You would think that success in the SaaS industry is a given considering the massive surge in growth. SaaS organizations are now operating in more than 100 countries, with an annual growth rate of 18%. The revenue forecast for the SaaS industry was $94.8 billion. Gartner predicts this will be close to $143.7 billion in 2022.
This is extremely positive, but of course, a lot of SaaS businesses are going to want to get in on this action. In 2000, only 199 new SaaS businesses were formed around the world. In 2017, 1,460 new companies formed. Today, there are over 15,000 SaaS companies in the world.
Competition is high. A good idea used to be enough, but for your SaaS business to succeed, we have put together a list of the 15 top tips.
1. Ensure you are solving a problem
The first stage for any new business, regardless of the industry they wish to enter, is to find a problem that needs to be solved. Before looking at SaaS, look around at all the gadgets and devices we have that either solve a problem or make life easier. Now consider SaaS services that we use in our business and personal lives. WhatsApp, Zoom, Google Drive, Salesforce, etc.
Generally speaking, your product needs to solve a problem for businesses (B2B) or consumers (B2C). There are opportunities for both; however, you will probably find larger profit margins in B2B. The problem doesn’t have to be a large one, but it does need to be a common one.
2. Start your lean processing plan.
Another solid rule for every business is to create a business plan. A complete business plan isn’t suitable for SaaS businesses because of continuous testing and updates. That’s not to say you can skip the planning stage. A lean plan is a condensed one-page pitch that contains 4 key bits of information:
- Your Strategy- a couple of lines about your business, the problem you intend to solve, your target market, and how you are different from the competition.
- Your Tactics- how you will get your product to the market, the resources you will need as well as the team. Your business model is essential for the financial side, including a budget, expenses, pricing, sales forecast, and a cash flow forecast.
- Your Time Frame- a detailed outline of how long each step will take, integrated with team members, responsibilities, and financial information.
3. Research the market
When you test your idea out on friends and family, they are naturally going to tell you it’s an amazing idea. While this is a great confidence booster, it will not give you an accurate idea of your need for the product in the real world.
Many SaaS founders won’t even write the first line of code until they have spoken to potential customers via phone, email, messages, social media, etc. Look on app stores to see if your product or a similar product exists. Read what the reviews are saying. Make sure you keep an organized list of those who respond positively to your idea so you can include them in your testing. Successful research allows you to start building long term relationships with potential testers and customers.
4. Be smart about your Minimum Viable Product.
One mistake we often see is a minimum viable product (MVP) that has too many bells and whistles. The risk here is that you are investing time and money before an official launch. At this time, another SaaS business could swoop into the market with your idea. Your end product is likely to have multiple solutions, but the MVP should be limited to resolving your core problem.
5. Test your MVP
Hopefully, you have perhaps 20-30 people you spoke to in your research phase who are keen to test your product and provide you with valuable, honest feedback. Obviously, you want to hear how much they love your product, but you also want to get actionable insights so things that they would like to see change or improve. You can also use this testing stage to learn more about how much people would be willing to pay for your product.
6. Wisely create your team
While you don’t need to be a software developer to come up with an idea, you will need someone who shares your vision and has the ability to execute the technical side of the product. Freelancers are appealing because of the savings in costs but the chances of having IT project management skills are low. You need someone who has the right experience and the knowledge to say ‘no’ when necessary. The right team will ensure your MVP has the right level of features and that your end product is bug-free and optimized for user experience.
7. Make your product legal and compliant.
When it comes to businesses’ legal side, there are taxes, registering your business name, licenses, etc. However, you also have to guarantee that your product complies with all compliance regulations for the industry, particularly data privacy. This is another reason to hire expert developers who are familiar with your industry regulations.
8. Is a Freemium viable?
It would be best if you did not assume that it’s the right option for you because the majority do it. Freemiums should only be offered when you have a huge addressable market. This means that your product isn’t limited to a particular industry or business type. In most cases, Freemium leads to missing out on customers who would have otherwise paid a subscription.
9. Set prices that draw in the crowds
Part of your initial research should have been related to pricing, including the feedback you got from those who tested your product. After looking at similar products and the costs of creating your MVP, you should have a good idea of the right price to set. Remember that it is normally more sensible to keep your prices lower (without undervaluing your product) to draw in more customers and then increase prices later.
You also need to think about the implied costs of setting a free trial period. The ideal time for a free trial is 14 days. This is enough to explore your product’s features but not so long that they look towards your competitors.
10. Know how to launch your product
There are going to be so many methods on the internet that will encourage you to launch your SaaS product in a certain way. Extravagant funnels and campaigns may tempt you, but you should always begin with a personal approach to launching your product. This will help you get those all-important first reviews.
Reach out to those who tested your MVP to inform them that the full product is about to be launched. You can also make the most of your personal contacts on social media. Your investors should be on the list, as well as those in your networking circle. Be sure to attend industry events to meet new potential customers. After exhausting your personal contacts, you can try cold calling and creating your email campaign and your landing page (though you may already have a landing page from your testing phase.
11. Be completely ready before paying for advertising.
At this point, you may have little revenue, and while this is nothing to worry about just yet, it still doesn’t mean you can start spending unnecessarily. Rather than spending money, you don’t have on paid advertising, focus your efforts on perfecting your product in the early stages.
Build solid relationships with your personal contacts that have started to use your product. Ensuring they are happy will encourage word of mouth and fresh leads, especially if you have set up a referral program. When your revenues start to increase, you can look at options for paid advertising—if necessary!
12. Set your SaaS business metrics
If you are not a fan of numbers, metrics might be off-putting at first, but they are crucial for decision making. Metrics will help you to plan for growth and success. There are numerous SaaS business metrics, but the most important to monitor are:
- Monthly recurring revenue
- The average income per customer
- Cost acquisition per customer
- Churn rate
- Conversion rate
13. Turn your trial customers into paying subscribers.
When a customer signs up for a free trial, your goal is to convert them into paying subscribers. As soon as you are aware of a new customer signing up for a free trial, you should contact them. You may feel that this is a little over the top, yet it gives you the chance to learn more about the customer’s needs and explain features that will enable them to get the most value from your SaaS. You can also follow-up with emails when you see activity from a customer and just before the end of the free trial.
14. Increase your average revenue per customer
Once your trial customers become subscribers, there is no need to then just forget about them. Aside from continuous support, you can also offer upsells and cross-sells. Upsells are when customers upgrade to a complete package for a higher price. Cross-sells are additional products that will work well with the product they have subscribed to. This could be a separate product that you offer or a product from a third-party if you choose to create partnerships.
15. Understand customer behaviors and interactions
SaaS analytics are the best way to learn about your customers’ behaviors and interactions. This is another area that you need to be on top of so that you can make better decisions and plan for the future. Google Analytics is an excellent place to start if you want to understand more about website analytics. It would help if you also looked into marketing and subscription analytics and reporting tools. Luckily, there are free and paid software solutions for all types of SaaS business analytics.
It might seem like a long and challenging road to creating a successful SaaS business. To some extent, this is true. Nevertheless, with the right planning and making sure your MVP and testing stages are carried out with maximum efficiency so that you can gain the most feedback possible, you are setting the right foundations. From there on in, personal relationships and understanding customer needs will take your SaaS business to the next level.