Form my previous post, Internet Products or SaaS in Bangladesh, it looks like bdjobs is the only celebrated success story in this area.

Why? What is the catch? I think the catch is to

A. Start in time. You start too early, your cash is dried up before you turn the business to a profitable one. You start late, too many players don’t allow you to gain enough customers. Customer acquisition cost shoots up.

Make sure customer acquisition cost is lower than the lifetime value of your customer. Now, what is that? If your total marketing cost (includes sales, marketing & advertising cost) is Tk. 1o lac and if you acquire 1000 paying customers with that money, you per customer acquisition cost is tk. 1000 (=10 lac/1000). On the other hand Customer Lifetime Value is ARPU * Customer’s Average Lifetime. ARPU is Average Revenue Per User (User is synonymous to Customer here). Customer Lifetime is the time a customer stays with you. So, if your product’s subscription charge is Tk. 1000 per year and if a customer stays with you on an average  for 3 years. Then your customer’s Lifetime Value is tk. 3000 (= tk. 1000 * 3 yrs). So, you have to make sure Customer Lifetime Value > Customer Acquisition Cost.

Sounds good? But you might like to discount the paybacks and apply the time value of money as well.

Software as a Service

B. Start with deep enough pocket to sustain long enough and to acquire enough paying customers to reach break even.

C. Ensure you are strong at both ends: IT and marketing. You have a great IT team, and you think you can build a better product than bdjobs in a couple of months. Great! But do you have the marketing budget and expertise to bite a share from a company with tk. 6.5 cr yearly revenue, or from a group like Transcom (prothom-alojobs)?

Equally important is your IT team. I think Prothom-alojobs could do better had they have an IT team with better know-how in design, usability and performance.

D. Possess business domain expertise and connections. Not for all product it is crucial, but for some for sure. For example you are thinking of building in Bangladesh. You need to have connection with publishers, writers and courier services for that matter. Well, you can build those over time, but that turns out to be a fancy idea if already a couple of strong players exists in market.

E. Ensure you have a competitive advantage. Well, it is true for any business. For IT product starting early is a huge competitive advantage. You ride on the network effect. Having a strong brand to piggyback is another advantage that is utilized by Google, Apple and even Prothom-alo in Bangladesh. Strict government regulation can be another one, as enjoyed by as opposed to Google in China.

That’s pretty much it. 5 tips delivered as promised :).

So, what are the last words? Last words are This is the time for Bangladesh. I wonder if has came up with its name from this concept! You delay more only to see some global giant or a tiny Indian company grabs your cherished market left you beholding.

Published On: July 1st, 2011 / Categories: Blog, Shaer on Business / Tags: , , /