SaaS Business Plan Template
Saas business plan.
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Saas Business Plan Example
Below is a template to help you create each section of your SaaS business plan.
All In One is a startup B2B SaaS company located in Los Angeles, California. The company is founded by Melissa Johnson, a business strategist with more than fifteen years of experience helping other businesses develop their operations and processes to optimize customer management, sales and marketing, and project flow. Melissa has garnered a positive reputation of helping companies become more profitable by using SaaS technologies to improve their efficiency. Now, Melissa is ready to venture out with her own SaaS platform. As the name implies, All In One will be a one-stop-shop SaaS platform to help enterprises of all sizes to streamline their business operations.
Melissa has enlisted the services of a software developer, Paul Smith, to be the Chief Technology Officer of the company and manage the technical aspects of the SaaS platform. Melissa plans on recruiting a small team of highly qualified professionals to help manage the day to day tasks of running a SaaS company including sales and marketing, customer support, financial reporting, and technology maintenance and optimization.
All In One will provide a comprehensive array of SaaS services beneficial to any business owner who wants to improve their efficiency. All In One will allow each client to ensure that every aspect of their enterprise is being managed seamlessly. All In One will be the ultimate choice for B2B SaaS services while being the most user-friendly platform around.
The following are the solutions that All In One will provide:
- Customer Relationship Management (CRM)
- Project Management (PM)
- Enterprise Resource Planning (ERP)
- Sales Funnel Management
- Financial Management
- Human Resources Management (HRM)
- Communication Solutions
- Automated Marketing Solutions
All In One will target all small-to-medium (SMEs) and corporate businesses in the United States. They will target businesses in every industry and sector. They will also target companies that already use other SaaS platforms as well as companies brand new to SaaS solutions. No matter the client, All In One will deliver the best interface, customer support, and net profit.
All In One will be owned and operated by Melissa Johnson. She has recruited an experienced software developer, Paul Smith, to be her Chief Technology Officer and help manage the SaaS technology.
Melissa Johnson is a graduate of the University of California with a Bachelor’s degree in Strategic Management. She has been helping other businesses develop their operations and processes to optimize customer management, sales and marketing, and project flow for over fifteen years. Melissa has garnered a positive reputation of helping companies become more profitable by using SaaS technologies to improve their efficiency. Melissa’s strategic skills and diligence have allowed her to develop a network of loyal clients.
Paul Smith has been a software developer for over a decade. He has a Software Development degree from New York University and has created a dozen successful software applications for B2B purposes. Melissa relies on Paul’s technical expertise and ability to transform her vision into an easy-to-use platform.
All In One will be able to achieve success by offering the following competitive advantages:
- Helpful, knowledgeable, and efficient sales and customer support team that will be available 24/7 to answer customer questions, help troubleshoot any issues that arise, and record feedback to improve the platform.
- Full suite of solutions to manage all aspects of business operations in one user-friendly, streamlined platform.
- All In One is an intuitive smart SaaS platform that learns the more it’s utilized, so each user can have a personalized experience that works best for them.
All In One is seeking $250,000 in debt financing to launch its SaaS business. The funding will be dedicated towards UX design and other software development. Funding will also be dedicated towards office equipment, supplies, and materials. Additional funding will go towards three months of overhead costs to include payroll of the staff, rent of an office space, and outbound marketing costs. The breakout of the funding is below:
- UX design and software development: $100,000
- Office equipment, supplies, and materials: $10,000
- Three months of overhead expenses (payroll, rent, utilities): $120,000
- Marketing costs: $10,000
- Working capital: $10,000
The following graph below outlines the pro forma financial projections for All In One.
Who is all in one.
All In One is a newly established B2B SaaS company dedicated to helping businesses of all sizes achieve optimal efficiency in their operations through technology. All In One is based in Los Angeles, California, but will be available to companies across the United States. All In One will be the most reliable, user-friendly, and efficient choice for business owners of small-to-medium enterprises (SMEs) and large corporations in any industry. All In One will provide a comprehensive menu of SaaS solutions for any business owner to utilize. Their full-service approach includes a comprehensive set of sales and marketing, project management, human resources management, and customer relationship management solutions all in one easy-to-use platform.
All In One History
All In One is owned and operated by Melissa Johnson, a business strategist with more than fifteen years of experience helping other businesses develop their operations and processes to optimize customer management, sales and marketing, and project flow. Melissa has garnered a positive reputation of helping companies become more profitable by using SaaS technologies to improve their efficiency. Melissa’s strategic skills and diligence have allowed her to develop a loyal client base.
Since incorporation, All In One has achieved the following milestones:
- Registered All In One, LLC to transact business in the state of California.
- Has a contract in place to lease a small office space.
- Reached out to numerous contacts to include former clients and business owners to begin getting beta users for the new platform.
- Began recruiting a small team of sales and marketing associates, customer support associates, an accountant/bookkeeper, and a technology officer.
All In One Services
The global SaaS industry is valued at an estimated $152B (USD). The market is expected to grow to $208B by the year 2023. According to Statista, there are over 15,000 SaaS companies in the U.S. The largest industry players include Adobe, Microsoft, and Salesforce.
SaaS is a major component of cloud computing. Businesses rely on SaaS for everything from video conferencing to sales and marketing automation and customer relationship management. As more companies grow to depend on these services, demand for SaaS offerings will continue to increase. Industry trends include an increased use of artificial intelligence, big data, and integrated cloud services.
The market is highly fragmented with many companies offering similar services. Industry operators can achieve a competitive advantage by developing recognizable and memorable branding and marketing campaigns, providing exceptional customer support, and offering value-add services in addition to the SaaS platform itself.
Demographic profile of target market, customer segmentation.
All In One will primarily target the following customer profiles:
- Small-to-medium enterprise (SME) business owners in any industry/sector.
- Corporate/enterprise businesses in any industry/sector.
- Business owners who are looking for a better SaaS platform than what they are currently using.
- Business owners who have never used Saas, but would like to get started to improve their operational performance.
Direct and indirect competitors.
All In One will face competition from other companies with similar business profiles. A description of each competitor company is below.
Get Customers: Sales and Marketing SaaS
Get Customers provides a SaaS platform catering to businesses of any size. The company’s main offering is for automated sales and marketing solutions, but they have recently branched out to offer more comprehensive services including human resource, customer relationship, and financial management tools. Based in Seattle, Washington, Get Customers offers its solutions to businesses and organizations across the United States.
Get Customers’ promise is to deliver a reliable SaaS solution, effective communication, honesty and integrity, and 24/7 availability of the customer support team. Get Customers’ team of experienced SaaS developers and business professionals assures the platform will allow the business operations of its clients to be run smoothly, freeing the business owners from day-to-day operational hassles.
Competitive SaaS Solutions
Competitive SaaS Solutions is a Los Angeles-based B2B SaaS company that provides outstanding business solutions for small business owners. Competitive SaaS Solutions takes the headache out of dealing with multiple SaaS platforms that are not always compatible. They provide comprehensive SaaS services in one place. SaaS solutions included in the platform are CRM, HR, PM, ERP, automated marketing, financial reporting, and video conferencing. The owners of Competitive SaaS Solutions are seasoned business owners and technology professionals so they understand how SaaS is best built, implemented, and managed.
Better Built SaaS
Better Built SaaS is a trusted B2B SaaS company that provides superior service to businesses of all sizes. They are able to provide a one-stop shop for business owners who are interested in optimizing their operational processes through automation. Better Built SaaS is able to serve new businesses and startups from the beginning and established corporations looking to improve their profit margins. They are also able to ease the stress of managers who are overwhelmed by the day to day hassles and complexities that come with running a business.
Their pricing structure is simple and straightforward. Better Built SaaS offers three pricing tiers for their services – the Basic Plan, the Premium Plan, and the Comprehensive Plan. Business owners can choose the plan that best suits their needs and change their plan at any time.
All In One will be able to offer the following advantages over their competition:
- Helpful, knowledgeable, and efficient customer support team that will be available 24/7 to answer customer questions and troubleshoot any issues that arise.
- An intuitive platform that works for any business size in any industry.
- Comprehensive solutions that can be customized to best fit each client’s needs.
Brand & value proposition.
All In One will offer the unique value proposition to its clientele:
The promotions strategy for All In One is as follows:
Word of Mouth/Referrals
Melissa Johnson has built up an extensive list of contacts over the years by providing exceptional service and expertise to her clients. Many former clients have communicated to Melissa that they are interested in signing up for the new SaaS and are happy to help spread the word of All In One to their network. Additionally, All In One will use a customer referral program and provide existing clients with discounts for referring new clients.
All In One will recruit an in-house marketing director to design and maintain its website. The website will be well organized, informative, and list all their services that All In One is able to provide. The website will also list customer support contact information, pricing plans, and demo videos.
The marketing director will also manage All In One’s website presence with SEO marketing tactics so that any time someone types in the Google or Bing search engine “B2B SaaS company” or “SaaS business solutions”, All In One will be listed at the top of the search results.
Social Media Marketing
All In One will use social media platforms including TikTok, YouTube, Twitter, Instagram, LinkedIn, and Facebook to promote the brand and attract customers. The company’s in-house marketing director will oversee the social media implementation.
The company will use content marketing on its website and social media to help drive traffic and convert customers. Content will be high quality, informative, and keyword optimized.
The pricing of All In One will be moderate and on par with competitors so customers feel they receive value when purchasing their services.
The following will be the operations plan for All In One.
- Melissa Johnson will be the Owner and CEO of the company. She will oversee all customer support staff and manage client relations. Melissa has spent the past year recruiting the following staff:
- Paul Smith – Chief Technology Officer who will provide all technical support for the platform.
- Bill Brown – Accountant/Bookkeeper who will provide all client accounting, tax payments, and monthly financial reporting.
- Kelly Jones – Marketing Manager who will provide all sales and marketing initiatives for All In One.
All In One will have the following milestones complete in the next six months.
8/1/2022 – Finalize contract to lease the office space.
8/15/2022 – Finalize personnel and staff employment contracts.
9/1/2022 – Complete software development of the platform.
9/15/2022 – Begin networking and outbound marketing efforts.
9/22/2022 – Begin moving into the office.
10/1/2022 – All In One opens for business and launches the beta platform.
Key revenue & costs.
The revenue drivers for All In One are the SaaS subscription fees that will be charged to the clients for use of the SaaS platform and services. All In One will have a tiered subscription model with a basic, standard, and premium subscription options. In addition, the company will have customized service options for an additional fee.
The cost drivers will be the overhead costs required to maintain a SaaS platform and staff the office. The expenses will be the payroll cost, rent, utilities, office supplies, and marketing materials.
Funding Requirements and Use of Funds
All In One is seeking $250,000 in debt financing to launch its SaaS business. The funding will be dedicated towards UX design and other software development. Funding will also be dedicated towards office equipment, supplies, and materials. Additional funding will go towards three months of overhead costs to include payroll of the staff, rent of an office space, and marketing costs. The breakout of the funding is below:
The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and in order to pay off the startup business loan.
- Average number of monthly subscriptions: 15
- Average fees per month: $50,000
- Office lease per year: $100,000
Income statement, balance sheet, cash flow statement, saas business plan faqs, what is a saas business plan.
A SaaS business plan is a plan to start and/or grow your SaaS business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.
You can easily complete your SaaS business plan using our SaaS Business Plan Template here .
What are the Main Types of SaaS?
There are a number of different kinds of SaaS, some examples include: Horizontal SaaS and Vertical SaaS.
How Do You Get Funding for Your SaaS Business Plan?
SaaS are often funded through small business loans. Personal savings, credit card financing and angel investors are also popular forms of funding. This is true for a business plan for any Saas company, including a B2B Saas business plan.
What are the Steps To Start a SaaS Business?
Starting a SaaS business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.
1. Develop A SaaS Business Plan - The first step in starting a business is to create a detailed SaaS business plan that outlines all aspects of the venture. This should include potential market size and target customers, the services or products you will offer, pricing strategies and a detailed financial forecast.
2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your SaaS business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your SaaS business is in compliance with local laws.
3. Register Your SaaS Business - Once you have chosen a legal structure, the next step is to register your SaaS business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws.
4. Identify Financing Options - It’s likely that you’ll need some capital to start your SaaS business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms.
5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations.
6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events.
7. Acquire Necessary SaaS Equipment & Supplies - In order to start your SaaS business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation.
8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your SaaS business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising.
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SaaS Business Plan
Congratulations! You have found an innovative software solution and are on the brink of launching your SaaS business – that is commendable.
Whether it is a new product that you are introducing or looking to revamp existing SaaS software, a sound SaaS business plan is your essential guide to climbing the ladder of success.
We understand that crafting a business plan for your SaaS business can seem challenging. That’s why we’re here with our SaaS business plan template , to simplify the planning process and assist you in creating a roadmap for your SaaS.
- A SaaS business plan helps you define your marketing strategy, customer acquisition strategy, retention strategy, and strategies to achieve your business goals.
- Craft an impactful executive summary that outlines the type of your SaaS business, marketing approach, financial outlook, and team expertise to attract potential investors and partners.
- Conduct thorough market research to understand market trends, consumer preferences, and the needs of your target market.
- To ensure efficient daily operations, provide in-depth operational plans that incorporate staffing, additional services, and customer service.
- Create realistic financial projections for sales revenue, expenses, and profit forecasts while considering contingencies & emergencies.
Why do you need a SaaS business plan?
For entrepreneurs who jump into business directly without writing a business plan is like delaying their success. Here are some reasons why you need a SaaS business plan:
Writing a business plan helps you work out and make clear your business strategy. Do you want customers to pay upfront? Or maybe you’re thinking about the “freemium” idea where some stuff is free, but others need a paid upgrade. Writing this down from the start helps your team understand where you’re headed.
Finances are important
Sometimes, it takes months or even a year to cover customer acquisition costs. So, you need a plan with a solid financial forecast. A good plan lets you play with different situations, so you know how much money you need for both the long and short term.
A good business plan outlines how you’ll get new customers. It could be a detailed marketing plan included in your business plan or strategies for how to acquire customers.
Getting customers is just part of the game for a subscription business. SaaS businesses need to keep their customers coming back, especially in a competitive market.
Knowing Your Market
A business plan lets you identify your ideal customer profile. Knowing your customers is crucial, and having a deep understanding of your customers helps you make the correct updates to your product in the future.
What to include in your SaaS business plan?
1. executive summary.
The executive summary is basically an introduction to the entire business plan. Entrepreneurs prefer to write it at the last because till then, they will have the full knowledge of the business plan.
Start your executive summary by engagingly introducing your business, and include all other elements like
- Saas company brief introduction
- Market Opportunity
- Vision & mission statement
- Target market
- Your products and services
- Marketing strategy
- Management team
- Financial Outlook
- Call to action
For instance here is an example of Saas company’s product introduction with the help of Upmetrics:
Remember, your readers might not read the whole business plan, but they will definitely go through the executive summary. So, make sure to keep it simple and engaging.
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2. Company Overview
In the company overview section, introduce your business in detail. It includes legal structure, name, location, business history, and everything about your Saas company.
First, provide the basic details of your Saas business – what is the name and what type of Saas business do you own; for example, your Saas business might be:
- Horizontal Saas: This Saas business model allows Saas businesses to cater services to various customer segments.
- Vertical Saas: Here the solutions are created for a particular customer segment of the industry.
- Collaboration Saas: This type of Saas business allows teams to work together. They also enable document sharing, project management, communication, and more such functions.
After that, mention the owners of your Saas startup along with the qualifications. Add the mission statement of your business and do not forget to include business history (if any) & future goals.
This section should provide an in-depth understanding of your business and business owners.
3. Industry Analysis
In the industry analysis section of your SaaS business plan, it is essential to provide a comprehensive overview of the SaaS industry. While this may seem unnecessary, it gives you a deep understanding of your industry which will help you in business planning.
Here are certain questions that will help you in the analysis:
- What is the current size of the Saas industry in terms of revenue?
- What are the current trends of the Saas business?
- Who are the leading SaaS businesses in the industry?
- What is the growth forecast for the industry?
For example, look at this industry and the size of the Saas industry with the help of Upmetrics:
Conduction this industry analysis will educate you about the market and help you prepare marketing strategies according to the market trends.
In short, your industry analysis will provide a clear and comprehensive view of the SaaS market, helping you make informed decisions and easily communicate your business’s positioning and potential.
4. Competitive Analysis
Competitive analysis will help you understand your business better and identify the strong points of your product.
Start by specifying who are your competitors – both companies like yours (direct competitors) and other choices customers might consider (indirect competitors).
Now, let’s focus on your direct competitors, those similar to your SaaS service. Provide an overview of each competitor, including their size and where they’re based.
Next, look at their strengths and weaknesses. Find out:
- Which customer segment do they serve?
- What kind of software services do they offer?
- How do they price their services?
- What are their strengths and strong points?
- What do they need to work on, according to their customers?
- What is their customer acquisition cost?
A better way to conduct this analysis is by seeing things from a customer’s viewpoint. You might even ask your competitors’ customers what they like and dislike about them to better get insights about them.
This way you can get to know the unique selling proposition of your SaaS company. Think about all the areas where you will outperform your competition and make sure to include that in your strategies.
Your USP might be:
- Ease of use
- Attractive pricing structure
- 24*7 customer support
In short, through this analysis get to know about your USPs and competitors.
5. Market Analysis
In this section, dive into the market where you will provide SaaS services.
Start your market analysis section by providing the details of your target customers. Your target market can be:
- Small to medium-sized businesses
- E-commerce retailers
- Enterprise level companies
- Nonprofits or NGOs
After mentioning your target market, give a detailed overview of the market size and growth potential of the industry. For example: here is the market size of wages and salary sales workers for a customer relationship management solutions provider software SaaS company:
Now focus on market trends too. Mention what your target customers prefer and what new are they looking for. For example, people might be looking for:
- Remote work solutions
- AI and machine learning integration
- Hybrid cloud solutions
At the end of the market analysis, do mention the regulatory environment your SaaS business needs to follow.
6. Product Offerings
After mentioning your target customers, give details of products that are supposed to make life easier for the target customers. So, make sure your products are easy to use and efficient.
Your product might provide one of these:
- Customer Relationship Management (CRM)
- Project Management (PM)
- Enterprise Resource Planning (ERP)
- Sales Funnel Management
- Financial Management
- Human Resources Management (HRM)
- Communication Solutions
- Automated Marketing Solutions
7. Sales and Marketing Plan
Writing the sales and marketing section means jotting down all the customer acquisition strategies and the tactics for how to retain them.
First, you need to identify and understand your target market, then need to know your USPs because these two elements will be at the base of all your strategies.
Now it is time to mention your customer acquisition strategy as in whether you will go for inbound acquisition or outbound acquisition.
Inbound strategies are fully digital and are necessary to fully convert potential customers into existing ones.
They include acquiring customers or retaining existing customers with the help of content marketing, search engine optimization (SEO), social media marketing, email marketing, etc.
Outbound strategies are all about going to the potential customers directly rather than waiting for them to come to you. This can only happen with a proper sales team by your side.
These strategies include cold emails, cold calls, LinkedIn outreach, direct mail, trade shows, etc.
Once you have noted down how you will acquire customers, then mention below things too:
- Customer acquisition cost
- How many customers do your salespeople close per month on average
- Your monthly paid advertisement budget
- Number of followers you have on social media
8. Management Team
Knowing who is behind your SaaS business will increase the appeal of your business plan.
The management team tells you about the people in charge of the SaaS business. It should explain each manager’s experience, what they’re good at, and what their jobs are.
Here is an example with the help of Upmetrics of how to mention your key managers:
Whether you are going for a traditional business plan or a modern lean plan, do not ignore mentioning your management team.
9. Operations Plan
This part is like a map that shows how you will make your SaaS business work. It’s divided into two sections:
This is what you do every day to keep the business running. Like getting customers, helping them out, and dealing with paperwork. You have to explain how you’ll do all these daily tasks efficiently.
For example here is the purchasing procedure for CRM software with the help of Upmetrics:
These are the important things you want to achieve in the future. It could be reaching a certain number of customers, making a lot of sales, hiring more team members, or launching new features.
Here, you have to show your plan for reaching these goals, including when you aim to get there and what you’ll do to make it happen.
This operations plan is like a guide for handling your everyday tasks and making big dreams for the SaaS business come true.
10. Financial Plan
Your financial plan needs to have a 5-year financial forecast. For the first year, break it down into monthly or quarterly details, and then summarize it annually. This forecast should cover your income statement, balance sheet, and cash flow.
An income statement, often known as a Profit and Loss statement or P&L, displays your earnings and then deducts your expenses to know the profitability of your business.
When crafting your income statement for SaaS sales growth, you have to make some assumptions. Here is an example of an income statement with the help of Upmetrics:
Balance sheets display your assets and liabilities. Although they can contain a lot of details, like equity, goodwill, other intangible assets, etc.
Cash flow statement
Your cash flow statement helps you see how much money you need to start or grow your business and avoid running out of money.
Surprisingly, you can make a profit but still face financial problems that could lead to bankruptcy. Therefore, you will need proper cash flow planning to avoid such circumstances.
SaaS Industry Highlights 2023
- Growth forecast: The Software as a Service (SaaS) market was to hit $141.40 billion in revenue by 2023 and is expected to maintain a yearly growth rate (CAGR) of 5.64%, reaching a market size of $186.00 billion by 2028.
- USA’s growth: When compared on a global scale, the United States is expected to generate the highest revenue, reaching $141,400 million in 2023.
- User spending: Spending by end-users on SaaS was to reach $208.08 billion in 2023, making up 35% of all spending on end-user public cloud services.
- Leveraging AI: Around 40% of businesses were prepared to integrate AI technology into their operations in 2021, and the forecasted expansion of cloud AI in 2023 is expected to be five times greater than it was in 2019.
Download a SaaS business plan template
Ready to kick-start your business plan writing process? And not sure where to start? Here you go, download our free SaaS business plan pdf , and start writing.
This intuitive, modern, and investment-ready template is designed specifically for SaaS businesses. It includes step-by-step instructions & examples to help in creating your own SaaS business plan.
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Frequently asked questions, where can i find a saas business plan template that investors will take seriously.
To secure funding and impress potential investors, an engaging SaaS business plan is necessary. Here are some resources from where you can find business plans:
- Business plan software
- Government website
- AI business plan generators
- Consultants and advisors
- Business plan writers
How do I define my target audience in a SaaS business plan?
While defining the target audience of your SaaS company, you have to mention their:
- Needs & pain points
- Purchasing habits
What are common mistakes to avoid in a SaaS business plan?
Here are some common mistakes you need to avoid while you write a business plan:
- Not conducting enough market research
- Poor vision
- Not having proper financial projections
- Wrong pricing model
- Insufficient ROI analysis
What technical details should be included in a SaaS business plan?
Technical elements you should include in your business plan are:
- Technology stack
- Technology architecture
- Data storage and security
- APIs and integration
- Data backups & recovery
Should I focus on the short-term or long-term goals in my SaaS Business Plan?
SaaS businesses need to focus on both short and long-term goals as both are important to know your near and far future goals with financial projections and budget.
About the Author
Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more
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The Ultimate Guide to Writing a SaaS Business Plan with Examples and Templates
Explanation: We fact-check all of our content to ensure you have reliable and up-to-date information for your eCommerce business decisions. Learn about our fact-checking steps .
Whether you’re an aspiring entrepreneur or a seasoned veteran, there’s no denying that writing a SaaS business plan is a critical step in launching your SaaS startup . In this article, we’ll give you the lowdown on what goes into writing the ultimate SaaS business plan.
Did you know that 70 percent of businesses that follow a strategic business plan manage to survive for five years?
But here’s the deal — the way you write your SaaS business plan differs a little from the way you might write plans for a more traditional “lifestyle” business. There are unique considerations that can help your business succeed or fail.
It’s necessary to validate your business idea and build a compelling case for investors. If you’re starting a SaaS business, there is an even greater need to create a solid business plan because the resources required to fund growth are often higher relative to other types of online businesses.
An excellent SaaS business plan lays out essential aspects of your business, from mission and values to marketing strategy and financial projections. It also helps you consider any potential risks and create contingency plans.
If you are considering developing your own SaaS business, this guide discusses what a SaaS business plan should include and how to create an outstanding one.
We’ll cover areas like your business model examination, marketing, financials, and how to make sure your plan doesn’t include any holes.
What is a SaaS Business Plan?
A SaaS business plan is the roadmap for your software-as-a-service (SaaS) business. With this plan, you can specify steps you need to take to make your business succeed. It basically helps you stay organized and keep track of your progress.
When creating a SaaS business plan, you must consider many factors, including customer segmentation, customer acquisition strategy, pricing structure, marketing, and operational costs. It’s also essential to set short-term and long-term goals to stay on track.
Moreover, the plan is vital for communicating with potential investors and customers, giving them a clearer insight into the product and its value.
Why Do You Need a SaaS Business Plan?
1. increased clarity.
A SaaS business plan creates clarity around your goals and objectives by articulating them in an understandable format. This plan gives you the foundation for making decisions moving forward, helping you identify potential challenges or opportunities down the road. Whether it’s for yourself, investors or shareholders, having a well-thought-out business plan can be invaluable when it comes to mapping out your trajectory for success.
2. Assign Responsibility
A SaaS business plan focuses on the project and keeps it organized, on track, and ultimately profitable. If your organization lacks a plan, you may find that progress is slow. Projects may get sidetracked or confused, and you may have trouble communicating goals to the team.
With a plan in place, your management team can see who’s responsible for what tasks, when those tasks need to be completed, and how their efforts are contributing to the overall project. It makes it easier to measure performance and set up rewards.
And at the same time, if someone falls behind or is underperforming, it’s also easier to identify which area needs improvement—all thanks to having a well-defined SaaS business plan.
3. Manage Change
When running a SaaS business, you must always be ready for a pivot. Having a detailed plan helps you prepare for any curve balls that may come your way. A plan is also helpful when expanding or trimming staff or services—it ensures that everyone is on the same page and understands your ultimate goals.
4. Secure Funding
Having a business plan is critical if you’re trying to secure funding for your SaaS project. Investors want to know that you have accounted for all aspects of your project.
Most are particularly interested in seeing your business model and product, competitive edge, customer acquisition strategy and financial projections. These insights help them to determine the potential profitability of your venture.
Your business plan typically shows investors how much money they will need to invest in getting the project off the ground.
Pro tip! Discover the techniques and best practices of price anchoring , a pricing strategy you can use in your business plan.
Crafting a Winning SaaS Business Plan Outline
We’ve mentioned earlier that a SaaS business plan is the roadmap you need to create a successful software as a service company. With the right plan, you can identify your target market, outline your strategy, and secure the resources you need to get started.
Here are the ‘must-haves’ in your outline to get started on the right foot.
1. Executive Summary
The executive summary is a “30-second pitch” that encapsulates the key elements and essential information about your business in a few short paragraphs. It’s the first chapter of your SaaS business plan, setting the tone for the rest of your document.
The executive summary should be clear and concise while providing enough detail to paint a vivid picture of your business concept and goals.
Potential investors or partners should be able to quickly understand your business goals and concept, as well as your competitive advantages and mission. Hence it’s best to keep your text concise.
- Include all the essential points and briefly explain how you plan to reach your objectives.
- Communicate why your company will succeed in this space relative to competitors in the market at large.
- Finally, don’t forget about visual aids—add charts and other visuals that can help illustrate your points throughout your executive summary to strengthen its impact and clearly present information.
You can see that this very brief executive summary includes an overview of the product, market, and mission.
Describing your product and market are particularly essential because they provide a framework for writing about your business model in a way that is focused on your target audience and clear to potential investors.
2. Identifying the Problem
The problem statement clarifies why you create your product or service and why customers need it. It should be succinct and designed to establish your company’s unique purpose and value proposition in the marketplace.
To write a comprehensive problem statement, you need to research and analyze industry trends to identify the unique problems that your product will solve.
Tools such as the Google Trends search engine or the Pew Research Center are excellent resources for conducting industry research. You can use Google Trends to view the relative popularity of search terms over time, while the Pew Research Center provides access to industry-specific survey data.
Tools like these can help you identify gaps in the current marketplace to help you create a compelling problem statement.
After your research, use straightforward language to articulate the primary issue your product or service addresses. Remember to keep it Simple. Refrain from overloading readers with too much information; keep it straightforward and easy to understand.
3. Asserting Your Solution
Once you’ve detailed the problem, you need to create a case study for why your solution is the ideal one. Solutions in a SaaS business plan typically refer to the product or service your company provides.
In this section of the business plan, you must clearly articulate how your solution will be better, faster, or cheaper than the competition.
As you explain the advantages of your solution, provide concrete data, such as customer testimonials, to back up your claims. It is also important to emphasize the value proposition and the differentiating characteristics that set your solution apart from the competition.
Ultimately, convincing potential customers that your product is better than any alternative will be a key part of gaining their trust. The more information you provide in this section, the more likely potential customers are to understand the value of your product and choose your solution over the competition.
4. Market Opportunity
Market opportunity refers to the potential size and growth of the available market for a business’s services or products. It is an important consideration in the business plan as an essential part of determining the potential success of the business concept. To assess and identify market opportunities, you must first understand your target market.
Check out this graph to find out the approximate global SaaS market growth:
Understanding your target market involves researching the product or service, the target customer demographic, and the market situation for similar products or services. Websites like US Census Bureau , Answer The Public , and Statista can help you uncover actionable insights to identify opportunities, such as untapped markets or customer subsegments that may be more receptive to your SaaS product.
It is also essential to consider any potential trends or changes in the market, such as new laws and regulations, technology, or changes in customer behavior, that could impact the market. Trend research can help inform pricing and marketing strategy for better long-term success.
You can see that this outlines the potential trend and growth of the cybersecurity market following an analysis by IBISWorld.
5. Competitive Analysis
The next section of your SaaS business plan should be a competitive analysis. In this part, you look at—and compare yourself to—your competition. This survey helps you understand the current market, identify areas of advantage and disadvantage, and develop strategies to help you stand out from the competition.
Writing a good competitor analysis begins with identifying who your competitors are. Tools like Similarweb can help you find direct and indirect competitors who offer similar services or products differently. For each competitor, you listed, describe the services they provide and their strengths and weaknesses.
Next, spell out the differences between your offer and your competitor’s. Analyze their pricing structures too. Are customers willing to pay more for specific product features? How often do copycats come along? Is there a demand for cheaper alternatives? Understanding these dynamics can help you create better pricing strategies for your SaaS business plan. Popular SaaS pricing strategies include penetration pricing , trial pricing , and psychological pricing .
You can also conduct an SEO competitor analysis to get a better understanding of your competitors’ strategies. This, in turn, will help you craft a more strategic marketing plan to outperform your competitors’.
6. Business Model Examination
Business model examination in a SaaS business plan involves analyzing and defining how the company plans to generate revenue and create value for its customers. This section includes an in-depth study of key elements of the company’s revenue model, such as pricing strategy, target market, cost structure, sales and marketing channels, and customer acquisition strategy.
The business model examination allows you to ensure that your assumptions are solid and strengthen weak areas. It also validates ideas and visualizes how they stand up compared to competitors in the market. Here, you’ll typically answer important questions such as:
- What value does the SaaS offering provide to its customers?
- How will the company monetize its SaaS offering?
- Who are the target customers, and what are their needs?
- What are the key costs associated with delivering the SaaS offering, and how will these costs be managed?
- How will the company acquire and retain customers, and what is the customer acquisition cost?
7. Marketing Plan and Strategy
This section details a comprehensive strategy for attracting and retaining customers by communicating the value of the company’s offering. It outlines the steps the company will take to build awareness and demand for its product and how it will retain its existing customer base.
A typical marketing plan in a SaaS business plan includes the following components:
- Target market analysis : Identify the target customer segments, their needs, and how the SaaS offering addresses those needs.
- Competitive analysis : Identify the competition and assess the company’s competitive advantage.
- Value proposition: Define the unique value the SaaS offering provides customers and how it differentiates from the competition.
- Positioning strategy : Determine how the SaaS offering will be positioned in the market and how the company will communicate its value proposition to its target customers.
- Marketing mix : Define the marketing mix, including product, price, place, and promotion, and how they will be used to achieve the marketing objectives.
- Marketing budget : Establish the marketing budget, including the cost of marketing campaigns and tactics and how the budget will be allocated to different marketing channels.
- Marketing KPIs : Define key performance indicators (KPIs) to measure the marketing plan’s effectiveness and track progress.
To learn more about measuring your marketing KPIs, read our comprehensive guide on essential SaaS metrics to track and improve growth.
8. Timeline and Map
A timeline is a visual representation of the key milestones and events the company intends to achieve in a specified period.
The timeline should outline the significant events such as;
- product development
- marketing campaigns
- key hires, as well as the expected completion dates for each event.
The timeline provides a roadmap for the company, ensuring that the business stays on track and meets its goals.
To create a comprehensive timeline in your business plan, determine what you want to achieve with your SaaS business. Next, identify the key events that need to happen for your business to achieve its goals. These events can include product development, launch, marketing campaigns, and key hires.
After identifying key events, assign a realistic time frame for each milestone, considering any dependencies or constraints. This step will help you to determine the expected completion dates for each event.
Finally, choose a format for your timeline that is easy to understand and visually appealing. A Gantt chart is a popular choice for creating a timeline, as it provides a clear and visual representation of the timing of each event.
9. Your Team
Your management team, composed of founders, executives, and everyone in between, are responsible for turning your brilliant idea into a reality. That’s why exploring how your team and plan mesh together is essential to create something truly unique.
In this section, you’ll want to talk about the experience and qualifications that your team brings to the table — including relevant work history and industry knowledge. You’ll also want to talk about how roles are divided among team members and how those roles might evolve.
If the company has a board of directors and advisors, this section should describe their background and experience and how they will contribute to the business’s success. The team section should also outline the company’s plans for future hiring and how the new hires will fit into the company’s overall strategy.
10. Financial Plan
A financial plan is one of the essential parts of your SaaS business plan. It lays out your current and future financial needs so that investors know where you are now and understand where you intend to be in the near and distant future. Here are some key elements to include when writing the financial plan section.
- Projected income statement: Provide a detailed projection of the company’s revenue and expenses over a period, usually 3-5 years.
- Projected cash flow statement: Show the company’s expected cash inflows and outflows over the same period as the projected income statement.
- Projected balance sheet: This section should show the company’s projected assets, liabilities, and equity at the end of each year.
- Break-even analysis: Show the point at which the company’s revenue will equal its expenses and how long it will take to reach that point.
- Assumptions and risks: Outline the assumptions and risks underlying the financial projections, such as changes in the economy, competition, and customer behavior.
- Capitalization table: This section should show how the company will be funded, including equity investments, debt financing, and other funding sources.
In today’s world, the process of creating a business plan has become much easier. You can find freelancers online who can help handle time intensive parts of the process like research and formatting, making it possible for you to focus on what matters most — your business strategy.
You can also find templates online that allow you to plug in your own information and print out pages with everything you need.
For example, SCORE provides fillable worksheets to help you cover these key pages in your business plan. The US Small Business Administration (SBA) also offers sample templates for both modern lean startup and traditional business plans. Additionally, you can find free templates on PandaDoc .
Pro tip! Trial pricing method is another pricing approach you can use when writing a winning SaaS business plan.
Now you see, you don’t have to be an excellent wordsmith or planner to craft a winning SaaS business plan. The steps in this guide will help you to organize your thoughts and create a comprehensive plan for your business.
Adaline Lefe Mary John
A great researcher and creator, Adaline is responsible for planning and managing content for all our websites. She has over 10 years of experience in creating and managing content.
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SaaS Business Plan Template
Written by Dave Lavinsky
SaaS Business Plan
Over the past 20+ years, we have helped over 10,000 entrepreneurs and business owners create business plans to start and grow their SaaS business. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through an SaaS business plan template step-by-step so you can create your plan today.
Download our Ultimate SaaS Business Plan Template here >
What Is a Business Plan?
A business plan provides a snapshot of your SaaS business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your business plans.
Why You Need a Business Plan
If you’re looking to start an SaaS business, or grow your existing SaaS business, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your SaaS business in order to improve your chances of success. Your SaaS business plan is a living document that should be updated annually as your company grows and changes.
Sources of Funding for SaaS Businesses
With regards to funding, the main sources of funding for an SaaS business are personal savings, credit cards, bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.
The second most common form of funding for an SaaS business is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan. Venture capitalists will not fund an SaaS business. They might consider funding an SaaS company with a national presence, but never an individual location. This is because most venture capitalists are looking for millions of dollars in return when they make an investment, and an individual location could never achieve such results.
Finish Your Business Plan Today!
How to write a business plan for a saas company.
Your business plan should include 10 sections as follows:
Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of SaaS business you are operating and the status; for example, are you a startup, or do you have an SaaS business that you would like to grow?
Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the SaaS industry. Discuss the type of SaaS you are offering. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.
In your company analysis, you will detail the type of SaaS you are offering.
For example, you might offer the following options:
- Horizontal SaaS – this business model allows big SaaS businesses to serve a varied customer base from a multitude of industries. Services can be expanded to incorporate a variety of software categories.
- Vertical SaaS – this business model includes solutions that are created for a specific customer type of industry. This software focuses solely on that industry’s needs.
In addition to explaining the type of SaaS you provide, the Company Analysis section of your business plan needs to provide background on the business.
Include answers to question such as:
- When and why did you start the business?
- What milestones have you achieved to date? Milestones could include usability goals you’ve reached, number of new subscriptions, etc.
- Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
In your industry analysis, you need to provide an overview of the SaaS industry.
While this may seem unnecessary, it serves multiple purposes.
First, researching the SaaS industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your strategy particularly if your research identifies market trends.
The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.
The following questions should be answered in the industry analysis section of your SaaS business plan:
- How big is the SaaS industry (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential market for your SaaS service. You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.
The customer analysis section of your SaaS business plan must detail the customers you serve and/or expect to serve.
The following are examples of customer segments: businesses, households, government entities, etc.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of SaaS you offer. Clearly, households would want different products and services, and would respond to different marketing promotions than government entities.
Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve.
Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.
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Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.
Direct competitors are other SaaS services.
Indirect competitors are other options customers may use that aren’t direct competitors. This includes customized software solutions and open source software. You need to mention such competition to show you understand that not everyone who needs software will subscribe with an SaaS company.
With regards to direct competition, you want to detail the other SaaS providers with which you compete. Most likely, your direct competitors will be SaaS providers offering similar solutions.
For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:
- What types of customers do they serve?
- What types of software do they offer?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide superior products?
- Will you provide services that your competitors don’t offer?
- Will you make it easier or faster for customers to use your products?
- Will you provide better customer service?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan.
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion.
Product : in the product section, you should reiterate the type of SaaS business that you documented in your Company Analysis. Then, detail the specific solutions you will be offering. For example, in addition to Customer Relationship Management solutions, will you also offer Email Marketing solutions?
Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the services you offer and their prices.
Place : Place refers to the location of your SaaS company. Document your location and mention how the location will impact your success. For example, is your SaaS production or support office located in the US or in India, etc. Discuss how your location might impact customer attraction or retention.
Promotions : the final part of your SaaS marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:
- Advertising in trade magazines
- Reaching out to associations that correspond with the industry or industries you are targeting
- Publishing articles or writing guest posts on relevant blogs
- Social media marketing
- Radio and/or TV advertising
While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday short-term processes include all of the tasks involved in running your SaaS business, such as attracting customers, running the customer helpdesk, processing paperwork, etc.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect your 100 th subscription, or when you hope to reach $X in sales. It could also be when you expect to hire your Xth programmer, or when you expect to launch a new solution.
To demonstrate your SaaS business’ ability to succeed as a business, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.
Ideally you and/or your team members have direct experience in SaaS. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.
If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in software development or deployment, and/or successfully running small businesses.
Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.
An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.
In developing your income statement, you need to devise assumptions. For example, will you have 10 enterprise subscribers or 500 individual subscribers? And will subscriptions grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.
Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $200,000 on building out your SaaS solution, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $200,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement
Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt. For example, let’s say a company approached you with a $100,000 customization contract, that would cost you $75,000 to fulfill. Well, in most cases, you would have to pay that $75,000 now for employee salaries, hosting, utilities, etc. But let’s say the company didn’t pay you for 180 days. During that 180 day period, you could run out of money.
In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing an SaaS business:
- Location build-out including design fees, construction, etc.
- Cost of equipment like computers, design and project management software, etc.
- Payroll or salaries paid to staff
- Business insurance
- Taxes and permits
- Legal expenses
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office design blueprint or location lease.
Putting together a business plan for your SaaS company is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the SaaS industry, your competition and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful SaaS business.
SaaS Business Plan FAQs
What is the easiest way to complete my saas business plan.
Growthink's Ultimate SaaS Business Plan Template allows you to quickly and easily complete your Saas Business Plan.
What is the Goal of a Business Plan's Executive Summary?
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of Saas business you are operating and the status; for example, are you a startup, do you have a Saas business that you would like to grow, or are you operating multiple Saas businesses.
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Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success. Click here to see how Growthink’s professional business plan consulting services can create your business plan for you.
Other Helpful Business Plan Articles & Templates
How To Create A SaaS Business Plan In 11 Steps: Full Guide
- November 17, 2023
Software as a service (SaaS) is the fastest-growing market segment of the past 5 years: the overall spend per company on SaaS products was up +50% in 2021 compared to 2018!
Yet, SaaS do require significant upfront investment before they can turn out a profit. Whether you are raising capital or applying for a grant, you will need a solid business plan for your SaaS startup.
Whilst every business is unique, we strongly recommend to follow a clear structure vetted by dozens of high-profile VC firms globally. Having a powerful and clear business plan will maximise your chances of raising capital from potential investors.
In this article we walk you through the 14 sections you must have in your SaaS business plan.
No te: If you are looking for a pitch deck instead, read our guide here . Although business plans and pitch decks are similar, they are also very different in their format. If you aren’t sure what is best for you, we recommend to read our article on the key differences between business plans and pitch decks .
SaaS Business Plan: The Template
If you are creating a business plan for your SaaS startup, we recommend you follow the following structure:
- Executive Summary
- The Problem
- The Solution
- Market Opportunity
- Competitive Landscape
- Business Model
- Intellectual Property
- Marketing Strategy
- Financial Plan
1. Executive Summary
The executive summary is the introduction of your SaaS business plan. This is a section you should spend a lot of time on as it’s the first impression investors will have when looking at your business plan.
The executive summary should fit in 2 pages maximum . Make it to the point, concise, and make sure to answer the following questions:
- What is the problem you want to solve?
- What is your solution?
- Who are the co-founders behind the project?
- Do you have early traction?
- What are you asking for (capital from investors, government grant application, etc.)?
Expert-built financial model templates for tech startups
2. The Problem
This is the “why” of your business. Explain in this section what is the problem you are trying to solve.
The greatest businesses are solving big problems, yet they aren’t necessarily obvious . For instance, if your SaaS startup aims to solve the pain points of HR administrative tasks (human errors, low digitalisation, time-consuming, etc.) make it clear here. Not everyone is knowledgeable about companies’ support functions processes, let alone HR.
Ideally you would list the 2/3 friction points you aim to fix. For instance, digitalisation usually fixes multiple problems at once: it is fast, seamless and accessible (vs. slow, prone to errors and non-readily available / accessible solutions).
3. The Solution
Your startup builds and commercialises a product and/or a service which solves the problem explained earlier.
This section should not explain in detail your product nor how it works. Instead, it should focus on the benefits for your customers .
Ideally, you should compare the pain points explained on section 2 (the Problem) to the benefits your solution brings to your customers. That way, it is crystal clear to investors your solution really adds value to potential customers .
4. Market Opportunity
Here, you need to clearly identify 2 very important metrics:
- Market size: how big is your market?
- Market growth: how fast does your market grow?
If you are operating in a niche market, chances are that you will face some challenges: the information might not be publicly available. In any case, you should be able to make a high-level estimation of your market. Read our article on market sizing and how to estimate TAM, SAM and SOM for your startup .
When looking for these metrics, you have multiple sources of information: public reports, specialised press, etc. Even public companies publish press releases and annual reports including some of their proprietary market estimates so be sure to look there too.
5. Competitive Landscape
How fragmented is your market.
Are there 3 big players sharing 90% market share or thousands of small players? Here, refer to public market reports and your own understanding of the competitive landscape.
A few questions you could ask yourself, among others:
- Who are your competitors?
- Are they local, regional, national or global?
- Do they have mobile and/or desktop applications?
Where do you position yourself vs. competition?
Is your solution a game changer other competitors don’t have (yet)? Do you have competitors with similar products/services?
Ideally, you would create a small table with, for each type of competitors (e.g. global diversified companies, small pure players, etc.) the main characteristics they share or not. For instance, do they all a global presence? Do they have a on-premise or a SaaS solution? Do they offer both a desktop and mobile app, or just desktop? What is their relative price positioning (expensive vs. accessible)?
6. Business Model
This section is very important. Now that we have clearly identified the problem you are solving and the benefits of your solution, let’s have a closer look at your product.
This is where you clearly explain 2 key things:
How does your product work?
Explain what your product is and how it works. For instance, is it a desktop and/or a mobile SaaS application? Who is it for exactly (is this a FP&A application only for CFOs or a Slack-like collaboration tool for any type of user)?
SaaS businesses have different types of pricing models: per-user, per-usage, flat-tiered, etc. For a full list of the different pricing models, refer to this great article here .
7. Intellectual Property
This section is optional: only include it if you already have a MVP. If so, you have a strong argument for product-driven investors which will give a lot of credit to your tech.
Be careful not to go into too many specifics though: investors aren’t always engineer by training. Do not put things like the programming language you have chosen (e.g. React, Python) or the database provider (PostgreSQL, MongoDB).
Instead, include things such as:
- whether you have a white-labelled solution or a proprietary back-end / database
- how many full time front/back-end engineers you have
- how much you invested already in your tech
8. Marketing Strategy
This section explains how you acquire customers .
Are you selling a SaaS solution to B2B customers? Or is this a B2C product? This will determine whether you have an inbound or outbound acquisition strategy, or both:
- Inbound acquisition : fully digital acquisition. It can be either paid (paid ads e.g. Google Ads) or organic (content, SEO). Essentially, you convert customers from leads who land on your landing page. This strategy is most common for B2C SaaS businesses
- Outbound acquisition : you acquire customers thanks to your sales team who contact potential customers via phone, emailing or in-person sales efforts. This strategy is very common for B2B SaaS businesses
Once you have clearly explained your acquisition strategy and what tools you are using (e.g. Google Ads for paid search, Instagram and/or newsletter for content), ideally you can show, among others:
- Your average Customer Acquisition Cost (only if you have early traction)
- The number of sales people you have today
- How many customers your sales people close per month in average
- Your monthly paid ads budget
- The number of followers you have on social media
- Your newsletter count
The roadmap tells investors where you are going and how is product going to evolve in the future. You can either keep it high-level (e.g. your long-term strategy) or more detailed (e.g. the pipeline of the near-future product features).
Investors do not just invest in your product as it is today. For example, you might only have developed a MVP with limited features for early-adopters while your product could be tweaked and serve a much larger customer base in the future.
Note: if you choose to include your product pipeline, keep it very simple. Your SaaS business plan isn’t your product manager’s presentation to engineers. Instead of features, focus on the additional benefits and customer segments you might target as such. For instance, if you plan to launch a messaging feature, focus on the fact it will open new growth opportunities (e.g. network effects).
In this section you should focus on the people behind the company. Unlike in the executive summary, the team section of your SaaS business plan should not be limited to the cofounding or management team.
Instead, you should explain the current organisational structure of your company, the different teams, who they report to and their relative size.
For the people, keep it short. Keep biography to a minimum and only to key people (cofounders and management team). As rule of thumb, 5 lines per team member are enough, 10 a maximum.
When it comes to biographies, only include what is relevant: name, position, years of experience and/or previous companies is more than enough.
What about advisors?
Do you have angel investors with significant experience who advise you on strategy? Do you have a PhD who acts as advisor to your SaaS startup (on regulation and market access matters for instance)?
Any advisor should also be included here, with the same level of detail as for the management team.
Demonstrating in your SaaS business plan that not only team members but also experts are advising and/or sitting on your board is a strong selling point.
Note: add a clickable link to the respective Linkedin profiles so investors can refer to a more exhaustive resume for your team members (if relevant)
11. Financial Plan
Along with your product and the team, this section is highly important. Unfortunately, many startups overlook the importance of financial projections in their SaaS business plan.
Think about your audience: investors (venture capital firms or angel investors) are financially literate individuals . As such, they invest in your business to generate returns. Logically, they care a lot about your financials and more especially, the expected financial performance of your business .
Do not expect investors to make up their own plan for your startup if you haven’t. As CEO, founder or entrepreneur alike, you should have a clear idea of where you are going .
As rule of thumb, the more advanced your startup is, the more granularity you should include here. Pre-seed startups might keep it short (1 slide) yet we recommend seed and Series A+ startups to include 2 slides instead.
Common SaaS metrics you should include in your financial plan slide are:
- Monthly Recurring Revenue (MRR)
- ARPU and ARPPU
- LTV and CAC
For a complete list of the 8 most important metrics for SaaS businesses, refer to our article here .
SaaS Financial Model
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SaaS is a hectic industry. It’s an ever-growing, straight-talking, constantly innovating world of solutions that help people and businesses do better, every day. That’s why we love it.
And if you’re an entrepreneur, you’ll also love the fact that it’s a market worth billions of dollars that is literally taking over the world.
Perhaps you have an idea for a SaaS product, and you’re looking for resources to help you put your ideas into action and get the wheels turning. It’s been a crazy year, but technology is still moving and you don’t want to get left behind.
We’ve put together some helpful SaaS business strategies, plans, and advice to help you with setting up your business and planning the scale-up journey.
Let’s get started.
Define: SaaS Business
SaaS (software as a service) products play an important role in our personal and professional lives.
It’s a market worth $105 billion in the US alone and it grows by 30% each year . If you’re an ambitious entrepreneur, that’s all you need to hear.
SaaS businesses stretch across all industries, from music to team management to healthcare, so you’ll find innovative software solutions in every specialized sector and niche.
So, how do we know something can be classed as software as a service?
SaaS is a software product that…
- Is accessed via an online platform or app
- Solves a particular problem
- Targets a particular group of people
- Uses a subscription model
We have cloud computing to thank for the evolution of SaaS businesses.
It’s a simple concept nowadays – software is stored and maintained in the cloud, and businesses pay for access to this software.
But it’s taken some serious technological advancement to get here, a point where high-performance software is readily available to anyone with an internet connection.
I’ve got a simple (maybe too simple) analogy for explaining SaaS businesses compared to other, older, methods of software use. You can use it when your parents ask you why you’re moving out of their cup noodle-littered basement and into your super yacht.
Let’s say you want a pizza. Because let’s be honest, everyone wants a pizza, all of the time. I’m so hungry, man.
You have two options:
- Planting some wheat
- Picking up the phone
You could buy a farm. You plant all your crops and take care of all your livestock. You harvest the grains, store them, and grind them to make flour. Etcetera. You now have all the ingredients required to make a pizza – all from your own premises. This is like “On-Premise” software. It’s installed, stored, maintained, and run on-premises.
You could also call your local pizza place, order your favourite – Hawaiian, obviously – and enjoy a delicious pizza within half an hour. The quality is always good, you don’t have to know anything about yeast, and it’s pretty cheap.
This is SaaS. Fresh, hot, Hawaiian pizza, delivered to your device.
SaaS Vs. Legacy Systems
Businesses in every industry, if they weren’t already built with cloud-based software, are making the switch to SaaS from traditional legacy systems.
To your average business owner, particularly if they’re a boomer, legacy systems are what they’ve always known.
It’s a scary thing to learn that all data is now stored in ‘the cloud’, but they’re starting to realize that competitors are moving faster because they’re using more modern tools.
Take wealth management, for example. It’s an old industry and it’s often run by older people (who are very good at what they do and have decades of experience).
The thing is, a shocking amount of wealth management takes place using clunky, ancient legacy systems (I’m talking about the software, not the people).
Heck, billions of dollars in assets might be tracked using a mission-critical spreadsheet. Let’s say old wealth manager Joe presses the wrong button in Excel – beep boop, he’s lost his client’s data.
This is where SaaS businesses save the day. When presented with the pros and cons, it’s a no-brainer:
In every industry – banking, beauty, education, finance, music, travel – SaaS businesses are riding the wave of cloud computing to offer businesses (and consumers) a far more advanced tool that is much simpler to use and, critically, far cheaper to run.
So, Mr/Ms. Entrepreneur, what kind of SaaS are you going to sell?
What Is Your SaaS Business Going To Look Like?
When mapping out a SaaS strategy for your startup, there are some fundamental parameters that should be in place.
- Solving a specific problem
- Catering to an audience you know and respect
- Pricing that demonstrates value
Your SaaS product is only going to be valuable if it solves a real, tangible problem for people. A problem that is so crucial that the solution is an urgent requirement.
At the most basic level, your SaaS business should be selling a product that helps other businesses make money.
Then there’s the audience for your SaaS business. You’ll get the best results from targeting a group of people that you know very well and, most importantly, that you respect.
Why? Because, if you want to succeed, you’re going to have to talk to them. A lot.
Now, price is obviously an essential factor because that’s how you make a seamless transition from your current clunker to a golden lamborghini. But it’s also how people perceive the value of your product.
If your product is valuable enough, if it truly solves a problem and helps businesses make money, they’ll be willing to pay for it.
Creating Your SaaS Business Plan
Okay, so you’ve got the concept for your SaaS business, you might have even started to dabble in development.
But you’ve got to get investors on board. To do that, you need a clear SaaS business plan that’ll persuade even the meanest dragon in the den that your product is the one.
SaaS Startup Business Plan: Traditional Vs. Lean
When you approach creating a business plan, you’ve got two options:
- Traditional Business Plan
- Lean Business Plan
A traditional business plan is a full-scale, 40-odd page manifesto that covers the following essential aspects of your SaaS business.
By the end of it, you’ll have a very serious-looking document that’ll have you feeling like a very serious business person.
The thing is, this is quite an old school method of business planning that doesn’t suit the environment where SaaS thrives.
In this industry, the entire market will shift, new competitors will emerge, new technologies will be invented, all in the time it takes you to write a 50-page document to send to Peter Jones.
So how do SaaS businesses plan their growth strategy without pinning themselves down? A Lean business plan.
Why A Lean Business Plan Suits SaaS Businesses
You’ll still need to cover the essentials, but there’s more wiggle room around areas that are constantly changing in the SaaS world.
Lean SaaS Business Plan Template
As well as your SaaS business plan, you need to provide two things:
- Clear vision and goals
- Assurance of profitability
Showing clarity and decisiveness around your business goals not only gives your business direction and momentum but impresses potential investors who will share your confidence in your SaaS business.
Of course, confidence is all hot air without proof of profitability. Make sure you’ve defined a clear path to profit and know your numbers because that’s what it boils down to when gaining investors.
Understanding The SaaS Business Model
So, we’ve established that SaaS is not like other girls because it sits on the cloud and, instead of investing a ridiculous amount into on-premise tech, businesses pay a small fee to access the data on a subscription.
All the major hallmarks of selling a tech product go out the window with SaaS – no physical product, no end-user license, no infrastructure needed to host the software – just log in on a web browser and maybe an app download.
Therefore, the core business model of any SaaS business is recurring subscription fees.
One-off sales are no longer the goal, instead, the focus is on the lifetime value of a customer. There are a number of ways a SaaS business can grow to maximize revenue, such as up-selling, partnerships, and affiliate marketing, but the core moneymaker is the subscription.
This is where the value of your product is everything, and I’ll circle back to the essential ingredient – helping businesses make money.
Think of the top SaaS businesses out there right now: Salesforce, Monday, Zendesk
If your software product is valuable enough, a business will:
- Use it for vital business activity – from task management to CRM organization to selling products
- Start building processes around the program – so even if a competitor comes along, they’ll stick to what they’ve been using
- Become reliant on the service it provides
- Pay just about anything to continue using and benefitting from it
SaaS leaders have cracked this code – and you can too, but there are many challenges to overcome (and that’s if your product is decent).
The SaaS business model sounds relatively straightforward, but it comes with many challenges. Let’s go over them:
Yikes. No wonder 92% of SaaS startups fail . That super yacht looks so far away when you’re deep in the Valley of Death, running through the last of your capital, and desperately pitching to investors while sleeping on your friend’s couch.
Knowing Your SaaS Business Has Made It (Key Metrics)
So, how do you know if you’ve made it? What are the SaaS marketing metrics for success if you’re running a SaaS business?
Let’s run through them. You should know these figures off the top of your head when you’re approaching investors.
- Customer acquisition cost
- Monthly recurring revenue
- Average revenue per account
- Customer lifetime value
- Customer retention rate
Churn is the most powerful metric for measuring SaaS success.
Customers will inevitably unsubscribe, whether it’s because they’ve found a better solution, they can’t afford the subscription, or they simply no longer need your product.
To calculate churn for a specific period, simply divide the number of unsubscribed customers by the total number of customers.
If your churn rate is increasing each month, you know you’ve got a problem.
Customer Acquisition Cost (CAC)
This is a great indicator for profit.
Divide the total cost in marketing and sales by the number of acquired customers.
Monthly Recurring Revenue (MRR)
A simple way to predict incoming revenue so you know how you’re tracking, without taking into account fluctuations in churn and customer acquisition. Multiply the number of customers by the average revenue each month.
Average Revenue Per Account (ARPA)
The average revenue acquired from one client each month or year. Calculated by dividing the total MRR by the number of customers.
Customer Lifetime Value (CLV)
This one’s a bit more complicated, but it’s one of the most important SaaS business metrics to track. It represents the average amount of revenue you can squeeze out of customers for the amount of time they stay with your company. Multiply the average revenue per account by the percentage gross margin, then divide it by the average churn rate.
Customer Retention Rate (CRR)
This just shows how many customers have stuck to using your software over time, proving the success of your marketing efforts and the value of your product. Divide the number of customers currently using the software by the total number of customers at the start of the specific time period, then multiple by one hundred to get the percentage.
The Marketing Approach To SaaS
You’ve developed your SaaS business plan, you know it like Chewbacca knows the Millennium Falcon, and you’re ready to send that sh*t into hyperspace.
SaaS growth is serious business. Every SaaS company navigates it differently, but it tends to look like the following stages:
When it comes to growing your SaaS business, you need a killer SaaS go-to marketing strategy.
This is obviously our area of expertise, so we’ll share our top SaaS marketing strategies and show you how to tackle the challenge of attracting customers with marketing.
Build Your Audience First
To truly master SaaS marketing, you should be thinking about it right at the start of your startup journey.
Before you start perfecting and developing your MVP, we highly recommend you start investing in your marketing essentials, including:
- Social media profiles
- Email marketing campaigns
- Product demonstrations
We’re not suggesting you invest in an inbound marketing agency right at the start, that wouldn’t be wise at all, you need that early capital.
But simply investing time and some resource into your marketing essentials, particularly your website, helps you build your audience alongside product development.
This helps you achieve a number of things:
- Test your USP
- Increase awareness of audience pain points
- Establish a relationship with your ideal customers
- Develop your brand voice
- Build anticipation for your product launch
By keeping marketing in mind from day dot, you save yourself from crafting an entire brand personality at a time where your product is ready and marketing should just plug and play to get the results you want.
It might mean doing a fair amount yourself, from writing the odd blog to posting on LinkedIn and setting up a mailing list.
For example, this fintech startup has been publishing high-quality blog content on its beautiful website since way before they started scaling up this year.
This means that, by the time they hit the hyper-growth phase and customer acquisition skyrockets, they’ve got a goldmine of epic content ready to make sure none of that organic traffic goes to waste.
Outbound vs. Inbound SaaS Marketing
Okay, so you’ve figured out how to start a SaaS business. You’ve got your MVP ready to go, some investors on board, and it’s time to start building an online presence to attract customers.
You know this means marketing, and you know that costs money, but you’re unsure how to best use allocate your funds to maximize results. The last thing you want to do is throw all your marketing spend at an ineffective campaign.
When it comes to B2B SaaS marketing, you’ve got two methods:
- Outbound marketing
- Inbound marketing
Outbound marketing uses tactics that directly target your audience, reaches into their day to day world, and initiates a conversation.
Traditional forms of outbound marketing involve radio ads, infomercials and those insidious cold calls at dinner time that provoked your Dad to swear in your presence for the first time.
Today, outbound marketing is all about social media and Google Ads. Companies pay to have their content displayed in front of users who Google, Instagram, LinkedIn, or Facebook recognize as belonging to their target audience.
Outbound marketing had a bad reputation for being manipulative and too in-your-face, which says a lot about a society that is sick to death of looking at advertisements. I mean, 81% of people will close their browser due to a pop-up ad.
But outbound marketing can be useful for businesses, particularly startups who need some traction with their online presence. It’s a useful way to track ROI – you pay a certain fee and get a certain amount of engagements.
Then there’s inbound marketing. Inbound marketing tactics are subtle – where outbound deals in flashy fonts, inbound provides education, subtlety, and value.
Rather than selling your SaaS product outright, inbound marketing educates your audience about the product and topics relating to it – how it works, how it solves a problem they face, what they can achieve with it, why it’s better than other products, why they should care about it.
Rather than persuading people to ‘buy now’, inbound marketing methods seek to gently steer your audience towards your product and showcase it’s value – with the goal that they’ll know where to find you when they need the product.
The most powerful form of inbound marketing is SaaS content marketing – words that work wonders for your business.
Inbound marketing is highly valuable to B2B SaaS for numerous reasons:
- SaaS products require more explanation for people to understand their value
- B2B customers take longer to make decisions so need more to read
- B2B decisions require discussion so need well-researched content
- SaaS relies on recurring revenue so customers need consistent value from content
There are many SaaS inbound marketing examples out there, all of which demonstrate the long term ROI that comes from building a goldmine of valuable content for your audience.
What’s more, SaaS inbound marketing is far more strategic. Different tactics and types of content can be engaged to guide leads down the marketing funnel to the point where they make the decision to purchase.
The SaaS Marketing Funnel
In every B2B SaaS marketing and lead generation guide , you’ll learn about the marketing funnel.
Basically, the funnel maps out every stage in a buyer’s journey from just noticing your product, to buying it and raving about it.
At its most basic level, the B2B SaaS marketing funnel has three stages:
By taking the time and using your knowledge of your customer persona, buyer journey, and your product, you can create an inbound marketing strategy that leverages the right content to attract customers at each stage of the marketing funnel.
With a future-proof inbound marketing strategy and a team of SaaS marketing experts by your side, your scale-up journey can be supported by high-value content that takes care of new leads and turns them into sales.
Conclusion: Let’s Get Down To Business
Let’s face it, inbound marketing is a serious long-term investment. To build a goldmine of content to nurture your leads, you’re gonna need a serious amount of high-quality blogs, case studies, landing pages, and videos.
If you’re an entrepreneur who’s just figuring out how to start a SaaS business, you likely won’t be able to hire an inbound marketing agency for a little while.
But that doesn’t mean we can’t help out. We want to support entrepreneurs looking to take SaaS further with solutions that’ll shape the world we live in tomorrow.
That sounded pretty cheesy, but we mean it. If you’re putting together inbound marketing strategies for your SaaS startup, let’s talk .
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Chris is one of the managing partners at Roketto. His area of expertise is digital marketing and loves sharing and educating on topics like Google Ads, CPC bidding tactics, Google Analytics, and marketing automation. When Chris isn't in the office, he enjoys playing volleyball, mountain biking, and hiking with his American Eskimo.
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How to Start a SaaS Company in 2023
Table of Contents
What is a saas company.
- How To Get Ideas For Your Saas Business?
SaaS Startup Plan: Steps to Start Your Business
What are the challenges of starting a saas company, examples of successful software as a service solutions startups, in conclusion.
The software-as-a-service (SaaS) business model has taken the business world by storm over the last decade. There's a reason for this: SaaS businesses have a lower entry barrier than traditional businesses. Business owners claim that the love for SaaS products prompted them to rethink their business ideas.
These businesses can be very profitable, and they’re usually more agile and innovative than their larger counterparts. Additionally, the SaaS industry is growing at an incredible rate. The global SaaS market is estimated to reach $195 billion in 2023, and it’s expected to reach $227 billion by 2025. So, if you’re thinking about starting a SaaS company in 2023, there are things to start thinking of like customer acquisition, LTV, metrics, lifetime value, minimum viable products, and etc. These are all related to SaaS companies. What are you waiting for? Now is the time to start a SaaS company!
SaaS companies are businesses that use software to provide a service to customers. These firms are in charge of the entire SaaS product development and/or lifecycle, from conception to completion, including hosting and maintenance.
Customers can access and use the software remotely, typically through the internet. SaaS companies often have a subscription-based pricing model, with customers paying a monthly or annual fee to use the software.
Some SaaS providers also provide a free trial period during which customers can use the software for a set period of time before deciding whether to subscribe.
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How To Get Ideas For Your SaaS Business?
Identifying a problem that software can solve is the best way to generate ideas for your SaaS business. To begin, consider the issues that you, your co-founder, or other entrepreneurs have encountered in your industry.
After identifying a problem, you can brainstorm potential solutions that will be delivered as a software application.
Looking at existing solutions in your industry and identifying areas that could be improved is another way to generate ideas for your SaaS business. This could include developing a new feature or redesigning an existing one to make it more user-friendly or efficient.
Once you've identified an opportunity, you can investigate whether there is a market for this solution and whether there are any existing competitors.
After you've generated some ideas, you must validate them by speaking with potential customers. This will assist you in determining whether there is a genuine need for your proposed solution and whether people are willing to pay for it.
Market research, surveys, and interviews with people in your target market can help you validate your ideas.
Starting a SaaS company can be a difficult task, but it can be made simple by following these step-by-step instructions.
1. Develop a great idea
The first step to starting a SaaS company is developing a great idea. This involves coming up with an idea for a software application that people will want to use.
Once you've come up with a SaaS idea, it's important to validate it with potential customers. This will help you assess whether there's a real need for the solution you're proposing and whether people would pay for it.
2. Build a high-quality software application
Once you've validated your idea, the next step is to build a high-quality SaaS application. This involves designing and developing your software to meet your customers' needs.
A well-designed and user-friendly application may attract customers and improve their user experience. Ensure that you also include SEO-optimized images or keywords in different places when building SaaS apps.
3. Create a sales and marketing strategy
The next step is to create a sales and marketing strategy to reach out to potential customers and persuade them to purchase your software product.
This could include developing a website and advertising your software to potential customers via email, social media, or business and employment-oriented online service, such as LinkedIn.
After acquiring customers, you must focus on retention by ensuring that they are satisfied with your solution and continue to use it.
4. Provide excellent customer support
Another critical step in launching a SaaS business is to provide excellent customer support. This entails ensuring that your customers are satisfied with your software. Good customer service will assist you in retaining customers and growing your small business.
5. Manage your cash flow carefully
Finally, it’s critical to carefully manage your cash flow. This is especially true for SaaS companies, which typically use a subscription-based pricing model.
To effectively manage your cash flow, you must carefully track your revenues and expenses and generate enough income to cover your expenses.
Following these steps will help you start your SaaS company successfully and overcome some of the challenges that you may face.
Aside from the difficulties, there are some things to avoid when starting a SaaS business.
Things to Avoid While Starting a SaaS Company
Like any business, there are some things to avoid while starting a SaaS company. These things may have a negative impact on your business and make it more challenging to succeed. Some of them include:
1. Don't Try to Solve Every Problem
When starting a SaaS company, it's essential to focus on solving a specific problem. Solving too many issues can make your software too complex and challenging. It can also make it more difficult to market and sell your solution. In general, it’s easier to solve a single problem very well than it is to solve multiple issues mediocrely. Focus on solving one specific problem exceptionally well when starting a SaaS company.
2. Don't Build a Solution That Nobody Wants
Another blunder that some SaaS startups make is creating a solution that no one wants. If you create a SaaS solution without first validating it with potential customers, you may end up with no one interested in purchasing your software solution.
Before you start building your software application, make sure that there is a demand for it. This can be done by conducting market research and talking to potential customers. Once you've validated your solution's need, you can build it.
3. Don't Skimp on Marketing
When starting a SaaS company, some SaaS startup founders make the mistake of skimping on marketing. Marketing is important for any business, but it’s especially important for SaaS businesses.
This is because SaaS companies must constantly acquire new customers in order to stay relevant and grow.
If you don't have a strong marketing strategy, it will be challenging to reach new customers and grow your business. Make sure to invest in marketing from the start and continuously invest in it.
4. Don't Forget About Customer Support
Another mistake that founders make is forgetting about customer support. Customer support is essential for any business, but it's especially vital for SaaS businesses. SaaS companies need to ensure that their customers are happy and using the software.
If you don't provide excellent customer support, you’ll likely lose customers and damage your reputation. Be sure to invest in customer support and make it a priority for your business.
5. Don't Forget About Cash Flow
Finally, another mistake that too many SaaS startups make is forgetting about cash flow. This is a mistake because SaaS businesses typically have a subscription-based pricing model, which means they need to continually bring in revenue to cover their costs. This can be a challenge, especially in the early stages when expenses are high, and payments are low.
To avoid these mistakes, it's essential to focus on solving a specific problem, keeping your solution simple, and creating a solid sales and marketing strategy. It's also necessary to carefully provide good customer support and manage your cash flow.
One of the most difficult aspects of starting a SaaS company is creating a solution that people want to use. This entails developing a great idea and testing it with potential customers.
After that, you must create a high-quality software application and effectively market it. Another difficulty in starting a SaaS business is acquiring and retaining customers. This entails developing a sales and marketing strategy to reach out to potential customers and persuade them to purchase your software.
Once you have customers, you must focus on retention by ensuring that they are satisfied with your solution and continue to use it.
Finally, managing cash flow is a challenge when starting a SaaS company. SaaS businesses typically use a subscription-based pricing model, which means they must constantly generate revenue to cover their costs.
This can be difficult for SaaS entrepreneurs, particularly in the early stages when expenses are high and income is low.
The Operational Challenges for a SaaS Company
Operational challenges are the difficulties that a SaaS company faces in its day-to-day operations. These challenges can include:
1. Managing the Server Infrastructure
The biggest operational challenge for a SaaS company is managing the server infrastructure. This includes ensuring that the servers are always up and running, monitoring usage, and scaling the infrastructure.
2. Handling Customer Support
Another operational challenge for a SaaS company is handling customer support. This involves providing support for customers using the software, dealing with customer complaints, and ensuring that customers are happy.
3. Managing Updates and Maintenance
Another operational challenge for a SaaS company is managing updates and maintenance. This includes releasing new features and updates to the software, fixing bugs, and ensuring that the software is always up-to-date.
4. Ensuring Security and Compliance
Finally, another operational challenge for a SaaS company is ensuring security and compliance. This includes ensuring that the software meets all security standards, managing user permissions, and complying with industry regulations.
The Financial Challenges for a SaaS Company
Financial challenges are the difficulties that a SaaS company faces regarding its finances. These challenges can include;
1. Managing Cash Flow
The biggest financial challenge for a SaaS company is managing cash flow. This is because businesses typically have a subscription-based pricing model, which means they need to continually bring in revenue to cover their costs. This can be a challenge, especially in the early stages when expenses are high and payments are low.
2. Planning for Expansion
Another financial challenge for a SaaS company is planning for expansion. This is because businesses need to invest in infrastructure and personnel to grow. This can be a challenge, especially for businesses that are multiplying.
Another financial challenge for a SaaS company is pricing the software. This is because businesses need to find a pricing model that will generate enough revenue to cover their costs and profit. This can be a challenge, especially for companies that have high costs.
4. Raising capital
Finally, another financial challenge for a SaaS company is raising capital. Businesses need to raise money to fund their operations and expansion. This can be a challenge, especially for not-yet-profitable companies.
There are several successful software as a service solutions startups. These companies have overcome the challenges discussed above and have become successful businesses. Some examples of these companies include:
Salesforce is a customer relationship management (CRM) app that allows businesses to track and manage their customer data. The software is a subscription-based service, and companies can choose from various pricing plans.
HubSpot is a marketing and sales software that helps businesses attract, engage, and convert leads into customers. The software is a subscription-based service, and companies can choose from various pricing plans.
Zendesk is a customer service and support software that helps businesses manage customer queries and complaints. The software is a subscription-based service, and companies can choose from various pricing plans.
MailChimp is an email marketing software that helps businesses send newsletters, promotional emails, and other customers. The software is a subscription-based service, and companies can choose from various pricing plans.
5. Adobe Creative Cloud
Adobe Creative Cloud is a suite of software tools for designers, photographers, and other creative professionals. The software is a subscription-based service, and businesses can choose from various pricing plans.
These are just a few examples of successful software solutions startups. Many other companies offer software as a service, and each has its unique pricing model and set of features.
The following are the most frequently asked questions about starting a SaaS business. Can you start a SaaS company without any technical expertise?
Yes, you can start a SaaS company without any technical expertise. However, it will be challenging to build and maintain the software without technical knowledge. Non-technical founders should partner with someone who has experience in software development.
How can I start a SaaS business with no money?
There are a few ways to start a SaaS business with no money. One option is to find a co-founder willing to invest their time and resources into the business. Another option is to bootstrap the company, using your help to fund the business. Finally, you could also look for investors or venture capitalists willing to invest in your industry.
How easy is it to start a SaaS company?
Starting a SaaS company is not as easy as it sounds. You will face many challenges, such as building and maintaining the software, pricing the software, and raising capital. However, if you are prepared to meet these challenges, starting a SaaS company can be a great way to grow a business.
What are the most common errors made when starting a SaaS company?
A few common mistakes occur when starting a SaaS company. One mistake is not having a clear understanding of the market and the competition. Another mistake is not having a solid business plan. Finally, another mistake does not have the right team to help you grow the business.
How long does it take to decide if your SaaS startup is good?
The question is difficult to answer as it depends on various factors, such as the size and complexity of the software, the market demand for the software, and the amount of capital you have raised.
It can take many years to determine if your SaaS startup is successful.
Starting a SaaS company can be a great way to increase the value of your investments. However, you will face numerous challenges, such as developing and maintaining software, pricing software, and raising capital.
In general, determining the success of your SaaS startup can take several years. Many factors will influence this, however, including the size and complexity of the software, market demand for the software, and the amount of capital raised.
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The SaaS factor: Six ways to drive growth by building new SaaS businesses
Many companies have a growth challenge: They expect to get as much as 50 percent of their revenue from new businesses and products by 2026 but are not on a path that will take them there. Among the strategies nontech incumbents should consider is taking a close look at developing software-as-a-service (SaaS) products.
We know from our previous work that one of the most important factors in driving growth is operating in a sector or area that’s growing. SaaS checks that box. The global SaaS market is currently worth about $3 trillion, and our estimates indicate it could surge to $10 trillion by 2030. The median revenue growth rate of 100 public SaaS companies in the United States with revenues above $100 million was 22 percent as of mid-2021, with the top quartile’s growth rates above 40 percent .
There’s a lot to like about SaaS beyond its revenue potential. For one thing, the asset-light nature of SaaS means it has lower overhead and logistical costs than physical products. Second, it frees traditional companies from doing some of the most complicated technical work by themselves—they can partner with major cloud service providers. And third, since software at its core is a series of 1s and 0s, it’s easy to scale, especially when combined with the cloud’s extensibility and elasticity.
As exciting as the SaaS new-business-building opportunity is, however, nontech incumbents aren’t set up to transform themselves quickly into SaaS operators. In fact, these companies’ long-standing practices in product management, funding, governance, and performance management may be hindrances to launching SaaS businesses.
Our experience in helping more than 20 nontech incumbents build new SaaS businesses highlights six key areas they should focus on to succeed.
1. Innovate through rapid test-and-learn cycles
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Large incumbents have for years honed tried-and-true processes for product development that have served many of them well. But those approaches are not always well suited for the faster learn-and-adapt cycles that are the foundation of innovation at successful software companies and core to SaaS product development. Like any good product or service development, it’s crucial to start with the customer.
While many incumbents have a strong understanding of their customers, they often lack the creativity to translate that understanding into innovation. Their approaches often focus on “how to improve X” rather than on completely rethinking “how to create Y.” This is partly why they have proven so vulnerable to start-ups. Incumbents often treat customer data as “inputs” that are translated into requirements and only infrequently consult the customers themselves. Innovators, however, go deep on understanding pain points and work much more closely with customers along the development journey, from testing and adjusting minimal viable products (MVPs) with real customers to co-creating products with them. For B2B solutions, getting feedback from the first four to five customers is particularly valuable because it amplifies the customer voice in shaping the product by defining customer needs before the product is launched broadly.
The key point in enabling this more iterative and collaborative approach is to bring software engineers, data scientists, and designers into the ideation process from the very beginning. They are then on hand to not only get a much deeper appreciation of customer needs but also rapidly adjust the prototypes based on real customer feedback. These test-and-learn cycles can take as little as a day and should be driven by a “fail-fast” ethos.
The Washington Post Company embraced this co-creation approach when it decided to offer its proprietary content-management system, Arc XP, as a SaaS product. It first offered it for free to about ten universities, both to understand how they each wanted to use it and to determine what would be required to support it for each institution. As it learned how to support multitenant architectures and resolve customer issues, it started working with increasingly larger players, including Canada’s Globe and Mail , which committed to working with the Post’s developers to improve the product. 1 Peter High, “How the Washington Post made its publishing platform a revenue driver,” Forbes , April 29, 2019. The Arc XP platform now powers more than 1,900 sites around the world, reaching more than 1.5 billion unique users each month.
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2. capitalize on existing digital and data assets.
One of the biggest assets nontech incumbents have is their own data and digital tools. However, they are not always aware of this and, indeed, sometimes take quite a narrow view of the value potential in digital assets they own. A maker of construction equipment, for example, might see its data as merely an aid to internal reporting instead of as a proprietary asset that can generate significant revenue. An insurance company may send out ad hoc reports or analyses that could instead be enhanced, automated, and turned into a SaaS product.
This too-narrow focus is reflected in the fact that most nontech companies don’t have a clear and comprehensive view of their data. Some of it may be under the control of IT teams, while, in other cases, operations manages it. This is a missed opportunity. Top companies look across all their digital and data assets to identify those that aren’t readily available in the marketplace but meet a specific customer need. This review is a creative business process—not finding something that already exists but imagining something completely new—to identify possibilities and courses of action. In some cases, for example, it requires assessing data gaps and how to fill them by adding data from the outside, or implementing smart devices to generate the data that’s missing. The leadership of a data strategist and product manager is generally necessary to get to this level of sophistication.
Anheuser-Busch InBev (AB InBev) saw an opportunity to create a new SaaS business on the back of its existing millions of data points, from its logistics and distribution networks to its customers’ purchasing habits. It launched a B2B SaaS e-commerce platform called BEES, a partner portal that small and medium-size retailers can access by an app to do a range of tasks, from ordering products to tracking customer preferences locally to monitoring the delivery of their orders. BEES also uses machine learning based on customers’ previous interactions with AB InBev to provide personalized recommendations through “suggested order” features. Launched in 2020, the platform is live in 17 markets, with 2.7 million monthly active users as of Q1 2022.
3. Plan for scale from day one
While the digital nature of a SaaS product allows it to scale much more quickly than other products, that advantage can be captured only when companies put in place two key elements:
- A dynamic and detailed road map. SaaS product road maps differ from the typical road map in that they incorporate much more flexibility and rapid turnarounds. Tracking progress happens daily in many cases, with leaders reviewing what pivots, if any, are necessary and what to test next. This allows teams to course correct quickly and build momentum. SaaS product road maps also have explicit plans for feature innovation based on specific key performance indicators (KPIs), an important element for customers who want to know that the product they’re buying will not just be supported but will continually get better. The road map should also explicitly lay out how to grow beyond the first five or ten customers, which are often existing relationships and might not provide a full representation of the larger marketplace. That means identifying multiple new customer segments, based on feature and functionality needs as well as their willingness to pay. Johnson Controls has taken this approach with OpenBlue, the digital platform that it launched in 2020. The 137-year-old company created a road map that laid out a vision for launching a suite of connected solutions that enable services, including clean air, energy optimization, and advanced safety monitoring. By thoughtfully and deliberately sequencing the solutions it rolls out so that it can build on previously developed capabilities, the company has been able to expand the range of services it offers to customers. 2 “Johnson Controls launches OpenBlue,” Johnson Controls, July 31, 2020.
- Flexible technology architecture. For a SaaS product to be able to continually evolve and grow, companies need to put in place a technology architecture that scales. Human-capital-management software provider Workday focused from the beginning on separating out its platform development from its application development so it could scale. This allowed it to continue to iterate on applications even when it had to make changes at the platform level, enabling the business to grow and scale quickly. This means building around microservices and APIs that create simple and well-defined interfaces to data, algorithms, and processes. This is what enables teams to quickly swap out features. Partnering with the right hyperscaler to take advantage of platform as a service (PaaS), including services such as data and AI, and infrastructure as a service (IaaS) is a critical component of scaling the infrastructure. To take advantage of cloud , nontech companies must develop capabilities in “CloudOps” (cloud operations) to deliver, adjust, optimize, and manage the performance of workloads and services that run in the cloud. Incumbents will also need to master FinOps (financial operations) to track and manage consumption, storage, and network costs, which can vary significantly from on-premises models.
SaaS, open source, and serverless: A winning combination to build and scale new businesses
4. target talent by going deeper and wider.
Finding good SaaS talent is a well-known challenge, especially for critical roles such as product managers, software developers, and data scientists. There is simply not enough supply to keep up with accelerating demand, which is driven by competition from software companies and nontech companies going through digital transformations.
To better compete for talent, nontech incumbents can shift and expand their current talent sources. Getting involved with communities such as GitHub or open-source communities and arranging hackathons, for example, can attract different kinds of tech talent. Some companies have turned successfully to coding competitions to identify prospective job applicants.
Others are combining databases of talent information (such as those from colleges and career portals) and using analytics to help identify trends in skills to better anticipate needs. Still others are identifying relevant current employees for upskilling, while the most progressive firms are partnering with workforce-development companies to identify often overlooked workers who have aptitude and ambition but lack access to traditional pathways.
The other important factor in finding the right talent is to target traits, not just skills. Our research has shown that successful software developers are mission driven and have a passion to build things that end users want rather than just “work on platforms.” Nontech companies have found success by focusing on candidates with a deep interest in the company’s sector—healthcare, aerospace, or energy, for example—and the work the company does. This approach helps avoid direct competition with Silicon Valley businesses.
To make themselves more attractive to the best talent, companies need to update their employee value proposition to emphasize, for example, variable and tailored career paths, use of advanced cloud-based coding practices, and opportunities for people to build their skills and networks.
5. Orient pricing and selling around product usage
The ability to integrate tracking mechanisms at almost every feature level in a SaaS product allows companies to understand the value of a given feature based on how it’s used, which is a big difference from the typical product or service. With these insights, companies can then be much more targeted and flexible about pricing based on customers’ feature needs and usage—essentially, on how much the customer values that feature. That brings possibilities of subscription pricing, cost per use, cost by volume of usage, cost by time of day, cost based on value the customer captures, and so on. By the same token, companies can tailor or create SaaS product features to be responsive to customers, even easily testing and trialing them to see how customers actually respond. Some human-capital software providers, for example, tie their pricing to employee satisfaction or experience.
In this way, companies can be much more responsive to their customers’ actual needs while also opening up new revenue streams. In fact, leading SaaS businesses put as much attention into caring for existing customers as they do into acquiring new ones. For this reason, they also invest heavily in customer-success managers, who provide their customers with support throughout the entire sales process and help ensure a successful customer experience.
To support this more flexible model, companies need to train their sales reps to sell differently. Many sales reps are offered incentives to sell products, but compensation instead needs to be tied to actual software consumption by their customers. New training, product collateral, support, and digital-product demos need to be developed with a clear eye on customer preferences. McKinsey research indicates, for example, that eight in ten B2B decision makers say that omnichannel is as or more effective than traditional methods, which means salespeople need to know when to engage with customers directly and when to offer them digital options.
6. Protect the funding, and focus on leading growth metrics
Every new business needs dedicated funding. Companies tend to expect particularly fast results from SaaS businesses, however, and when they don’t materialize, the temptation is great to pull back funding. Patience and continued support are needed, which is why it is crucial to protect funding and tie it to performance.
Making this work requires companies to step away from some of their established capital-commitment yardsticks, which are usually focused on lagging indicators, such as margin and revenue. In SaaS, in order to avoid stifling the budding business line, it’s crucial to use growth-oriented leading indicators, such as number of interested partners, the volume of interested leads, and the success rates of concept tests. One of the most important metrics to track, in fact, is net retention .
Some companies have turned to external partners for capital and expertise. Besides helping to spread risk, this approach brings in an external voice with additional experience to push the SaaS business forward and guard against loss of focus.
Launching new SaaS businesses needs to become a priority for nontech incumbent companies looking for new sources of growth. Their existing capabilities, expertise, and position in their own markets give them a great head start. To succeed, however, incumbents need to understand and embrace the unique needs of SaaS products.
Chandra Gnanasambandam is a senior partner in McKinsey’s Bay Area office. Ari Libarikian is a senior partner in the New York office, where Cem Turkeli is an associate partner.
The authors wish to thank Todd Horst, Ayush Jain, and Sid Tandon for their contributions to this article.
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SaaS business model: Stages, pros & cons + essential tools to get ahead
The SaaS business model is unlike the traditional business model in many different ways. Perfecting it can be difficult without the right tools. Explore the fundamentals of how SaaS works, including models, metrics, and tools for SaaS growth.
What is SaaS?
- The SaaS business model
SaaS business stages
9 saas business examples.
- Key SaaS business metrics
- 4 SaaS growth tools
What’s next for SaaS businesses?
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Ever since John Koenig first coined the term “SaaS” back in 2005, the software-as-a-service industry has been one of the fastest-moving and creative in the world. And with the field having undergone a couple of “ knockout expansion years ,” with more revenue pouring into SaaS than ever, it has never been a better time for a young SaaS company. The SaaS business model powering all of this activity is startlingly unique, still young, and inextricably tied to the power of cloud computing. Understanding the fundamentals of how SaaS works is vital when building out a plan for your company’s forward growth.
SaaS, or software as a service, is a delivery model in which a centrally hosted software is licensed to customers via a subscription plan. Any company that leases its software through a central, cloud-based system can be said to be a SaaS company. A SaaS company maintains responsibility for the servers, database (and the data they contain), and other software that allow their product to be accessed and used. The subscription plans offered to customers can vary considerably within separate companies; some SaaS company business models involve offering multiple applications within their product, with different subscription plans giving access to different services.
How does the SaaS business model work
The reason we’re distinguishing between the SaaS business model and the rest is that the SaaS model includes a number of factors peculiar to it, such as:
In SaaS, clients do not buy hardware. The software-as-a-service business and pricing model involves providing a subscription service to use the app, so you will have to worry about paying the yearly or monthly subscription as opposed to only once. Recurring payments take the form of monthly recurring revenue, otherwise known as MRR. Because a SaaS company provides a service, not a product, accounting for revenue properly can be difficult. When your customer signs the contract and subscribes, you may get some cash upfront, but that cash cannot be counted as revenue until you've earned it. Until then, it is a liability—money that your customer can ask to be returned at any point if you don’t deliver your service. As a result, revenue recognition is a fundamental part of the SaaS business model.
Heightened customer retention
All businesses care about customer retention, but in the SaaS revenue models, it is 10 times more important because retention of paying customers is the only thing that keeps you afloat. As we said above, you can’t lay claim to all of your clients’ subscription money until you’ve provided a complete term of service, so if you’re signing customers up for 12 months who are then leaving after 2, then you’ll be without the other 10 months of recurring revenue. As a result, the SaaS business model puts tremendous value on cultivating customer relationships and upselling. An existing SaaS customer spends more, on average, than a new customer, and are more than seven times more likely to churn (leave your business) to go to a competitor because of poor customer service than they are for a better product.
While other products may come out with “next-gen” product versions, SaaS consistently provides smaller and more frequent upgrades to their services to keep the end-users happy and have better customer lifetime value. Part of this comes from the nature of being in the software business: software vulnerabilities can put customer information at risk from hackers, so continually assessing the state of security fixes is a top priority in the SaaS model. Hosting their own products also means SaaS companies can push updates whenever they need to, releasing new features, enhanced versions of old ones, and new product enhancements. By combining this with good customer communication, SaaS companies can be highly responsive to the needs and feedback of their customer base.
As we’ll see shortly, highly successful SaaS businesses can boast valuations in the $100 millions, serve a huge number of customers, and completely change the way in which entire industries think about aspects of their business. That, however, is the final and most successful stage of the SaaS business model. Broadly speaking, a SaaS business’s life can be broken down into three stages:
In the early stage of your SaaS business, you as the business owner or entrepreneur are still operating at the bare-bones level. You’re unlikely to have many customers, and your product will still be in its early developmental stages . You may be seeking your first round of pre-seed funding , or you may have decided to go for the bootstrapping approach to maintain better control of your operations. In the early stage, your staff roster will still be small, you will more than likely still have only one product you’re focusing your attention on, and you may not have started to turn real profit yet. At this stage, you should be asking yourself these main questions: Am I tracking metrics, bringing in new users, and looking to optimize pricing? Have I begun developing my own personal business model that will enable me to seek the right kind of funding and use it well?
2. Growth stage
The growth stage is where things start to get exciting. You’ve built something that’s growing fast, your product is gaining subscribers, and you’re beginning to bring in MRR and possibly positive cash flow. To kick off your growth stage and to continue powering through it, you will need to begin raising serious funds that will allow your company to grow its team, invest in product development and iteration, and scale. There are a number of funding types that serve the SaaS business model, including:
- Venture Capital: The glamour means of procuring funds for your startup, venture capital is provided by firms or funds that see high growth potential or a strong track record of recent growth in a SaaS company, enough to merit substantial financial assistance.
- Angel Investors: An angel investor is a single operator with substantial financial means who is prepared to make an investment in your company. They can be ideal for startups looking for their first big investment, although, more recently, so-called “super” angels have begun to play a decisive part in later funding rounds too.
Venture capitalists and angel investors are not the only routes to growing your business. Some companies go through incubators in their very early days; other, slightly more established SaaS companies find startup accelerators that meet their needs and use them for a different kind of funding experience. Some companies continue to bootstrap for a much longer time, and others are so adept at raising revenue from the start that they find they don’t need external funding until much later.
Now, you should be asking yourself these questions: Have I established key performance indicators (KPIs) to ensure I’m primed for further scaling? Do I have a strong monetization strategy in hand for when I do decide to seek some form of investment?
3. Mature stage
A SaaS company that has reached the mature stage has proved itself and can consider itself established. A company at the mature stage has a well-defined target audience that it’s catering to and has a reliable product that it’s making updates to. The company is bringing in good MRR, and all the other key KPIs (more on those to come) are stable. Mature-stage companies might still seek and receive investment, but it’ll be of a much larger order, aimed at breaking new markets or buying out competitors. The main question a SaaS company should be asking itself at this stage is: When is the last time we checked our pricing strategies? SaaS companies often reach the mature stage and settle into a sense of complacency, thinking that, because their business is solidly profitable, it must be running at its maximum potential. In fact, mature-stage SaaS companies are often positioned on a pile of potential revenue that they’re wasting with poorly chosen price points .
The variety of successful SaaS-type businesses is astonishing; there are examples of tremendous success in the B2B and B2C spheres, in AI and video hosting, in e-commerce, in data analytics, and more. To show you just how broad success in SaaS can be, we’ve compiled a list of a few SaaS businesses that have made a serious impact in their fields — or, in some cases, created new ones!
Wistia is a company providing video-hosting services for businesses, from uploads to tracking performance to building audiences and brand attention. Brendan Schwartz and Chris Savage founded the company in 2006 and got their first client, a medical devices company, that year. In 2019, the picture is pretty rosy for Wistia. Despite taking relatively little investment in its early days, it's now the video-hosting service of choice for more than 300,000 businesses across 50 countries that depend on Wistia, bringing them more creative and authentic communications .
Shopify is an e-commerce platform for online stores, allowing businesses to create online stores without needing to know how to code. Shopify has completely revolutionized the way businesses think about e-commerce in the process; now, any retailers, big or small, looking to sell online, on social media, or in person have a single integrated solution that can meet their needs. Shopify has been amply rewarded for its innovations in e-commerce. It made over $1 billion in 2018 and have well-exceeded that total in 2019. Since then, Shopify has grown to 4.4 million active merchants in 2023 .
Artificial intelligence has been one of the primary growth areas in SaaS during the late 2010s, and no company exemplifies the potential of that field more strongly than Chorus.ai . Chorus is a leading conversation intelligence platform for sales teams. The company’s solution functions as a plug-in to video-calling services, allowing sales teams to record their business calls and extract meaningful data.By recording and analyzing the contents of sales calls, commercial teams are able to refine their approach to selling, curate new training surveys , and regimes for their reps, and come up with new in-depth strategies for better communicating with clients. Chorus’ solutions are used by world-class revenue teams at other great (SaaS!) companies like Zoom, Adobe, Asana, and Segment.
Just when you thought recruitment was one of those fields that could never change, a SaaS company came along and changed everything. Lever revolutionized the recruitment sphere with its streamlined processes for sourcing, attracting, and hiring new talent. Its talent software makes it easier for employers to vet candidates, take care of talent marketing, and foster connections between employers and employees through the company’s cloud service. Much like Chorus, proof of Lever’s success comes with it being used by such seminal companies such as Shopify, Eventbrite, and Netflix to fill their offices with the best employees.
Clearbit creates products and curates data APIs aimed at providing insights throughout the customer life cycle to help businesses grow. There are few industries where clear communication between client and customer is more vital than in SaaS, and Clearbit’s resolution to help those who work with it “ understand [their] customers " has made it a vital asset to those they work with. Clearbit’s ability to do this, as well as their cutting-edge means of identifying future leads and personalizing marketing approaches, has led it to be designated one of the fastest-rising companies in SaaS.
The SaaS business metrics to keep an eye on
SaaS companies are powered by data, and success in the field is predicated on how you maintain awareness of key metrics, how they interact, and how to improve then. The following are five key business metrics that determine the health and potential of a SaaS business.
Lifetime value, (LTV)
LTV is the total amount you’re due to receive from a customer over the life of their account with your product. The LTV of a user is one of the most important metrics for a SaaS business, and it’s vital that you calculate it the right way . Retention-rate numbers (which we’ll come to shortly) are important but leave gaps in your understanding of how much retained customers are bringing in each month and won’t tell you much about the success you are (or aren’t) having with upselling. LTV brings you this precise understanding.
Customer acquisition cost (CAC)
CAC is the total cost of sales and marketing efforts that are needed to acquire a customer.
The fact of the matter is that bringing on new customers costs—and it’ll be a considerable time after bringing a new customer on board that the additional MRR offsets the cost of winning that new customer. You need to keep tabs on your CAC to ensure that your LTV is able to comfortably outpace it. Being too conservative with how much you’re willing to spend on CAC can lead to missed opportunities for revenue and growth from new customers; but being too reckless with it can lead to often critically low profitability.
Monthly & annual recurring revenue (MRR & ARR)
MRR and ARR are the lifeblood of a SaaS business. They measure the total amount of predictable revenue that a company expects on a monthly or yearly basis. Many companies manage to make a mess of their MRR, nevertheless. A survey hosted by ProfitWell showed that one in five SaaS companies were not reporting expenses correctly when accounting for MRR; two in five were incorrectly including trialing or free users in some manner in their MRR; and a majority were making mistakes when differentiating between monthly, quarterly and annual payment timelines. There is no excuse for slackness with MRR, regardless of the fact that it’s not a figure you need to report to a government entity. It is a key statistic that allows investors to monitor the status of your company and is as important for you when plotting your trajectory.
Churn rate is the percentage of your customers leaving your service over a given period. It’s the nightmare statistic in the SaaS business model; even a little bit can be extremely damaging to a company’s hopes for sustaining the momentum of its growth. In fact, churn can be ruinous for companies even when all of their other metrics are reasonably healthy. Knowing the foundation of your customer churn rate and the means by which you can reduce it could not be more important in SaaS. It can be a complex metric to get a full picture of. Breaking down your churn into segments and cohorts will reveal the different drivers behind your churn, while failing to correctly account for trialers or episodic/seasonal customers when plotting churn can muddle the picture. At our last count, there were 43 different ways public SaaS companies were accounting for the metric.
Your ability to retain customers is your foundation for growth in subscription-based services; churn is the flip side of retention, and keeping retention high is as important as keeping churn low. You may have noticed a pattern emerging in our speculations on key SaaS metrics —and, yes, like all the rest, there’s a serious tendency among SaaS companies to calculate their retention rates incorrectly, too. Both user and MRR retention need to be calculated in tandem, so you can account for both the effects of your product, marketing, customer service, and pricing and the likelihood of sustaining profitability. You might not be taking care to differentiate between customer life-cycle stages when calculating retention rate, either, or between the plans your customers are on. In short, there’s a lot that can go wrong with your retention-rate calculations.
3 tools that help SaaS businesses grow
Now that we have a pretty solid understanding of the SaaS business model, you might already have started wondering what’s available to allow your business to get the best of the competition and really start to grow. We’ve got a few tools here at Paddle that can really help young SaaS companies grow.
The SaaS business model is based on recurring billing, so you won't get very far without a decent recurring billing tool. There are a variety of solutions for managing subscriptions and recurring billing out there, but in many cases, you'll need to integrate these tools with a broader payments stack to manage payments and revenue. This can get messy fast. Or you can take an all-in-one approach and use a merchant of record .
As we saw above, your grasp on your data informs your success as a SaaS company: a well-organized, powerful analytics solution can make all the difference. Continued insight into the drivers behind your growth is fundamental for success in the SaaS business model: which customer segments are driving and detracting from subscription growth, which features in your product command the highest willingness to pay among your customer base, which features are leaving customers at more persistent risk of churn.
For all their importance when gauging the health of your SaaS business, churn and retention rates are seldom completely understood by young companies. Identifying customer cohorts and tracking revenue retention, MRR churn, and delinquent churn can be difficult to do without resorting to a plethora of spreadsheets. Tools that aid your retention rates and help drive down churn, while minimizing the chances of human error or misreporting, are vital.
The range of applications in SaaS is virtually limitless, and with the means of fundraising continuing to diversify, it has never been a better time to join the field. Still, all of the most successful software-as-a-service companies underpin their success by adhering to a few fundamentals in the SaaS business model: a reliance on good statistics and the use of the right tools and solutions. Apply the same principles to your business and you might find yourself heading in the same direction.
Take the headache out of growing your software business
We handle your payments, tax, subscription management and more, so you can focus on growing your software and subscription business.
What is SaaS business model?
SaaS business model is based on selling cloud-based software for a subscription fee. The cloud-based software is usually accessible via mobile, desktop, and web apps, and the subscription fee is usually monthly or annually.
What is SaaS revenue model?
The SaaS revenue model is based on regular and ongoing payments to use software or a different digital product or tool. The payments have a defined period, and the most common two are monthly and annually.
Is Netflix a SaaS?
It may sound unusual initially, but yes, Netflix is indeed a SaaS. Netflix sells the software to stream movies and TV shows, both licensed through distribution deals and produced by Netflix.
What are the benefits of using Saas?
There are many benefits to SaaS software. The biggest include cost-effectivity, scalability, better security, no licensing management, and more scalability.
7 Essential Steps for Launching Your Own 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 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.
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?
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?
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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Table of Contents
What is SaaS Marketing? The Complete Guide With Actionable Steps
10 Key Growth Metrics for SaaS Companies in 2023
15 High-Converting SaaS Websites and Their Winning Strategies
- Landing Pages
- Content Marketing
- Social Media
- Web Development
SaaS: The Ultimate Guide to Software as a Service
Learn how the SaaS industry works and discover everything you need to know to launch and grow a successful SaaS product
GROWTH STRATEGY TEMPLATE
Outline your corporate growth plan with the help of this detailed template.
If you've been thinking about launching a SaaS product, now is the time to do it. The SaaS industry is expected to be worth roughly $195 billion U.S. dollars by the end of 2023.
This market offers an incredible opportunity, but to succeed in it, you'll need at least some basic knowledge about its dynamics and intricacies.
Luckily, that's what you'll learn in this guide. We'll help you understand how the SaaS industry works. You'll also discover what you need to know to launch and start growing a SaaS product.
Keep reading to learn more, or use the chapter links below to jump ahead.
What is SaaS?
What is a saas company, types of saas products, saas sales, marketing, and service, saas pricing models.
Software as a Service (SaaS) is a software distribution model that gives customers access to applications over the internet, rather than requiring a physical media and custom installation.
How does SaaS work?
SaaS products are centrally hosted by a provider, who also maintains and updates the software automatically. Customers access and use them via the web and mobile browsers.
Benefits of SaaS
Without a doubt, SaaS has revolutionized the software delivery model.
In the past, it was a hassle to introduce a new application to an organization.
From the lengthy sales process to complex on-site installation to custom development to training, it could easily take weeks — if not longer — before employees could start using a new tool effectively.
With SaaS, this can happen in a matter of days or less.
As a result, SaaS is rapidly becoming the model for the delivery of core business applications. In fact, even traditional on-premises software vendors are building SaaS products, and often expand their offering by acquiring SaaS companies .
A few examples include Microsoft Teams, Amazon Chime, or Oracle buying Opower for $532 million.
A SaaS company is a type of business focusing on creating, developing, hosting, and maintaining a proprietary Software as a Service product. The core benefits of running a SaaS company include instant access to an unrestricted, global market and the ability to scale without having to raise product delivery cost proportionally.
Although they often share the same name, SaaS companies aren't synonymous with their products.
A typical SaaS company develops and maintains their product. A great deal of its operations, however, also revolves around sales, marketing, and customer success.
SaaS applications come in different sizes, shapes, and serve various purposes. Most, however, fall under one of the below three categories.
These are products that help manage a specific process in an organization such as improving employee engagement, strengthening customer relations, or boosting marketing effectiveness.
HubSpot is an example of a packaged solution. We offer tools companies use to manage sales, marketing, and customer relationships.
These applications help improve how teams work together. From messaging and video conferencing to collaboration on documents , these platforms support collaborative efforts.
Zoom, Paper, and Basecamp are some examples.
These applications offer tools to manage or improve development or technical processes.
Cloudsponge, for example, allows developers to include a contact importer in their products effortlessly. Algolia offers a search API that helps other apps improve the search experience.
Venture investor Tomasz Tunguz categorizes SaaS products by the value they deliver, as well.
For him, some apps assist in increasing a company's revenue . HubSpot helps companies to more effectively market, sell, and service prospects and customers. This, in turn, leads to higher growth and revenue.
Other apps reduce costs . Basecamp, for example, offers multiple tools in a single package, eliminating the need for using additional products.
The third group, productivity software , falls somewhere between the two. These products also help increase revenue or reduce cost. However, their effect is less obvious.
For example, Zoom.us allows companies to run meetings over the Internet.
While using the product will likely reduce costs and could provide a platform for new revenue-generating ideas, this result is not as evident as in the case of products in the other two categories.
Let's dive into five examples of SaaS solutions to give you a better understanding of what this all means.
HubSpot offers a CRM platform complete with all the tools and integrations you need for marketing, sales, content management, and customer service.
HubSpot's Marketing hub was awarded one of G2's Top 100 Highest Satisfaction Products in 2020.
Since HubSpot's product infrastructure is hosted on Amazon Web Services (AWS), a cloud platform, it is an example of a SaaS company.
For more examples, here are our top SaaS companies and products to watch in 2023.
Slack offers an incredibly popular chat tool for businesses, which can be used for internal messaging, video conferencing, and productivity bots. The tool is used by major brands, including Netflix and Uber.
With an internet connection, you can easily install and begin using Slack's application. No special hardware or software is required, and because the application is web-based, security and performance is managed by Slack directly.
Zoom provides video conferencing tools for hosting remote meetings. The company has seen exponential growth in the past few years as the world adjusted to a primarily remote workforce as a result of the pandemic.
For the ongoing fiscal year 2023, the company is expecting between $4.53 billion and $4.55 billion in revenue.
The platform is cloud-based, so it's easy to install and begin using across devices.
Square is a credit card processing app that lets businesses easily accept credit payments without a cash register.
Square's software can be easily plugged into a computer or tablet to transform it into a credit card processor, and the company offers various products for commerce, banking, payroll, and more.
Square's expected to see roughly 80% annual revenue growth at the end of 2021 — much faster than its growth has been historically at roughly 40% year-over-year for the past five years.
Atlassian's products, including Jira, Confluence, and Trello, are aimed at improving software development, project management, collaboration, and code quality.
Many Atlassian products are cloud-based, while others are server and data center products.
Atlassian emphasizes the importance of transparency by creating tools that enable teams to work openly — so everyone within a team or organization at-large has visibility into what's happening.
How Do SaaS Brands Attract Users?
For a new SaaS company to take off, it needs to find, attract, and convince new people to try their product.
Moreover, it needs to do so fast.
According to a McKinsey report , SaaS companies must achieve annual growth rates greater than 20% if they want to survive.
That speed of growth is hardly a small task when you consider how much SaaS marketing differs from other industries.
In SaaS, you promote a product with nothing tangible to show for it. Your potential customers can't hold it in their hands. As a result, your marketing efforts must convince them that your product works and can solve their problem.
Users decide whether to try out a SaaS product in a blink . They often conduct a quick online search, compare some solutions, and make their selection. It can all take no more than a couple of hours.
Your marketing, therefore, must target every stage of the buyer's journey and offer relevant information that can convince someone to test your product.
So many consumers, however, commit little effort to discovering the new tool . Many new users log in to an app once, never to return to it again. Most don't realize the full value of the app before moving on to another solution.
Your promotional efforts must also help customers realize your activation point — the true value your product delivers.
You also rely on different sales models. Buying a self-serve SaaS product, one which customers sign up to by themselves, can take hardly any time at all.
In a sales-driven approach, a customer goes through most of the process on their own. However, in the last stage, they typically engage with a sales team that helps guide and recommend the best plan.
This process can naturally take longer and might require additional resources.
Finally, the enterprise cycle could easily take months, if not longer, before a contract is signed.
All in all, however, typically, SaaS companies have the below objectives for their marketing strategies.
SaaS Marketing Objectives
Objective 1: attract the right audience..
To kickstart its growth, a SaaS company must connect with potential users and bring them to their site first.
However, these shouldn't be any visitors. Rather, people who already experience a specific problem your product aims to solve.
So, the first objective is to understand what challenge you're solving for your users. Then, devise a strategy to entice them to learn more about the product.
Objective 2: Build a relationship with leads.
Marketers are responsible for nurturing leads. Using a combination of content, emails and other channels, a new SaaS company should position themselves as an authority, and convince leads to test their product.
Objective 3: Remove roadblocks to sign up.
In SaaS, marketers often optimize conversions around various website goals — from trial sign up to on-boarding to converting free users into paying customers.
Objective 4: Engaging users.
For most SaaS apps, users sign up for a trial, free, or demo version of the product first. It's often a marketer's job to ensure they convert into paying customers.
Typically, marketers accomplish this by optimizing the free or trial plan to help a person get to the activation point, where they realize the true value of the product.
Objective 5: Increase customer lifetime value.
Since most SaaS companies charge customers on a subscription model, it's imperative that a person remains a user for as long as possible.
SaaS marketing strategies are often aimed at increasing customer lifetime value by reducing churn and moving customers to higher priced plans.
SaaS Marketing in Practice: The Most Effective SaaS Marketing Channels
SaaS companies have a plethora of opportunities to introduce their products to potential users and achieve initial traction. Below, we've listed the most effective SaaS marketing channels that can help spark initial growth.
Inbound marketing strategies aim to attract strangers to your product and convert them into new customers. And it all starts with content. Blog posts, guides, resources, and other content types help attract new visitors and then convert them by adding value at every stage of the buyer's journey.
Search Engine Optimization (SEO)
Today, almost everyone turns to search engines for answers. It doesn't matter whether a person is looking for a product recommendation or guidance on solving a problem, they know that they can find it on Google.
SEO is a practice that helps position your site and content in front of potential users at every stage of the buying cycle.
Publishing engaging content helps you position your brand or product as a credible authority and helpful resource in the industry. And, in turn, you'll build meaningful relationships that can convert prospects into paying customers.
SaaS companies place online ads to attract and entice potential users to sign up.
Many also use paid ads, from pay-per-click (PPC) channels like Adwords to social media ads to display or banner advertising to drive potential users to lead generating assets or a product sign up.
These days, PR is more than just publishing and distributing press releases. Modern public relations focuses on improving almost every aspect of a brand's online visibility. From search results to brand mentions, online reviews, and much more, PR strengthens brand awareness and recognition.
Viral strategies focus on getting existing customers to refer and promote your product to others. These programs focus on getting your users to invite their friends, family, and connections to sign up and try out the product as well. Common types of viral marketing strategies in the SaaS space include referral, or affiliate, programs or viral loops .
For some apps, users can naturally expand a customer base by introducing the product to their clients. For example, Xero discovered that, on average, a single accountant using their product introduces anywhere from 6 to 31 new users to the platform .
App Stores, Resellers, and Affiliates
Some SaaS companies can also take advantage of app marketplaces like Intuit, Apple Appstore, or Google Play to promote their products to new audiences.
Many others launch affiliate or reseller programs that reward anyone willing to promote their products with cash or other rewards.
SaaS Customer Service
When you work for a customer support team within a SaaS company, the types of complaints you field are going to look different than they would for another type of business, such as an e-commerce brand.
For instance, with e-commerce you're primarily dealing with customers who are unhappy with their purchases and would like to make exchanges, or who need help making a purchasing decision.
With SaaS customer support, on the other hand, you're helping customers use your product to solve for their unique challenges, and assisting them in both their pre- and post-sale journeys.
Ultimately, good SaaS customer service will make or break the success of your business, since many SaaS customers will require advanced support to see results from your software.
Additionally, SaaS businesses can see higher churn rates than normal — in fact, the average churn rate in the SaaS industry is 5% , while a "good" churn rate is considered 3% or less.
SaaS customer support can help reduce churn rate and increase customer satisfaction by communicating your brand's values and mission to your customers, demonstrating empathy, and going above and beyond for your customers.
If you're interested in learning more about SaaS customer service, our beginner's guide explores the differences between SaaS customer service and traditional support, building a strong SaaS customer support team, and optimizing your SaaS customer service workflow.
Before attracting any visitors, a new SaaS company must decide how it is going to charge for their product. This is important for two reasons:
A pricing model will affect a potential user's willingness to consider their solution.
And it could affect a company's rate of growth. As PwC reported , it takes two years for a typical SaaS company to break even.
So, let's review various pricing models you could use in your product.
The freemium model offers a significant number of features for free, along with additional paid packages. Slack, Dropbox, or Airstory are examples of freemium-based SaaS products.
Most users can use them at no cost. But when they need more than the basic feature-set, they must upgrade to a premium package.
2. Flat-Rate Pricing
In this pricing model, a company offers a single product with a standard feature set for a flat rate.
Basecamp, for example, charges a flat fee of $99 per month for which a person can use all its features.
3. Tiered Pricing
By far, the most common pricing practice among SaaS brands is to offer multiple packages. Each package includes a different feature set, designed to suit various user needs.
This is the model we use here at Hubspot.
4. Per-User Pricing
Some SaaS companies offer a different option depending on the number of users.
Instead of paying a flat fee or choosing a feature-set, they can pay per user. Asana, for example, charges companies a flat rate for every person they sign up to the app.
5. Usage-Based Pricing
Finally, some products charge for usage, rather than feature sets or users. Companies using Stripe, for example, pay for every transaction processed.
SaaS Learning Resources
Want to learn more? We've pulled together some of the top online resources that cover everything SaaS to help you expand your knowledge.
1. Tomasz Tunguz
Tomasz Tunguz is a venture capitalist at Redpoint Ventures, and writes extensively about SaaS on his website.
This includes topics such as "the identity crisis facing open source companies in the cloud" and "How a Merger of Salesforce and Slack Would Change the SaaS Landscape."
You can subscribe to the newsletter to ensure you never miss a post, or scroll through his SaaS posts to learn more about the SaaS industry.
Hiten Shah has started three successful SaaS companies: Crazy Egg, KISSmetrics, and Quick Sprout.
He also offers a weekly SaaS newsletter, Hitenism, and writes compelling SaaS-related articles such as "We Haven't Hit Peak SaaS" and "3 Lessons that SaaS Founders Should Learn from David Cancel."
As someone who has a proven record in the SaaS space, Hiten is a fantastic resource to learn from.
SaaStr is the world's largest community of SaaS executives, founders, and entrepreneurs.
The company offers a variety of SaaS content in the form of blog posts, ebooks, podcasts, and videos, plus annual events for 15,000+ SaaS entrepreneurs.
Whether you're looking for content to get started or seeking out industry connections, SaaStr is a great starting place.
4. Startup School
If you're interested in starting your own SaaS business, Startup School is a powerful online program to check out.
Startup School offers a curriculum, a progress tracker to analyze the progress of your startup, a co-founder matching program, and access to more than $100,000 worth of deals on AWS, GCP, and more.
5. For Entrepreneurs
Voted #2 on Forbes List of 100 Best Websites for Entrepreneurs, For Entrepreneurs was started by David Skok, a serial entrepreneur who has founded four companies.
Here, you'll find articles aimed at helping both startup founders and SaaS entrepreneurs.
6. Chaotic Flow
Chaotic Flow stands out in this list due to its segmentation of four separate SaaS categories: SaaS Marketing, SaaS Product, SaaS Sales, and SaaS Metrics.
It's easy to find highly technical and specific topics for any of your SaaS needs, whether you're looking for articles on aligning SaaS customer acquisition or SaaS product-market fit.
The website offers SaaS go-to-market strategies and tactics, and was started by Joel York, who has spent 20+ years in the SaaS industry.
7. Sixteen Ventures
In the "Library of Awesomeness" on Sixteen Ventures site, you'll find articles ranging from good SaaS churn rate to emotional disconnect during customer onboarding.
The website, created by customer-centric growth expert, consultant, and thought leader Lincoln Murphy, is a great starting place when looking for customer-centric strategies in the SaaS industry.
8. On Startups
We may be biased (the founder of this site is also the founder of … well, HubSpot).
But On Startups, a website created by Dharmesh Shah, stands out as an impressive website if you're looking for content about software startups.
The website includes a list of software startups Shah has invested in, videos such as "From Day 0 to IPO: What Went to Plan, What Most Certainly Didn't", and content for both startup founders and investors looking to learn what's next in the SaaS startup space.
9. Predictable Revenue
Predictable Revenue offers content in a variety of formats, including podcasts, webinars, blog posts, and ebooks, and even provides case studies so you can learn how other SaaS companies have succeeded.
If you're interested in consuming video or audio content, this is a good option for you, with podcast episodes like "How to write proposals that sell" and videos like "How To Not Suck At Demo Calls".
SaaS offers an incredible business opportunity. Adoption of the software as a service model continues to grow rapidly.
However, with high demand and competition, founders must understand the intricate dynamics of the market and work to stand out by providing unique solutions and immense value to users.
As you continue to explore SaaS and make your introduction into this multi-billion dollar industry, remember to keep these goals at the core of your offering.
Don't forget to share this post!
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How to Start a SaaS Company: 6 Ingredients for Success
Lea LeBlanc on June 27, 2023
Projections indicate that the SaaS industry will be worth $700 billion by 2030 , and 99% of companies will have at least one SaaS solution installed by late 2023. These numbers prove that now is as good a time as any to launch a SaaS company.
Are you working on launching a successful SaaS business ? If so, you’re in the right place. In this guide, we’ll share the best tips for how to start a SaaS company. We’ll also reveal what makes a good SaaS product, so you can hit the market with a solution your target users won’t hesitate to pay for.
Why Start a SaaS Business?
The SaaS industry is already highly profitable, and its profitability is still growing. This is due to the increased adoption of SaaS solutions among small, medium, and large businesses. For instance, companies used an average of 12 SaaS solutions in 2016. By 2021, the average number of SaaS apps used in businesses rose to 110 .
More businesses using SaaS products means a bigger market, which you can get a slice of by introducing a SaaS solution that solves a pressing problem. Fortunately, unlike most industries, the SaaS industry has low barriers to entry. You can start a SaaS company with minimal upfront investment because you don’t need much physical infrastructure or a big team.
Combine SaaS’ recurring revenue model with low overhead costs, and you can expect potentially high-profit margins. The winning mix has contributed to projections of continued SaaS industry growth.
Let’s now dive into the secret sauce for starting a successful SaaS company.
How to Start a SaaS Company: The Idea
The first and most vital step to creating a successful SaaS company is coming up with a solution idea . Your idea must solve at least one existing problem, and an effective way to get such an idea is to look inward.
What pressing issue have you experienced at work or in your personal life, and what would solve it? Your answer to this question will be your idea that you can turn into a SaaS product.
If you can’t think up a problem to solve, you can look outward by actively listening to those around you to identify the problems they want to solve. For example, what recurring issue do your friends, families, colleagues, or seniors mention, and do you have a solution idea for it?
However, note that you can’t pick just any problem to solve. The problem you want to create a solution (SaaS product) for must be relevant and specific. Otherwise, you may have trouble finding a market for it.
The problem must also be long-term and recurring. Otherwise, people could eventually have no use for your solution, leading to negative results.
Product Development: What Makes a Good SaaS Product?
The next step in starting a SaaS company is developing your SaaS product. As we’ve mentioned, you need an idea first. The product must solve an existing and recurring problem. The more widespread or popular the problem is, the more potential users you’ll have, meaning a bigger target market.
But there’s more to what makes a good SaaS product. Besides providing a valuable solution to user problems, a good SaaS product must be:
Unique: It’s rare to find a SaaS product with zero competitors. Differentiate yourself from the competition by offering a quality product that delivers value and something unique. The unique element could be cost-effectiveness, customer support, or something equally attractive.
User-friendly: Regardless of how much value a SaaS product delivers, users will avoid it if it’s difficult to use. Create a SaaS product that the average user can quickly understand and navigate to experience value without assistance or extensive training.
Scalable: Users should have no trouble scaling your product to match their growing or shrinking needs. From your end, your product should also be able to scale to accommodate your user base and traffic as it grows. Lack of scalability will lead to users experiencing performance issues.
Reliable: Your SaaS product should be reliable with consistent uptime and speed. SaaS products with excessive downtime and service disruptions are untrustworthy, leading to high customer churn.
Validating Your Idea
Once you have a product idea, you should test its viability. Doing so ensures that you build a product that users want and will be willing to buy.
You can test your product’s viability by performing product validation. While there are several ways to validate a product , in our experience, the best way to do it is to build a product and have target users test-drive it. However, building a fully functional prototype of your product only to have users go, “No, thank you” is expensive.
A much more cost-effective strategy is to build a prototype that showcases your minimum viable product (MVP). If users show interest and positively interact with your MVP, it means people care about your product, validating your product idea.
Developing Your SaaS Product
After confirming that your target users love your product idea, you can start building your SaaS product . Start with a rough sketch that showcases how your product’s interface will look.
Your rough sketch will help you identify and eliminate unnecessary elements, plot user flows, and map how your product will work. Next, turn your rough sketch into a prototype: a product mockup with clickable elements.
This prototype will closely simulate the look and functionality of your finished product. With this prototype, you can iron out bugs and get user and stakeholder feedback regarding what to improve, add, or remove.
The prototype can then be used to develop the MVP (as discussed above). With the launch of an MVP, you can then gather user input and develop version one of your product.
Should You Develop Your SaaS Product Yourself?
You can hire in-house developers, freelancers, or a development agency to build your SaaS product. Hiring freelancers costs less, while in-house teams are more convenient due to their accessibility.
On the other hand, hiring a development agency is pricey, but you get expertise and a full-service team to handle all aspects of product development on your behalf. The right option for you will depend on your budget, how much expertise you need, and how hands-off you want to be.
Now that you know how to develop your SaaS product, let’s dive into how to start a SaaS company, including the six special ingredients you need to successfully build a SaaS company.
#1. Financial Plan
Starting a SaaS company costs money, and getting your return on investment can take a while. So, how will you get the money for your SaaS startup, how will you spend the money, and what will you do with your earnings? Your financial plan will answer these questions and more.
A financial plan is a written document that states your company’s financial goals and how you will achieve them. It’s basically a comprehensive roadmap for your company’s finances, and you can use it to track your progress toward achieving your financial goals.
Financial plans for SaaS startups typically detail revenue projections, cash flow, and expenses for specific periods. Without a financial plan, you may struggle with managing finances to ensure your business’s long-term viability.
Build a financial plan for your SaaS company by following this process:
Outline your financial goals: Specify the financial targets you want to hit and the timeframe to achieve each one.
Identify revenue streams: Revenue streams are sources of capital for your company. Since you’re a new company, you can generate revenue through pre-orders, loans, angel investments, and other sources.
Forecast future finances: Your financial plan should contain a forecast of your sales and revenue generation for the upcoming year. Effective financial forecasting requires identifying relevant data, such as target market size. With the data, you can estimate how many customers you’ll acquire and how much revenue each customer will generate.
Estimate operating expenses: Your business will incur operating expenses as part of its daily operations. Such expenses include salaries, utilities, marketing costs, and so on. Your financial plan must list these expenses because they will eat into your revenue and profit. Listing these expenses will help with budgeting and identifying areas for cost-cutting.
Determine cash flow: Create a cash flow statement that shows your cash inflow and outflow for a specific period. The statement can help you identify cash flow gaps or surpluses. It can also help you estimate how much funding you need and when your company will become profitable.
Create a budget: Analyze your revenue, gross profit margin, customer acquisition costs, churn rate, and other relevant data. Use insights from the analysis to create a realistic budget that will cover your expenses for the next six months to a year. The budget should align with your financial goals and help prevent overspending.
Use our financial model template to build a financial plan for achieving your goals.
#2. SaaS Pricing Strategy
Your SaaS pricing strategy determines your product price and how you’ll charge users to access your product. Charging very low ( penetration pricing ) to attract customers to your product may seem tactical, but it has its downsides. For instance, low prices can negatively affect your long-term profitability.
However, if you charge too high (far higher than competitors), you could put off potential customers and lose them to more affordable competitors. You need to find the pricing sweet spot that attracts customers, profits your company, and minimizes the risk of churning. Identify the right price for your SaaS product with these steps:
Analyze your product to verify its value
Research competitors to identify how much they offer similar products
Identify what potential customers are willing to pay for a product like yours
Based on your research, you can use a value-based pricing model, a cost-based (cost plus) pricing model, or a competitor-based pricing model. Value-based pricing involves charging a price that matches your target user’s perceived value of your product.
On the other hand, cost-based pricing involves identifying the cost of building, marketing, and distributing your product. You then add a premium to that amount to create your product’s price. Lastly, competitor-based pricing involves charging a price similar to your closest competitors.
Next, you need to pick how to charge. Will you charge monthly? Will you offer annual subscriptions? Or, maybe you’ll charge per feature or have a usage-based pricing model. How you charge is crucial as it will affect your product’s ease of adoption. It will also impact forecasting for your SaaS financial model .
#3. Customer Acquisition Strategy
After starting your SaaS company, it needs to start making money, and it can’t do that without customers. How do you get customers? With a customer acquisition strategy. This is a plan that lays out multiple tactics for attracting and converting new customers .
Since SaaS companies are different from other business types, it requires a unique customer acquisition strategy. A SaaS customer acquisition plan must be purpose-driven and build long-term customer relationships. Create such a strategy with these steps:
Define your target audience: Identify the people you want to target with your customer acquisition strategy. Ideally, your target audience will consist of people who need and can afford your product.
Select acquisition channels: Your acquisition channels are the platforms for connecting with your target audience to market your product. Popularly used acquisition channels include social media, email, and business websites. Get the best results by connecting with your target audience via channels they already use. For instance, if most of your target audience frequently congregates on LinkedIn, then you should market on LinkedIn.
Build a marketing budget: Your budget will dictate how much to spend to reach and convert potential customers. Create a marketing budget that isn’t so large that it puts your company in the red but not so small that it yields insignificant ROI.
Have a well-optimized landing page: Your brand’s landing page is essential. It determines the first impressions of potential users led to your website by your marketing campaign. Make the landing page attractive, show social proof, add valuable content, and strategically place calls to action to convert visitors.
Share positive reviews: User-generated content, such as testimonials and reviews, is known to influence customer purchasing decisions. Showcase customer success stories by inserting the brand logos of satisfied customers on your homepage and sharing case studies and reviews.
Create valuable content: Your acquisition strategy should include content marketing, which involves sharing valuable, insightful, and engaging content. Share such content on acquisition channels to engage, educate, and convert your target audience.
Monitor performance: Lastly, frequently check the performance of your customer acquisition strategy and make adjustments to improve results. Skip this step, and you could blow your marketing budget without getting the desired return on investment.
With Baremetrics, you can view MRR, conversion rate, and other metrics within your dashboard to judge your customer acquisition strategy’s performance.
#4. Business Plan
Like every other business, companies using a SaaS business model need a written business plan. The plan for your new SaaS company will outline its marketing and sales strategies, financial projections, organizational structure, and operational details.
Your startup needs such a business plan because it will help clarify and communicate your vision and strategy to potential investors and customers. It can also help articulate your value proposition and build credibility by showing your roadmap to achieve growth and success.
Create a comprehensive business plan for your SaaS startup by adding these details:
Mission/vision statement: The mission statement will distinguish you from competitors by clearly stating your company’s core values, purpose, and overall mission. Your vision statement, on the other hand, will describe your company’s direction, long-term goals, and aspirations.
Executive summary: The executive summary is a concise and persuasive overview of your business plan. It gives readers a quick and clear understanding of your company’s value proposition, market opportunity, and growth potential.
The product: Your business plan should clearly describe your SaaS product or service. The description should cover your product’s unique value proposition and competitive advantage over existing products.
Target market: The plan should contain a detailed analysis of your target market. It should clearly state customer segments, demographics, and buying behavior so investors have a clear picture of your target audience.
Marketing and sales strategy: The business plan should specify your customer acquisition, retention, and growth strategies. It should also contain financial projections for your first and second years to paint a picture of your anticipated profitability.
Organizational structure: Your SaaS company can’t run itself. Specify your company structure and management strategy in the business plan. You should also add details regarding roles and who will be responsible for specific duties.
Note that the most successful SaaS businesses have business plans that prioritize customer retention. That’s because happy, long-term customers ensure uninterrupted recurring revenue, which is essential for a SaaS company to succeed.
Our how to start a SaaS company guide would be incomplete if it didn’t mention business formation . You must incorporate your SaaS company, but first, you must pick a legal structure. The legal structure may be an LLC, C corp, or S corp.
A Limited Liability Company (LLC) is a flexible and relatively simple business structure ideal for small businesses and startups. C corporations (C corps) have shareholders as owners, and you can raise capital through stock sales. On the other hand, S corps have certain tax advantages, such as not paying federal income tax on profits.
Before picking between an LLC, S corp, and C corp, talk to a corporate lawyer who can help you make a well-informed decision in line with your business plan. Other important legal considerations you shouldn’t ignore are:
Intellectual property protection
Data privacy and security
Compliance with relevant state and federal laws and regulations
#5. Launch Strategy
After creating your SaaS product, how do you bring it to the attention of your target customers so they buy it? That’s where a product launch strategy comes into play.
A launch strategy outlines the steps to introduce your new product to your target market. It involves:
Identifying target customers
Determining product pricing
Developing and executing marketing and communication tactics
The goal of the strategy is to generate excitement, awareness, and interest in your product. The more aware and excited people are, the more sales you can expect once your product launches, ensuring a strong start for your company.
On the other hand, generating insufficient awareness and excitement for your product can lead to slow sales and trouble raising sufficient revenue to keep your startup afloat.
Use the below tips to launch your SaaS product :
Conduct market research: Your research should help you identify and understand your target audience. Insights from the research will also help pinpoint the best communication channels for connecting with your audience. Lastly, it will reveal the most effective content and language for engaging your audience to get them excited about your product.
Create a product launch plan: Your launch plan should include the timeline and budget for your product launch. It should also list your strategy for generating buzz and key performance indicators (KPIs) to measure your launch’s effectiveness.
Announce your product: Let the world know your product is coming and target your messaging at prospective customers. Share your announcement via multiple marketing channels, but focus more on your target audience’s preferred channels.
Launch an MVP: The MVP is a base version of your product with only core features and functionalities. Release this prototype so people can test drive your product before it launches. Besides generating awareness of your SaaS product, you can use the MVP to collect feedback on ways to improve your product before release.
Perfect user onboarding: Create a simple and intuitive onboarding process that ensures new users can easily access your product and experience value. The sooner new users can try your product and experience value, the more excitement it will create, leading to free word-of-mouth advertising.
Engage users: Maintain excitement levels by engaging users via social media and communication channels. Also, provide ongoing support and updates to deliver the best user experience.
#6. Metrics & Results
Congratulations! You’ve launched your SaaS company, but your journey’s not over. You have to measure your startup’s growth and performance to confirm you’re on track to achieve your business goals. Tracking your results will also reveal underperforming strategies and operations you can improve to get better results and protect your ROI.
Some of the most important metrics SaaS startups track include:
Active Customers: This reveals how many users your product has.
Customer Acquisition Costs (CAC): This is the amount you pay to acquire each new customer, including the cost of marketing, onboarding, and so on.
Churn Rate: This is the percentage of customers lost within a specific period.
Average Revenue Per User: This is the average amount of revenue you earn from each active customer monthly.
Customer Lifetime Value: This is how much you can earn from a customer during their relationship with your company.
Monthly Recurring Revenue (MRR): This is how much you expect to earn from your users each month.
Conversion Rate: This shows the percentage of users who take your desired actions, such as signing up, booking a demo, or paying for a plan.
Baremetrics is the easiest way to track the above metrics and understand the data. With the Control Center of our user-friendly SaaS reporting solution, you can see and react to real-time events and insights. Track events and transactions, such as cancellations , signups, payments, and downgrades, and make well-informed decisions.
Baremetrics facilitates quick and accurate analysis of SaaS and subscription KPIs via its Smart Dashboard . The visual and interactive dashboard turns complex data into simple information so you can dive deep into relevant metrics. Even better, the segmentation feature allows you to filter insights by segmenting customer data into specific categories. That way, you get to see only the data you need.
Other valuable features include the Benchmarks and Forecasting tools. With Benchmarks , you can compare your metrics with competitors. The insights from the comparison will help you identify how to improve and compete more effectively in your market.
The Forecasting tool is excellent for predicting and planning your company’s future. The tool uses relevant data to forecast MRR, customer churn, cash flow, and more. With this information, you can make data-driven decisions to scale your business and minimize churn.
Reach SaaS Success With the Help of Baremetrics
Baremetrics is the only tool you need to view and understand your company’s customer and growth data. With our tool, your SaaS startup can track and measure various KPIs to understand how close you are to reach your goals. Insights from measuring your SaaS metrics will also reveal performance areas you can improve to stay on track and achieve better results.
Know what’s going on with your revenue and customers in real time by taking a test drive of Baremetrics today!
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How to Create a business Plan for a SaaS Company
- January 26, 2023
- Articles , Blog Posts , Business Investment , Uncategorized
You’ve decided to open up a software company and your current venture needs more funding. If you’re in SaaS, you’re going to want an SaaS business model to show potential investors value in what you offer.
When taking into consideration the vastly different financing needs of Software as a Service (SaaS) companies compared to traditional commercial businesses, it follows that the SaaS business plan has similarly unique needs.
As capital investors ourselves, we have seen many hopeful business plants cross our desks. In the article below, we have compiled some of the key attributes we look for in a business plan to help get your software funded and out on the market.
Types of Business Plans
Generally, there are two main types of business plans a company will use: traditional and lean plans. When you write a business plan, you should set out to include all the most important information about your business or start up, how you are planning to scale, and most importantly information about the types of problems your product fixes.
Traditional Business Plans for SaaS Companies
These types of business plans are generally longer and require in-depth information about not only your product, but the target audience you are looking to serve. Generally, these include the following sections:
- Executive summary : this is where you get to talk about you, your company, and why it is valuable.
- Company Description : here, you build on your executive description by explaining more about the mission of your company and the problems your product is aiming to solve.
- Market Analysis : this is where you use data to explain the different sectors of your market and how your product appeals to them.
- Organization Structure : Here, you explain the legal organization of your company’s ownership. Depending on the size of your company and the number of your products, the complexity of this section varies.
- The Product : simple and straightforward– explain your product and why it’s amazing
- Marketing Plans : this is where you will assimilate all your market research from before and explain the best way to reach those individuals.
- Finances and Funding : Finally, you set out your financial needs to get your plan off the ground. This can include both shorter-term funding in addition to other needs that come with scaling your company.
Lean Business Plans for SaaS Startups
Lean plans are best for companies and startups who are in earlier stages of development or who plan to change their product on a regular basis. For some SaaS startups , this plan often leaves more room to accommodate for different product lines, packages, and changes that will eventually happen over time.
Advantages of a Lean Business Plan
- Explain Partnerships, Activities, and Resources : for many in the SaaS community, offering a product that serves many functions is an important aspect of your value. This is where you should explain the various offerings you can give to your clients, in addition to the kinds of working partnerships you will secure to get there.
- Determine Product Value : Here, you explain not only why your product is awesome, but how it fares better than your immediate competition
- Outline your Audience : Through market research, you will show which groups of individuals will most likely benefit from using your product
- Outline your Cost Structure and Revenue Stream(s) : For many SaaS companies, your cost structure and revenue streams are going to look different from companies selling a physical product. Here, you want to outline where, when, and how much funding you will need, in addition to the different ways in which you will bring revenue in (such as different tiered products, subscription duration, etc.)
Now that we know a little more about the different types of models you will use for your business plan, we will discuss in greater detail what information you will need most.
How to Create a SaaS Business Plan
If you are looking for a business plan template , the internet has many options to offer. However, it’s good to remember that not every template will fit the needs of every business (or every investor, for that matter), so it’s always best to make sure you know not only what information you should include, but why it’s important to pitching your company.
Know Your Niche and Their Pain Points
One of the detrimental mistakes many SaaS start-ups make is that they develop a product before developing an audience. This is the business equivalent of trying to wear your pants as a sweater.
The reason is simple.
If you don’t offer a compelling solution to a problem your audience already has, there is no reason to buy your product.
Calculate CAC for SaaS Products
What many entrepreneurs don’t realize about SaaS products is that they follow a different growth curve than many other types of product. This is largely because SaaS companies rely on recurring subscriptions rather than a one-time purchase.
In the beginning phases of an SaaS company , it takes a heavier financial push to see growth than other industries. You need to acquire leads that convert, which will eat up a large part of your early revenue.
Making this initial investment however, is an important step. Making sure your leads are hot, and your customers are likely to stick with you over the long haul, are integral to building the bedrock of your financial stability.
As you acquire customers, they become the foundation of your recurring revenue. Over time, the initial cost of acquiring these customers begins to pay for themselves.
Define Your Pricing Mode
For the reasons mentioned above, having a pricing model that works for both your audience and your product is an essential component of your business plan.
Here, you will want to first decide and state what your product will actually cost and how those costs contribute to your overall revenue. This usually involved a tiered pricing model featuring a free (or low-cost) package, complimented by other “premium” plans which had more usable services.
Here is also a good point to outline your growth prospects and how you plan to achieve your goals. This not only shows business viability, but a way for you to show you are knowledgeable and well-informed about the future prospects of your business.
Prove Your Profitability
In addition to building a pricing model, show your long-term profitability. Most often, this includes different levels of products you would like to offer in the future, different business ideas that are related to your main product, even ways in which you could monetize your company going forward.
This step looks different depending on your industry and your overall goals for your company. The important aspect of this step is showing the ability to conceptualize your product over time and many iterations.
When You Need an Extra Financial Push for Your SaaS Company
The internet is full of SaaS business plan examples. You could use one of those as a jumping off point for formatting and inspiration, but no template will replace a well-thought-out idea of your market, product, and company.
At RevTek , we take qualifying companies and help them reach their expansion goals by giving them the financial support where it’s most needed. With a full staff of experienced entrepreneurs, we can help businesses assess their strengths, weaknesses, and help them refine and achieve their goals.
To begin the conversation about how to take your business to the next level, contact us at ( 602)-730-4558 to schedule an appointment.
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- Ways to Raise Capital for Startups September 28, 2023
- How to leverage SaaS, Recurring Subscription Revenue can help you meet your Valuation Goals September 21, 2023
- Debt vs. Equity Financing Pros and Cons September 14, 2023
- A Look at the Future of SaaS Investing August 31, 2023
- SaaS Company Valuation: Multiples and More August 25, 2023
- How To Grow a SaaS Company August 17, 2023
- How to Start a SaaS Company August 10, 2023
- SimSpace Closes $22.6 Million Financing Round August 7, 2023
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Software-as-a-Service (SaaS) on AWS
Build and scale your saas business with aws.
AWS approaches Software-as-a-Service (SaaS) as a business and software delivery model that enables organizations to provide their offering to customers in a low-friction and service-centric manner. AWS works with organizations to build a SaaS model that establishes agility and operational efficiency as pillars of their business strategy—promoting growth, reach, and innovation.
Learn how the fastest-growing startups, largest enterprises, and leading government agencies are using AWS to build SaaS to innovate faster, become more agile, and deliver differentiated value to customers.
Build for global scale and performance
AWS has the most extensive portfolio of cloud services, making it faster, easier, and more cost effective to build, migrate, and modernize SaaS applications that can solve nearly any customer challenge you can imagine.
Accelerate time to market
Move from design to launch faster with proven best practices, training, ready-to-use solutions, and hands-on build and design support from technically validated AWS Partners.
Design for security and compliance
Develop your SaaS applications on AWS cloud infrastructure—built to satisfy the security requirements for the military, global banks, and other high-sensitivity organizations.
Grow your business with AWS Marketplace
Increase reach and revenue by listing your SaaS solution in AWS Marketplace and becoming an AWS Partner. Per Forrester study, AWS Marketplace sellers realized deal sizes 80% larger, closed 27% more deals, and accelerated sales cycles by 40%.
Explore resources for any stage of your SaaS journey from design and build, to launch and optimization.
Not sure where to begin? Start with AWS SaaS Journey Framework .
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Tips for Creating a Business Plan for a SaaS Company
Every business plan has the same components, but a SaaS business plan should pay special attention to customer acquisition (i.e. marketing) and the financial strategy.
Business plans contain elements specific to the sort of business, thus in the instance of a SaaS company, you’ll want to list all of your requirements and work out how to meet them. A business plan will be tailored to your objectives and will assist you in developing your business to its greatest potential.
For any entrepreneur, writing business tips is a crucial step. However, if you’re establishing a SaaS company, the business strategy is critical because the amount of money necessary achieve growth can be more than what entrepreneurs initially expect. Spend a couple of days on plan making so that you have a clear-cut strategy to expand your business instead of relying on a spray and pray approach.
If you’re thinking about starting your Software as a Service company, the tips on how to build a business plan for a SaaS startup below will help you get there.
Tips for creating a Perfect Business Plan
Choose a format.
Every business plan can be written in a variety of formats, and you must determine which one is best for your organization. There are several options available to you:
Traditional: A traditional business plan necessitates a thorough understanding of your entire SaaS firm and how you intend to run it. You must include your objectives, the services you provide, and your target audience. It necessitates a description of your business, a market study, your products, marketing plans, and financial information.
Lean: A lean business strategy is best for SaaS organizations and start-ups that offer a wide range of products and are still in the early phases of development. When it comes to SaaS, you need to make changes daily, thus a lean strategy is great for business owners.
You can find a variety of business plans according to the type of business you want to run, but creating a lean business plan is the safest option for a SaaS company. As a SaaS firm, you’re always coming up with new ideas, so you’ll need room to grow; a lean business plan will include your strategy, products, and business model.
It’s crucial to establish who your target audience is before starting a business, which involves defining your customers. You won’t be able to sell anything if you don’t know who you’re creating your services for. You must separate and categorize your diverse customers depending on the type of items and services you provide.
If you have a target market in mind, you may use demographics and customer data to come up with features that will appeal to them. Most SaaS businesses make the error of launching a product without first evaluating their target market and potential clients. It is very important to have a product plan .
To expand your business, you must provide something that your target market wants; consequently, establishing your target market is important.
Plan an Acquisition strategy for customers
Customer acquisition is critical to the success of your SaaS firm. It doesn’t matter how fantastic your service is if you don’t have any sales or customers.
We’re talking about marketing and sales when we talk about customer acquisition. This section of your company strategy describes how you’ll reach out to potential clients and how your sales process will work. Your marketing and sales strategies will be determined by your target market. Your marketing strategy should include information on how you want to reach your target audience and how much money you expect to spend on marketing and advertising.
You must specify whether your sales process will require a sales crew or will be self-service in your sales plan. If you’re selling to businesses, you’ll probably require a sales force, and the sales process could take weeks or months. If you’re selling to consumers, you might be able to use a self-service sales approach, in which clients sign up for your service without having to communicate with you.
Set your Pricing Model
Both you and your target audience will benefit from defining your price model. You must determine different rates for the products and services you provide, as well as the total cost of your revenue.
You may also showcase your future goals and how you plan to achieve them by offering your consumers a price model that varies depending on the services you provide. For example, Muslim Pro provides a list of all of their services as well as an estimate of how much they will cost.
You can also use a price model that varies depending on the services you supply to indicate your future goals and how you plan to accomplish them. Muslim Pro, for example, provides a list of all of their services along with an estimate of how much they will cost.
Research Your Competition
Irrespective of your business age, there’s probably going to be a company (or two) out there offering the same software-as-a-service as you. Hence, it’s important to research your competition and after you do that, go nuts with learning about their offering and services. Watch their customer reviews, take a free trial of their product, and even speak with their customers if possible.
Then use all the insights to determine what they’re doing right and how you plan to outshine them in the future. This is going to be the value proposition you show to investors.
Make a Financial plan
Because it differs from the rest of the business plans, a SaaS business plan needs financial backing. Because your sales are dependent on clients subscribing to your firm, you’ll need investors to help you stay operating. You can keep track of critical metrics such as:
Subscription sales forecast
A SaaS business’s subscription sales forecast will show how many new customers join up each month, as well as how many customers cancel. You should also list the typical membership price and any setup costs you may charge new consumers. Subscription forecasting is difficult since revenue from annual contracts must be recognized over time rather than all up-front.
Rate of churn
Typically, this is incorporated in your sales projection. It’s the monthly proportion of existing customers who terminate their membership. This is a crucial metric for determining the health of a subscription business. If a large number of consumers are expected to cancel, this suggests that their value is low and that your solution isn’t a good match for their needs.
The total amount of money that a typical customer will spend on your service during their tenure
as a customer is known as lifetime value (LTV). If your service is new, you may not have accurate information on the average customer lifetime.
Fortunately, dividing 1 by your monthly churn rate will give you an estimate of a customer’s estimated lifetime. This will offer you an estimate of how long a typical consumer will subscribe to your service. You may calculate your anticipated LTV by multiplying this figure by the average amount you charge your consumers.
Flow of cash
A profit and loss prediction will undoubtedly be included in your financial plan, but your cash flow forecast is even more crucial. It’s astonishing how much capital is required to fund initial growth for SaaS startups. This is because your clients usually pay you monthly rather than upfront.
A subscription business, unlike a business that sells things and earns all of the cash immediately, collects money from clients month after month, year after year. So, while your normal customer may be worth a lot over time, recouping the money you spent on gaining that customer may take some time.
A cash flow prediction will assist you to figure out how much money you’ll need to keep your company afloat until you have your first clients.
Don’t Forget Management and Operational Aspects
Management and operations are the lifeblood of the business. They indicate how the SaaS company is going to function on an ongoing basis. In other words, this aspect of the business plan outlines the day-to-day responsibilities for running business operations, including tasks assigned to the management team. You can also map out the tasks assigned various departments within the firm, costs requirements of managing operations, and capital geared towards this aspect of the organization.
Including management and operations is especially important when your SaaS company is young. And remember, some ongoing adjustments and analysis will be required as your operations mature in the foreseeable future.
Keeping everything in order will make you appear profitable to potential investors, allowing you to obtain the funding you require to expand your company. SaaS business plan examples abound on the internet. You can use one of those as a starting point for formatting and inspiration, but no template can replace a well-considered market, product, and company strategy.
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SaaS Business Plan Sample
SaaS business plan for starting your own company
Are you thinking about starting a business that will have an enormous scope in the near future? Well, you must opt for a SaaS business then. SaaS stands for software as a service and includes providing software such as CAD or content management with their key or license on a subscription basis to many customers, even at the same time, and hosting and upgrading them while sitting on your location. These days several startups and businesses require different software to make their tasks easier. But not all of them want to buy them. So, they prefer to contact SaaS businesses and pay on a monthly or weekly basis to use their software services instead of spending a heavy amount in making a purchase. If you have made up your mind to start this business but have no idea about how to start or how to write a business plan SaaS, you can take help from here. This sample SaaS business plan provides all the crucial details while relating them to a SaaS business startup, Techware, based in Houston.
2.1 the business.
Techware will be a registered and licensed SaaS business responsible for hosting software services throughout Houston and nearby cities. Techware will be offering management, accounting, and engineering software on affordable subscription fee. Moreover, it’ll be responsible for updating and monitoring the provided software from time to time.
Tom Will, the owner, has decided to manage his business by himself. Knowing the importance of good management structure in business, he decided to include that in his business plan for SaaS startup. Tom will hire experienced software engineers, IT experts, computer experts, account managers, sales executive, and other personnel to run his business. Later in this sample SaaS business plan package, we will be listing company’s employees along with their job description and average salaries.
Before making a business plan for SaaS company, it’s essential to know your customers. Having a clear idea about your target groups helps you in devising SaaS business continuity plan template, which can help in specifying ways to deal with possible losses/threats by approaching another group of customers if one fails to satisfy your sales. After analyzing the market, Techware identified that every group which will be associated with any small or large business, company or institute will be its target customers.
2.4 Business Target
Our main business targets are to add two new software services every 3 months, expanding our business network and increasing our sales by 20% every 6 months.
3.1 company owner.
Tom Will, owner of Techware is a software engineer who did an MBA from London Business School after his graduation. Tom has worked in Symantec for two years as a product manager. But he resigned as he wanted to start his own business. No doubt, he possesses all the qualities that enable one of starting their own business such as talent, knowledge, management skills, experience and wealth.
3.2 Why the SaaS Business is being started
In this age, no business and company can survive without the usage of the latest software. But not every startup can afford to buy them. So here comes the scope of SaaS companies who buy expensive software and host their services on any location specified by the customers on a subscription basis. So, Tom who always wanted to start his own business couldn’t have come up with a better idea than initiating a SaaS business. As it offers him the platform to blend his software knowledge with his management skills to generate huge gains.
3.3 How the SaaS Business will be started
The only way to avoid confusion at every decision making stage is to formulate a proper saas business plan. Your business plan for saas company must cover the details of your investments, advertisement costs, strategy to reach your customers, management structure and financial plan. Recognizing the importance, Tom created a thorough software as a service business plan . According to which, the company’s office will be based in Houston, but its services will be offered in nearby cities too. The office will be decked by first-class equipment and the latest networking system. Initially, the company will be providing services for some major software such as office software, payroll processing, customer relationship management, and collaboration, etc. Moreover, it will hire highly experienced personnel to ensure the perfect running of the business and skilled web developers to ensure a strong web presence.
The detailed startup requirements are given below:
Services for Customers
Choosing your services at the initial stage will also help you in devising saas lean business plan and finding ways to minimize wastage of resources.
- Providing Management Software: We’ll be offering software services for management software like accounting, invoicing, enterprise resource planning, content management, office software, human resource management, payroll processing, customer relationship management, and collaboration.
- Providing Engineering Software: Software that are used in engineering institutes and companies will also be offered by us such as Adobe Font Folio, AutoCAD, Visual Studio Ultimate with MSDN, VxWorks, etc.
- Providing Construction Software: We’ll provide services for following expensive software used by construction companies such as Oracle Primavera P6, Esticom, Buildertrend, FINALCAD, etc.
- Graphic Designing Software: We’ll offer services in graphic designing software such as Adobe Illustrator CC, Adobe InDesign CC, CorelDraw Graphics Suite, Corel PaintShop Pro, etc
- Training Sessions: Our software engineers will also give training sessions on the latest software at our customer’s location.
Marketing Analysis of SaaS Business
If you want to opt for a SaaS startup, you must first search out whether the market you’re choosing has the potential to bear your startup or not. It’s better to research to know if there are already-established such businesses because it’ll be difficult for you to strive then.
5.1 Market Trends
In this current age, usage of software in various sectors has increased which has helped in increasing productivity and keeping pace with the fast-going world. Almost all companies and businesses require some sort of software. But usually, enterprises don’t prefer to purchase them for a lifetime and opt for seeking the services of SaaS companies instead. So you don’t have to bother at all about the scope or trend of SaaS business, you’ll just need to have a look at your budget. If it is not too large then you can start with just one type of software such as business software.
5.2 Marketing Segmentation
Before you think about how to find clients, you must be clear upon who will be your clients. To understand their demands and meet their expectations, it’s essential to do a thorough marketing segmentation in your saas business plan template.
The detailed marketing segmentation done for Techware is given in this part of startup saas actual business plan.
5.2.1 Companies: Our first target will be the companies that will be needing our services to have the latest payroll, coordination, and management systems. Besides the general software, they are also expected to use our services for software which will be specific to their works.
5.2.2 Startups: Our second target will be the startups who just can’t afford to make huge investments on the software especially when they have a better option to get them hosted by SaaS companies.
5.2.3 Institutes: Our last category will be institutions such as those who carry out research work on some engineering-related projects. They will surely be needing diverse software, some for a smaller span of time and some for a larger, thus, will obviously prefer to use our services.
The detailed market analysis of our potential customers is given in the following table:
5.3 Business Target
Setting SMART: specific, measurable, attainable, realistic and time-bound goals for your startup is necessary to keep up the spirit of working hard and harder.
Our business targets are as follows:
- To achieve a net profit margin of $15k per month by the end of the first year
- To increase our services by adding new software in our package after every 3 months
- To increase our overall sales by 20% every 6 months
- To attain an average rating of 4.5/5 by the end of the first year
5.4 Product Pricing
To maintain the quality of our services Techware found it essential to not compromise on the money. So, our prices will be in the same range as that of our competitors.
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SaaS Marketing Strategy
Before writing a saas business plan, you must research what your competitors are doing. This will help you in coming up with diverse and better services. If you are looking for saas business plan example to get an idea about what strategy can make you more preferable than your customers, you can take help from this saas business plan template free of cost.
6.1 Competitive Analysis
Our biggest competitive advantage lies in our wide range of services and the skills of our employees. Secondly, we are highly customer service oriented. Besides providing them with just our software services, we’ll offer training sessions by our software engineers, so that they can learn about working on it. We’ll be providing our services in various regions so we expect to attract more customers to our site. Lastly, we’ll be extremely careful about protecting our customer’s data.
6.2 Sales Strategy
We’ll advertise us by the following methods:
- By ensuring a strong web presence
- By providing a 5% discount on our services for the first two months
- By personally sending our representative to our target customers
- By providing a 2-day free training session to help those persons who don’t have hands-on on the latest software
6.3 Sales Monthly
Our monthly sales are forecasted as follows:
6.4 Sales Yearly
Our yearly sales are forecasted as follows:
6.5 Sales Forecast
Our forecasted sales are given below.
It’s not just the role of management which must be played efficiently. No business can survive until devoted and talented employees invest their tireless efforts in it. So, it is necessary to hire suitable persons for your business. In this saas business plan sample we’re listing personnel plan of Techware to help those who have no idea about how to writing a saas business plan.
7.1 Company Staff
Tom will be the manager himself and will hire the following persons:
- 2 Network and Information Security Managers to ensure network security
- 1 HR Manager to coordinate staff
- 2 Software Engineers to maintain and upgrade software
- 4 IT experts to host software services
- 2 Technical Assistants to maintain equipment
- 2 Accountants to maintain financial and other records
- 4 Sales Executives to market and reach target groups
- 1 Web Developer to manage company’s sites
- 2 Customer Representatives to interact with customers off/online
- 1 Cleaner to ensure a healthy environment
- 2 General Assistants to carry out day-to-day tasks
7.2 Average Salary of Employees
The following table shows the forecasted data about the salaries of the employees for the next three years.
Since a SaaS business requires a large investment for purchasing licenses of costly software thus it’s necessary to get its business plan written by a financial expert. The financial expert must be adept at playing with figures and stats and finding ways to cater possible capital losses. As for Tom, he wanted a business plan saas that could enable him of making a heavy investment every 3 months to increase his services as well as generating profits after spending money on all possible expenses like salaries and system maintenance. So he sought help from a financial consultant. Thus the financial plan which is provided below is the result of combined efforts of Tom and his hired financial consultant.
8.1 Important Assumptions
8.2 brake-even analysis.
8.3 Projected Profit and Loss
8.3.1 profit monthly.
8.3.2 Profit Yearly
8.3.3 gross margin monthly.
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
8.5 Projected Balance Sheet
8.6 business ratios.
Download SaaS Business Plan Sample in pdf
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Saas Company Business Plan (Why You Need One & How to Write It)
Starting a saas company may sound like an easy thing to do. However, it's not the case since starting such a business involves a lot of things to settle. In general, there's so much more to starting a saas company that you need to have a business plan to be successful. Otherwise, you will end up being overwhelmed with so many things.
Now, if you're wondering about a business plan and how it's essential as you start your saas company, you've come to the right place!
A business plan for a saas company generally illustrates your goals, financial strategies, research, and everything else involved with your business. It contains the strategy for guiding and helping you start and run your business.
In this article, we'll talk more about the business plan for a saas company and every concern you may ask about, mainly how to write one.
Without further ado, let's get into it!
What is a saas business plan?
A saas business plan is a document that defines (in detail) a saas company' objectives and how it plans to achieve its goals.
For instance, a saas company typically needs an initial investment. As such, you need to include the said amount in your plan and how you can acquire such, either from your pocket or through a business loan or any other financing option (learn more about a saas company financing .
Profit and goal are other examples. It is also included in your business plan as a goal to achieve within a set period, usually within months.
Overall, the business plan is the document that lays out a written road map for the saas company from a marketing, financial, and operational standpoint. You should also have a basic idea about a saas company profitability .
Business plans are essential for startups and established businesses, and the saas company is no exception. Every business, regardless of the type, should have one.
Further, business plans are critical documents for internal and external audiences. For instance, you may use these plans to attract investors before establishing a track record. It can also help you secure loans from financial institutions.
Business plans can also help keep your saas company' leadership team on track for meeting established goals and on track with strategic action items.
Overall, business plans are particularly helpful for new businesses, including the saas company. Ideally, goals should be reviewed and updated periodically to reflect achievements or changes. When an established business changes direction, a new business plan is created.
Why do you need a saas business plan?
You need a saas business plan for several reasons. However, the main reasons are to help you establish your company, set the goals you want to achieve, and evaluate your saas company’ status after a specific timeframe.
As a general rule, your business plan serves as a guide. Revising and adjusting this plan may also be necessary as circumstances change throughout your actions.
You should know that if you plan to apply for a business loan (which any knowledgeable entrepreneur should do), lenders want to see a business plan.
For your saas company to succeed and meet your goals, you need a precise and robust business plan.
Learn more about starting a saas company :
Where to start?
-> How to finance a saas company? -> How much does it cost to start a saas company? -> Pros and cons of a saas company -> How to get clients for a saas company?
-> Other saas company success stories -> Examples of established saas company -> Marketing ideas for a saas company
-> Profitability of a saas company -> Saas company tips
How to write a saas business plan?
When creating a business plan, you need to include more than just the steps on how you start. It also includes how you will sustain it and how you can develop it even further as you move forward. Simply put, it should include everything related to your saas company.
If you’re wondering how to write a business plan for your saas company, here are the things you need to include:
1. Executive summary
The executive summary in a business plan includes a gist of your entire saas company. Further, it includes the general reason why it will turn out successful.
2. Company description
The company description details every information about your saas company. As such, it includes your advantages over your potential competitors and the things that make your business stand out above other similar companies.
3. Organization and management
The organization and management are the part of your business plan that states the structure of your saas company.
It includes the entire staff, especially the ones who will run your saas company, whether you’re solo, with a partner, or with a group of people. Simply put, it shows what type of business you run and who is responsible for it.
4. Market analysis
The market analysis is the part of your business plan that shows your perspective on the industry where your saas company belongs.
Since it’s about marketing, it includes your target market or customers. Further, it includes your potential competitors since they can take away your potential customers.
5. Financial plan
The financial plan is the part that concerns everything related to your saas company finances. This document consists of a detailed financial statement and an analysis of your finances and the required funds .
6. Marketing strategy
The marketing strategy outlines the concerns about reaching out to potential customers . Moreover, it demonstrates how to expose the products and services your saas company offers.
Besides attracting customers, it also includes strategies for gaining new customers and keeping the regular ones from leaving. Finally, it outlines strategies for increasing sales for your saas company to grow.
What makes a good saas business plan?
A good saas business plan serves as a roadmap that outlines the strategies and actions required to achieve the goals and objectives of a business. It typically includes information about the business's products or services, target market, competition, marketing and sales strategies, operations, financial projections, and management team.
Here are some key elements that make up a good business plan:
- Executive summary : This is a brief overview of the entire business plan, summarizing the key points and objectives of the company.
- Company description : This section provides detailed information about saas company, including its history, mission statement, and legal structure.
- Market analysis : This section should describe the industry and market that saas company operates in, including target customers, competitors, and market trends.
- Products or services : This section should describe the products or services saas company offers, highlighting their unique features and benefits.
- Marketing and sales strategies : This section should detail the strategies that saas company will use to promote and sell its products or services, including pricing, distribution, and advertising.
- Operations : This section should outline the day-to-day operations of saas company, including manufacturing, production, and distribution.
- Financial projections : This section should provide detailed financial projections, including income statements, balance sheets, and cash flow statements.
- Management team : This section should introduce the key members of saas company's management team, highlighting their qualifications and experience.
Overall, a good saas business plan should be well-researched, realistic, and focused on achieving specific goals and objectives. It should also be adaptable and able to evolve as the business grows and changes over time.
Frequently Asked Questions
Can i write a saas business plan myself.
Yes, you can write a saas business plan yourself. It requires a clear understanding of your goals, target audience, competition, financial projections, and marketing strategy. Research successful plans and use templates. Ensure it's comprehensive, realistic and seek help if needed. Ultimately, a good business plan sets you up for success.
How long should a saas business plan be?
There is no standard length for a saas business plan. It can range from a one-page summary to a comprehensive document of 50+ pages. The length depends on the complexity of the business, audience, and purpose. A concise plan that covers key elements is often more effective than a lengthy one.
In a nutshell, creating a business plan for a saas company is a bit complicated, but you still need to do it.
Overall, a business plan will help you make the right calls, obtain the funding you need, and strongly start your new saas company. As such, you must make a robust and precise one.
The six parts we included above should be handy throughout this process. With this information, you can begin writing your business plan and see what it takes to become a professional entrepreneur.
- 10 Tips For Starting A Successful Saas Company (2023) 1 of 9
- How Profitable Is A Saas Company? (Updated for 2023) 2 of 9
- 51 Marketing Ideas For A Saas Company (2023) 3 of 9
- How to Get Clients For A Saas Company? (In 2023) 4 of 9
- How To Finance A Saas Company?  5 of 9
- 72 Trending Saas Company Businesses  6 of 9
- 39 Pros & Cons Of Starting A Saas Company (2023) 7 of 9
- How Much Does It Cost To Start A Saas Company? (In 2023) 8 of 9
- 64 Amazing SaaS Company Success Stories & Case Studies  9 of 9
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SaaS Business Plan
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Executive Summary executive summary is a brief introduction to your business plan. It describes your business, the problem that it solves, your target market, and financial highlights.">
Scope creep. The consulting client uses the approval process to demand more consulting without more payment.
A professional consulting business normally involves a proposal — also called an engagement letter — and acceptance. The accepted proposal becomes the agreement between consultant and client on what’s to be done, when, and for how much money.
During fulfillment, a reference to the original engagement is a valuable tool for tracking progress and managing ongoing work, and avoiding scope creep. It’s a critical missing link for most consultants.
Overture compiles proposals incorporating building blocks of content including text, tables, and milestones, component tasks, and date and deadline data, with ongoing progress tracking, tickler functions, communication with clients, and billing for progress. The key differentiator, secret sauce, is easily managed tools and a conceptual framework for ending scope creep.
Prospects include single professionals, small professional firms, and individuals in large firms. Pricing makes the software accessible to different levels, as little as $19.95 a month for the individual account.
There are several good proposal management offerings .
- Quote Roller
None of them addresses scope creep like Overture. Most are priced well above us, few have the features we have.
The real competition
The real competition is using existing word processing tools combined with project management and billing.
We have a great team including three proven successful startup veterans who are in a position to invest their own funds to cover start-up investment in the middle six figures. All three have strong experience and track records related to software and consulting.
We are value-driven. We believe that we’re doing something that needs doing, will help our users succeed, and will be the best possible way to spend the money they spend.
Our priority for the foreseeable future is high growth, not profits. We want to achieve the kind of high valuations that make a good opportunity for us and our investors.
Financial Highlights by Year
We plan on a capital investment of $2.5 million.
- Our three founders are able to fund $240K of early seed money to build the business enough to secure a round of local angel investment.
- We plan to take in $750K angel investment in the Spring of 2020.
- Series A venture capital in Spring of 2021.
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