RS333: Grading My Business (and yours!)

In this New Year's Eve 2024 episode, we dive into a framework for evaluating SaaS businesses across eight crucial criteria. Instead of doing a typical year-in-review or making predictions, we explore how to assess the fundamental strength and potential of your business.

Episode Highlights

Craig grades Castos (podcast hosting platform) across eight key criteria for evaluating SaaS businesses:

1. Pricing (6/10)
- Core product (podcast hosting) averages $28/month - below ideal $50+ threshold
- Production services start at $1,500/month
- Enterprise clients pay tens of thousands annually
- Mixed pricing model affects overall score

2. Churn (9/10)
- Extremely low churn rate
- Attributes success to:
- WordPress integration
- Premium pricing (no free tier)
- Strong technical reliability

3. Payment Processing Integration (4/10)
- Offers multiple monetization options:
- Castos Ads
- Castos Commerce
- Donations
- Paid subscriptions
- Private podcasting
- Limited adoption of direct monetization features
- Most customers monetize indirectly through business growth

4. Switching Costs (6/10)
- Technically easy to switch providers
- High retention due to ongoing necessity
- Perceived switching cost higher than actual

5. Technical Advantages
- WordPress integration provides unique value
- Core functionality similar to competitors
- Important lesson: Customer needs often simpler than assumed

6. Expansion Revenue (3/10)
- Limited expansion opportunities
- Most customers stay at $19/month
- Working to add upgrade opportunities
- Identified as major growth limitation

7. Established Market Need (10/10)
- Clear market position
- Well-understood service category
- Strong product-market fit

8. Customer Acquisition (6/10)
- Success with content marketing, SEO, partnerships
- Struggling with paid acquisition
- Limited by low price point
- Working on improving paid channels

Key Takeaways

- Overall Business Grade: B (maybe 80/100)
- Growth Ceiling: Business could potentially double but unlikely to become a $50M/year company
- Main Limitations:
- Low initial price point ($19/month for most customers)
- Limited expansion revenue
- Restricted marketing channels due to unit economics

Looking Forward

Future episodes will mix personal insights about founding and running a business with interviews featuring successful founders.