Software as a Service (SaaS) is one of the hottest business models of internet-based businesses, and if done right, it can be quite profitable with little overhead. More than half of the world’s organization are reliant on SaaS services, and big companies like Microsoft are serving such applications.
The idea is to create software so that it is leased to third-party clients on a subscription basis, as opposed to selling one-time license keys. Apps are hosted online, so clients will need to be connected to the internet to be served, avoiding the need for offline software packages.
While SaaS models are relatively low-cost, easy to start, and require limited employees, the field is very competitive and requires lots of diligence to obtain a stable position.
There is no guarantee for success, but here are some solid tips to help while planning your business model:
One of the biggest challenges startups face is not debugging code or coming up with cool website design, but rather getting customers to visit your domain in the first place. Without sales, your startup will not remain cash positive and will end up disbanding like the majority of SaaS businesses within their first year.
Before thinking about dumping money into a grand marketing scheme, start with a basic zero-cost promotion like:
- Promoting on social media & social bookmarking (like Reddit)
- Submitting to a SaaS directory or any general business directory.
- Launching free services or tools on the same domain
- Launch a blog section and start content marketing
- Regularly post content on social media and Medium to accrue a following.
Once you have gotten out there and taken up some clients, try moving onto more pricey means like:
Paid press release distribution
Paying social media influencers for reviews or product placement
Adsense and Youtube CPM ad campaigns. According to a Hubspot study, 81% of businesses utilized video ads in 2018, and that number is likely going up.
Ad placement on large authority sites & traditional media.
Launching an affiliate program, making others essentially a market for you.
More Testing than Development
Whether done by your coders or a third-party audit, you should strive for perfection as early as your first release. Your testing team should thoroughly brainstorm and check all possible issues that can go wrong for your software, and especially security holes.
You may consider doing an invite-only beta testing as you are nearing release, targeting groups of people that would be sincerely interested in your software. If game development serves as an example for the rest of software development, the average consumer can stumble upon more bugs than the developers themselves.
Automated Customer Onboarding
Even for relatively simple concepts, you need to implement a fully automated on-boarding process with rarely the need to reach out to customer service. As there are likely competing apps in your field, the slightest bit of annoyance can cost your lots of potential subscribers, and the longevity of your platform.
Some simple implementations should include a straight-forward sign-up process, a guided tour screen, and some sort of FAQ to allow them to answer most of their basic questions. Using a chatbot is also quite popular among SaaS companies, often resolving common issues before passing it along to your customer support team.
And the part that should be least neglected being the checkout process. The key is to be very concise with each step of payment while asking the bare minimum of customer information required. It may help to break it down with simple steps in separate screens, starting with email, going all the way to the final payment gateway.
Focus on Customer Retention
As your SaaS startup will rely on customers paying their subscription, retaining them is even more important than customer outreach. More often than not, a customer may cancel after the first month if it fails to meet their expectations, or if they feel there is no value in using it past the first month.
This should give you the motivation to constantly innovate with product updates without taking away from the original product. New features and quality of life updates for a SaaS will not only give people incentive to renew their subscriptions, but they may also recommend it to others.
One key tip to improve retention is to give triggers to incite engagement, while of course avoiding annoying them at the same time. Consider sending out automated emails regarding event triggers, like congratulatory emails, company updates, and notifications of subscription expiry.
Only Hiring When Necessary
If you don’t have an existing cash flow, there is no use diving in deeper by hiring employees. This is especially true for a SaaS startup, where the idea is about automation in the first place.
The only hiring you should do during the initial stages is perhaps freelance gigs or consulting with complete, per-project payments. This can include things like front-end design, SEO, or programming.
Also, if you plan to move to a tech hub like Austin or San Francisco to find employees, consider scrapping it as many programmers work remotely nowadays.
Understand the Limitations of the Market
Before declaring your SaaS to be a failure, you need to consider that not all niches have room for a mega-sized subscription base.
For example, if you only have around 50 subscribers at $20 per month, this is already more than what the vast majority of startup projects are making. Instead of scrapping your product and existing consumer base, you may keep your SaaS alive as a side project while you move onto something bigger.
There are no one-size-fits-all approaches to succeed as a SaaS company, especially considering the broadness of the market and hyper-competitiveness. Go in with the understanding that people are willing to pay you to provide a service that solves their specific problem. The better you understand the consumer and niche, the more likely you are to have a loyal subscriber base.