Beta Testing: The most skipped phase in B2B SaaS

How to prepare for & successfully exit this phase of early-growth

Most founders will claim they had a beta phase in their growth, but when I dig deep, these beta customers sound much more like standard customers, that were never truly leveraged to inform customer or product development.

This typically happens because founders, under pressure from investors, peers and their cash out timeline, get over eager to make $. This eagerness to get $ in the door doesn’t appear to impact the company from an $ARR perspective in the moment, because revenue flows very nicely to begin with.

The short-term temptation to lean into closing contracts at the highest value possible at this point is one that founders fall for time and time again, however, the impact of this overzealousness to go to market often only rears its head further down the line when founders attempt to scale their business.

By this time, the standard operating procedures, company culture and vision of the future of the startup have been increasingly cemented. Founders often only realise they’ve made this mistake at the point of taking series A funding when they are expected to double-down on their growth and deliver 3x ARR inside 12 months.

Suddenly, they realise they can’t deliver close to 2x ARR, and for every month that passes, for every salesperson that gets fired the ARR multiple required to deliver on the promise to investors increases! The growth from $2m ARR to $6m in ARR soon becomes growth from $2.5m to $6m inside 6 months! It’s a nightmare situation for both founders and their teams, but especially the sales org.

Failing to truly successfully exit the beta customer phase is a ticking time bomb, and one every business founder and VP of Sales should look out for.

Here are some pointers for how founders should prepare for the beta customer phase, some successful exit criteria to look out for:

But first, a glossary of terms:

- KPI: Key performance indicators - the major metrics upon which a business measures success, often different by business.

- ROI: Return on investment - the measurable return (often in $) a business can expect for every $ spent

- ARR: Annual Recurring Revenue - the amount of revenue that recurs annually in a business eg: 12-month subscription revenue in SaaS

- ACV: Annual Contract Value - the annual typical contract value of a client contract

- MVP: Minimal Viable Product - the first product developed as a working prototype as a result of customer development work.

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How to successfully prepare for beta customers

In the early phases of your startup, it’s all about customer and product development. Unless you listen to the market, you’re not going to build a product they truly want, and you’ll never get product-market fit for the market you intend to target.

In order to do this, you have to find a way to put aside the desire to make significant $. It doesn’t mean you have to burn incredible sums of capital either, however the idea that you are going to be wildly profitable at this phase of growth is likely fanciful.

Your initial goal is to get your product into the hands of as many customers you deem to be your likely ideal customer profile as possible - the more the better.

These should be your primary goals of the beta phase: