Recurring Revenue, More Freedom: Navigating the "Let's Build a SaaS" Trap, With Stephen Neville

Jul 23, 2025

Join Stephen Neville, CEO of BugHerd and a veteran in agency operations, as he dives into the exciting world of SaaS. He discusses the allure of transitioning from services to software and the importance of managing client relationships differently. Stephen highlights the critical need for agencies to say no to client demands to maintain profitability and debunks common misconceptions about SaaS, emphasizing that it still requires people and dedication. Discover the risks and rewards of this business model shift that can stabilize revenue and enhance expertise.

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ANECDOTE

Stephen's Service to SaaS Journey

Stephen Neville shared his journey from digital advertising to founding an application development agency, then moving into product with Bugherd.
His agency was one of Bugherd's first customers, illustrating his deep connection and experience transitioning from service to software.

INSIGHT

Key SaaS vs Service Differences

Software businesses manage thousands of customers, unlike agencies with few clients, requiring disciplined 'no' to feature requests.
SaaS faces delayed ROI and uncertain returns, while service businesses get paid quickly after work.

INSIGHT

Product Rigidity vs Service Flexibility

SaaS features start with negative value until discovered, adopted, and create impact, unlike services which allow quick fixes.
Product decisions are often fixed long term, causing technical debt, unlike flexible adjustments in services.

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Points of Interest

0:00 – 1:05 – Introduction: Marcel introduces Stephen Neville, CEO of BugHerd, highlighting his background in agency work and his transition into running a SaaS company that helps agencies streamline QA and client feedback.
2:24 – 3:10 – The Dream of SaaS: Marcel and Stephen discuss the allure many agency owners feel toward building a product, inspired by success stories like 37signals—often without fully grasping the implications.
5:30 – 7:10 – Major Model Differences: Stephen outlines key contrasts between service and product businesses, including delayed ROI in SaaS, the shift from clients to customers, and the challenge of proving value before seeing returns.
8:02 – 9:09 – Saying No at Scale: Product businesses require frequent, disciplined “no’s” to user feedback—unlike services, where agencies are more likely to say yes. This shift is critical to managing scope and long-term product health.
10:14 – 11:02 – Why Agencies Want to Pivot: Common motives include stabilizing revenue, creating proof of expertise, and giving teams opportunities for skill development—though not all transitions are strategically sound.
13:19 – 14:04 – Common SaaS Misconceptions: Marcel highlights flawed assumptions—such as SaaS needing less human capital or being less client-facing—debunking the idea that software removes the need for people.
16:20 – 17:01 – SaaS Risk Profile: The risk and financial exposure of building SaaS is often underestimated, with founders needing to endure potentially years of losses before seeing profitability.
21:15 – 22:53 – Lessons to Apply in Services: Stephen emphasizes adopting the SaaS discipline of qualifying and deflecting misaligned client requests, to protect team capacity and maintain healthy utilization.
24:01 – 24:59 – Productization Without Code: Agencies can create repeatable, value-rich offerings by productizing existing services—without building software—through structured, process-driven deliverables.
28:29 – 30:20 – The Real MVP Framework: Marcel shares his “Three Ps” framework—Problem, Point of View, and Process—as the true foundation for product development, arguing services are the best way to validate solutions.
33:01 – 34:46 – Services as a SaaS Growth Lever: Stephen explains how services improve acquisition, onboarding, and retention—especially for enterprise clients—making them a strategic tool, not a liability.
35:46 – 37:25 – Monetizing Services in SaaS: The conversation closes on the growing trend of SaaS companies charging for implementation and support, reframing these formerly free functions as value-rich offerings worth paying for.

Show Notes

Connect with Stephen via LinkedIn
Website – Bugherd.com