Building a SaaS product is no easy feat. Given that launching a SaaS can cost anywhere from $50,000 to $500,000 for the initial launch, it's one of the more expensive types of startups to get off the ground.
But the risk can be well worth the reward. Tech companies boast some of the highest revenue per employee figures. Without the need for physical products, warehousing, and logistics, software is highly scalable. You can keep your expenses relatively stable even as you drive more customers and revenue.
To increase your chances of success, you need to develop a prototype and test it with real users. You also need To avoid the common mistakes that tank SaaS companies. In this guide, we’re diving into all things SaaS so you can learn how to develop a successful product and company.
What is a SaaS product?
A software-as-a-service (SaaS) product is cloud-based software that is delivered via a subscription model. Most SaaS products function as web-based applications that can be accessed via any desktop or laptop computer, but some SaaS companies also offer native mobile apps or mobile-optimized, web-based apps.
Examples of B2B SaaS products include accounting software like QuickBooks and email marketing software like Mailchimp, while examples of B2C SaaS products include budgeting software like EveryDollar and novel-writing software like Novel Factory.
Why are SaaS products worth building?
The short and skinny of it is that SaaS products have the potential to be highly profitable. Due to the nature of the business, you can build millions in annual recurring revenue, without always having to hustle to get new customers every month.
SaaS products boast an average revenue-per-employee of $145,000 according to Statista. For the fast food industry, on the other hand, that amount is just $55,000.
Most traditional businesses also have a lot of overhead in terms of rent, utilities, inventory, equipment, salaries, etc.
But SaaS companies need the bare minimum of expenses on top of software development, sales, and marketing.
And with SaaS, as you acquire new customers, you’ll need to purchase additional servers and be more mindful of cybersecurity. You don’t need to purchase more inventory the way you would with physical products.
Types of SaaS products
It’s important to understand the type of software product you want to build before you dive in. And we’re not talking about industry. We’re talking about the breadth and depth of your product and how you see it evolving long-term.
Now, you won’t be able to forecast the future of your business from the beginning, but it’s smart to get a sense for the type of business you want to build. This way, you can better identify essential features and direct competitors.
Horizontal niches mean that these tools can be used by anyone, from business owners to employees.
Vertical niches mean that the tool is designed for a specific audience or industry.
Narrow-scope horizontal tools
A narrow-scope horizontal tool allows anyone to do a small, specific task.
Example: Curator
A good example of this is Curator, a SaaS product that lets you embed your social media feed on your website so that new content shows up on your site according to your moderation rules.
Comprehensive horizontal platforms
Comprehensive horizontal platforms are still designed for anyone to use, but they help you perform a lot more tasks.
Example: Mailchimp
For example, business owners, assistants, and marketing professionals from all different industries can use Mailchimp to tackle dozens of different marketing tasks.
Narrow-scope vertical tools
With a narrow-scope vertical tool, a specific audience can achieve a specific task.
Example: Clearscope
Clearscope is a content optimization tool designed for SEO content writers. They can discover secondary keyphrases and get a content score before publishing new blog posts.
Comprehensive vertical platforms
Comprehensive vertical platforms are all-in-one tools that offer as many features under one roof as possible—but only for a specific target audience.
Example: DesignFiles
DesignFiles offers dozens of tools for a specific vertical (interior designers). The feature set extends to designing, client management, invoicing, reporting, and more.
When you understand these key differences, you’re more likely to build a SaaS business that fits your level of ambition and your passion.
Are you passionate enough about a specific audience to build every tool they might ask for?
Is there enough room for opportunity in your horizontal niche?
Or are you better off building a tool with a narrow-focus so you can create a lifestyle business that doesn’t require the stress of VC investors to beat the market?
These are the sorts of questions you need to ask yourself. Have a clear understanding of what type of SaaS product you’re building initially and how it might evolve over time. If the market demands more effort than you’re willing to give, rethink your initial strategy.
What constitutes a minimum viable product?
A minimum viable product (MVP) is the first version of your product that you launch to your audience.
A true MVP should only contain the base features required to convince someone to pay for your product. No more. No less.
Most software development agencies pitch you a big MVP project so they can lock you into a large contract.
At DevSquad, we whittle down your MVP as much as possible, prototype it, test the concept with real users, and launch it in just 3 to 6 months.
We build your entire MVP around a pilar feature—the one feature your audience has to have in order to give up their credit card information. We focus on launching this feature as quickly as possible so you can start driving revenue and collecting more feedback.
Sign up for the 1-Page SaaS Blueprint challenge to develop your own SaaS business plan. Or, click here to learn about our unique approach to MVP development.
What is the best framework when building a SaaS product?
B2B SaaS entrepreneurs should strongly consider choosing Laravel as their development framework. Laravel boasts excellent documentation that is both accessible and comprehensive, offering clear guidance to developers and minimizing the likelihood of architectural mistakes. This facilitates smoother project onboarding for new developers and ensures a higher standard of software quality.
Laravel prioritizes the developer experience (DX), providing a suite of command-line tools that enhance productivity and enjoyment during the coding process. The focus on DX has made Laravel a favorite among skilled developers.Plus, Laravel comes with pre-built fundamental SaaS features, such as Laravel Socialite for easy authentication with popular platforms like Google and Facebook, saving developers significant time and effort. These features are first-party packages developed by the Laravel core team, which means they’ll be reliable in the long term without you having to worry about third-party vendors going out of business. ensuring their reliability and longevity without dependency on third-party providers.
How long does it take to build a SaaS product?
Most SaaS MVPs take 3 to 5 months to build. You’ll then update features and add new features according to competitor research and user requests.
It should take no longer than 6 months to go from ideation to successful launch and start collecting real revenue. Any longer and it’s a sign that your MVP isn’t as small as it should be, that your development team doesn’t have the skills or management playbooks needed to get the project across the finish line, or that your agency is trying to fleece you.
Unfortunately, many internal teams and agencies will take 9 to 12 months to build a product. This puts you at a disadvantage because you’re at risk of running out of capital or losing a ton of market share to faster competitors.
Check out a few stories of fast launches:
How to build a SaaS product step-by-step
Follow these steps to building a SaaS product and you’ll increase your chances of developing a product that meets a real market need and stays on budget.
Fail to follow these steps and you might find yourself in the SaaS horror story hall of fame. If you’re feeling wrongly optimistic, just go ahead and read this list of 179 expensive SaaS failures.
We know that there are no guarantees, however there is a clear process that successful SaaS entrepreneurs follow, and this is it.
1. Ideation
The first step to building a SaaS product is of course to either have an idea, or discover a painful and problem and then come up with a technological solution to fix it.
There’s far more opportunity in B2B SaaS, so start there. You can build a SaaS product that solves problems you’ve experienced in your own business, or that friends, coworkers, or family members have told you about.
You could also pick any industry (literally any industry), and shadow someone for a day, get a job, or interview someone in order to find out the problems that they need solved.
Once you’ve got an idea, make sure to validate it with our step-by-step process for vetting SaaS ideas.
2. Prototype creation
All of these steps to building a SaaS product exist for a reason. Creating a prototype satisfies a few key requirements:
Provide feedback before development begins: A prototype gives you the option to give feedback to your developers before they actually build your product. Whether you use an experienced prototype creation team, or piece together your own team and manage them yourself (not recommended unless you’re experienced), it will be more affordable to give feedback on a prototype than an actual build.
Get feedback from target users: In the next step, we’ll go over prototype validation. For now, all you need to know is that getting feedback from target users before you build is a key reason why you should make a prototype first.
Helps you test out your development team: When working with new entrepreneurs, we create the prototype for them first, then let them decide if they want to continue with us as their SaaS developers. We believe in the quality of our work enough that we don’t try to sell development straight from the jump. For you as a SaaS entrepreneur, you should use the prototype process as a way to vet your developers skill, responsiveness, proactive communication, expertise, etc.
Gauge your interest and commitment level: Let’s be honest, a lot of businesses fail simply because the entrepreneur decides they’re not right the person to tackle this idea or issue. There’s nothing wrong with that but it’s better to find out sooner rather than later.
Your prototype should be high fidelity, meaning it looks as close to the finished UX as possible. You can open it up in a web browser or large tablet, and see the menu and dashboard.
Your prototype designer should also be able to make a few features partly functional. You could click around and see some mock data built inside, that way you get the feel of using your software as if it were fully functional.
3. Prototype validation
We based Sprint Zero, our prototype creation workshop, off of Google Venture’s Design Sprint Process, partly created by Jake Knapp.
Essentially, it’s five steps: map, sketch, decide, prototype, test.
When you’re validating your prototype, you’re in the testing phase. The best way to test it is to show it to users and get their feedback. Using your personal network, door knocking, and cold outreach, build a list of 10 - 15 people who match your profile for a target customer.
Send them your prototype and record their interactions with it using Lookback.io so that you don’t have to take notes on their feedback.
Ask them what they think the product does
Ask what they think about the overall design
Ask them to use the product to do X (what your product achieves)
Ask them if they think it can help them achieve X
Ask them if they think X is something they need help with
Ask them if there’s something they need help with more than X, or in addition to X
Ask them to navigate around the prototype and talk their way through it: what they see, what they assume features are for, what they’re confused about
At this phase, you should already have vetted your idea, but you still want to take the opportunity to gain feedback on your overall concept, not just on product design.
You can also use these additional tools and processes to vet your concept before proceeding. You can do email and LinkedIn outreach to learn more about your target users wants and needs, and you can launch a form to gauge interest level like Joel Gascoigne from Buffer.
Make necessary changes to your prototype and you’re ready to proceed.
4. Backlog creation or approval
With an approved prototype, you’re ready to create your backlog. A backlog is a list of everything your development team will be doing. It should be both high level (the necessary steps along the course of development) and detailed (containing estimated time, purpose, development platforms and languages used, etc.).
If you’re working with an experienced development team, they will create the backlog for you, and you will need to approve it. They should explain to you why everything is in the backlog to make your decision easier.
Because you’re in the MVP stage, they should only be building the necessary features in order to launch and gain paying customers.
This is the stage at which you have the chance to hack at your idea. Is it truly an MVP? Are there features that can wait until after you’ve launched?
5. Development and UX design
So, how long does it take to build a saas product? That depends. It could take anywhere from 2 months to 10 months, and possibly longer, but for most SaaS MVPs, it shouldn’t take longer than 6 months. We build MVPs in 3 months on average.
Faster development not only saves money on development costs, but it also increases your speed to market, meaning you can launch to beta users and then paying customers much faster. The quicker you get to MRR the better.
During the development and UX design phase, your development agency should give you regular check-ins.
With our clients, we have the dedicated product manager check in every day with updates. If anything is taking longer than expected, our clients are the first to know, that way they can make adjustments to the feature set dependant on their budget and amount of runway.
Very rarely do new entrepreneurs succeed with managing developers, designers, QA engineers, product managers, and DevOps engineers all on their own. That’s why we include management of a full agile team in our process. 
6. QA testing
The next set to building a SaaS product is quality assurance testing. There are lots of different types of quality assurance testing, but they all fall into two main categories: manual testing and automated testing.
Manual testing: QA testers essentially bang on the app looking for bugs. They may do exploratory testing and use it just like a real user would, or they might go through a list of manual tests, executing each function and each variation in order. Then they log issues in a platform like Jira or Github so developers can address them.
Automated testing: QA engineers write scripts or use a low-code automated testing platform to create tests that run 24/7 and generate reports with issues.
We’ve put QA testing as a separate step, because there is a large amount of testing that happens before deployment. However, the best development teams will run testing on each feature and user flow as it is built.
7. Deployment
After a solid round of QA testing (in addition to testing that was done as each feature was built), it’s time to deploy the software to the cloud. This is where a DevOps engineer comes in.
There are many different deployment models that can work for SaaS, including multi-tenant servers, single-tenant servers, private cloud, and on-premise data center. While many enterprises will want to manage a private cloud, new entrepreneurs are typically better off with a vendor managed solution. We recommend AWS Lambda for a scalable solution.
8. Continuous testing and DevOps management
High-performing product teams deploy 200 times as often as low-performing ones. The Etsy team once deployed 80 times in a single day while Amazon deploys thousands of times in a single day.
The most successful SaaS products and mobile apps are deployed continuously, and they’re also tested continuously. You should have proven agile processes in place for both.
9. Building new features
After you go to market, you should immediately have a backlog of new features to build. Why? Because if you went to market and felt like you built enough, then you didn’t create a true MVP.
You likely already have some basic features and user flows that need to be built. You’ll also need to take feedback from beta users and customers about what needs to be built. Just send them a simple email and ask them to reply with what features they’d like to see.
You can also send a survey, use a feedback tool like Hotjar, or conduct user testing interviews.
Building a SaaS product is incredibly complicated.
Entrepreneurs who try to do it themselves face these common problems:
Don’t know how to manage different roles to improve collaboration and efficiency among developers, designers, QA testers, DevOps engineers, and product managers
Developers aren’t using technology that saves time and money on development (low-code platforms in combination with custom code)
Team doesn’t understand how to build a true MVP and is building a product that is too large
Team is overcomplicating everything from the product to the development to deployment
5 mistakes to avoid when building a SaaS product
If you’re building a SaaS product, you need to be aware of these dangerous mistakes. They can pull your business (and your ego) down to the ground.
1. Not prototyping your product
If you don’t prototype your product and get feedback on it, you’re operating on assumptions. Diving straight into a big, costly development project is super risky.
Not only do you put all of that money on the line, but you risk not even catering to real user needs.
Want to avoid this mistake? Learn more about low-fidelity prototyping.
2. Not conducting user testing
Just developing a prototype and getting feedback from your best friend and your mom isn’t enough.
Do users think your product will solve their needs? Are they willing to use it? Are they willing to pay for it?
To find out, you need to conduct user testing with real target users, whom you can find with a platform and crowdsourcing service like UserTesting.
Want to avoid this mistake? Learn more about user testing during design sprints.
3. Not pivoting quickly enough
One of the deadliest mistakes when building a SaaS product is not pivoting quickly enough. You can become obsessed with your idea or a specific target audience—failing to see a better opportunity right in front of your face.
The only way to find out what truly works is to vet your idea, build it as soon as possible, and start selling it. Or, you could try pre-selling it to see how the market responds. Either way, no matter how much research you do, the truth is that people vote with their money. This is why speed is the name of the game. The quicker you launch essential features and test audience segments, the better.
Want to avoid this mistake? Sign up for the 1-Page SaaS Blueprint Challenge.
4. Not carefully selecting your funding method
Do you need an investor? A co-founder? A loan?
There’s no right answer for anyone. But the wrong funding method could ruin your business, even if the idea is solid and the market is hungry.
That’s because the wrong funding method could cause you undue stress. The wrong partner could convince you to go after an unideal target audience, grow too fast, etc. The list goes on.
Want to avoid this mistake? Sign up for the 1-Page SaaS Blueprint Challenge.
5. Not competing based on your unfair advantages
And lastly, one of the biggest mistakes SaaS founders make is not considering their unfair advantages and what makes them special as a person and entrepreneur. You need to bring your unique self to your business, including your previous experience, your skills, and your scrappiness.
Your unfair advantages will be the secret sauce behind what makes your SaaS product stand out in the market.
Want to avoid this mistake? Sign up for the 1-Page SaaS Blueprint Challenge.
Tips for building a successful SaaS company
Want to make success more likely? Follow these tips.
Choose one or two marketing channels to begin with - Use the simplest, most straightforward way to reach your target audience, like cold email or cold calling. If you can afford it, layer on one marketing channel, like newsletter sponsorships or Google ads.
Focus on the user’s problem more than yourself - Don’t commit yourself to building a business. Commit to solving the user’s problem, even and especially if that means identifying a more lucrative target user. If you can’t continuously, find product-market fit, be willing to pivot or walk away.
Keep your expenses low - To preserve your runway and potential for profit, you need to carefully monitor your expenses. Choose affordable agencies, partners, and services. Default on outsourcing to fully managed agencies with proven results so you can avoid having to manage costly fullytime employees.
Calculate and monitor your break-even point - Make sure to calculate your break-even point (the point at which you will start to turn a profit. Keep track of your revenue and how it compares to your expectations so you always have an eye on your break-even point. This will help you stay lean and get there sooner.
Choose the right development team - Partner with a team that offers all of the talent, experience, and playbooks you need. The company should offer an approach that caters to entrepreneurs and helps them launch high-quality, vetted products quickly.
Ready to take the next step?
Sign up for the 1-Page SaaS Blueprint challenge to develop your own SaaS business plan.
Or, click here to learn about our unique approach to MVP development.
