How to start a SaaS company in 8 steps

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xmlns="http://www.w3.org/2000/svg" viewBox="0 0 24 24"><circle cx="6.18" cy="17.82" r="2.18"/><path d="M4 4.44v2.83c7.03 0 12.73 5.7 12.73 12.73h2.83c0-8.59-6.97-15.56-15.56-15.56zm0 5.66v2.83c3.9 0 7.07 3.17 7.07 7.07h2.83c0-5.47-4.43-9.9-9.9-9.9z"/></svg> </a> </div> <main id="site-main" class="site-main outer site-main-post has-post-image"> <div class="feature-post-wrapper"> <article class="post-full post tag-saas-leadership tag-marketing tag-product-management "> <section class="post-full-content SaaS Leadership"> <header class="post-full-header"> <div class="post-full-header-wrapper"> <section class="post-full-meta"> <time class="post-full-meta-date" datetime=" 2024-02-06">6 February 2024</time> <span class="reading-time">13 min read</span> </section> <h1 class="post-full-title">How to start a SaaS company in 8 steps</h1> <section class="post-full-meta"> <a href="/tag/saas-leadership/">SaaS Leadership</a> </section> <div class="post-author-with-linkedin-wrapper"> <div class="post-author-wrapper"> <section class="post-full-authors"> <section class="author-card"> <a href="/author/anthony/"> <img class="author-profile-image" src="/content/images/size/w300/2022/04/image_123986672.JPG" alt="Anthony Witherspoon" /> <section class="author-card-content"> <h4 class="author-card-name">Anthony Witherspoon</h4> <div class="post-full-footer-right"> <div class="author-card-button">Read More</div> </div> </section> </a> </section> </section> </div> </div> </div> <div class="post-full-image" style="background-image: url(/content/images/2024/02/How-to-start-a-SaaS-company.jpg);"> </div> </header> <div class="post-content"> <aside class="toc-container"> </aside> <p>Nowadays, everyone wants a piece of the SaaS industry spending expected to reach<a href="https://artios.io/saas-statistics/?ref=saasalliance.io#:~:text=Projected%20worldwide%20end%2Duser%20spending,tenfold%20between%202015%20and%202023."><u> $232.3 billion</u></a> in 2024. Who can honestly blame them? </p><p>But the cold hard truth is that the SaaS industry is mind bogglingly competitive and the cost of setting up your own company can be astronomical. Additionally, the number of moving parts that need to be in place can be daunting. </p><p>Where do you start? </p><p>Obviously, there’s no one size fits all approach, but there are some general rules of thumb that you want to nail down in order to have a shot at competing on the global stage. </p><p>We’ve broken them down here. Let’s jump in!</p><h2 id="1-create-a-use-case-that-addresses-genuine-needs">1. Create a use case that addresses genuine needs </h2><p>The first step is deceptively simple: you need to come up with an idea. But there’s a catch. You can’t just come up with an idea that sounds cool in your head, you have to find a genuine need in the market and then figure out how your product can address that. </p><p>This foundational step will go hand in hand with the second step (understanding your target market). By uncovering the needs of your potential customers you’ll start to better understand your target market better and you can then create a product that is dictated by customer needs from the get go. </p><figure class="kg-card kg-bookmark-card"><a class="kg-bookmark-container" href="https://www.saasalliance.io/top-5-reasons-why-startups-fail-and-how-to-avoid-them/"><div class="kg-bookmark-content"><div class="kg-bookmark-title">Top 5 reasons why startups fail and how to avoid them</div><div class="kg-bookmark-description">While it’s true that competition in the SaaS market is fierce and competitive, there are steps you can take to give your product the best shot at SaaS super stardom.</div><div class="kg-bookmark-metadata"><img class="kg-bookmark-icon" src="https://www.saasalliance.io/content/images/size/w256h256/2020/06/saasfav-1.png" alt=""><span class="kg-bookmark-author">Future of SaaS</span><span class="kg-bookmark-publisher">Anthony Witherspoon</span></div></div><div class="kg-bookmark-thumbnail"><img src="https://www.saasalliance.io/content/images/size/w1200/2023/02/why-startups-fail.jpg" alt=""></div></a></figure><p>If you’re able to accomplish this essential task, it’ll instantly put you ahead of a substantial portion of the competition, as one of the major problems SaaS companies face is still this: <a href="https://www.saasalliance.io/top-5-reasons-why-startups-fail-and-how-to-avoid-them/"><u>they don’t create products for customers.</u></a></p><p>In a nutshell: Aim high. Don’t create a nice-to-have, create a product that’s going to become an indispensable part of your users’ lives.  </p><h2 id="2-get-to-know-your-target-market">2. Get to know your target market</h2><p>There’s a psychological aspect that boils down to this: you need to put yourself in the shoes of your potential customers and visualize their day-to-day lives. What are the common hurdles that they encounter throughout their day? And what do they really care about? Here are some practical steps you can take to achieve this : </p><h3 id="speak-to-potential-customers">Speak to potential customers</h3><p>There are many ways you can achieve this. You can send out surveys and feedback forms within your target market and circulate them on socials. Or you can view discussions between SaaS leaders online (or attend focus groups if you have the time). </p><p>Often you get a better idea of how people are actually feeling when you see people within your potential customer demographic interact with each other. Rather than scattered responses, you can find the common consensus. Then you can determine the most pressing problems plaguing the industry. </p><h3 id="ask-the-right-questions">Ask the right questions</h3><p>Above all else, ask the right questions. Rather than asking questions like: “What would you think of a product that does this?” Or “What kind of product would you like to see?” Try making your questions centered around the people you're interviewing.</p><p>Try this instead: </p><ul><li>Can you describe your day-to-day tasks?</li><li>What’s the biggest challenge in your day currently? </li></ul><p>With these kinds of questions you leave all your preconceived notions at the door and instead allow your research to be led entirely by potential customers, setting a great precedent for how you should be running your whole business going forward.</p><figure class="kg-card kg-bookmark-card"><a class="kg-bookmark-container" href="https://www.saasalliance.io/win-against-competitors-by-knowing-your-customers/"><div class="kg-bookmark-content"><div class="kg-bookmark-title">Win against competitors by knowing your customers</div><div class="kg-bookmark-description">Ten steps you can use to stay ahead of your competition and bolster your competitive intelligence and product marketing strategy by listening to your customers.</div><div class="kg-bookmark-metadata"><img class="kg-bookmark-icon" src="https://www.saasalliance.io/content/images/size/w256h256/2020/06/saasfav-1.png" alt=""><span class="kg-bookmark-author">Future of SaaS</span><span class="kg-bookmark-publisher">Aicha Zaa</span></div></div><div class="kg-bookmark-thumbnail"><img src="https://www.saasalliance.io/content/images/size/w1200/2021/09/Win-against-competitors-by-knowing-your-customers.jpeg" alt=""></div></a></figure><h3 id="examine-the-competition">Examine the competition</h3><p>When crafting a top-notch product you not only want to look at the problems you’ll be solving, you want to know what the potential gaps are in the market. Your goal is to get competitive, so look at who the biggest heavyweights are in the industry and zoom in on what they’re failing to address. </p><p>Equally important: What are they succeeding at? It’s not always a question of reinventing the wheel. There will be some pretty foundational stuff that you’ll want to replicate, and then you can think about differentiating. </p><h3 id="look-at-research-papers">Look at research papers</h3><p>There are many reports every year taking the pulse of the industry. For example, see our SaaS metrics report <a href="https://www.saasalliance.io/saas-benchmark-metrics-report-2023/"><u>here</u></a>. Find the most reliable sources that chart the progress of your key demographic in the form of hard data. Where are the key players in the industry struggling and failing? Having concrete stats can provide a solid backbone for your decisions going forward. </p><h3 id="search-forums-and-join-online-communities">Search forums and join online communities</h3><p>There are many spaces online where people within your target market will discuss their main issues. Make a note of the common recurring issues, join slack communities and ask questions that pertain to the day-to-day struggles of your potential customers. </p><p>By coming in as a curious observer you may find that you get more revealing responses than you would if you were trying to push a product on them.</p><figure class="kg-card kg-bookmark-card"><a class="kg-bookmark-container" href="https://www.saasalliance.io/community-led-growth-is-the-future-of-saas/"><div class="kg-bookmark-content"><div class="kg-bookmark-title">Community-led growth is the Future of SaaS</div><div class="kg-bookmark-description">Community-led growth is a go-to-market strategy that relies on an engaged community of customers as a tool for acquiring new customers, retaining existing customers, and expanding your business reach.</div><div class="kg-bookmark-metadata"><img class="kg-bookmark-icon" src="https://www.saasalliance.io/content/images/size/w256h256/2020/06/saasfav-1.png" alt=""><span class="kg-bookmark-author">Future of SaaS</span><span class="kg-bookmark-publisher">Emma Bilardi</span></div></div><div class="kg-bookmark-thumbnail"><img src="https://www.saasalliance.io/content/images/size/w1200/2021/05/toa-heftiba-6bKpHAun4d8-unsplash--1-.jpg" alt=""></div></a></figure><h3 id="ask-the-experts">Ask the experts</h3><p>Who are the key advisors within the industry, the people who are speaking to your target prospects everyday? </p><p>They can give you a birds-eye view of what the most common issues are. Also, by arming you with insights on where the industry might be headed in the future, they can give you a considerable competitive edge. </p><p>If you can anticipate the ever-changing needs of SaaS end users, you can provide answer to their new challenges before your competitors can. </p><p>Look for people who’ve seen trends come and go and have a reliable grasp on what the lasting developments are going to be. </p><p>Some other key factors to consider are as follows: </p><ul><li>Determine whether you’re going after startups, smaller businesses, mid-size or corporate giants. Their needs will be considerably different, so this is something you’ll need to figure out early in your strategy</li><li>Is there going to be a difference between who’s buying your product and who actually ends up using it? If so, ensure you’re targeting the people who are actually going to be making the final purchasing decision. In many cases, users and buyers might overlap but not always. </li><li>What are the significant challenges likely to rattle the market in the year ahead, economic downturn, job layoffs? These kinds of factors should dictate the central idea behind your product. </li><li>Don’t just focus on your users’ professional lives. Take a holistic view of their lives. With this in mind you’ll have a better idea of how you need to address them when reaching out. These are all key factors that will help you to differentiate your product. </li></ul><p>The fact is, all SaaS companies are looking to make lives easier, but how are <em>you</em> going to do this? You need to be able to form an accurate portrait of your potential customers. Additionally, you need to know exactly how large your market is. This will help you determine how targeted you need to be in your approach. </p><p>Some SaaS companies prefer the horizontal approach, appealing to as broad an audience as possible, while others decide they need to target a more niche audience. But make no mistake, horizontal doesn’t mean generic. You’re still going to need to get super granular about what problems your product solves.</p><h2 id="3-look-at-the-big-picture">3. Look at the big picture</h2><p>You don’t want to create the kind of SaaS company that’s reactive, constantly setting short term goals. You need to aim to have an organization that has a firm mission statement. Only then can you hope to have different functions that are in alignment. </p><p>Companies that are short-sighted often struggle to form a hierarchy of priorities and often find themselves constantly putting out fires rather than building a firm foundation for future growth. </p><p>A good rule of thumb is the SMART model (Specific, Measurable, Achievable, Relevant, Time bound) </p><p>You want to aim high while keeping your goals realistic. On top of this, have firm benchmarks for achievement, otherwise goals can get lost or forgotten about. What figure will you have to hit so that you can check that goal on the list? It’s hard work but long-term vision and quantifiable results are your guiding stars. </p><h2 id="4-choose-a-pricing-plan">4. Choose a pricing plan </h2><p>Let’s start with the no-brainer stuff. Companies need to know how much they’re going to charge their customers for their products. But there are a few pesky nuances you need to be mindful of. </p><p>You need to know what customers within your target market are willing to pay, and that comes from the thorough research you will have conducted into the lives of your customers, their average income bracket, what they typically spend on, what they enjoy, and what issues are plaguing them professionally. </p><p>This will also help you to determine exactly what kind of subscription plan you’re going to set up. Here are the pricing options that SaaS companies typically offer: </p><figure class="kg-card kg-bookmark-card"><a class="kg-bookmark-container" href="https://www.saasalliance.io/pricing-your-saas-offering/"><div class="kg-bookmark-content"><div class="kg-bookmark-title">Pricing your SaaS offering</div><div class="kg-bookmark-description">My name’s David Wadler, and I am Co-Founder and CEO of Vendorful. I’m also an investor in a variety of startups, almost all of which are SaaS businesses. In this article, I’m going to go through some ideas about how you can start to think about pricing SaaS.</div><div class="kg-bookmark-metadata"><img class="kg-bookmark-icon" src="https://www.saasalliance.io/content/images/size/w256h256/2020/06/saasfav-1.png" alt=""><span class="kg-bookmark-author">Future of SaaS</span><span class="kg-bookmark-publisher">David Wadler</span></div></div><div class="kg-bookmark-thumbnail"><img src="https://www.saasalliance.io/content/images/size/w1200/2021/11/angele-kamp-_XlhZVsKykw-unsplash--2---1--2.jpg" alt=""></div></a></figure><h3 id="flat-rate-pricing"><strong>Flat rate pricing</strong></h3><p>In the realm of SaaS pricing models, this is about as straightforward as it gets. You present a single annual or monthly fee for a specific set of features. While this model is increasingly uncommon in the expansive SaaS landscape, it brings notable advantages.</p><p><strong>Pros</strong></p><p>Streamlined simplicity: It's incredibly straightforward. Friction, often a hurdle in customer conversion, is minimized. Customers crave a quick understanding of what you offer and its cost, and simplicity accelerates this process.</p><p>Sales-friendly: Complex offerings can be tough to sell. By maintaining a minimal offering, you can concentrate your sales expertise on sealing the deal without the distractions of intricate packages.</p><p><strong>Cons</strong></p><p>Limited negotiation leverage: Without alternative offers, negotiating with hesitant customers becomes challenging. There's no fallback option to sweeten the deal.</p><p>Niche appeal: A confined offering with a fixed price may not resonate with various demographics. The beauty of SaaS models lies in their flexibility, allowing customers to choose a package tailored to their needs. A flat rate, unfortunately, eliminates this advantage.</p><h3 id="usage-based-pricing"><strong>Usage-based pricing </strong></h3><p>In straightforward terms, this model charges users based on their frequency of use of your service. Depending on your specific use case, this pricing approach may bill users according to the features requested, the number of scheduled posts (for a social media management platform), or the amount of data consumed.</p><h3 id="pros">Pros</h3><p>Friction-free sign-Up: No upfront costs mean users can sign up without any financial risk. If they don't find value, they can simply opt out without incurring any expenses.</p><p>Resource efficiency: Users pay for what they use, eliminating the risk of unpaid users burdening your resource costs. It's a straightforward and fair system.</p><p><strong>Cons</strong></p><p>Revenue uncertainty: Predicting revenue becomes a tricky business when pricing hinges solely on usage. This makes it challenging to allocate resources and plan budgets effectively.</p><p>Customer cost ambiguity: SaaS organizations rely on forecasting costs, especially those tied to customer usage. In a usage-based model, the profitability of a customer can shift rapidly, turning a once-profitable customer into an unprofitable one in a short timeframe. The mystery of customer costs complicates financial planning.</p><h3 id="tiered-pricing-model"><strong>Tiered pricing model</strong></h3><p>This has become the go-to model for SaaS organizations, providing a spectrum of user pricing options. Ranging from a wallet-friendly package with essential features to a premium offering loaded with advanced functionalities.</p><p><strong>Pros</strong></p><p>Conversion opportunities: The majority of users often gravitate towards basic packages, increasing conversion chances. Although initial costs may rise in customer-related aspects, the subsequent growth can compensate and lead to more users opting for higher-priced options over time.</p><p>Diverse demographic appeal: Tailored packages for different needs and budgets broaden the appeal across various demographics. A tiered approach ensures more customers can find a pricing plan aligning with their lifestyle.</p><p><strong>Cons</strong></p><p>Overly broad appeal: Offering a multitude of features may dilute your product's vision or unique value proposition. A more focused approach can establish a clearer brand identity.</p><p>Potential confusion: If users need a magnifying glass to decipher your offerings, they might abandon ship. Streamlining the sign-up process is crucial; users won't spend extensive time unraveling complex pricing structures, risking them forgetting about your product altogether.</p><p>For full coverage of different pricing models, check out our full article on the subject right <a href="https://www.saasalliance.io/saas-pricing/"><u>here</u></a>.</p><h2 id="5-draft-a-business-plan">5. Draft a business plan</h2><p>Something you’re going to be thinking about as a SaaS founder is investment, but in today’s volatile market, securing investment is going to be a trial. You’ll need a robust business plan that forecasts the vision for your company, breaking it down into key milestones. </p><p>Investors want to see that you have a vision for growth (they want to see how you plan to bring in a profit) and the business plan is your way to showcase how you’re going to get there. </p><p>It’s also a great way to demonstrate who you are and the story of your product. What are you and your brand about? These are things you’ll need to bear in mind when rolling out a marketing plan. </p><h2 id="6-create-an-mvpminimum-viable-product">6. Create an MVP(Minimum viable product) </h2><p>This is the bare bones version of your product that simply demonstrates its key use case. While it may be tempting to try and tack on all the bells and whistles early on, it can really benefit you as a problem solver within the SaaS space to boil your product down to its core value. Once you’ve had this consolidated and you have a strong foundation, then you can start to build. </p><figure class="kg-card kg-bookmark-card"><a class="kg-bookmark-container" href="https://www.saasalliance.io/launch-a-showstopping-saas-with-these-6-examples-of-a-minimum-viable-product/"><div class="kg-bookmark-content"><div class="kg-bookmark-title">Launch a showstopping SaaS with these 6 examples of a minimum viable product</div><div class="kg-bookmark-description">Your product never stops evolving, the MVP is just the first to step in that process. Take the first step to launching an amazing product with a showstopping MVP.</div><div class="kg-bookmark-metadata"><img class="kg-bookmark-icon" src="https://www.saasalliance.io/content/images/size/w256h256/2020/06/saasfav-1.png" alt=""><span class="kg-bookmark-author">Future of SaaS</span><span class="kg-bookmark-publisher">Anthony Witherspoon</span></div></div><div class="kg-bookmark-thumbnail"><img src="https://www.saasalliance.io/content/images/2023/05/MVP.jpg" alt=""></div></a></figure><p>Some vital factors to consider when creating an MVP: <strong>Simplicity is your friend</strong>: The main thing here is just to get your product into the hands of users quickly so you can determine whether it has value and whether there’s an appetite for it within the market. Develop a strong use case, create an MVP, collect feedback and grow from there. </p><p><strong>Zoom in on your value</strong>: Out of all the problems you plan to solve which is the one that’s going to bring the wow factor and make the most significant difference to the lives of your users. This is what needs to be showcased in your MVP. </p><p><strong>Be open to feedback</strong>: We get it, your product is your baby, but it’s time to swallow your pride and get enthusiastic about how users respond to your product. You’re going to gain valuable insight on how you can improve and how your solution differs from others in the market. </p><p><strong>Be ready to make a change</strong>: Sometimes you just have to start again, or make pretty drastic changes to what you’re doing. Don’t look at this as a failure, but rather as an essential step along the path to building a SaaS that’s really going to wow your users. </p><p>To find out more about MVPs, take a look at our deep dive<a href="https://www.saasalliance.io/launch-a-showstopping-saas-with-these-6-examples-of-a-minimum-viable-product/"><u> here</u></a>. </p><h2 id="7-develop-a-marketing-plan">7. Develop a marketing plan</h2><p>Two terms you need to be familiar with: Inbound and outbound. That’s the leads that are coming directly to you vs those that you’re actively reaching out to. Let’s cover inbound first. Start by having a nice web presence: a clean professional looking site that makes users want to stick around and explore further. </p><p>You should look into improving your SEO game to ensure that your site has good visibility. Also consider dipping your toes in thought leadership. Create blog posts and whitepapers that establish you as an established authority in your field. You can also start to generate a social media community around your product, generating buzz and excitement </p><figure class="kg-card kg-bookmark-card"><a class="kg-bookmark-container" href="https://www.saasalliance.io/saas-marketing/"><div class="kg-bookmark-content"><div class="kg-bookmark-title">SaaS Marketing</div><div class="kg-bookmark-description">As the demand for cloud-based software continues to grow, SaaS companies are facing intense competition in the market. Here is a guide to help you develop a successful SaaS marketing strategy.</div><div class="kg-bookmark-metadata"><img class="kg-bookmark-icon" src="https://www.saasalliance.io/content/images/size/w256h256/2020/06/saasfav-1.png" alt=""><span class="kg-bookmark-author">Future of SaaS</span><span class="kg-bookmark-publisher">Future of SaaS</span></div></div><div class="kg-bookmark-thumbnail"><img src="https://www.saasalliance.io/content/images/2023/02/FoSaaS_Hub_meta_Marketing.png" alt=""></div></a></figure><p>Now outbound is where it can get really intensive. Email marketing is a prime example, and you can start forming a mailing list of potential users you’d ideally reach out to (you can use leads generated through your inbound methods, such as white papers). </p><p>Finally, into investing into  paid social ads, but as a budding organization you don’t want to be relying on this too much. In order to facilitate sustainable growth, you want to make the most of your organic channels. The more buzz you can generate through simply being a strong presence within the industry, the more cost-effective it’s going to be. </p><h2 id="8-iterate-and-pivot">8. Iterate and pivot </h2><p>Once you’ve launched your product you need to keep a firm handle on how it’s been received and make changes where necessary. Look at the data you have at your disposal, did they match your projections, and if not what went wrong? Look at qualitative feedback as well. </p><p>You may have a really great product, but users have noticed a few wrinkles. Take note of these and take steps on how you can iron them out. Use these insights to improve and iterate. </p><p>To sum up: </p><ul><li>How's the market responding to your SaaS product?</li><li>Any recurring feedback from users catching your attention?</li><li>Which marketing channels aced it, and which ones fell short?</li><li>What messages are striking a chord with users?</li><li>Which feature requests are cropping up the most?</li></ul><p>Once you have some sensible answers to your questions, you can take steps to adjust your business goals and your business plan going forward. </p><h2 id="wrapping-up">Wrapping up </h2><p>The most important lesson: these things take time. Pivots in your strategy might delay your goals, but it’s all part and parcel of your growth-chasing efforts. Be prepared to make mistakes, pivot when needed and integrate new insights into your plan. </p><p>And secondly, <strong>listen to the market</strong>. There’s no point in making a product that no one has any need for. To blaze a trail through the SaaS world you need to find an opening, and that should be dictated by the current issues that users are experiencing. </p><p>Keep your ear to the ground and create a product that resonates!</p><hr><p>Like what you see? Why not gain exclusive insights to some of the leading minds in SaaS with a Future of SaaS membership plan? </p>  <a href="https://www.saasalliance.io/signup/?utm_source=article&utm_medium=blog&utm_campaign=membership-ad"> <img src="https://www.saasalliance.io/content/images/size/w1600/2021/03/Membership-ad.png"> </a>  </div> <aside class="post-upgrade-cta hidden-upgrade"> <div class="post-upgrade-cta-content"> <img src="/content/images/2024/04/SAAS-ICON.png" alt="SaaS Alliance icon" class="site-logo" /> <h2>Like what you see? Then check out tonnes more.</h2> <p class="post-upgrade-cta-desc"> For exclusive content by industry experts and an ever-increasing bank of real world use cases, to 100+ deep-dive summit presentations, our membership plans are packed with awesome AI resources. </p> <div class="post-upgrade-buttons-wrapper"> <a class="button large primary" href="/signup/">Subscribe now</a> </div> </div> </aside> <aside class="post-upgrade-cta get-cert-cta" style="display:none;"> <div class="post-upgrade-cta-content"> <img src="/content/images/2024/04/SAAS-ICON.png" alt="SaaS Alliance icon" class="site-logo" /> <h2>Get product marketing certified.</h2> <p class="post-upgrade-cta-desc"> PMMC™ unleashes product marketers’ potential. Lauded by leading lights like Facebook and HubSpot, it offers expert insights, priceless tuition, and awesome resources. No topic missed. No page unturned. </p> <div class="post-upgrade-buttons-wrapper"> <a class="button large primary" href="https://certified.productmarketingalliance.com/p/product-marketing-certified-core" target="_blank">Get certified</a> </div> </div> </aside> <section class="post-full-authors post-full-authors-with-bio"> <section class="author-card"> <div class="post-full-authors-content"> <p>Written by: </p> </div> <a href="/author/anthony/"> <img class="author-profile-image" src="/content/images/size/w300/2022/04/image_123986672.JPG" alt="Anthony Witherspoon" /> <section class="author-card-content"> <h4 class="author-card-name">Anthony Witherspoon</h4> <p>Anthony is the copywriter at Future of SaaS. 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