November 5, 2018 | Shreya Panchal

Complete Guide to Strategize, Start and Develop a SaaS-based Business

According to Gartner, SaaS industry revenue is expected to grow to $67 billion in 2018.

It’s no wonder there are innumerable articles associated with setting up a SaaS business floating around the Internet these days! Software as a service (SaaS) has enormous profit potential for cloud providers but discovering success in this cut-throat business landscape demands finesse. Are you armed to make it big in the SaaS market, or are you fated to fall short?

The question persists: how can you begin a SaaS business and prosper in the competitive Cloud market?

Even though SaaS provides the maximum value to customers, compared to IaaS (infrastructure as a service) and PaaS (platform as a service), businesses can not expect to be thriving in the SaaS market by going in blind. There are several factors to bear in mind when launching a SaaS business—including sales techniques, financial issues, technical considerations, customer expectations, partnership opportunities and many more.


Why SaaS?

Both businesses and individual customers prefer SaaS for a variety of reasons:

  • SaaS approach allows enterprises to cut down on software maintenance costs
  • Companies can instead pick a ‘pay-as-you-go’ pricing model and only pay for the storage and features they consume instead of investing in custom enterprise application development
  • Individuals can anytime terminate their SaaS license or upgrade to the next level, thereby growing software feature set and storage space
  • A SaaS provider exclusively controls software updates and security patches
  • Customers/employees can use Cloud-based apps from any device connected to the Internet

The SaaS business model can be a significant aspect of a business portfolio, but it needs proper execution. Our SaaS guide for businesses caters to some tips and best practices to assist you to get started in this competitive market.


Step 1: Begin with a lean business plan

Everything begins with an idea, no matter what type of software you want to build. Being original is always advantageous; however, the future of your SaaS business chiefly depends on the quality of your software system and market demand for the idea in question- after all, the shortage of customer interest for a product is the straight reason why almost 42% of startups fail.

Begin with a one-page pitch, instead of penning down a 50-page business plan.

It is probably the fastest method to get your idea onto paper and the most efficient first step in the lean planning process. It is claimed to be much more lucid and iterative as compared to traditional business planning techniques. The one-page pitch format fits perfectly with SaaS businesses that are regularly testing new ideas.

The pitch is going to shell business strategy (what to do), business plans (how to do), business model (how money is made), and lastly scheduling (who is doing what and when).

Software like LivePlan can help you build an initial “lean plan” in a short span of time while helping you to focus on what matters- on validating your business plan.

  • Business Strategy –  It is essential to ensure the problem and the solution are evident in the strategy section. After all, you don’t have a business if you aren’t solving any problem. Strategizing would include a brief description of:
    • Your business’s unique value proposition
    • The problem you are resolving for your customers, the solution to the problem, which is commonly the product/service that you offer
    • Target market
    • Your competitions and how you differ from them
  • Business Plan – In the planning section:
    • Enumerate your business sales channels
    • Define how will you be selling your product/services ( Generally it is via stores/online/distributors)
    • List the marketing activities
    • List significant partners and resources you’ll need
    • List your core team and also define their roles and responsibilities
  • Business Model – We want business to generate revenue besides creating value. Although it is beneficial to be able to have sales forecast and expense budget at primary level, it is not necessary until you have authenticated your business idea. At this level:
    • List your principal revenue streams and critical expenses
    • At a later stage, craft appropriate sales forecast, cash flow forecast, and expense budget
  • Scheduling – Scheduling comprises of outlining your business action plan and moving ahead with building the business. The action plan will include a schedule of tasks/milestones which will be mapped onto dates, responsibilities, and budgets. Considering the iterative nature of business planning, you can always come back and add more steps as you march forward. The action plan would be broken up into three parts: the testing plan, the execution plan, and the review:
    • Testing plan checks your business plan for how you are going to test the viability of your product
    • The execution plan is the list of all the milestones you need to accomplish to get your business going
    • The review section is the list of discoveries that you generate that can trigger you to review and revise your business plans


Step 2: Validate your business idea

Now that you have crafted your lean business plan, it is high time that you attempt to answer:

“Can my idea make money?”

Answering this cuts down several risks for you. Additionally, this helps you validate your business idea and directs you if the concept could further be shaped into a viable business.

The step one that you had worked on was mostly a list of assumptions. This step assures if your assumptions were right or wrong and then as per that you can adjust your business plan.

The most excellent way to do this to talk to your potential customers as talking to real-life people will help you find out if you’ve got a good product, or just a solution in search or a problem, or a product in search of a market.

One of the principal mistakes that businesses commit is carrying out mostly secondary market research instead of primary research as it doesn’t help you validate your business idea.

Interacting with real-life people, helps you learn:

  • If you have recognized a problem, they face?
  • Do you provide a solution that solves their problem?
  • What is the best possible way to sell them? What is the worst way?
  • What products are they currently leveraging to solve their problems?

Based on your learnings you can go back to your business plan and revise it, or refine it. You might even like to reconsider your original idea if there’s no real market for your current approach.

  • Pay close attention to the competitors
    It is essential to understand your competitors well besides your customers. Competitors mainly help you authenticate your idea if you focus on how they are resolving problems for customers, how they are pricing their services/products, and so on. The trick is to make sense of what part of solution rendered by your competitor is not suffice. What do customers want that they aren’t getting currently?

  • Create your minimum viable product
    Minimum Viable Product refers to a basic version of the product with the least possible set of features that are enough to deploy and test the crucial hypothesis to resolve problems of the product’s potential customers.Creating MVP is predominantly admired strategy in the world of product development which is used to quantitatively and promptly test a product/product feature. The concept of building MVP comes out to be relevant especially in SaaS.

    However, SaaS products tend to iterate rapidly with comparatively lesser expense than a physical product, a developer’s time and efforts could pose as an expense to your emerging business. SaaS products are subjected to higher churn rates as compared to traditional companies, which implies that you would want to keep your customers satisfied with your product from the very beginning. MVP can help your business swiftly finesse the prime challenges for SaaS businesses- the product- market fit.

    MVP’s thus helps not only enhance the product functionality but also prove that there is a market for your product with less investment upfront. With MVP, you have a clear signal for all your efforts in sales and marketing along with the assurance that customers are willing to buy your product. Your business will thereby have a cutting edge and benefit over your competition from the start, rather than undergoing several growing pains that could potentially kill several SaaS businesses.

  • Craft a more detailed forecast
    What if you learn your customers wouldn’t be comfortable with paying your initial price? Alternatively, what if you identify you were charging way less than customers were willing to pay? Your initial forecast would have been for nothing then. This wouldn’t happen once you validate your business idea. Without a realistic sales forecast and budget, you wouldn’t get a complete idea on how much money are you going to require to take off your business. After all, the subscription business is only going to render a small payment each month from every customer. Also, you cannot be sure how long customers are going to subscribe, so it gets critical to regularly update your forecast as you learn more about your customer behaviour.


Step 3: Differentiating yourself with business branding

Whether you are considering to stand out in an already-crowded business place, or to fundamentally be a great business, it becomes essential to brand your company to differentiate yourself in this competitive business landscape.
Business branding need not be only design-oriented initiative. If you are working closely with several business partners who are assisting you to distribute your product/services, it is critical to ensure they understand what your business is, who you are, how you speak and whom do you cater.

  • The significance of the domain name
    Finding a great domain name often becomes a crucial part of any branding strategy. An online SaaS business usually begins with a great domain which is a short .com domain and is effortless to spell, and that is memorable. Domain name potentially makes a massive difference in the long run for it gives credibility and edge over the competition, especially in the primary stages of business. The cheapest place to buy a domain is through Namesilo and we use it for all our clients.


Step 4: Make your business legal

While you do not require any specific qualifications to develop software, you strictly need to comply with industry-specific rules and regulations.

  • Pick your business structure
    Of all the things you need to do to make your business legal is to pick and register your business structure. Business structure mainly depends on individual needs.

  • Pick a name for your business
    One cannot register any business until it has a name. Naming business is a part of the startup business process that most of the individuals may enjoy.

If you are struggling to come up with business names yourself, consider trying a business name brainstorming tools like Shopify, Namemesh and many more. There are lots to pick from!


Step 5: Get Financed

How do you obtain funds to initiate your business? There are numerous solutions to this problem. One is bootstrapping your business and carry out most of the ardent groundwork on your own. Also, you might opt to go for a grander sum of capital right from the beginning by proposing an angel investor or a venture capitalist for business funding. Moreover, if everything else fails, how about asking friends and family to lend a hand?

On one side of the coin, bootstrapping your business off provides you much control over it. You get to take all the calls, counting how you wish to operate the business and whom do you want to be involved in it. Taking into consideration, that it is a time-consuming and slow process.

On the flip side of the coin, both your business learning and go-to-market strategies can accelerate if you can get the right investors to your business on board from the beginning itself. If you are lucky enough, you might even get direct access to several channels that might have otherwise taken years to enter. However, as a disadvantage, you’ll certainly give up more or less control of your business the moment you invite on outside investors.


Step 6: Design and develop your product

  • Commence as soon as possible
    Begin collecting data for interested, potential customers. Consider developing a landing page, some light advertisements and generally reach out to as many prospective customers as you can.

  • Use a particular product development methodology
    Agile methodology is the most preferred and most used methodology that software enterprises use. Take an estimate on what it is going to take to get to a functioning alpha or minimum viable product (MVP).

  • Consider outsourcing your SaaS product development
    Product development in SaaS is distinct in several manners from that of traditional products. This is chiefly because of the sheer volume and scale to which the product is being built. The development teams need to be greatly skilled and adaptive actually to understand the end goal of product development, and to plan technical advancements and deployments accordingly.

As a result, developing or maintaining a SaaS product in-house can be expensive. The readiness of these essential skill sets are more often time-consuming and costly processes, and the ever-evolving technology landscapes are sure to complicate it further.
Outsourcing SaaS product development merely is about two elements: saving time and saving money. All other considerations and queries further narrow down to these essential elements.
Few key benefits to consider for outsourcing SaaS development includes:

  • Reduced costs and improved business profit margins
  • Access to grander pools of talented and skilled developers
  • Enhanced operational efficiencies due to reduced internal strain on resources
  • Increased team efficiency concerning agile methodology


Step 7: Market and launch

There are innumerable ways to market and brand SaaS products- ranging from paid ads and affiliate partnerships, through active outreach to several media outlets, and content marketing. Trialling and testing with an appropriate combination of these methods is always a great idea. Focus on what works for your business and be attentive that it might change over time.

  • Take the content route
    Today, it is principally critical for SaaS businesses to get into content marketing. Content marketing as defined by Content Marketing Institute is “Content marketing is the marketing and business process for creating and distributing relevant and valuable content to attract, acquire, and engage a clearly defined and understood target audience – with the objective of driving profitable customer action”.

  • Begin with Beta Testing
    Another exceptional and effective way to get started with marketing is launching the beta product. It provides an efficient way to learn before the actual thing is out in the market. Consider creating and launching a beta version of your product when it is functioning adequately and is bug-free. Let your beta users provide the necessary feedback and help you shape your future outcome.


Step 8: Track metrics

Tracking metrics helps businesses to make informed decisions, which in turn will reduce much weight of guesswork. It will also help you how to grow your business. It is essential to understand what the metrics can indicate your business, to examine your business health.

It is also essential that you monitor how these metrics are performing on a regular period so that you can make better and informed decisions out of it and plan proactively for the future.
Tools like Profitwell, Baremetrics, Mainmetrics, Chartmogul, Insights can help you analyse and track metrics for your SaaS business.


Conclusion: Be persistent- and watch it happen

These are a few essential strategies that should make your SaaS business a successful one. Be equipped to give yourself and the company at least two years of time to gain any results. It might take you a year to mould the product right, and another one to get its relevant material revenues. You might also have to deal with peculiarities of the early and possibly low/non-paying customers.

In SaaS, it mostly takes a longer time, until then it is tough to avail recurring revenue engines going. Preliminary days will consistently have confusion and chaos. However, the success of your business will highly depend on your capability to deal with it and learn how to transform various processes that work for your company.

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