Building a SaaS startup can be challenging, especially in a competitive market. There are around 30,000 SaaS companies worldwide where both individuals and businesses use the advantages of SaaS. Considering the demand for SaaS solutions, there is space for more developers to sell their products and make a good profit. The SaaS market is expected to reach $716.28 billion by 2028, and global spending on SaaS solutions increased 18.4% in 2021 compared to 2020.
SaaS development is a tricky task. Just like any business, you need to know your customer, research the market, examine your competitors, come up with a product idea, built it, sell it, maintain and develop it. As a SaaS startup, however, you’ll need to drill down into the customer’s painponts and needs. Why? Because they must choose every month to pay or not to pay for your software. Or, maybe, refer to the competitors that offer additional feature you still have in plans-to-develop? Or you can bind your customer by offering only annual subscription?
Questions like these can be vital for your success. But even if you don’t have the most defined answers to these questions right away, you can learn from the entrepreneurs that have already gained their place in the SaaS market.
This guide will address the best way to develop your startup considering the mistakes you want to avoid along your journey.
What is Software as a Service
SaaS (Software as a Service) is a cloud-based solution accessed via the internet as an app or platform using a user subscription. Unlike on-premise Software that can be accessed only from a specific location, a SaaS solution can be operated remotely from any device with an internet connection. The SaaS solution provider will manage the software updates and maintenance needs without any implication from the customers.
The first SaaS solution in the world was SalesForce, founded in 1999. This was the first company that was built as a SaaS startup, without offering other types of services. SalesForce is specialized in CRM SaaS and sales SaaS to help companies reach their growth objectives. Nowadays, SalesForce has a $50 billion market cap and it is one of the most appreciated SaaS companies worldwide. SaaS became so popular today, that we published two articles: one is regarding 35 best saas ideas, the other is about 25 developed SaaS examples which we found fascinating in 2022. But, keep going.
Learn from Success: What Are the Best SaaS Startup Companies to Look at
A SaaS startup is a company that offers Software as a service through a subscription to its customers. The SaaS solution can focus on a specific industry, such as education or healthcare, or it can address a wider audience through services such as communication and management tools. There are even such a category like SaaS tools for startups. So, feel free to use them while developing your own SaaS solution!
We are speaking about learning from success (not mistakes, don’t confuse it!) The following examples of SaaS startups are worth following as their growth was very promising from the beginning.
ClickUp was founded in 2017 in San Diego, California and its five year growth is 1416%. This company offers a SaaS solution that allows customers to organize their chats, lists, tasks, and goals in one platform. The app can also be used for project management and integrates with other SaaS platforms like Jira, Trello, or Airtable.
Lemlist is a SaaS startup company founded in 2018 in Paris, France. It offers a SaaS platform that boosts email engagement, making it an excellent platform for CRM solutions.
SimplyDo is a platform that helps employees share ideas and develop action strategies to reach their goals. Founded in 2015 in Cardiff, United Kingdom, the company showed a steady development and a 39% five-year search growth performance.
SetApp was set up in 2016 in Youghal, Ireland, offering an array of SaaS solutions in one platform. Companies can use it for security, productivity, or organizing tasks according to their needs. The company has a five-year search growth of 107%.
SalesLoft comes to help sales companies with efficient SaaS solutions for designing multi-step outreach campaigns and analyzing their sales to perfect their strategy. With a five-year search growth of 212%, this company also seems to have a lot to offer in the coming years.
How SaaS Startups Differs From Other Startups
Startup companies are businesses that function in the first stage of their development. They are typically just launched and gathering their first clients while they aim to introduce their products and services on the market.
A SaaS startup is a company that focuses on delivering one or more SaaS solutions to a target audience. SaaS startups typically operate on a freemium business model, which is not the typical business strategy for all startup companies. The freemium model implies offering a free service with limited features and a premium version of the service for a fee.
A Common Myth: Can You Start a SaaS Company Without Technical Expertise
Not having the technical expertise shouldn’t stop you from developing your own SaaS startup. Many entrepreneurs started their companies without experts in the company’s domain of activity, such as Rand Fishkin, who created Mox without mastering the technical expertise. He talked about his professional journey in his book “Lost and Founder,” explaining how important it was to keep learning the technical aspect of his business and surrounding himself with knowledgeable people.
To build a SaaS startup, you need to outline your goals and gather the right team to achieve them. An entrepreneur is a valuable skill, even without technical expertise, as long as you lead your team toward successful results.
The Right Way for SaaS Product Development
1. Validate Your SaaS Idea
It starts with an idea, but your SaaS idea must be appropriately validated before reaching the market. Your idea might seem like a winner to you but until you test it on other people you will not know how successful it can be. The idea behind Minimum Viable Product validation is that the product has to respond to market needs and demands.
Before you dedicate yourself to developing a SaaS solution, ask yourself who would find it helpful and how they would use it. This question will help you identify the target customers you can address with your product. If you find it’s difficult to do, try to narrow your audience. Maybe, micro saas is more suitable type of a solution for you.
Also, ask yourself what budget your customers should invest to benefit from your product and how big is the niche you target.
2. Take Time to Make Market Research
Market research is crucial for your success. Talk to your potential customers and get their feedback on the SaaS product you want to develop. You can do that face-to-face and online through a “coming soon” website or ads. Use your social media accounts and activate your market network by presenting your product and seeing how much interest they show in it.
You can get as creative as you need to get the opinion of real people on your product. A strategy is to go from door to door with a presentation brochure. Or set up a booth in an area with high traffic, where you can spread your marketing materials to people. If your feedback is positive, you know you have a good perspective for your SaaS service.
3. Think About Your Future: Write a Business Plan, Business and Marketing Strategy
Writing a business plan is mandatory when you want to launch a startup of any kind, and SaaS startups are no exception. Set up your business metrics and the future development of your startup. You don’t have to do a detailed business plan; if you are new to this type of planning, you can create a lean business plan. Such a plan will allow you to include the main details regarding the development of your business on just one page.
Regardless of the type of business plan you choose, it should include details about your competitors, your business expenses, your business MVP idea, metrics or milestones you want to reach, partners and resources, your target customers, and the roles in your team.
4. Define a Pricing Model
To price your SaaS product fair and make a profit, you will have to research other pricing models for solutions similar to the one you want to launch. You might not find the best price on the first try, and new SaaS companies also tend to offer a solution for a better price than their competitors. This excellent strategy will help you break into the market, and it is always just a temporary compromise. Once your clients know your product and start liking it, your reviews and recommendations will increase, and so will your price.
A great way to choose your price is to identify the pricing models of your competitors. Look at your niche’s lowest, average, and highest pricing models and see where your solution fits in the range.
5. Find Sources of Financing for Your SaaS Startup
Once you establish the expenses for your company, you will have to look for reliable financing sources. If you don’t have the funds you need, you could put together a fundraising campaign or find an investor that believes in your idea as much as you do.
Trying venture capital funding can also be a solution. You will need to create a business folder containing your business plan, financial documents, and a brief presentation of your startup (pitch deck). To obtain venture capital, you will need to convince a venture capitalist firm that your startup has the potential to be successful. You can do that through the presentation of your business and the team you are working with.
6. Build an MVP and Roll It Out as Quickly as Possible
MVP in software development is some sort of a prototype of a final SaaS solution. It can decide the course your startup takes. As we mentioned above, creating an MVP is one of the first steps that you need to complete to validate your idea and get the feedback you need. Your MVP can contain only the basic features of your SoftwareSoftware, but it has to be functional enough to give your customers a realistic idea about your SaaS solution. Ultimately, your MVP could be the pivot of your future, a more complex SsaS solution, as you can keep building on it.
Get the MVP out on the market as soon as possible and use all the feedback you receive to improve your upgraded SoftwareSoftware. You can send your prototype to people that work in the niche you want to enter so they can test it and review it objectively.
7. Customer Onboarding and Support
Customer onboarding and support is an essential step that will determine if your customers will keep using your product or not.
Keep your customers engaged by offering them the best and most helpful information about your product. Ease the sign-up process as much as possible so they will not spend more than a few minutes completing it. Also, give them something to look forward to such as new features or upgrades that will improve your product according to their needs.
Learn from Mistakes: Top 10 Mistakes You Should Probably Avoid When Building Your SaaS Startup
Knowing what to do to make your SaaS startup successful is not enough. You also have to know what not to do. Here are the ten most serious mistakes to avoid when you want to launch your company.
Mistake #1: Building Something that No One Cares About
No matter how good you think your idea and SaaS product are, you will not be the one buying it. So, thinking in an empathic manner is crucial because you want to offer your customers what they need.
How to handle it: Validating your idea is a critical way to avoid building something that no one will want.
Go through the validation process and pay attention to the feedback you receive. If the feedback is mostly negative, you can rewire your mind and find a new potential SaaS solution. But if the input has mostly positive remarks with a few suggestions that would make your product better, this is your chance to improve it and develop it in the right direction. Validating your idea will also tell you what the demand on the market is for the SaaS solution you want to launch.
Mistake #2: Underpricing
If you sell your product too cheap, you send your potential customers the wrong message, which is that your product is inferior in terms of quality too. Underpricing your SaaS solution is also undervaluing it.
How to handle it: While individual customers might be price sensitive, businesses are not putting the price of a product at the core of their decision-making process. Most companies will be willing to pay more for a quality product. So, try to price your product correctly, even if it doesn’t end up being cheaper than others.
Mistake #3: “Winner Take All” Way of Thinking
You fall into the “winner takes it all” mentality when you try to top all the other SaaS products on the market. If you are trying to be highly innovative and create a product that was never made before, you risk not having a market for it or having a high level of skepticism among your target customers.
How to handle it: You can make a significant profit by improving SaaS concepts that were already created and adding your unique features to them. There is no need to create a SaaS solution from nothing.
Mistake #4: Expecting a Good Product to Sell Itself
Trusting your product and its quality is essential, but thinking your SaaS solution is so good that it will attract customers like a magnet is unrealistic. Your SaaS startup could fail not because of the poor quality of the product you launch on the market but because of your flawed or inexistent marketing.
How to handle it: You have to introduce your SaaS solution to your potential customers, and you have to find the marketing strategies that convince them your Software is better than others.
Mistake #5: Moving too Slow
From the moment you get your idea, you are in a time-sensitive race to get it out on the market in the form of a product. Wasting time will not work to your benefit because the market is changing, and the demands will be different in a few months than it is now. Plus, if you start talking to people about your SaaS idea without having a product coming soon, someone else might put it into practice. In the end, what matters is who launches the best SaaS solution, not who has the idea to do so. And moving too slowly could be your biggest mistake. Moving too slowly is also a bad strategy in terms of marketing your product.
How to handle it: You want people to know about your SaaS startup, and the more exposed they are to your advertising, the better. You want to move faster than your competitors and be present in the market.
Mistake #6: Waiting too Long to Hire
You might not feel too confident to hire people as soon as you launch your SaaS product, but waiting months to form your team can kill your startup before it has a chance to live. If you wait too long to hire people, you will have to do most, if not all, of the tasks and move too slowly. Also, your performance will be reduced if you focus on several tasks simultaneously. Being too controlling and working out to a burnout point will not bring you the success you want for your startup.
How to handle it: Prioritize forming a team from the moment you launch your company.
Mistake #7: Fundraising too Early
Fundraising is essential when it comes to sustaining your startup. But if you start raising funds in the first stage of your startup, you will also be pressured to spend those funds. This can make you waste money without knowing what you are doing long-term because you are so new to the industry.
How to handle it: You want to focus on bootstrapping for as long as you can until you understand what the market fit will take and how much funding you will actually need for your startup long term.
Mistake #8: Not Vesting Founder Equity
If you have a co-founder or more when you start your business, the vesting terms for each co-founder should be established before the investing stage. When a founder leaves the company without vesting established, they are entitled to their shares, but those shares no longer represent their contribution to the business. So, to substitute the departed founder’s contribution, the company will have to issue new shares, which will reduce the shares of other stockholders.
How to handle it: Implement vesting founder equity from the moment you create your company.
Mistake #9: Thinking in Years, not Months
SaaS startups are time sensitive in terms of planning the vision you have for your company. Getting to an MRR (Monthly Recurring Revenue) of thousands of dollars takes years, not months.
How to handle it: You will need to establish your product on the market and get hundreds and even thousands of customers that stick to your SaaS solution, which takes time, so you will have to think long-term.
Mistake #10: Underestimating customer onboarding
Convincing your customers to trust your product long-term is much more complex than getting their attention for a short time. Even if your SaaS idea seems interesting to your potential clients, not feeding that interest will drive them away from your company.
How to handle it: You want to invest in engaging your customers, asking them for feedback, and advertising the future features or upgrades you plan on adding to your SoftwareSoftware, so they have something to look forward to.
The Best Way to Avoid Mistakes Is to Refer to An Experience Software Provider Like SumatoSoft
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If you have an entrepreneurial spirit and the determination to get into the SaaS market, SumatoSoft can support you through the entire process. Our company offers services such as SaaS product conceptualization, strategy development, UI design, rapid prototyping, SaaS development, and quality testing.
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