Starting a SaaS Business: 13 Tips That Will Set You Up For Success

Mallory Merrill

Advice for Startups

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SaaS is booming; Gartner forecast that global revenue from SaaS will grow from $73.6 billion in 2018 to $266.4 billion by 2020. There’s certainly a huge opportunity, but there is also a lot of competition and plenty of ways to make mistakes. That’s especially true when you have a low budget – you have very little capability to absorb errors until you’ve started generating revenue, which could be months away.

We’ve created SaaS products for a wide variety of clients, and we understand first-hand what it takes to build and grow a SaaS business. We’ve grouped our tips into three sections that deal with tips you need to know before you start development, tips for developing your product successfully, and tips for growing your business post-launch.

Let’s dive in:

Before You Start Developing Your Solution

These first tips deal with things you need to think about before you start spending money on development:

Tip 1: The Importance of a Testing-First Mentality

Netflix started as a mail-order DVD rental company, Tiffany and Co began as a stationery business, and Twitter started life as Odeo, a network for finding and subscribing podcasts. All these businesses tested, experimented, changed and adapted – and so must you; where would they be if they hadn’t changed course?

Don’t make the mistake of falling so in love with your idea that you can’t adjust it or give it up for a different idea. It is worth remembering that until you have feedback from the marketplace, your idea is just that, an idea; a best-guess at what the market needs. If it’s going to lose money, you need to find out fast and with the least possible expense so that you can adjust or move on to a new product.

Discovering this requires both early and ongoing testing of your products and ideas. And the best tester isn’t you, your friends, or even past colleagues – all of whom have a vested interest in finding something nice to say – it’s the market. Building a great piece of software is an iterative process: create something, get market feedback, and adjust. Then test again.

Tip 2: Get Ready To Wear Many Hats

Unless you’re a jack-of-all-trades, it’s likely that you have one or two main business competencies – you might be a marketer, a salesperson, or a developer, for example. When you start your own SaaS business, you will need to embrace a wide number of additional roles: you’ll be head of marketing, customer support, product development, and everything in between.

If you’re a developer, we’ve got an uncomfortable truth for you: as the visionary behind your product or service, your time may be better spent leading the business than it is coding for hours on end. You need to set aside your favorite hat (development) and try on a few others (marketing, sales, finance) for at least a few hours each day, even if they don’t fit quite so well.

Perhaps the biggest and most uncomfortable of these hats is marketing. Finding customers is one of your biggest priorities: without them, you don’t have a business. That means meeting people, making calls, and networking as much as possible.

Tip 3: Create Your Elevator Pitch

There are a few things you need to do before you start developing your product, and the first is to nail your elevator pitch. Unless you’re applying for finance or investment, you won’t need a long business plan at this point, but you do need clarity on the direction your business is taking.

You need to boil your idea down to the very basics: Who is your audience? What problem will you solve, and how? Try to explain your business in one sentence:

{Company name} helps {target market} solve {problem} by {solution}.

This is going to come in very useful. Firstly, you’re going to be talking to a lot of people about your business over the next year, and you’ll come across as far more professional and credible if you can explain the value of your business succinctly.

Secondly, this simple statement gives you something to test. Is this a problem your target market have? Is your solution the correct one? Testing this hypothesis should start before development – see Tip 5.

Tip 4: What’s Your Advantage?

You’re rarely going to be the first solution to the market, but that’s not always a bad thing. If the problem you are trying to solve is common, it is likely another business has already tried. Competing solutions show that there is a genuine problem and demand for a solution, and they also give you something to beat.

If you are competing with other businesses, you will need something that makes your business stand out. This could be:

  • Targeting a specific section of the market in which you have strong experience

  • Providing a better (quicker, faster, cheaper, more complete) service than other businesses

  • Using a different pricing model (service vs. product)

  • Delivering superior customer service

Tip 5: Testing Your Hypothesis

You’ve found a problem you want to solve, but is there a market for it? CB Insights report that 42% of SaaS businesses fail because there is not enough need in the market. By testing your hypothesis before you begin development, you adhere to our testing-first mentality (Tip 1) and ensure you lose as little money as possible.

Follow these simple steps:

  • Step 1 – Find people who need your proposed solution

  • Step 2 – Figure out the best way to get in contact with them

  • Step 3 – Contact them and find out if they have the problem you think and if they are interested in your proposed solution

The more people you reach out to the better as some won’t reply. What you are looking for is enthusiasm for your project. A person who says, “I might be interested” is probably being polite – we want to see a real interest.

If a good proportion of the people who reply are enthusiastic about your project that is a great sign that you are on the right track; these people could be your first customers, so you want to keep in touch with them. Keep talking to them and find out how they currently deal with the problem (this might give you information on possible competitors) and what value they put on the solution.

Tips For Developing Your Software

These next tips relate mainly to the development phase:

Tip 6: Use Agile Development

From Tip 1 onwards we’ve been advocating testing your business model and assumptions as quickly and often as you can. Development is no different.

An agile methodology uses fast sprints to deliver regular functioning versions of your software. Instead of working on everything at once, you start with the most basic working prototype and then continually improve it.

Agile development has many advantages for SaaS:

  • You will get to market faster.

  • You can react to feedback from your customers quicker.

  • It’s easier to change direction if you receive new market data.

  • Development costs are more predictable.

  • You have a clear roadmap for future development.

  • Emphasizes high-quality testing.

As product developers, we see the value of using agile methodology every day while working to build high-quality solutions for our customers.

Tip 7: Build Your Audience As You Build Your Product

Unless you’re fortunate enough to have secured investment, big press reveals, or support through an accelerator program; it’s likely your initial marketing budget will be quite small. Without a big budget, you’ll need to grow your audience more organically – and that takes time.

If this is the case, you will benefit from marketing as early as possible. If you’ve followed the above tips, you’ve already started to build your audience. In Tip 4 we suggested you reach out to prospective customers to get their feedback – this was also your first steps in marketing.

Your objective is to scale Tip 4, find more prospective customers, and then engage with them throughout the development process. If your market research is correct, some of these individuals and businesses will be highly interested in the solution you’re creating. Get them on an email list, reading your blog, or engaging on social media; they could become your first customers.

Tip 8: Hiring? Make Them Count

Early hires are a risk if your revenue is not yet up to speed - it means their salary is coming out of start-up funds that would otherwise go towards development or marketing. This means that when you do need to make it hire you need to make it count; both the cost and the potential impact of your business is high.

If you do need to hire, you want to choose individuals with a broad range of skills and competencies. Think ‘t-shaped’ hires: deep skills in one discipline, supported by a broad knowledge and interest in other areas. This means that even if your business changes direction, they will still be able to add value.

Launch and Post-Launch Tips

This final batch of tips deal with how you can ensure your product grows after launch:

Tip 9: Turn Your First Customers Into Brand Ambassadors

Unless you’ve got a big launch, you’re likely to start with just a few customers. This isn’t great for revenue, but with the right focus, you can turn this to your advantage.

Your main objective is to create brand ambassadors. You do this by rewarding their early investment with first-class support. Give them your attention now, and they’ll pay you back with glowing first reviews, great testimonials, and your first word-of-mouth marketing.

You also want to use their experience to improve your product. Find out about the services, products, and information they need from you to solve their problem and then use this feedback to guide iterative improvements of your product.

Tip 10: Data Is Your Friend

You don’t have to rely solely on feedback from customers: by tracking their behavior, you can learn a lot about how they use your software and which features are valuable to them. You can use this data to:

  • Spot which problems are more likely to cause a cancellation

  • Get an early warning of customers who are at risk of canceling

  • Identify customers who may be ready to upgrade

  • Find the features that drive the biggest value to customers

Tip 11: Onboarding Processes Save Time And Reduce Churn

Onboarding is a vital part of the customer acquisition process. Investing in good onboarding resources up front will save hours of customer support time, improve the customer experience, and reduce churn. The overall objective is to help the customer start experiencing the value of your product as quickly as possible after purchase.

To meet that goal, you need to provide the tools and information that enables your customer to solve their problem. When we talk about the customer’s problem, we don’t mean finding a particular setting, or even performing a certain task; we are talking about the person or business problem that led them to sign up to your service in the first place.

For example, if they signed up to a tool that enabled them to market on social media more efficiently, your onboarding processes should be created with the intention of enabling that as quickly as possible.

Depending on your service and business model, this might require:

  • Educational email campaigns

  • Instructional videos

  • Consulting

  • Done-for-you setup

  • Tooltips

For larger, more complex B2B offerings, there may be several reasons why someone signed up to use your service. In this scenario, it is essential that you tailor your onboarding process to the reason they signed up.

Tip 12: Marketing – Don’t Try To Do Everything

Facebook, Pinterest, LinkedIn, PPC, Twitter, content marketing, YouTube… these are all good methods of marketing a business, but that doesn’t mean you should use all of them. Be very wary of diving head-first down the marketing rabbit hole – you can come out believing you have to do fifty different things to grow your business.

If you’ve done your market research properly, you already know who your customers are and where you can find them. Your task is simply to find one or two methods that drive the highest ROI for your advertising spend – then master them. Keep investing in and growing that marketing method until you have maximized it.

There are several benefits to this approach:

  • Knowledge – By becoming an expert in one or two marketing methods you will learn advanced tactics that will improve your ROI.

  • Economies of Scale – Most marketing activities become cheaper per lead as you scale them.

  • Time – You’ve got a lot to do and your time is a valuable resource. Learning and focusing on just a few activities is far more time-efficient than trying to do everything at once.

Tip 13: Going Viral

We’re not talking about posting funny cat videos here: viral is about encouraging your customers to share your product with lots of people they know. If enough of them then share your product as well, you’ve gone viral – a self-perpetuating marketing machine running on word-of-mouth.

There are two keys to achieving this. Firstly, you need a great product and fantastic customer service. It doesn’t matter how many times your customers share your product if the people they know aren’t interested, and you won’t get any shares at all if you provide them with a poor customer experience.

Secondly, you need to provide the right reasons for customers to share. A small percentage, your most enthusiastic customers, will share without any encouragement, but most won’t. Here are a few ideas you might want to try:

  • Just Ask! – Some customers will share your product if you ask them, with no other reward. Add sharing buttons to your post-checkout thank you page or ask them to share when you email them after signing up.

  • Reward Them – Creating a referral scheme encourages customers to share. Possible rewards include free months, monetary incentives, or free consultancy. Get creative and find a reward that incentivizes your customers and provides you with a high ROI.

  • Jump The Queue – If your product is on a waiting list or limited beta release you can jump people to the front of the queue as a reward for sharing on social media.

Bonus Tip: Save Money By Using Software Development as a Service

You’re used to software as a service (you better be – you’re researching building one!), but did you know you can purchase software development as a service?

Instead of charging a fixed project fee, we operate on a month-by-month subscription model. Our customers have complete flexibility: we don’t lock you into a contract and you can scale the service they receive up or down as your requirements change.

With this model, there’s no huge upfront commitment, and you only pay for what you need. We’ve found that our customers love this subscription model; it’s an efficient, cash-flow friendly, and perfect for SaaS development.

Are you looking for a development team? Schedule a call with DevSquad today

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