Software as a Service (SaaS) has exploded, changing how many of you do business.
With SaaS, you can offer software applications and services in the cloud. This makes it easier and more convenient for customers to access the software they need anywhere.
SaaS can be profitable as it typically involves a subscription-based business model, which can generate a steady stream of recurring revenue. However, SaaS markets can be highly competitive, which means your business needs to be able to offer unique and valuable services customers are willing to pay for in the long term.
Building and scaling a successful SaaS (Software as a Service) business requires hard work, strategic planning, and the flexibility and will to adapt.
Here are five steps to help you build and scale a successful SaaS business:
1. Identify a problem and create a solution
Identifying a problem and creating a solution to fix it is the first step to starting any business.
Don’t just assume that because you’re providing something useful, customers will be interested in using it. It’s up to you to determine if your product is something people want.
You build SaaS businesses by identifying an important problem in your customer’s life and helping them solve it. One difference between selling SaaS and any other product is that your customer may not know they have this problem until you show them they do.
Let’s say you have an idea for a new SaaS product that helps small businesses manage their inventory online.
The first step is identifying the problem your product solves—small businesses have trouble managing inventory—and then looking at how many customers are dealing with this problem.
You may need to consider how much they’re paying now: if they’re paying $10 per month for a subscription service that doesn’t solve their problem, then paying $15 monthly for your solution that works may seem like a bargain.
Here’s another example.
Before CEO Dennis Kayser co-founded Sage Intacct customer Forecast, he worked on e-commerce projects for a global technology provider.
Dennis discovered a big problem dealing with chaotic projects that never came on time or within budget. The problem was that teams were always using spreadsheets for delivery, which, although widely used for resource and project management, quickly turned into mishmashes of data.
Dennis investigated project and resource management systems and found nothing suitable for the mid-market business segment. It was a problem needing a solution, which Dennis sought to create.
Dennis 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 and machine learning.”
You can use the same techniques as any other business—customer interviews, surveys, market research—to identify problems that your customers are having.
Do the work and speak to customers to understand their needs and pain points. With this information, refine and adapt your potential solution 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’ve identified a problem and come up with a solution, the next step is to build a product that meets those needs. This can be especially difficult if you’re building a SaaS product, as many technical skills are required.
If you’re not technical or don’t have any experience with coding, it’s important to bring in someone with those skills. There are plenty of freelancers and agencies out there who specialize in software development, so investigate those options before deciding to hire an in-house developer.
You may already have a huge list of things you want to build and features to include. However, it’s important to prioritize features based on users’ likelihood of using them. The more a feature appeals to your target audience, the higher it should be on your priority list.
Often, SaaS startups start with a minimum viable product (MVP) that contains core functionality and addresses the most pressing needs of your 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.
A business early in its growth, WCKDR RZR is a financial startup working on technology that aims to automate global data governance compliance using machine learning. In 2022, WCKDR RZR secured $1.2 million in funding from angel investors.
Founder Chuck Texieira said that in building its first product, WCKD RZR stepped back and started from a blank piece of paper. He says, “First, we said that everyone wants 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 organization’s databases and catalogs 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
Choosing the best team will be your biggest asset when creating and delivering a powerful SaaS product.
However, it’s important to have a clear vision of what kind of culture you want to build at your company before looking for new hires. Then, like any other business, you’ll want to hire a dedicated team of talented individuals to help develop, market, and support your product.
As you grow, you’ll need to hire team members with software development, marketing, sales, and customer support expertise. You need to ensure that the people you hire have the necessary skills, but also fit in with your culture and work well with others.
Here are some tips on recruiting good people:
- Be willing and prepared to pay what they deserve. Some of the best people are worth more than their weight in gold.
- Look at as many people as possible. When looking through applications or resumes, don’t just focus on the ones with fancy degrees or impressive titles—look at everyone who has applied! You never know when some random person will come along and change everything about your business.
- Ensure that every new hire gets adequate training before working on projects by themselves. This will help them get used to things before being made responsible for anything big.
If you’re successful, scale and reach Series A, 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.
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.”
Forecast brought in a Chief Financial Officer (CFO), Simone Goodman, to support the acceleration and growth of Forecast into the US market.
Simone 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 must actively secure your customers’ loyalty to ensure they remain active users of your SaaS product.
That means you’ll need to develop a marketing strategy that keeps them engaged and excited about the value of your product. You’ll also need a sales team to build relationships with potential customers, so they understand how your product can be useful and get them signed up for it.
You must ensure they’re getting the most value out of your product and feel valued by you as an organization.
This means investing time in understanding their needs and tailoring your messaging accordingly—and ensuring that when they interact with your team, they feel like they’re heard by real people (instead of just another faceless company).
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, winning a company’s business through excellent service and meeting its needs better than any other competing software.
From there, you can earn more business across the organization and get bigger deals—you have landed and are in the process of expanding.
You want to build a long-term sales strategy, creating long-lasting customer relationships 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 innovate, agile and adaptable
One of the big advantages of running a SaaS business is that it offers opportunities to innovate with your products. The more you know your customer, the greater your opportunity for innovation and creating value for them.
It’s important to understand that every interaction with a customer 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 superior business outcomes.
IDC sets out the idea of an ‘innovation flywheel’, which you can follow to ensure your SaaS development or investment results in good business outcomes.
‘The Spark’—the innovation flywheel starts with an idea, which starts the innovation process. You must 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, using 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 want to buy SaaS.
You can measure results and iterate on features, functionality, performance, and reliability. Consider measurement an ongoing process—you’ll need to evolve your metrics and improve your outcomes while regularly analyzing 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 1.
Jonathan Farina, 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 we’ve built cutting-edge technology quickly because we could innovate.”
Grow your dream SaaS business
Running a successful innovative 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 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 customers.
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