Why do many IT companies still face the problem of unstable income despite years of operation in the market? How to overcome this problem and ensure a stable cash flow? Let’s figure it out together.

If your company has been operating in the market for more than three to five years, you probably already have several regular clients or have a well-established process for attracting new ones. But even so, you still face difficult times from time to time, when the money for the previous project has already run out, the salary needs to be paid today, and the next payment is only next week. Sounds familiar, doesn’t it?

The reason for this situation lies in the very nature of the project business – the irregularity of income. Projects tend to end, and it takes a long time to get new ones (especially for amounts from 20-50-100 thousand dollars). So what should an IT founder do to create a stable income for the company?

SaaS model as a solution to the problem

Over the years, each outsourcing company has accumulated expertise in solving problems in various business domains (e.g., fintech, IoT, e-commerce). The logical next step is to package the existing expertise into a proprietary product. This allows us to:

1. Not to develop a unique solution from scratch for each new client.
2. Provide access, customization, and support for client users.
3. Sell to the client only once, and receive money for using the product on a monthly or annual basis.

This is the essence of the SaaS (Software-as-a-Service) approach.

According to research by forentrepreneurs.com:

– The average contract for such solutions is about 25 thousand dollars a year.

– In half of the cases, the duration of contracts is from two to three years.

– Another quarter of contracts are more than three years old.

– You receive money from clients regularly – on a monthly and/or annual basis.

What prevents the founders of Ukrainian outsourcers from earning money from their products regularly?

The main question is whether the product will be needed by the market?

The first question I encounter when discussing the situation with IT founders is often the following: “How do I know that the product will be needed by the market and that the effort and money invested in development will not be wasted?”

The answer is simple: first, you need to sell the product to the market, and then make it. But how do you sell something that doesn’t exist? Stop for a moment… how do clients “try” what you are selling now? In the beginning, the client buys a promise from you to solve a problem with your skills, experience, and time. You convince them that you can solve the problem, build a trusting relationship, and then get paid and do the work. That’s why it’s so difficult to sell from scratch every time because you have to start all over again with each new client.

Seven simple steps to launch a product

Especially for IT founders, I have prepared seven simple steps that will help you launch a product and reach your first regular clients in six months:

1. Find a business niche in which you have experience.
2. Understand what actual problem (pain) you will solve in the niche.
3. Gather a beta group of 20-40 decision-makers.
4. Build an MVP (minimum viable product) for the beta group.
5. Test market prices for the product on the beta group after a month of operation.
6. Get 5-7 paying clients.
7. Scale the product further (+5-10 clients per month).

This approach will allow you to develop an MVP without investing 25-30 thousand dollars per month in a development team. It will be enough to spend 2-3 thousand dollars to develop one main feature that solves a client’s problem within three, maximum four weeks! You don’t need to build a spaceship for your money if a simple glider will solve the client’s problem.

Product promotion: myths and reality

The next question that often arises: “Sales in the West are very expensive. Where can I get money for promotion?”. Yes, if you hired professionals in the Western market to do everything for you, it would cost at least 3-5 thousand dollars a month.

But at step 6 in the diagram above, you have already received your first paying clients, so you have confirmed your guess about who needs your solution. The next step is a matter of technology – scaling on your own.

Conclusion

1. Don’t be afraid to move from a project model to a product model. The SaaS model can provide a stable income for many years.
2. Start by solving a real problem in a niche that you know well.
3. Don’t spend months developing the perfect product. Create an MVP that solves one specific client problem.
4. Test your product on real users as early as possible. This will help you avoid spending money on unnecessary features.
5. Don’t be afraid to sell something that doesn’t exist yet. You’re already doing it in your outsourcing business.
6. Product promotion does not necessarily require huge budgets. Start small, but do it regularly.
7. Use your experience and expertise to build trust with potential clients.

Remember: the transition from outsourcing to your product is not just a change in business model. It is a way to financial stability and scale your business. Don’t be afraid to experiment and learn from your mistakes.