SaaS spending is 40/40/20. 40% of operating expenses should be R&D, 40% sales and marketing, and 20% G&A. We wanted to see the statistics behind the rules of thumb. Since October 2017, 73 SaaS startups have gone public. Perhaps the rule of thumb should be 30/50/20. The data is below.

30/50/20. R&D accounts for 26% of opex, sales and marketing 48%, and G&A 22%. We think R&D/S&M/G&A should be 30/50/20.

There are outliers. There are exceptions to rules of thumb. Dropbox spent 45% on R&D whereas Zoom spent 13%. Zoom spent 73% on S&M, Dropbox 37%, and Bill.com 28%. Snowflake spent 130% of revenue on S&M, while their EBITDA margin is -192%.

G&A shouldn't stand out. Minimize G&A spending. Priorities should be product development and sales. Cloudflare, Sendgrid, Snowflake, and Palantir spend 36%, 34%, 37%, and 43% on G&A.

Another myth is that COGS is 20% of revenue. Median and averages are 29%.

Where is the profitability? Data-driven operating income calculations were simplified (Revenue COGS R&D S&M G&A). 20 of 73 IPO businesses reported operational income. Median and average operating income margins are -21% and -27%.

As long as you're growing fast, have outstanding retention, and marquee clients, you can burn cash since recurring income that doesn't churn is a valuable annuity.

The data was compelling overall. 30/50/20 is the new 40/40/20 for more established SaaS enterprises, unprofitability is alright as long as your business is expanding, and COGS can be somewhat more than 20% of revenue.

Niches are rich, as the adage goes.

Micro SaaS requires a great micro-niche; otherwise, it's merely plain old SaaS with a large audience.

Instead of targeting broad markets with few identifying qualities, specialise down to a micro-niche. How would you target these users?

Better go tiny. You'll locate and engage new consumers more readily and serve them better with a customized solution.

Imagine you're a real estate lawyer looking for a case management solution. Because it's so specific to you, you'd be lured to this link:

instead of below:

Next, locate mini SaaS niches that could work for you. You're not yet looking at the problems/solutions in these areas, merely shortlisting them.

The market should be growing, not shrinking

We shouldn't design apps for a declining niche. We intend to target stable or growing niches for the next 5 to 10 years.

If it's a developing market, you may be able to claim a stake early. You must balance this strategy with safer, longer-established niches (accountancy, law, health, etc).

First Micro SaaS apps I designed were for Merch By Amazon creators, a burgeoning niche. I found this niche when searching for passive income.

Graphic designers and entrepreneurs post their art to Amazon to sell on clothes. When Amazon sells their design, they get a royalty. Since 2015, this platform and specialty have grown dramatically.

Amazon doesn't publicize the amount of creators on the platform, but it's possible to approximate by looking at Facebook groups, Reddit channels, etc.

I could see the community growing week by week, with new members joining. Merch was an up-and-coming niche, and designers made money when their designs sold. All I had to do was create tools that let designers focus on making bestselling designs.

Look at the Google Trends graph below to see how this niche has evolved and when I released my apps and resigned my job.

Are the users able to afford the tools?

Who's your average user? Consumer or business? Is your solution budgeted?

If they're students, you'll struggle to convince them to subscribe to your study-system app (ahead of video games and beer).

Let's imagine you designed a Shopify plugin that emails customers when a product is restocked. If your plugin just needs 5 product sales a month to justify its cost, everyone wins (just be mindful that one day Shopify could potentially re-create your plugins functionality within its core offering making your app redundant ).

Do specialized users buy tools? If so, that's comforting. If not, you'd better have a compelling value proposition for your end customer if you're the first.

This should include how much time or money your program can save or make the user.

Are you able to understand the Micro SaaS market?

Ideally, you're already familiar about the industry/niche. Maybe you're fixing a challenge from your day job or freelance work.

If not, evaluate how long it would take to learn the niche's users. Health & Fitness is easier to relate to and understand than hedge fund derivatives trading.

Competing in these complex (and profitable) fields might offer you an edge.

B2C, B2M, or B2B?

Consider your user base's demographics. Will you target businesses, consumers, or both? Let's examine the different consumer types:

• B2B refers to business-to-business transactions where customers are other businesses. UpVoty, Plutio, Slingshot, Salesforce, Atlassian, and Hubspot are a few examples of SaaS, ranging from Micro SaaS to SaaS.

• Business to Consumer (B2C), in which your clients are people who buy things. For instance, Duolingo, Canva, and Nomad List.

• For instance, my tool KDP Wizard has a mixed user base of publishing enterprises and also entrepreneurial consumers selling low-content books on Amazon. This is a case of business to many (B2M), where your users are a mixture of businesses and consumers. There is a large SaaS called Dropbox that offers both personal and business plans.

Targeting a B2B vs. B2C niche is very different. The sales cycle differs.

• A B2B sales staff must make cold calls to potential clients' companies. Long sales, legal, and contractual conversations are typically required for each business to get the go-ahead. The cost of obtaining a new customer is substantially more than it is for B2C, despite the fact that the recurring fees are significantly higher.

• Since there is typically only one individual making the purchasing decision, B2C signups are virtually always self-service with reduced recurring fees. Since there is typically no outbound sales staff in B2C, acquisition costs are significantly lower than in B2B.

User Characteristics for B2B vs. B2C

Consider where your niche's users congregate if you don't already have a presence there.

B2B users frequent LinkedIn and Twitter. B2C users are on Facebook/Instagram/Reddit/Twitter, etc.

Churn is higher in B2C because consumers haven't gone through all the hoops of a B2B sale. Consumers are more unpredictable than businesses since they let their bank cards exceed limitations or don't update them when they expire.

With a B2B solution, there's a contractual arrangement and the firm will pay the subscription as long as they need it.

Depending on how you feel about the above (sales team vs. income vs. churn vs. targeting), you'll know which niches to pursue.

You ought to respect potential customers.

Would you hang out with customers?

You'll connect with users at conferences (in-person or virtual), webinars, seminars, screenshares, Facebook groups, emails, support calls, support tickets, etc.

If talking to a niche's user base makes you shudder, you're in for a tough road. Whether they're demanding or dull, avoid them if possible.

Merch users are mostly graphic designers, side hustlers, and entrepreneurs. These laid-back users embrace technologies that assist develop their Merch business.

I discovered there was only one annual conference for this specialty, held in Seattle, USA. I decided to organize a conference for UK/European Merch designers, despite never having done so before.

Hosting a conference for over 80 people was stressful, and it turned out to be much bigger than expected, with attendees from the US, Europe, and the UK.

I met many specialized users, built relationships, gained trust, and picked their brains in person. Many of the attendees were already Merch Wizard users, so hearing their feedback and ideas for future features was invaluable.

focused and specific

Instead of building for a generic, hard-to-reach market, target a specific group.

I liken it to fishing in a little, hidden pond. This small pond has only one species of fish, so you learn what bait it likes. Contrast that with trawling for hours to catch as many fish as possible, even if some aren't what you want.

In the case management scenario, it's difficult to target leads because several niches could use the app. Where do your potential customers hang out? Your generic solution: No.

It's easier to join a community of Real Estate Lawyers and see if your software can answer their pain points.

My Success with Micro SaaS

In my case, my Micro SaaS apps have been my chrome extensions. Since I launched them, they've earned me an average $10k MRR, allowing me to quit my lousy full-time job years ago.

I sold my apps after scaling them for a life-changing lump amount. Since then, I've helped unfulfilled software developers escape the 9-5 through Micro SaaS.

Whether it's a profitable side hustle or a liferaft to quit their job and become their own Micro SaaS boss.

Having built my apps to the point where I could quit my job, then scaled and sold them, I feel I can share my skills with software developers worldwide.

Read my free guide on self-funded SaaS to discover more about Micro SaaS, or download your own copy. 12 chapters cover everything from Idea to Exit.

Watch my YouTube video to learn how to construct a Micro SaaS app in 10 steps.

There’s a funny part of ‘Steve Jobs’ by Walter Isaacson where Jobs says that Bill Gates was more a copier than an innovator:

“Bill is basically unimaginative and has never invented anything, which is why I think he’s more comfortable now in philanthropy than technology. He just shamelessly ripped off other people’s ideas….He’d be a broader guy if he had dropped acid once or gone off to an ashram when he was younger.”

Gates lacked flavor. Nobody ever got excited about a Microsoft launch, despite their good products. Jobs had the world's best product taste. Apple vs. Microsoft.

A CEO's core job functions are all driven by taste: recruiting, vision, and company culture all require good taste. Depending on the type of company you want to build, know where you stand between Microsoft and Apple.

How can you improve your product judgment? How to acquire taste?

Test and refine

Product development follows two parallel paths: the ‘customer obsession’ path and the ‘taste and iterate’ path.

The customer obsession path involves solving customer problems. Lean Startup frameworks show you what to build at each step.

Taste-and-iterate doesn't involve the customer. You iterate internally and rely on product leaders' taste and judgment.

Creative Selection by Ken Kocienda explains this method. In Creative Selection, demos are iterated and presented to product leaders. Your boss presents to their boss, and so on up to Steve Jobs. If you have good product taste, you can be a panelist.

The iPhone follows this path. Before seeing an iPhone, consumers couldn't want one. Customer obsession wouldn't have gotten you far because iPhone buyers didn't know they wanted one.

In The Hard Thing About Hard Things, Ben Horowitz writes:

“It turns out that is exactly what product strategy is all about — figuring out the right product is the innovator’s job, not the customer’s job. The customer only knows what she thinks she wants based on her experience with the current product. The innovator can take into account everything that’s possible, but often must go against what she knows to be true. As a result, innovation requires a combination of knowledge, skill, and courage.“

One path solves a problem the customer knows they have, and the other doesn't. Instead of asking a person what they want, observe them and give them something they didn't know they needed.

It's much harder. Apple is the world's most valuable company because it's more valuable. It changes industries permanently.

If you want to build superior products, use the iPhone of your industry.

How to Improve Your Taste

I. Work for a company that has taste.

People with the best taste in products, markets, and people are rewarded for building great companies. Tasteful people know quality even when they can't describe it. Taste isn't writable. It's feel-based.

Moving into a community that's already doing what you want to do may be the best way to develop entrepreneurial taste. Most company-building knowledge is tacit.

Joining a company you want to emulate allows you to learn its inner workings. It reveals internal patterns intuitively. Many successful founders come from successful companies.

Consumption determines taste. Excellence will refine you. This is why restauranteurs visit the world's best restaurants and serious painters visit Paris or New York. Joining a company with good taste is beneficial.

2. Possess a wide range of interests

“Edwin Land of Polaroid talked about the intersection of the humanities and science. I like that intersection. There’s something magical about that place… The reason Apple resonates with people is that there’s a deep current of humanity in our innovation. I think great artists and great engineers are similar, in that they both have a desire to express themselves.” — Steve Jobs

I recently discovered Edwin Land. Jobs modeled much of his career after Land's. It makes sense that Apple was inspired by Land.

A Triumph of Genius: Edwin Land, Polaroid, and the Kodak Patent War notes:

“Land was introverted in person, but supremely confident when he came to his ideas… Alongside his scientific passions, lay knowledge of art, music, and literature. He was a cultured person growing even more so as he got older, and his interests filtered into the ethos of Polaroid.”

Founders' philosophies shape companies. Jobs and Land were invested. It showed in the products their companies made. Different. His obsession was spreading Microsoft software worldwide. Microsoft's success is why their products are bland and boring.

Experience is important. It's probably why startups are built by generalists and scaled by specialists.

Jobs combined design, typography, storytelling, and product taste at Apple. Some of the best original Mac developers were poets and musicians. Edwin Land liked broad-minded people, according to his biography. Physicist-musicians or physicist-photographers.

Da Vinci was a master of art, engineering, architecture, anatomy, and more. He wrote and drew at the same desk. His genius is remembered centuries after his death. Da Vinci's statue would stand at the intersection of humanities and science.

We find incredibly creative people here. Superhumans. Designers, creators, and world-improvers. These are the people we need to navigate technology and lead world-changing companies. Generalists lead.

Ray Dalio's super-effective roadmap 

Ray Dalio's $22 billion net worth ranks him 36th globally. From 1975 to 2011, he built the world's most successful hedge fund, never losing more than 4% from 1991 to 2020. (and only doing so during 3 calendar years). 

Dalio describes a 5-step process in his best-selling book Principles. It's the playbook he's used to build his hedge fund, beat the markets, and face personal challenges. 

This 5-step system is so valuable and well-explained that I didn't edit or change anything; I only added my own insights in the parts I found most relevant and/or relatable as a young entrepreneur. The system's overview: 

1. Have clear goals 

2. Identify and don’t tolerate problems 

3. Diagnose problems to get at their root causes 

4. Design plans that will get you around those problems 

5. Do what is necessary to push through the plans to get results 

If you follow these 5 steps in a virtuous loop, you'll almost always see results. Repeat the process for each goal you have. 

1. Have clear goals 

a) Prioritize: You can have almost anything, but not everything. 

I started and never launched dozens of projects for 10 years because I was scattered. I opened a t-shirt store, traded algorithms, sold art on Instagram, painted skateboards, and tinkered with electronics. I decided to try blogging for 6 months to see where it took me. Still going after 3 years. 

b) Don’t confuse goals with desires. 

A goal inspires you to act. Unreasonable desires prevent you from achieving your goals. 

c) Reconcile your goals and desires to decide what you want. 

d) Don't confuse success with its trappings. 

e) Never dismiss a goal as unattainable. 

Always one path is best. Your perception of what's possible depends on what you know now. I never thought I'd make money writing online so quickly, and now I see a whole new horizon of business opportunities I didn't know about before. 

f) Expectations create abilities. 

Don't limit your abilities. More you strive, the more you'll achieve. 

g) Flexibility and self-accountability can almost guarantee success. 

Flexible people accept what reality or others teach them. Self-accountability is the ability to recognize your mistakes and be more creative, flexible, and determined. 

h) Handling setbacks well is as important as moving forward. 

Learn when to minimize losses and when to let go and move on. 

2. Don't ignore problems 

a) See painful problems as improvement opportunities. 

Every problem, painful situation, and challenge is an opportunity. Read The Art of Happiness for more. 

b) Don't avoid problems because of harsh realities. 

Recognizing your weaknesses isn't the same as giving in. It's the first step in overcoming them. 

c) Specify your issues. 

There is no "one-size-fits-all" solution. 

d) Don’t mistake a cause of a problem with the real problem. 

"I can't sleep" is a cause, not a problem. "I'm underperforming" could be a problem. 

e) Separate big from small problems. 

You have limited time and energy, so focus on the biggest problems. 

f) Don't ignore a problem. 

Identifying a problem and tolerating it is like not identifying it. 

3. Identify problems' root causes 

a) Decide "what to do" after assessing "what is." 

"A good diagnosis takes 15 to 60 minutes, depending on its accuracy and complexity. [...] Like principles, root causes recur in different situations. 

b) Separate proximate and root causes. 

"You can only solve problems by removing their root causes, and to do that, you must distinguish symptoms from disease." 

c) Knowing someone's (or your own) personality can help you predict their behavior. 

4. Design plans that will get you around the problems 

a) Retrace your steps. 

Analyze your past to determine your future. 

b) Consider your problem a machine's output. 

Consider how to improve your machine. It's a game then. 

c) There are many ways to reach your goals. 

Find a solution. 

d) Visualize who will do what in your plan like a movie script. 

Consider your movie's actors and script's turning points, then act accordingly. The game continues. 

e) Document your plan so others can judge your progress. 

Accountability boosts success. 

f) Know that a good plan doesn't take much time. 

The execution is usually the hardest part, but most people either don't have a plan or keep changing it. Don't drive while building the car. Build it first, because it'll be bumpy. 

5. Do what is necessary to push through the plans to get results 

a) Great planners without execution fail. 

Life is won with more than just planning. Similarly, practice without talent beats talent without practice. 

b) Work ethic is undervalued. 

Hyper-productivity is praised in corporate America, even if it leads nowhere. To get things done, use checklists, fewer emails, and more desk time. 

c) Set clear metrics to ensure plan adherence. 

I've written about the OKR strategy for organizations with multiple people here. If you're on your own, I recommend the Wheel of Life approach. Both systems start with goals and tasks to achieve them. Then start executing on a realistic timeline. 

If you find solutions, weaknesses don't matter. 

Everyone's weak. You, me, Gates, Dalio, even Musk. Nobody will be great at all 5 steps of the system because no one can think in all the ways required. Some are good at analyzing and diagnosing but bad at executing. Some are good planners but poor communicators. Others lack self-discipline. 

Stay humble and ask for help when needed. Nobody has ever succeeded 100% on their own, without anyone else's help. That's the paradox of individual success: teamwork is the only way to get there. 

Most people won't have the skills to execute even the best plan. You can get missing skills in two ways: 

1. Self-taught (time-consuming) 

2. Others' (requires humility) light

On knowing what to do with your life 

“Some people have good mental maps and know what to do on their own. Maybe they learned them or were blessed with common sense. They have more answers than others. Others are more humble and open-minded. […] Open-mindedness and mental maps are most powerful.” — Ray Dalio 

I've always known what I wanted to do, so I'm lucky. I'm almost 30 and have always had trouble executing. Good thing I never stopped experimenting, but I never committed to anything long-term. I jumped between projects. I decided 3 years ago to stick to one project for at least 6 months and haven't looked back. 

Maybe you're good at staying focused and executing, but you don't know what to do. Maybe you have none of these because you haven't found your purpose. Always try new projects and talk to as many people as possible. It will give you inspiration and ideas and set you up for success. 

There is almost always a way to achieve a crazy goal or idea. 

Enjoy the journey, whichever path you take.

Don't promote it.

I rarely read a post on how Rich Dad, Poor Dad motivated someone to grow rich or change their investing/finance attitude. Rich Dad, Poor Dad is a sham, though. This book isn't worth anyone's attention.

Robert Kiyosaki, the author of this garbage, doesn't deserve recognition or attention. This first finance guru wanted to build his own wealth at your expense. These charlatans only care about themselves.

The reason why Rich Dad, Poor Dad is a huge steaming piece of trash

The book's ideas are superficial, apparent, and unsurprising to entrepreneurs and investors. The book's themes may seem profound to first-time readers.

Apparently, starting a business will make you rich.

The book supports founding or buying a business, making it self-sufficient, and being rich through it. Starting a business is time-consuming, tough, and expensive. Entrepreneurship isn't for everyone. Rarely do enterprises succeed.

Robert says we should think like his mentor, a rich parent. Robert never said who or if this guy existed. He was apparently his own father. Robert proposes investing someone else's money in several enterprises and properties. The book proposes investing in:

“have returns of 100 percent to infinity. Investments that for $5,000 are soon turned into $1 million or more.”

In rare cases, a business may provide 200x returns, but 65% of US businesses fail within 10 years. Australia's first-year business failure rate is 60%. A business that lasts 10 years doesn't mean its owner is rich. These statistics only include businesses that survive and pay their owners.

Employees are depressed and broke.

The novel portrays employees as broke and sad. The author degrades workers.

I've owned and worked for a business. I was broke and miserable as a business owner, working 80 hours a week for absolutely little salary. I work 50 hours a week and make over $200,000 a year. My work is hard, intriguing, and I'm surrounded by educated individuals. Self-employed or employee?

Don't listen to a charlatan's tax advice.

From a bad advise perspective, Robert's tax methods were funny. Robert suggests forming a corporation to write off holidays as board meetings or health club costs as business expenses. These actions can land you in serious tax trouble.

Robert dismisses college and traditional schooling. Rich individuals learn by doing or living, while educated people are agitated and destitute, says Robert.

Rich dad says:

“All too often business schools train employees to become sophisticated bean-counters. Heaven forbid a bean counter takes over a business. All they do is look at the numbers, fire people, and kill the business.”

And then says:

“Accounting is possibly the most confusing, boring subject in the world, but if you want to be rich long-term, it could be the most important subject.”

Get rich by avoiding paying your debts to others.

While this book has plenty of bad advice, I'll end with this: Robert advocates paying yourself first. This man's work with Trump isn't surprising.

Rich Dad's book says:

“So you see, after paying myself, the pressure to pay my taxes and the other creditors is so great that it forces me to seek other forms of income. The pressure to pay becomes my motivation. I’ve worked extra jobs, started other companies, traded in the stock market, anything just to make sure those guys don’t start yelling at me […] If I had paid myself last, I would have felt no pressure, but I’d be broke.“

Paying yourself first shouldn't mean ignoring debt, damaging your credit score and reputation, or paying unneeded fees and interest. Good business owners pay employees, creditors, and other costs first. You can pay yourself after everyone else.

If you follow Robert Kiyosaki's financial and business advice, you might as well follow Donald Trump's, the most notoriously ineffective businessman and swindle artist.

This book's popularity is unfortunate. Robert utilized the book's fame to promote paid seminars. At these seminars, he sold more expensive seminars to the gullible. This strategy was utilized by several conmen and Trump University.

It's reasonable that many believed him. It sounded appealing because he was pushing to get rich by thinking like a rich person. Anyway. At a time when most persons addressing wealth development advised early sacrifices (such as eschewing luxury or buying expensive properties), Robert told people to act affluent now and utilize other people's money to construct their fantasy lifestyle. It's exciting and fast.

I often voice my skepticism and scorn for internet gurus now that social media and platforms like Medium make it easier to promote them. Robert Kiyosaki was a guru. Many people still preach his stuff because he was so good at pushing it.

Orion's red supergiant Betelgeuse erupted. This is astronomers' most magnificent occurrence.

Betelgeuse, a supergiant star in Orion, garnered attention in 2019 for its peculiar appearance. It continued to dim in 2020.

The star was previously thought to explode as a supernova. Studying the event has revealed what happened to Betelgeuse since it happened.

Astronomers saw that the star released a large amount of material, causing it to lose a section of its surface.

They have never seen anything like this and are unsure what caused the star to release so much material.

According to Harvard-Smithsonian Center for Astrophysics astrophysicist Andrea Dupre, astronomers' data reveals an unexplained mystery.

They say it's a new technique to examine star evolution. The James Webb telescope revealed the star's surface features.

Corona flares are stellar mass ejections. These eruptions change the Sun's outer atmosphere.

This could affect power grids and satellite communications if it hits Earth.

Betelgeuse's flare ejected four times more material than the Sun's corona flare.

Astronomers have monitored star rhythms for 50 years. They've seen its dimming and brightening cycle start, stop, and repeat.

Monitoring Betelgeuse's pulse revealed the eruption's power.

Dupre believes the star's convection cells are still amplifying the blast's effects, comparing it to an imbalanced washing machine tub.

The star's outer layer has returned to normal, Hubble data shows. The photosphere slowly rebuilds its springy surface.

Dupre noted the star's unusual behavior. For instance, it’s causing its interior to bounce.

This suggests that the mass ejections that caused the star's surface to lose mass were two separate processes.

Researchers hope to better understand star mass ejection with the James Webb Space Telescope.