsaas makes easier on the founder if you really truly are in search of that lifestyle.
Are They Actually Profitable?
So now that we understand what Microsaas is, let’s answer this question: Are they actually profitable?
If we think about profit, it’s the revenue you take in minus your expenses.
Revenue’s pretty obvious, right? Typically you’re going to have customers paying you for the service and they’re getting value out of it. And even if your revenue is low, let’s say it’s 1000 or 2000 or 3000, you have to compare that to what the expenses are. And so let’s look at the three most common expenses for a micro SaaS app.
Number one: Hosting or Your Infrastructure Costs
Number one is your hosting or your infrastructure costs.
SaaS apps require some type of hosting. Sometimes this is really inexpensive, sometimes it’s included in the marketplace that you’re in.
In most cases, hosting an infrastructure for Microsaas are going to be relatively low. Obviously, if you’re doing a lot of computation, you’re doing something with machine learning or AI. Those can creep up, but in general they are gonna stay relatively low.
Number two: Marketing
The second expense can be marketing. As I said above, usually marketing is almost taken care of by organic rankings. And so it depends on how much time and or money you’re investing in that when you think about expenses.
So if you’re ranking in Google naturally, and you just can do minimal upkeep, then there won’t be a ton of expense. But if you find that you have to put out new articles or optimize them, obviously you’re either doing that yourself or you’re paying people to do that.
Number three: Freelancers / Contractors
And lastly, freelancers / contractors that you bring in to do the work, to do email support, maybe to maintain the application.
If you’re not a developer to help out with marketing, if that’s something that you need to do, and it’s a trade off, right? If you’re doing a thousand a month, then you’re probably going to be doing the work yourself. You’re not going to be bringing freelancers in. If you’re doing $30,000 a month, you’re probably thinking about hiring some folks to help out so you don’t have to be answering every email that comes in asking for support.
Conclusion
So to answer this question, are Microsaas companies profitable?
The answer is an emphatic yes, they can be insanely profitable even when your revenue is low. If you keep those expenses low and you do the work yourself, they can throw off a ton of profit. And while I said above that there is often a ceiling to Microsaas companies, that negative comes with the benefit that they are insanely profitable and usually more profitable than standard SaaS companies where you have to hire a team and be constantly building out the platform.
In just a second, I’ll tell you about the place I would go to find almost endless inspiration for new microsass ideas. It’s at rocketgems.com, founded by Ramy, where he has listed 68 B2B SaaS marketplaces with opportunities for indie hackers, microconfers, bootstrappers, and folks looking to launch both microsass businesses. But also wanting to get into what he calls a SaaS marketplace, which is where that takes the heavy lifting of the marketing away from you, and it makes it so you can focus on building essentially an add on to an existing ecosystem.