SaaS – Software As A Service – is the process of delivering a software program over the internet. There are many SAAS business products you have probably already heard of or used, like Salesforce, Uber, and DocuSign.
Before high-speed internet, purchasing software used to be a painful process for businesses and individuals. You had to go out and buy floppy disks, later CDs, then install the software on every computer that needed to use it.
In fact (showing my age) I remember sitting with baited breathe in front of my cousin’s new computer waiting for a game to load. It took about 45 minutes but we all sat there for the whole time listening to the beeping and whirring! 😂
Now, with software accessible through a browser, new applications can be quickly accessed with no more effort than a few clicks of a mouse. SaaS is a very big business. By 2025, it’s estimated that 85% of business apps will be SaaS based, and some of the best SaaS developers are multi-millionaires.
In this article I’m not suggesting you go into competition with the likes of Uber; you need mountains of funding to compete with the big SaaS business models.
Instead, I’m going to focus on the other end of the marketplace, where there are thousands of successful entrepreneurs making an excellent living, with smaller niche applications.
Here is an example of the kind of SaaS product I’m talking about:
Connectio.io is a collection of apps that help other entrepreneurs automate and improve Facebook advertising. Created by the awesome Wilco De Kreij these products don’t require armies of taxi drivers, or hundred of employees to run.
They are simple software programs (I’m sure Wilco would jump in and say ‘not that simple!’), with pleasing user interfaces, that solve a problem and give people enough benefit to pay the developer a small monthly or yearly fee.
Let’s do some maths.
As you can see, it doesn’t take many users to soon be earning a handsome income. And all of this can be done by a lone individual with a laptop, from anywhere in the world.
How to Start a SAAS Business
The first thing you need to decide is what kind of software service do you want to sell?
The chances are unless you’re an app or software developer the only reason you’re reading this article is that you already have an idea and now want to know how to bring it to fruition.
I don’t know too many non-techies who wake up one morning and say – ‘hey, let’s build some software‘.
However, if that is indeed what happened to you and you haven’t decided what software you want to sell yet, then that is priority No 1.
Whilst I don’t go into specifics on software, this post on choosing your business and niche will help.
How to Get Ideas for Your SAAS Business
A SaaS application needs to fill a need for its users. Something that will make their lives easier and help them to achieve a benefit, like make money, lose weight, or find love.
You shouldn’t try to re-invent the wheel with your SaaS app. No-one will be interested in your competitor to Gmail. But, they might be interested in a CRM that caters specifically for restaurants, for example.
To get some idea of the applications that are coming soon to market check out these two websites.
Each of these sites has a selection of SaaS company startups, so you can see what is coming to market soon, and you can get an idea of the current trends in the industry.
While you are looking for your big idea, you’ll need to answer several questions, like:
Is my app a social app or a task-based app?
Social apps are much harder to make a success, as you require a certain number of users to reach the tipping point of viral growth.
Are there several well-funded apps that do the same thing already in existence?
If there are some well-funded apps already established, then discard your idea and start again.
Does my app have a hungry audience, with the means to pay me a regular monthly fee?
Don’t make it hard for yourself. Target a niche where there are people with money and a need.
White Labelling a SaaS Application
Before you start down the (often expensive) road of software development, the type of app you want to create may already exist that you can sell under license.
vendasta.com has a whole swathe of B2B apps you can rebrand and sell as your SaaS product.
Also check out sell-saas.com, who have a suite of tools aimed at internet marketers that you can brand as your own and be up and running as a software company in under a day.
Picking a white-label SaaS product means that you’ll obviously be promoting a product with plenty of competition, so your marketing game needs to be strong. But as I showed earlier, it doesn’t take too many customers before you start earning a decent income.
A cautionary tale
Back in 2010 when I started teaching online business owners how to use Facebook fan pages to build email lists, I paid $100 to have some PHP code created for people to quickly & easily add landing pages into the old FB fan pages (see my story here).
Little did I know I was heading into the realm of a SAAS business model that would eventually cost me tens of thousands of dollars and a lot of wasted time.
FB fan pages were huge news at the time and my little PHP template while great (and free) was fairly limited, so I set about creating more complex templates with some bells and whistles.
I hired a couple of developers from what was Elance (now Upwork) and set about improving on the template I already had.
Over the following two years, my templates became more and more complex as I tried to grow and adapt to all the Facebook changes while also attempting to stay ahead of the competition, many of whom had a lot more money & resources than I!
But I wasn’t a SaaS company, nor had I any inclination to be one. I was (and am) an educator and a marketer!
While I was knee-deep in code and communications with developers and constantly adjusting to Facebook updates, my main competitors were using licensed white label templates far superior to mine and focusing on marketing & promotion, pocketing thousands in software sales.
By the time Facebook decided it was all over for tabs and landing pages, and organic rankings for fan pages were falling, I was seriously outmanned, outgunned, out of energy, and out of pocket.
Lesson learned? Stay in your own lane and find collaborative opportunities with people or companies ahead of you to create a win-win!
If you’re still intent on building your own unique SaaS application, then this is the process I recommend you follow.
If you don’t fancy starting a SaaS company, make sure to read our 189 lifestyle business ideas to you can start today.
Steps to Create a SaaS Application
Plan the App on Paper
Start with your customer story. Write down an account of how a customer will use your SaaS application. Get into real detail, think about the problems they are having, and how your app will solve them. Write out a scenario of them using your software. This helps you clarify your ideas.
Then before you spend any money on the development, plan out your application in full on paper. Down to the smallest detail. Include the individual buttons and links, and what each of them does when pushed or clicked.
Next, validate your idea by demonstrating the paper-based system to people in your target market. Literally, show them the drawings and walk them through each step, so they fully understand what your app can do for them.
At this stage, you may get useful feedback that you can incorporate into the design. But, don’t feel you have to implement every single suggestion. At the beginning of the process, your aim is to create an MVP – Minimum Viable Product.
An MVP will be the initial prototype that you use for testing with a few users, to iron out the bugs and errors. Save some of the feedback from the paper walk-through to start a feature list for future developments.
Finding a UX Designer
When you have your drawings ready, then it’s time to hire some experts to turn your ideas into reality. The first step is to retain the services of a good UX Designer. The UX designer will produce the ‘look’ of your SaaS application.
How a SaaS app looks and feels is essential for user retention. People don’t like to use ugly software, so your presentation needs to be top-notch.
A lot of the high-end UX designers hang out on dribbble.com, though be prepared to pay handsomely for their work. If you are working on a budget, you can also get UX work done by hiring on more general freelancing platforms like Upwork and Fiverr.
Once your UX designers work is done, you will have the front-end Wireframes, CSS style sheets and HTML that will form the display elements of your SaaS app.
Next, it’s time to hire a coder/developer to work on the back-end.
Hiring a Developer
Hiring a Developer for your burgeoning SaaS company is a tricky business. Get it right, and future riches await, get it wrong, and you’ll understand why thousands of software projects fail every year.
You broadly have two options when hiring a developer. You can choose an expensive one from Europe and the US, or you can choose a cheaper (but no less talented) one from places like India and the Philippines.
You may find communication with those from India and the Philippines more difficult, due to communication difficulties springing from cultural differences despite the common language.
But, plenty of world-class software development is developed by skilled Indian and Filipino coders, so you shouldn’t fear to work with freelancers located there. (In fact, almost all of my part-time contractors in all areas of my business are based in India and the Philippines.)
The main thing to consider when hiring is the quality of their feedback. I searched for freelance developers on Upwork, and found the following guy:
As you can see, at $30 per hour, well-rated (can’t be faked), and with lots of confirmed earnings, you could certainly add him to your shortlist.
When you list a project on Upwork, you will get plenty of applicants who want to work for you. The key is the interview process.
- Make sure that they are an individual and not a front for a group that outsources work.
- Insist on a face to a face video meeting. You will need to develop a rapport with your developer, so ascertain that you can communicate well and trust your gut here.
- It’s not rude to demand to see examples of previous work. There may be a project or two that they have signed an NDA for, but they must be able to demonstrate their abilities.
With software projects often numbering in the 100s of hours, you’ll likely need a significant budget. Upwork gives you the ability to create project milestones though, so you can spread the payment out over time, while also making sure that the project stays on track.
Beta Testing Your SAAS Application
Remember the initial aim for your SaaS company is to create an MVP to get to market as soon as possible. Before the full launch, you’ll need to test your software with real-life users, to make sure that everything works as it should.
Called ‘Beta-Testing’ this is the stage where you attract users in your target market to test out the product. You can pay for Beta testers, but it shouldn’t be necessary, especially if you offer the testers access to the first release free of charge, or at a reduced rate.
There are lots of places you can look for Beta testers. You may already have access to a community in a Facebook group or can track some down on a website like Reddit.
There are also websites you can advertise for free for Beta testers (some people love Beta testing, and are always on the lookout for new apps to play with).
Here are a few of the sites for you to get an understanding of the process.
To go more in-depth on how to get free Beta testers, take a look at this good case study on chanty.com
Once your UX designer and Software Developer have fixed the issues picked up in Beta testing and produced the initial release, then it’s time to think about getting your application to market.
Getting your SaaS Application to Market
Hiring specialists to design and produce your SaaS app is not the only cost you’ll need to budget for. Hosting and marketing costs will need to be factored in too.
Good web hosting is crucial to the success of a SaaS app. If your app goes offline or functions slowly, then unhappy customers will leave you, demand refunds, and spread reputational damage about you.
You shouldn’t think about hosting an app on the kind of shared hosting you might have a WordPress blog on either. Your hosting needs to be more resilient than this and have the ability to scale up as you bring more users on board.
To start with, you will need to budget around $50 monthly for your hosting. If your app takes off, then this can grow up into thousands of dollars per month. So it’s essential to choose the right hosting company from the start.
It’s frequently challenging to choose a web host. There is always somebody somewhere who has had a bad experience with any hosting company you care to name. So stick with the biggies.
Three of the most well-known ones for scaleable hosting are:
Marketing Your SAAS Business
SaaS companies have a global selling opportunity and therefore, global competition. So you will need to fire every neuron of your marketing brain to bring onboard users for your app.
Facebook advertising, content marketing, a YouTube channel, and building an email list are just the starting point. One example of just how involved you need to be with the marketing comes from a Reddit thread on how a bootstrapped SaaS company got their first 720 paying customers.
In the beginning, they actually recorded personalized welcome videos for each of the first hundred or so users that signed up. (This is relatively easy to do using a SaaS app called Loom!)
An extreme example? Maybe so, but it illustrates how committed you need to be when marketing your SaaS business in the beginning.
Also, consider partnering up with individuals and organizations who are already established in your niche. Earning a shoutout from an influencer in your niche can go a long way to get those initial users. You can also leverage affiliate programs to help spur sales.
Pricing Your SAAS Application
Pricing your SaaS app is another variable you need to get right. There are a few general routes you can choose:
Pricing by features
Moz.com, the popular SEO tool, uses a pricing structure that increases with the number of features used. With the Premium level here coming in at a staggering $599 per month!
Pricing by Features and Users
Nokotime, a widely used time-tracking SaaS solution, has a pricing structure that combines features and number of users.
The freemium model is one that you see most often. You can attract users for free (who doesn’t like free!), but to get the most out of the software, you need to take out a subscription. Here is the famous note-taking app Evernote’s pricing structure.
Long-standing SaaS companies experiment with different pricing structures over time to find out the most profitable format for them.
This is because successful SaaS developers are continually seeking out marginal gains and improvements to their product, and you will need to as well. So, finally, let’s take a quick look at onward development.
Onward Development for Your SAAS Business
It’s often tempting to delay the release of your SaaS app because you want to add just one more feature or try something in a different color. Try and resist these urges. One of the benefits of SaaS software is the ability to deploy improvements much more quickly than traditional software development.
Before high-speed internet made SaaS possible, you often had to wait a year or more for new features to be added to your favorite software.
Now, software development is developed using agile techniques, which favor short ‘sprints’ to deliver smaller updates more frequently.
Using these modern software development methodologies enables you to deliver a product that your customers want, and react to feature requests much more rapidly.
You should always seek to create a healthy dialogue with your users. Because if you are attentive to their requirements and deliver on them, you’ll make them true fans and product ambassadors.
How to Start a SAAS Business – FAQ’s
What is a SaaS Business?
A SaaS (Software as a Service) business is a type of software company that provides its products or services through subscriptions. Unlike traditional software companies, which typically sell their products through one-time purchases or licenses, SaaS companies allow users to access and use their products on an ongoing basis for a recurring subscription fee.
The SaaS business model allows users to avoid the hassle of installing and maintaining software themselves while allowing SaaS businesses to monetize their products more effectively.
What are the Benefits to Starting a SaaS Business?
There are many benefits to starting a SaaS business. Perhaps most importantly, it allows you to tap into a large and rapidly growing market; according to research firm IDC, worldwide revenues from public cloud services grew 29.0% to $408.6 Billion in 2021.
Additionally, SaaS businesses typically have lower overhead costs than traditional software companies, allowing you to keep your operating expenses low and pass these savings along to customers through competitive subscription fees.
What is an example of a SaaS?
One common type of SaaS business model is a cloud-based software company. Examples of popular SaaS products include subscription-based productivity tools like Microsoft Office 365, customer relationship management platforms like Salesforce, and content management systems like WordPress.
Other examples of SaaS companies include online marketplaces such as Amazon Web Services and ride-hailing services like Uber and Lyft. Overall, the key to success in a SaaS business is providing value to customers by developing innovative software products that meet their needs.
How to Start a SAAS Business – Summary
I hope this article has given you a good understanding of how to approach developing a SaaS business and take it to market.
While I got my fingers burned when I stumbled almost accidentally into this business, for those who are better suited to the environment, great at project management and have a great idea for a software as a service product, there are real fortunes still to be made for daring entrepreneurs who get it right.