Building a 7-figure SaaS by sacrificing immediate income for future revenue

Keith Perhac built an internal product for his agency, then realized there was a market for it. So he turned it into a standalone SaaS called SegMetrics and shut down the agency.

Now, it's making low- to mid-seven figures in annual revenue.

Here's Keith on how he did it. 👇

Building an opportunity

I'm a developer-turned-marketer-turned-SaaS founder.

Graduating during the first dot-com bust left me with limited job prospects in the US, so I moved to Japan to teach English for what I thought would be a year. That year turned into three, which turned into six, which turned into fifteen, during which I got married and took a job as a salaryman at a Japanese venture in Nagoya.

My path might have remained there if not for my best friend Patrick McKenzie — known to many as patio11 — who was also the only other American developer in our prefecture. His constant encouragement convinced me to leave my corporate job and start my own thing.

So I did. I started by freelancing as a technical marketer, which grew into a consultancy, and eventually evolved into a CRO agency.

We specialized in serving clients with specific technical and marketing needs who were highly data-oriented. However, we found ourselves spending more time on reporting than on developing marketing strategies. To address this, we built an internal tool to streamline our analytics and reporting. That tool became Segmetrics.

Our clients loved the tool and started requesting access, so we added user logins. When they wanted to invite colleagues, we implemented billing features. Before we knew it, SegMetrics had outgrown our agency work.

Recognizing its potential, in 2020 we decided to shut down the agency and focus on SegMetrics full-time, joining TinySeed as part of that re-focus.

Three-pronged revenue

SegMetrics is a marketing analytics tool designed for digital marketers — particularly SaaS companies and content creators looking to optimize long-term nurture sequences.

It helps businesses understand the true ROI of their marketing efforts by connecting revenue back to individual touchpoints in the customer journey.

We're currently generating low-to-mid seven figures in revenue. We make money in three main ways. The first is through our standard SaaS subscription model. We charge a flat recurring fee based on your chosen pricing plan, along with metered pricing based on specific metrics relevant to that plan. That's our bread and butter.

Secondly, we have several technical integrations with partners where we provide our analytics engine for use with their customers. One example is Kit (previously ConvertKit), where we supply the analytics data backend for their Pro users. These partnerships have been a significant source of revenue growth for us.

Finally, we offer services and training, much like we did in our agency days. Ironically, when we built the SaaS, we were excited to move away from the agency business and step out of providing training and services. We even tried several times to work with third-party partners to offer services to our users. But in the end, our customers really wanted to talk to us directly and receive training from us.

Creating a fully self-serve software product is the dream, but I find that if you're solving any sort of difficult problem at a business level, there are inevitably people who want that personalized training and service, and you should be prepared to offer that to them.

Services don't make up a huge piece of our revenue pie, but they do provide a nice additional stream of value. They're often utilized in the first months that a new customer joins, which means we're able to recoup acquisition costs much more quickly.

Here's the split:

• MRR: 73%

• Partnerships: 16%

• Services: 11%

Sacrificing money in hand

Building a SaaS product like SegMetrics while running a consulting business was incredibly challenging due to the stark revenue disparity between the two.

I could spend 10 hours on client work and earn $3k or invest 40 hours into the SaaS and maybe gain a single customer worth $100/mo. This created a constant tug-of-war between that delicious immediate income and investing in a future payoff.

But we found that SegMetrics only really grew when we dedicated focused time to it. You can see in our MRR graph the exact moments when we made company-wide decisions – like stopping the onboarding of new clients, parting ways with existing ones, or restructuring our team to concentrate on the SaaS instead of client work. 

Investing in a SaaS product was an investment in your future. But it was very challenging to give up the money in your hand for an uncertain outcome down the road.

A changing tech stack

Our tech stack has changed quite a bit over the last 10 years. We're a Laravel product, and I recently reread our launch article from a decade ago when we first created SegMetrics — it's like looking at a graveyard of old technology.

What we're using now is pretty straightforward: Laravel, Vue.js with InertiaJs, and DigitalOcean.

One of the biggest technological changes from when we started — and something I wish we'd had back then — is that we now use SingleStore for our data analytics database. Moving from a traditional relational database to a columnar store was the number one thing that improved performance and really opened up what we could do with our analytical queries. We waited way too long to make the shift, which meant it was a solid six-month project to fully migrate over. I wish we'd done that from the beginning.

One of the biggest challenges with building a product is that you don't know what you need until you need it, especially when you're starting out. A couple of years ago, we had to completely rebuild our analytics engine because the organically grown version just wasn't up to the task anymore, as we added more and more data and different data sources.

However, the bones of what we had 10 years ago are still there, and that's something that was a really hard problem to solve and is one of our core unique selling propositions. It's not something that can be stapled onto an existing product, which means we have an advantage over competitors that might want to enter our space.

Growth via partnerships

Our initial customers came from our existing agency relationships and word-of-mouth referrals. They were already familiar with the value we provided, so transitioning them to our new platform was a natural step.

We were up to $1k MRR in the first week of launching, and that came from existing clients. It was getting to that SECOND thousand of MRR that was the tough part.

Over the last ten years, we've tried various channels. Here are the top performers.

Ads

Like many others in our space, we run ads: search intent, display, and branding ads (though I still find branding ads to be somewhat of an abomination).

Looking back, we've found that focusing on partnerships and agency relationships has been far more effective, though.

Partnerships

In our industry, thought leadership plays a crucial role in sales. Everyone is trying to become a better marketer and gain an edge over the competition, so they turn to successful thought leaders for recommendations on strategies and tools.

The biggest gains we've seen in customer acquisition come from these thought leaders and partnerships.

Partnerships for us fall into two main categories: personality-based and technical.

Personality-based partnerships involve collaborating with thought leaders or other marketing companies. These individuals have established trust with their audiences, so their endorsement carries significant weight.

Technical partnerships focus on integrating our tool with other platforms, entering marketplaces, and building relationships that way. While the number of customers we get from individual marketplaces might not be high, our 100+ integrations add up.

B2B2C

One of our most effective channels is our agency offering. We have a strong relationship with marketing agencies, and each agency can bring on anywhere from 5 to 50 customers. The lifetime value of an agency partnership is substantially higher than that of an individual customer signing up. By providing tools and support tailored to agencies, we've been able to grow our user base more efficiently.

Not a growth strategy

"Build it and they will come" is not a growth strategy. From the very beginning, you need to think not only about how your product helps people but also about how you plan to market it in a way that you're comfortable with.

Being comfortable with your marketing strategy is crucial. If you don't like talking to people, you probably shouldn't rely on an outbound sales strategy. If your audience doesn't respond well to ads, you need to find an SEO or content-based approach.

Don't force yourself into marketing tactics that don't align with who you are – it will come across as inauthentic. Instead, leverage your strengths and find marketing channels that suit you. The goal is to build genuine connections and provide real value, not just to make a sale.

Marketing isn't a dirty word. It's about getting valuable information about your valuable product in front of people who need it but don't know it exists.

The best way to get that message in front of your audience is to understand what they value and how they consume content. Once you grasp that, you can connect with your audience and present your product in a way that's valuable to both them and you – without feeling like a used car salesman.

Remember your roots

One of our biggest mistakes was forgetting our roots and why we started the product in the first place.

We felt pressure from the industry and our competitors to quickly go up market, and in the process, we moved away from our core customer base. SegMetrics was always built to be the software I wished I had when running my agency. We created it because there wasn't an option available for small to medium businesses like mine – the idea was to give the power of a full business intelligence suite to everyone. I feel like we lost our way with that.

In recent months, we've made a concerted effort to refocus on our core customers.

I think there's a feeling of betrayal when a startup moves upmarket. I still remember when Intercom was $20 a month, and now, without discounts, it's more like $500. It felt like a slap in the face when they increased their pricing.

You can tell which companies have figured out who they are and whom they serve because they go all-in on that audience.

I believe it's important for customers to feel seen and appreciated by the products they use. And as a founder, it's crucial that you enjoy your customers. SaaS is like a marriage — if you don't like your customers, you're going to have a very hard time wanting to build a great product for them.

What's next

Every few months, I feel like the product is almost complete and we just need to polish from here. Then, the market changes, new technology emerges, or something else happens. Suddenly, there's a new feature or idea that would be great to introduce to our customer base.

Currently, we're working on modernizing the way we help people understand reporting. Our goal is to make it so that even those who aren't data-oriented can gain effective insights and know what to do, even if they're not data pros.

After that, we're refocusing on small and medium businesses, making it easier for them to gather and understand their data so they can spend less time in the tool and more time improving their marketing and products.

You can check out SegMetrics at segmetrics.com. We teach a lot about marketing and data on our YouTube channel, and post on our blog, Data Beats Opinion and X.

If anyone has any questions for us, we’re always around, and happy to help – whether about SegMetrics, SaaS, or marketing in general.