The hardest part of starting a software as a service (SaaS) company or making a SaaS product is often putting together the right team. Guided by research, data, and curiosity, we thoroughly explored the process and outlined steps to help you start your SaaS company.
We curated our research and experience working with successful SaaS startups to explain why 2023 is the best time to start a SaaS company and how you can get in on this thriving distribution model.
The term (SaaS) has been trending throughout the past few decades, and for a good reason—properly managed SaaS companies are growing and thriving.
This article offers you 7 actionable steps on how to create a SaaS company.
This article covers a lot. Please bookmark this article so you can come back and reference it in the future. Let’s go.
Why now is the best time to start a SaaS company
Smaller SaaS startups with lower average return rates can still compete with larger companies who are, quite honestly, too busy competing with each other to find and fill all the gaps.
Simply put, the technology and IT spending budgets are growing, and SaaS tools are innovating too fast for the leading SaaS products to take hold over the market.
Internet culture challenges people, organizations, and businesses to reach their audience through online tools. Using different software is how we communicate, organize, and innovate online interactions.
SaaS products and SaaS marketing methods are changing how these interplays work, and now is a good time to start up.
TechCrunch hosted a video interview with former founder and active venture capitalist Jason Lemkin to discuss why now is the best time to start a SaaS company.
Also, Gartner predicts that the service-based cloud application industry will be worth $143.7 billion by 2022. Smaller startups can compete with their larger contenders if they have the right SaaS product and focus on key growth metrics.
Can you start a SaaS company without technical expertise?
Yes. There are a few options to consider for starting a SaaS company without the technical expertise; being a designer, developer, marketing expert, etc. Let’s explore possibilities.
Partner with a technical founder
Before you worry about finding an agency to work with, you may want to narrow down your technical specifications. Not just rough ideas about what your product will do but concise details for every factor throughout development.
Examples could be:
- how do users sign up;
- what are the pages of the product;
- what are the administrative details that you need in the backend;
- what reports do you need and with what information;
- how does billing work;
- what happens if a credit card fails to charge;
- are there trial periods or some way to test drive the product?
There is a seemingly infinite number of questions that go into this part of the process. You could prepare the specifics yourself, but if you have never developed a Web app before, you probably won’t have the skills to handle this step.
Partnering with a technical cofounder may be one solution for dealing with the business’s more intricate details but there are other options as well.
Hire a strategic manager, product strategist, or brand strategist.
Alternatively, you can hire a strategist.
This strategist would formulate and help implement significant goals and initiatives taken by an organization’s top managers on behalf of you the owner.
They may conduct an assessment of the internal and external environments in which the organization operates. They may specify the organization’s objectives, develop plans and procedures to meet those objectives, and allocate resources to implement those plans but one person can only accomplish so much.
Partner with an agency
You could look at the options of hiring an agency. A well-staffed agency will most likely have strategists, project managers, designers, developers, and writers to help create your SaaS product. This option we recommended if you don’t have all the technical skills and you want to start quickly.
Handpick your team
Another option to consider is creating a team of managers, developers, and other creatives, vetting and handpicking them for your specific needs and work-style.
Now, let’s get into the 7 actionable steps to starting a SaaS company.
1. The thought process: How to think about SaaS solutions for your industry
If you don’t already have a clear idea in mind, or maybe you haven’t thought about all the specifics, you should start with this step.
There are a few ways you can think about SaaS solutions. The core idea is that you create software that solves a problem, is accessible through web devices, and uses cloud computing.
Find a simple solution for a complex problem
Thinking simply can be challenging for some people, and some of the most innovative problem solvers could think and find simple solutions to complex problems.
Great ideas often get overlooked because the concept seems too easy or other industries are already providing solutions.
For example: Who thought that driving to the video store and waiting in line to rent videos was such a problem? Yet, Blockbuster is no more and Netflix is the new standard. The idea behind Netflix was simple. Bring movies to your door and now they’re bringing them straight to your screen.
Netflix is a SaaS company because you don’t have to download their software or worry about versions or updates—this is why you pay a monthly subscription.
Reed Hastings has some insights that I think back up the “simple solutions” approach we’re suggesting.
Most entrepreneurial ideas will sound crazy, stupid, and uneconomic, and then they’ll turn out to be right
Sometimes people and businesses don’t see there’s a problem with the way things currently are. Challenging the status quo can look crazy, stupid, or uneconomical until it plays out in the market and they’re reaping the benefits or closing their store locations (Blockbuster).
In this example, the simple solution was bringing videos and video games to the customer’s home. The complex problem was an established brick-and-mortar store (Blockbuster) with a vested interest in maintaining physical locations.
Find and fix a specific problem for a specific person
Finding and solving a problem for a specific person or group of people is a sure way to create a SaaS product.
For example, I bet there’s a startup right now that offers voice command cooking recipes with cooking instructions and voice activation for cooking timers—the whole nine yards. It wouldn’t surprise me if it were called Voicipe or something trendy like that.
The idea is that this company is solving a problem for a very specific person. In this example, the person would be a cook who likes to try out new recipes, following step-by-step instructions but doesn’t want to dirty their devices or worry about touching their screens.
The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself: Peter F. Drucker, management consultant, educator, and author.
Solve an issue that affects you personally
Some people call solving an issue they’re facing a ‘lifehack.’ You might call it a software company. They say potato, and you say SaaS solution. Solving a problem that’s close to you doesn’t only help with your day-to-day but also helps others.
If you found a way to optimize your workflow and can turn that optimization into software, you have the makings of a SaaS product.
“The number one rule for any SaaS business should be to solve your own, real problems and not someone else’s problems. Only by solving a problem you have struggled with yourself will you fully appreciate how to solve the problem in the best possible way.” Uwe Dreissigacker, founder and CEO of InvoiceBerry.
Leverage your industry knowledge
Leveraging your industry-specific knowledge and finding areas to innovate are great ways to enhance your SaaS product. This ties in to working on something close to you and finding a solution for a specific group of people.
Solving industry-specific problems that only someone with your knowledge and experience is consciously aware of could be the beginnings of an epic SaaS product.
I had industry experience and knew that there was a big void to be filled for small and medium-sized businesses that could not afford to pay for local servers and an IT team. We created UpKeep to fill this void—a cloud-based solution that was affordable for any size business. Ryan Chan, founder of UpKeep
Utilize new technologies
Keeping an eye on progress in tech has its benefits. Here are a few viable areas in tech that could spark new SaaS products:
- Artificial Intelligence
- Internet of Things
- Serverless Computing
- Augmented Reality / Virtual Reality
- Natural Language Processing
- Quantum Computing
- 3D printing
- Educational technology
The list goes on…
Listen to early feedback of your ideas
Spreading your ideas throughout your network and beyond can help you see how people react and engage. Who knows, someone may even bring up points you haven’t considered, which may be valuable information for improvements now or in the future.
We talk more about how to get feedback in step 3: Testing Your Product.
Businesses can’t afford to react to what their customers want; they need to anticipate their needs. Parker Harris, co-founder – Salesforce
2. How to outline your SaaS business plan: Creating the technical blueprints
If you want to play a more substantial role, you can outline the specifics of your SaaS business plan yourself. Here are the key factors to consider when drafting your SaaS business plan:
Strategy (Specify the objectives)
Firstly, you could specify the context and objectives of your product and target market. Draft a comprehensive and thoughtful strategy to help guide your actions, both now, and in the future.
An Example of a SaaS strategy outline could look like this:
- A one or two-line description of your business—your unique value proposition.
- A description of the problem you’re solving for your customers and your solution to the problem. (Which is usually your product or service.)
- A description of your target market or the different market segments you’re targeting.
- Your competition, and a brief description of how you differ from them.
- What is the best way to sell your product, and what are marketing methods to avoid?
- What would they pay for your product or service? Have you priced it too low or too high?
- How many people need or would want this product?
- What products do they currently use to solve their problem?
- How is your product better than the competition?
- How many people would you need to hire contract vs in-house?
The list goes on…
Tactics (how will you accomplish those objectives)
Establishing a plan and execution strategy for your objectives could help with keeping your timeline. Thinking about how you will execute on objectives can be beneficial.
Here are some examples of how you could accomplish your objectives more efficiently:
- Establish your vision, mission, and goals;
- Make sure your entire team is aligning with those goals;
- Gain insight from customer behavior;
- Utilize outreach to find out what your customers want and need;
- Measure your progress through metrics and feedback;
- Find out what your competitors are doing and why;
- Understand the benefits of testing both internally and externally;
- Put Together a Simple Strategic Document to Serve as Your Compass;
- Stick to a results-oriented management process;
The business model (How will you make money)
We want to compare the SaaS business model to other business models because the SaaS business model has unique and specific factors.
Here are some factors to consider:
In SaaS, you provide a subscription service, which means you have to worry about getting payments every month/year instead of only once, as is the case with products you download for a one-time fee.
You track recurring payments through a metric known as MRR. Because SaaS companies provide a service and not product sales, estimating revenue can be difficult.
When your customer subscribes, you may get some funds upfront, but you can’t count those funds as revenue for the entire year. It means that booking will turn into revenue only if the customer’s subscription proceeds.
By consistently delivering the product to the customer and providing necessary updates and customer support, you can ensure that your customer keeps their subscription and doesn’t ask for a refund.
All profitable businesses care about customer retention, but it is more significant in SaaS business models because retention is how you ensure revenue.
The SaaS business model places enormous importance on nurturing customer relationships and selling new features and plans. An existing customer is more likely to leave your business and go to a competitor because of poor customer service and user experience.
SaaS products are consistently updating their services to keep customer retention high. It benefits the user because profitable businesses want to keep their customers, and good companies constantly innovate and improve their products.
Hackers can be a threat to SaaS companies, putting user’s data at risk. Hosting your product means keeping up-to-date on security risks.
The benefits most certainly outway the risks but being aware of these factors can help you plan ahead.
Here are some questions to ask yourself when considering this business model:
- Are you going to require subscriptions up-front?
- Will you offer a free trial?
- Will you take the “freemium” route—where some features of your product are always free and others require an upgrade to a paid price tier.
The plan (Who is doing what and when)
Knowing what to do is only half the battle, making plans and assigning the right team members to those tasks is a challenge. Being informed and having a singular source of information to refer to could help you make the process easier, which is why we wrote this article. We don’t only write articles, Pixl Labs also help our clients develop and design Saas websites, and are here to help with marketing needs. (Shameless plug)
We think there are 4 plans you should have in place besides branding documents and company goals, etc.
Here are the 4 SaaS business plans we recommend:
1. Customer acquisition plan
Customer acquisition is key to the SaaS business model and having a plan in place will ensure you’re hiring the right people and growing your business.
HubSpot wrote an article titled: How to Approach the 4 Stages of SaaS Customer Acquisition and we recommended using that information along with the other information in this article to plan sustainable growth for your SaaS company. If you want a quick overview…
Customer acquisition key takeaways: Boost your organic traffic by refining your SEO strategy; Getting in front of the right audience through PR initiatives and events; Encouraging current users to invite their network through word-of-mouth; Start an affiliate program with incentives Promoting your content or product through paid advertisements; Educate leads and be a resource. Convince leads to convert through free trials, a freemium model, or an expert sales team. Keep them coming back for more with genuine customer service and user experience.
2. Retention plan
With SaaS products, retention is key, and having a plan in place will ensure you’re hiring the right people and growing your business.
Crazyegg wrote an article titled: 27 SaaS Customer Retention Strategies You Need to Be Using Today and we recommended using that information along with the other information in this article to plan sustainable growth for your SaaS company.
Customer retention key takeaways
- Raise your price.
- Reconsider your value proposition.
- Reassert your value proposition.
- Re-analyze the onboarding process.
- Follow up on every interaction with the customer.
- Avoid customer satisfaction surveys or any unnecessary surveys for that matter.
- Emphasize engagement as soon as possible.
- Develop a regular interaction schedule.
- Send targeted tips.
- Provide free training.
- Invite feedback.
- Respond instantly to customer needs.
- Follow your customers on social media.
- Build out social profiles to develop multiple ways of interacting.
- Consider a loyalty program.
- Create progress towards a goal.
- Create a retention team.
- Measure customer engagement.
- Set customer expectations.
- Brand yourself as a service, not software.
- Add new security features.
- Release a new version.
- Upgrade the customer automatically.
- Make it easy for customers to leave.
- Conduct exit interviews.
- Assign each customer a retention specialist.
3. Market Research Plan
Planning your market research early will help you understand your audience and goals but continuing to conduct market research will help you improve your product over time. We thought this was worth mentioning.
We found some good information on market research planning here: How to Perform a Market Research for your SaaS
Market research plan key takeaways
- Identify a pain point that could have a better solution
- Identify your potential customers
- Determine your niche and potential market size
- Speak to your potential customers
- Keep offering new features to stay competitive
- Analyze competitors and substitutes
- Competitive landscape
- Competitive advantages
- Competitive matrix
- SWOT analysis
- Win/loss analysis
4. Executive summary
“A good executive summary is often used as a stand-alone document that you can send to lenders and investors as part of the fundraising process, so you want to make sure that it’s short and to the point.
Make sure to include these key elements:
- The problem you are solving. Make this into a story and engage your audience.
- How your product solves this problem.
- Who your target audience is
- Your sales and profitability projections
- Who you are and why you’re qualified to build this business
- How much money you’re raising (if you’re seeking investment)”
Here’s an article from Bplans titled: How to Write a Business Plan for a SaaS Company
We viewed the points made in this article and they align well with our views on this process.
Here are some of the key takeaways:
- Writing a business plan can seem like a waste of time. It can even seem like a form of procrastination if you want to dive in and start solving the problem you identified.
- Business planning plays a more important role with SaaS companies specifically because the money required to fuel growth can be much more than you would guess.
- SaaS or subscription business plans should have a special focus on customer acquisition (ie. marketing) and the financial plan.
- For a business that relies on monthly subscriptions, cash flow can become a real issue.
3. Testing your product: Validating Your SaaS idea
You have your idea and you’re ready to launch and market. However, There’s another step to consider; validating your SaaS idea.
Validating your SaaS idea is another way of asking, “How do I know that this product will make money?” There are a couple of ways to expand on this question.
Here are some examples of the ways:
- Through talking to people in real life, what can I learn?
- Have I identified a problem they have?
- Do I have a solution that solves their problem, whatever it is?
- What is the best way to sell to them, and what’s the worst way to sell to them?
- What would they pay for my product or service? Have I priced it too low or too high?
- What products do they currently use to solve their problem?
Make sure you validate your idea before releasing it to the market. Validating your idea before you enter production will save you a large financial burden in the future.
Create a minimum viable product
You have validated that people will pay for your product. Are you ready to go into development? Not quite yet. There is one more aspect to validate. While people may say that they would pay for your product in passing, YOu can be more sure when they interact with the product and provide feedback.
Creating the minimum viable product or MVP could be valuable. When developing a minimum viable product, the following attributes help guide the product analysis.
- MVP is more about the process, not the product.
- MVP is not a product with the minimum number of elements, but rather has core features sufficient to implement an idea and retain early users.
- MVP is based on the lean startup philosophy and implies the iterative process of building, measuring, and learning loops until the product completely meets the market need.
- MVP aims to avoid building unviable, unnecessary products by gaining insight into the market first.
For example, you have an idea for audio editing software. Your final product has yet to be produced because you are testing if there is a need in the market. So, you create software that compresses audio files. This compression feature will not be your only feature, but is a great way to tread the waters of the market.
Noah Parsons says, “Start with cheap mockups, wireframes, or even sketches on paper to make sure that your customers are going to want what you build.”
Conduct a competitive analysis
It’s good to know not only your customers but your competitors as well.
Having competitors in the market is a good indicator that there is, indeed, a need for your product.
What are other SaaS products doing well?
- HubSpot—CRM, social media marketing, content management, web analytics, and SEO
- Google—search engine, digital analytics, document creation, online advertising, etc.
- Shopify—an eCommerce platform for online stores and retail POS
- Piesync—automates data-entry
- LastPass—password management
Learn from SaaS products that failed.
SaaS companies fail for a plethora of reasons. These reasons range from fraud to skipping the validating step. What are the possible reasons your product is not taking off?
John Solomon wrote an article that we have summarized below titled: Why Do Most SaaS Companies Fail?.
- Lack of Market—did you validate your idea in the market?
- A Failing Business Model—are you spending more per customer than you make?
- Higher Churn than Growth—are there more cancellations than new customers?
- First-to-Market vs. Fast-to-Market—are you trying to be first, or are you trying to be the best?
- Frustrating Fast Adoption—are you selling to customers, or spending time helping customers?
- Poor Management—is your management team on board with all of these problems?
How can you be different from the competition?
Your goal is to find out what makes the competitor an unviable solution for the customers’ needs. What exactly is it that your competitors are not delivering that the users want? This is also key to competitive analysis.
Noah Parsons, COO of Palo Alto Software, says, “LivePlan’s competition is often Word and Excel. We know that Word and Excel are time-consuming, error-prone, and offer no help and resources. Our solution, an automated business planning tool, helps eliminate those pains for customers.”
4. Finance and funding: (Funding your company)
We found several options to consider for funding and plenty of solutions to this problem. You can bootstrap your startup and do most of the work on your own. You can go for a large sum of capital by pitching angel investors or a venture capitalist. And, if all else fails, you can reach out to your network of family and friends.
Bootstrapping your business gives you majority control. You call the shots, including how you want to operate the business and who you want to hire but it’s a slow process.
Alternatively, getting the right investors on board from the beginning can assist in both your knowledge, resources, and strategy. You may also get immediate access to channels that may have otherwise taken years to accomplish. But, you will have to give up some control of your company the moment you bring on outside investors.
Before you decide on which funding and investment route you choose, the best thing you can do is develop a detailed financial estimate. The reason we haven’t’ proposed to make a financial estimate until now is that you haven’t yet got validation from your pricing, your market and you haven’t explored costs.
Having a detailed and well-thought-out forecast can improve your chances of getting funded by investors and funding organizations.
It acts as a tool that can assist you in understanding your business’s health, set milestones, and guide decision-making.
Here are a few resources you may want to check out:
- 40 Proven Ways to Fund A Small Business
- How to Bootstrap Your SaaS Startup: 7 Tips
- The top 25 VC’s investing in SaaS right now
- SaaS Angel Investors
Without a real sales forecast and budget, you have no idea how much money you're going to need to get your business off the ground. After all, with a subscription business, you're only going to get a small payment every month from each customer, and you don't know how long customers are going to subscribe, so you have to constantly update your forecast as you learn more about your customers. This forecast will help you predict how much cash you're going to need to fund your growth. Noah Parsons
Sales forecasting isn’t impossible, or even all that difficult. Anyone can do it so long as they know their customers and their market. The great thing about the sales forecast is that it will really help you, and investors, answer that central question — Can my business really be a business?
Once you’ve done your forecast, don’t forget to go back and update your lean plan. You will do this throughout the life of your business, so get used to it and enjoy it.
Do it yourself
If you have the ability and the passion to do the work yourself, you can save yourself a lot of money. Joe Kindness, co-founder at Agency Analytics, says,
“Since Blake and I were both developers (and still are), we were able to create this company without any funding or additional resources. We set a goal to be profitable within one year and if that did not happen, we would move on. After about a six-month development cycle, we launched a beta version in July 2010, and three months later, started earning revenue that grew each month. The real motivation in all this was passion. Sure it was great (and essential) to be validated with revenue, but ultimately we enjoyed what we were creating so much that it resulted in a very nice product.”
If you can use your own savings or get a small bank loan, or even fund yourself via a third-party platform, you can avoid taking on too much risk. Gabriel Kuperman, CEO of CuePin, says, “Try testing an idea with a small budget that you can obtain through your own savings, a small bank loan, or even a Kickstarter campaign. Bringing in investors too early, before proof of concept is hard and may be unnecessary. You might also be giving investors too much equity early on, as the risk is extremely high for them in the beginning stages of growing a SaaS company.”
Taking the slow and careful approach can also save you from making some costly mistakes, says David Batchelor, President, and co-founder of DialMyCalls. “[Doing this] helps you really learn and get a feel for your industry, and lets you make mistakes on a smaller scale. It’s not as sexy as getting a big VC investment upfront and takes a bit longer, but at the end of the day, it has been much more rewarding for us to build it with our own capital.”
Seek out venture capital funding
If you’re seriously thinking about pitching for VC funding (scary statistics aside), it’s useful to know a bit more about what venture capitalists are looking for. You can start by reading a few (or all) of these 17 venture capital blogs, reading Tim Berry’s thoughts on what venture capital firms want, and his advice on finding venture funding.
Even though Konstantinos Bratanis, co-founder and CTO of Goodvidio, and his partner started the business with their own hard-earned money, they eventually raised VC funding. The great thing about raising money after they’d already started was that they’d had time to validate their idea and start building a team of good employees.
Konstantinos says, “As we were validating the value of our solution and recruiting early adopters, we started talking to a few VC firms. At the time, we didn’t have a sales pipeline yet or revenues coming into the firm. What encouraged us, was learning that at such an early stage VCs are more interested in the people behind the new company and their potential to build a viable business. They have modest expectations when it comes to cold hard sales and revenue numbers, so they want to see that there is a healthy team spirit behind the wheel that has the potential to reach growth. They want to see commitment, drive, vision, and hard work.
Thanks to a combination of these traits we were able to secure a first-round of six-figure VC funding, which gave us a jump-start to start developing our sales and marketing channels.”
Just be sure that when you approach investors that you have your updated business plan, financial documents, and a pitch deck ready to go.
These will help you prepare and give investors more holistic documentation to reference as you pitch your business."
Say’s Bplans in their article titled: How to Start a Successful SaaS Company in 2021
When designing your SaaS product and company website we recommend focusing on the user interface, the user’s experience, features, benefits, and site functionality. Pricing plans, customer service options, and retargeting will play a major role in this system.
Hiring the right design team is key to your success in this phase and having a team that works well with your developers will help you avoid issues further down the road. Make sure the tools your designers use align well with your developer’s workflow or hire an agency of developers and designers.
We wrote an article titled: 15 SaaS website Design Examples and What You Can Learn From Them. Check that out for some design insights and inspiration.
Also, HubSpot wrote an article on the best website design agencies. We linked you to Pixl Labs page in that directory. Please reach out to use for design and development services.
The technology stack Each SaaS company is unique and your developer may suggest a custom technology stack that suits your product and goals. However, there are a few common technology choices for building your web application in 2021.
Here they are:
- MongoDB (For data storing and processing)
- Express.js (For most backend development)
- AngularJS/React (Standard front-end frameworks)
- Node.js (For most backend development)
- Google Cloud Platform/Amazon Web Services (For cloud storage)
This technology stack could be referred to as the MEAN stack.
What is the MEAN stack?
Hubspot wrote an article titled: How To Audit Your Company’s Technology Stack
We think this could help you now and in the future when referencing your company’s technology stack.
We also found that this article titled (How to choose the right tech stack for your SaaS startup?) was informative and could help you make the right decision.
Everything is well designed and developed. Now, how do you get subscribers?
We wrote an article titled: The Complete Guide to SaaS Marketing. Check these marketing strategies to grow your business.
We also wrote an article titled: 10 key growth metrics for SaaS companies.
We hope this provides you the information necessary to market and improve your SaaS company.
No matter what path you choose to take make sure it resonates with your brand and audience. Push to new limits and strive for greatness. Not all of us have the same budgets or resources.
Being creative and collaborative is key. Also, finding a great team to help you along the way can make all the difference.
Here at Pixl Labs, we create custom & intuitive websites that grow your business with an epic, responsive, and creative team, and we specialize in helping our clients make the most out of HubSpot’s CMS.
If you need a website that works for you and not the other way around. Please contact us. We want to know more about your business.
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