What are the cons of running a managed service business compared to building a SaaS?
A managed service is a step below a SaaS: you build a technology solution that productizes or simplifies the service, then onboard clients to it, but the model remains high‑touch—you interact with clients regularly. It’s not hands‑off like an Uber‑style app where users never talk to a person. Because of the ongoing client interaction, scaling is harder; you can’t fully automate delivery, and you remain responsible for support, customization, and relationship management. The progression typically goes from manual service → managed service → full‑auto SaaS, so a managed service requires more ongoing effort and limits how much you can leverage automation and abstraction.
I think packaging automation as a SaaS product is cool. I've done this before for many viewers. You can view it as a way to improve consolidation, but essentially you can treat SaaS as either green or blue—just a label. SaaS product growth over time is tricky at first, then you hit product-market fit and scale rapidly. For most of the lifetime, especially the first couple years, you make basically no money, unlike an agency or service implementation where you can earn a fair amount right away. Agency revenue tends to be up and down and hard to scale; after 2-3 years, an agency might still be where it started, while a SaaS product could have completely overshot it. So there are pros and cons depending on the time scale you plan for. Market dynamics also help—SaaS is becoming easier to build with no-code tools. Additionally, you can package an automation as a SaaS but still sell it as a service implementation. For example, take your automation workflow and have Lovable or Bolt create a simple front end for it. If you want more nuance, check out a video where I actually built one. I don't recall which specific video it is, but there's an example: me wearing a backward baseball cap, turning a 2K automation into a 10K SaaS no-code product using Lovable to package the automation I built as a SaaS product resembling a little proposal generator. You can try that approach, but still sell it as a service. Hopefully that answers your question.
My thoughts are simple: a service business (agency) brings immediate income but requires managing people, while a SAS (software) trades early losses for later scalability and automation. In the early years, an agency can generate far more money—maybe 10 times more—than a startup, because you get paid right away. However, once the SAS finds product-market fit, it can scale with far less time investment since it doesn't need people to fulfill. The trade-off is time versus money. My optimal approach is to start with a service business to earn money, gain client experience, and learn financial management. Then evolve that service into a managed service and eventually a product. For example, Instantly began as a cold email agency, made early money, then built a SAS product that now scales. I recommend this path for most people today.
The creator says you don't have to choose one or the other; you can combine CRM management with automation add‑ons. By keeping CRM as your core service you retain your social proof, while offering automation features (call logging, one‑click form fills, proposal drafting, automatic follow‑ups, invoice collection, onboarding) as enhancements. This lets you productize the CRM service and niche down. He notes that CRM (or project management) is the hub of a company's sales side, and the same ideas apply there. He personally does both and advises not to feel limited to a single offering.
Don’t automate any client‑facing activities—calls, proposal videos, onboarding, strategy or upsell sessions—because white‑glove service brings in far more money. Automate everything else: lead capture, data handling, invoicing, reporting, and any backend tasks.