How to Build a SaaS Startup: Step-by-Step Guide

Emerged with the rise of cloud technologies, day-to-day Software as a Service products are conquering their place on the top. 

• What SaaS is and how to build it? 
• What do you need to successfully launch a SaaS product? 
• Is the SaaS market saturated? 
• What mistakes should you avoid if you decide to develop a SaaS product? 

All these questions will be discussed in the article.

Contents:

What is a SaaS Product?
What are the advantages of SaaS products for customers and product owners?
Why create SaaS in 2021? Top trends.
SaaS product development stages
Some questions about building a SaaS product‍
Some mistakes you should avoid building SaaS‍
Bottom Line

What is a SaaS Product?‍

SaaS (an abbreviation from Software as a Service) is a software delivering model where you get the software on a subscription basis. Users use SaaS products through the internet browser or a web-based app. 

The software is hosted on cloud servers of a software provider, in contrast to the desktop-based model where you should install software on your computer or run it on your own server (or hard drive disk). 

The SaaS model is a part of cloud computing. SaaS products are also called “web-based” or “cloud-based” solutions. 

So SaaS is a software program, and you use at least one SaaS solution daily.

Google Docs, Salesforce, Canva, Figma, all CRM-s and CMS-es (Jira, Magento. WordPress), Microsoft Azure, etc. 

SaaS solutions are distributed on a monthly/annual paid basis, which means you should pay for permission to use them every month/year. 

To summarize, to start working with a SaaS solution, you only need to pay the billing and have the internet connection - that’s all. You can use SaaS solutions on any device.  

What are the advantages of SaaS products for customers and product owners?

Advantages of SaaS for customers: 

• Convenience - customers avoid problems with software installation - you only need a working device and a stable internet connection.
• Flexible pricing - customers choose a price plan according to their needs. It can be monthly/annual, premium/standard, etc...
• Save cost on hardware - the data and app files are stored on remote data centers. 
• Automatic updates - SaaS apps get updates and bug fixes through the internet automatically.
  

Advantages of SaaS for product owners: 

• Less piracy - cloud-based apps are less susceptible to software piracy.
• Huge grooving market - the potential customers of SaaS apps are the whole world since SaaS solutions are available from any part of the planet where there is an Internet connection. 
  

Why create SaaS in 2021? Top trends.

The COVID-19 pandemic and transitioning to remote work accelerated the digital transformation of companies all over the world. 

SaaS trends affected by the 2021 pandemic include increased market demand and give new opportunities for building vertical SaaS solutions. 

1. Rising market demand

The demand for SaaS solutions keeps growing, the supply is trying to keep up the trend. 

According to the report of 2021from technavio, the SaaS market has the potential to grow by USD 99.99 billion during 2021-2025.

Chiefmartec created a diagram of all martech solutions from the 2011 year to 2020.

Martech stands for marketing technology that is a range of software and tools that assist in achieving marketing goals. According to the report, the number of the martech solutions increased from 150 in 2011 to 8000 solutions in 2020, so it experienced a 5,233% growth in this landscape since 2011. 

2. Opportunity for vertically focused SaaS solutions

With the accelerated migration to cloud computing, companies are looking for SaaS solutions that specifically target their industry's needs. This provides SaaS companies with an opportunity to develop vertical SaaS solutions for specific industries, which can provide more business value and better results for a narrower target user group. These industry-specific Software as a Service solutions also provide benefits in increasing customer insight and improving data governance.

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SaaS product development stages

1. Market Research and Target Market Defining

Market research is the first thing on your to-do list. Properly conducted, it will become the foundation of the product’s long-term success. Go and interview your potential clients about the challenges they face and how they overcome them. Study the demand and supply on the market. Your goals are:

• to find out what problems customers have
• to understand your client’s profile
• to analyze business opportunities on the market you are targeting at
• to look through competitors, strengths and weaknesses of their software

2. Formulate Long-term Strategy and Create Implementation Plan

The strategy is a complete vision of a product, a picture of the future success of the product, and how it’s going to get there. The strategy consists of three main elements. 

• Vision consists of answers to all possible questions like “What is special in your solution? How does your product help customers? How will you get paid for your product?”, etc.
• Concrete and measurable goals, the fulfillment of which will lead to the achievement of a vision. 
• An implementation plan is a set of actions or steps that should be taken to achieve the goals.
  

3. Determine Pricing Model

You need to find a balance between your revenue and your product value for customers. SaaS pricing models:

• Usage-based - customers pay only for the amount of service they use.
• Simple, flat-rate - a fixed price for a product no matter how much and how often you are going to use it. 
• Per-user - a flat rate for every active user. 
• Per-feature - a flat rate for every feature you get from the service. 
• Freemium - a free-to-use product, supplemented by additional paid packages. 
• Tiered Pricing - customers buy one of the multiple packages with different combinations of features and different pricing for them. 

4. Wireframing

Wireframing is the process of creating a schematic visual representation of the product layouts that demonstrate key interface elements on the screen. It defines the basic structure of pages before falling into detailed design. 

To develop insightful wireframes you need the following information: 

• A future users profile 
• A list of problems you are going to solve with UI
• A Customer Journey Map and user stories
  

5. Define the MVP 

MVP or a minimum viable product is a version of a new software product that includes the basic features required to deliver value to customers. The main goal of MVP is to attract early adopter customers and validate a product idea early in the product development cycle. 

MVP is not about a low-quality version of an app, but about a sufficient version of an app that customers would like to use. It is the least resource-intensive tool for validating the economic feasibility of a business idea, which also serves as the basis for the final offer.

The main benefits of MVP:

• It allows testing whether the market needs your product or not
• You get early feedback from customers 
• Using MVP you reduce the development cost
• Quickly deliver a product that solves at least one problem of users 
  

6. Develop and release the app 

By that step, you should have market research, defined goals, clients’ profile, product concept, project vision, an implementation plan, a pricing model, a wireframe, user stories, MVP. With that information, it’s time to make all the development work. The most significant part of that stage to choose a team of developers. To make the right choice check out the guide about how to find a reliable software development company and what pitfalls you should avoid. When you find a team to work with, the next steps are: 

• Pre-development stage. It includes the work of business analysts, solution architects, project managers, and software developers. The results are a project plan with specific timeframes, technical requirements of the project, chosen technological stack. 
• Coding. In this stage, all work related to the development process goes. The result is a ready-to-use software program with minimum necessary functions (MVP). 
• Rolling out the product. When the work is done, you are free to release your product so customers can use it. Most likely, you will need cloud servers to store files of your software. If this is your first product we advise you to pay attention to Microsoft AZURE and Amason AWS since they are the most popular and reliable cloud hosting providers. 

7. Post-production Support and Maintenance 

Nothing stops when you release your product. Analyze the user interface, set out hypotheses on how to improve the product and make it more user-friendly, test them, provide fast and qualified support to new customers - the initial impression plays a significant role in further users’ choice. 

You should constantly increase your product awareness and promote your service. Some of the tools that help you are: 

• Content Marketing
• Product Trials
• Search Engine Optimization (SEO)
• Referral Marketing
• Google AdWords
• Co-marketing
• Retargeting
  

Some questions about building a SaaS product

Can you start a SaaS company without technical expertise?

If you have a great idea for a SaaS application, but you don’t know any programming languages, you still can run a successful project. How?

Browse the software development companies and ask for a consultation - they are experts that are aware of best practices in development and help you to pick a tech stack that will suit your business idea. Since the number of software companies is really huge you can look through the list of top development companies on https://techreviewer.co/. 

What are the key SaaS metrics to track? 

After you release your product, you need to measure its success. There are some metrics for SaaS that help you with that: 

• Customer acquisition cost (CAC) - is the cost of acquiring a new user. 
• Monthly recurring revenue (MRR) - is a company's revenue that is expected every month. 
• Customer churn or churn rate - the percentage of customers that unsubscribe from your product in a month. 
• Customer lifetime value (CLV) - the revenue from an average customer that you will get during his subscription. 
• Average monthly revenue per user (APRU) - the amount of revenue every user brings in a month. 

Some mistakes you should avoid building SaaS

Сommonly made mistakes (better not be repeated) when building a SaaS product:

1. No market need

The number 1 mistake for SaaS products and startups is to deliver a product that doesn’t solve any market problem. According to the analysis of 101 startup products, 42% of ideas fail because the market doesn’t need those products. Focus on bringing value to users, not a product. 

2. Choosing the wrong software provider
   

Choosing the wrong software vendor can ruin even a great SaaS idea. The wrong development team can lead to reputation problems, customer churn, and loss of profit. Choosing not the right team is the third most common reason why startups fail - so it’s crucial to find a reliable team of developers. 

SumatoSoft team is an example of a trustworthy software partner with solid expertise in digital product creation and vast experience in SaaS development services in particular. 

3. Failing to pivot

The digital world in general and the SaaS market, in particular, are undergoing continuous reorganization and development, so it’s important to keep up with its pace not to be left overboard. Flexibility is the key. Thus, it’s needless to change and be stuck at the first business model you came up with: leaders often have to pivot to survive. 

Bottom Line

The SaaS market is continuing to expand, the amount of products keeps growing, the potential profit in that sphere reaches billions of dollars. We use SaaS apps daily, and SaaS platforms bring new opportunities to our lives year by year. That’s why joining the SaaS market today may bring great prospects and huge benefits tomorrow. Hope our quick guide was helpful, you understood how to make a SaaS product, and we managed to show you that the rewards are great.