It took 11 PAINFUL months to grow my bootstrapped SaaS startup Rivo from $1,000,000 to $1,500,000 ARR. Here are the 4 biggest mistakes I made that slowed down growth while moving from SMB to Mid-Market in the Shopify app ecosystem.
CONTEXT:
There is a jarring difference between the SMB and mid-market in the Shopify ecosystem. At times, it’s felt like starting a whole new company. Lots of these mistakes come from being enthusiastically naive and not doing enough research before diving in.
1) Not seeing hidden moats
"Hey, look at this big Shopify app - they suck, they’re super expensive, and the product is barely updated anymore. We should just build a competitor and charge 50% as much"
This might be all true... but what you CANT see in this scenario, is that the big competitor has 10+ years of deep-rooted relationships with agencies and brands across the ecosystem that make the buying decisions.
You can absolutely break these, but if your product is not 2x as good as the incumbent - you're going to be pushing a boulder up a hill, wondering why things aren’t working.
It took me at least a year to understand how tight-knit and relationship-driven the mid-market really is.
2) Switching costs are 10X more than SMB
From my experience, SMB brands are much more likely to replace an app if they can get a similar product that costs 50% less. Brand loyalty doesn’t really exist in the Shopify app store funnel.
Brands on Shopify Plus aren’t looking to save $10K by switching to your app. It’s not worth the time and hassle of onboarding your product.
If you can instead show them how your superior product/service will generate another $250K+ or greatly improve the customer experience, then you are in the convo.
3) TAM is much smaller than expected
There are over 4M Shopify stores, but in my experience, the TAM of stores that will pay an ACV of $10K+ is around 0.005% of that number (~20,000 stores)
This is especially true in 2024 as the price of SaaS in the Shopify ecosystem folds over the next 12 - 24 months.
I can account for around at least $100M+ ARR in the ecom loyalty & referrals space across many competitors so this isn't an issue, however, the landscape is ultra competitive with a high number of vendors fighting for a very small pool of customers.
4) Importance of brand building
This is where I really dropped the ball in the first year. I wasn't quick enough to shift from the transactional mentality of SMB to a mindset where most of our customers aren't actively in the market for our product.
The brand we build in the meantime is how they'll remember us if/when they eventually need our solution in 6-12 months.
TAKEAWAY:
Most of the last year has been frustratingly slow as we were still figuring out the GTM upmarket.
We've finally hit traction where the numbers are starting to add up now.
My only regret was not spending enough time to truly understand the mentality/rules of the new game before making the switch.
CEO @ Rivo • Helping DTC brands like HexClad, Ridge & Kitsch retain customers through loyalty and referral programs • Bootstrapping to $25M+ ARR in Ecom SaaS
1ySide note: If you know of any senior Ruby on Rails engineers with deep knowledge and experience in the Shopify ecosystem, please feel free to point them in my direction 🙏