Software as a Service (SaaS) has exploded, changing how many people do business.
With a SaaS business, you offer software applications and services in the cloud. This makes it easier and more convenient for your customers to access the software they need wherever they are in the world.
SaaS can be a profitable business model, as it typically involves a subscription-based revenue model, which can generate a steady stream of recurring revenue.
However, markets can be highly competitive, which means your business needs to be able to offer unique and valuable services to stand out and succeed in the long term.
Scaling a successful SaaS business requires hard work, strategic planning, and the flexibility and will to adapt.
In this article, we feature five steps to help you build and scale your SaaS business.
Here’s what we cover:
1. Identify a problem and create a solution
Identifying a problem and creating a solution is the first step to starting any business.
Before Dennis Kayser co-founded global technology platform Forecast as its CEO, he worked on e-commerce projects for a global tech provider.
Dennis discovered a big problem dealing with chaotic projects that never came in on time or within budget. Teams were always using spreadsheets for delivery, which, although widely used for resource and project management, quickly turned into mishmashes of data.
He investigated project and resource management systems and found nothing suitable for the mid-market business segment. It was a problem Dennis sought to solve.
He says: “We wanted to build a holistic finance, resource and project management system with a best-in-class user interface and experience. We also wanted customers to be able to connect their existing systems, such as Salesforce, HubSpot, Sage and others, and through that data, use AI [artificial intelligence] and machine learning.”
Carry out market research and speak to your customers to understand their needs and pain points. With this information, refine and adapt your product to make it as great as possible.
Dennis says: “The founders will always be the best sellers of the product because they know the problem in depth. We talked to every one of our first customers to try and understand their problems and how to solve them.”
2. Develop a product
Once you have a solution in mind, you can start building it. But that doesn’t mean you should create the finished article.
Often, SaaS startups start with a minimum viable product (MVP) that contains core functionality and addresses the most pressing needs of the target customers.
You can test your idea and gather feedback from early users, which can help you refine and improve the product before launching it more widely.
WCKR RZR is a financial startup working on technology that aims to automate global data governance compliance using machine learning. In 2022, the company secured $1.2m (£1m) in funding from angel investors.
Its founder, Chuck Teixeira, says that in building its first product, WCKD RZR took a step back and started from a blank piece of paper.
He says: “First, we said that all people want is to use their data and not spend huge amounts of money transforming their systems. And secondly, we fundamentally didn’t believe people should pay money to use their data.
“So, we created software that allows you to connect to data wherever it is and whatever type of database you’re using.”
This led to WCKD RZR building a product called Data Watchdog, data enablement software that sits between an organisation’s databases and catalogues the data in them through machine learning. It allows users to find, govern and access data while remaining compliant over different jurisdictions.
3. Build a great team
You want to hire a dedicated team of talented individuals to support your SaaS product.
With your business in pre-seed stage, you’ll need to hire team members with software development, marketing, sales and customer support expertise.
As your business gets to Series A stage, you’ll probably want to focus on building a leadership team. That’s what Forecast has done, especially as it wanted to accelerate and grow in the US market.
Forecast co-founder Dennis says: “At the start, we had bookkeepers and a handful of different systems. We matured from there. We first brought in a finance director to create more structure, and now we have a CFO with a fully fledged finance team.”
Simone Goodman is Forecast’s CFO. She says: “We’re very optimistic about what comes next. We recently hired a VP of sales and marketing working out of New York. We’ll also be building a New York-based Centre of Excellence.”
4. Develop strong SaaS marketing and sales
There’s bigger complexity with SaaS regarding marketing and sales because a SaaS sale isn’t a one-time event. You need to actively secure your customers’ loyalty to ensure they remain active users of your SaaS product(s).
You might allow customers to try out your product before they buy as part of a ‘land and expand’ strategy. You can show what your product can do, therefore winning business through excellent service and by meeting a customer’s needs better than a competitor.
From there, you can earn more business across the organisation and get bigger deals—you have landed and are in the process of expanding.
You want to build a long-term sales strategy, while creating long-term relationships with customers that will bring in cash over the long run. You’ll need metrics that prove you’re adding and keeping subscribers, and that’s where a finance team will come in.
While SaaS sales focus on acquiring, retaining, and expanding customer relationships, SaaS finance balances growth with gross profit. Your SaaS finance and sales teams need to work in harmony and alignment—business partners that use data and decision-making to keep growing, but in a financially manageable way.
5. Stay agile and adaptable
One of the big advantages of running a SaaS business is that it offers you opportunities to innovate with your products. The more you know your customer, the greater your opportunity for innovation and creating value for that customer.
It’s important to understand that every customer interaction generates information and data (qualitative and quantitative) that provide insights into where and how you can generate new value.
This drives the next round of innovation, leading to deeper engagement with your customer and greater business outcomes.
Global market intelligence firm IDC sets out the ideal of an ‘innovation flywheel’, which you can follow to boost the chances of your SaaS development or investment resulting in good business outcomes.
‘The Spark’—the innovation flywheel starts with an idea, which starts the innovation process. You’ll need to consider the pain points and needs of the users you’re selling to.
Design thinking involves non-linear iterative processes that can help you understand users, challenge assumptions, redefine problems, and create innovative solutions you can prototype and test.
You can build a SaaS application when you have the functionality to deliver value. You might need a mix of technologies—options include cloud marketplaces, professional services, open source, internal code, and even AI-assisted code generation.
How will you distribute your software? You might want to look at industry ecosystems and cloud marketplaces to push SaaS subscriptions. You need to understand how and where your customers would like to buy SaaS from you.
You can measure results and iterate on features, functionality, performance, and reliability. Consider measurement as an ongoing process—you’ll need to evolve your metrics and improve your outcomes while regularly analysing results to make data-driven decisions.
Once you’ve measured the results of the SaaS product, you can iterate, where you improve through repeating the innovation flywheel loop from step one.
Jonathan Farina, chief technology officer (CTO) of WCKD RZR, says: “With a startup, you must build the tools from zero, which seems incredibly daunting. But it’s a huge opportunity because you can learn from your mistakes.
“We like to think that we’ve built cutting-edge technology very quickly because we had the freedom to innovate.”
Grow your dream SaaS business
Running a successful SaaS business requires a clear vision, a well-designed product, and a solid plan for bringing it to market—just like any company with a more traditional business model.
However, you should be aware of the unique challenges that a subscription model brings, and the higher degree of flexibility and scalability you can take advantage of.
By working in an innovative and agile way, you can position yourself for success and create a thriving business that delivers value to your customers.
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