The Ultimate Guide To Launching & Growing
Your Own SaaS Startup
Did you know that the SaaS industry size is expected to reach $716.52 billion by 2028?
SaaS is one of the most lucrative industries to be in right now and as a SaaS startup founder, you’re in a great position to capitalize on this growing market.
However, a growing market also comes with fierce competition.
How do you ensure that your SaaS startup stands out from the rest and continues to grow?
In this article, we will talk about everything you need to know to launch and grow your own SaaS startup.
What Is A SaaS Startup?
Before anything else, we first need to understand what is a SaaS startup.
A software-as-a-service (SaaS) startup is a new company that provides software as a service.
The SaaS business model typically involves charging users a recurring subscription fee for access to the software.
This business model has become increasingly popular in recent years as it provides a more affordable and convenient solution for businesses and individuals who need to use the software.
SaaS startups typically have lower upfront costs than traditional software companies because they don’t need to invest in expensive hardware or software infrastructure
What this means for you as a SaaS startup founder is that you have a lower barrier to entry when starting your company.
However, it also means that you’ll need to work harder to stand out from the competition and ensure continued growth for your startup.
Pre-Launch: SaaS Startup Checklist
Now that we know what a SaaS startup is, let’s talk about how you can ensure the growth of your SaaS startup even before you launch.
The first step is to create a SaaS startup checklist. This is everything you need to do before launching your SaaS startup. This will help you stay organized and on track.
Here are some of the essential things you need to take care of:
- Product-market fit
- Technology and IT infrastructure
- Pricing model and strategy
- SaaS MVP
- Go-To-Market strategy
- Your team
- Your budget
- Marketing plan
- Sales strategy
- Customer retention strategy
When you’re starting any kind of business, one of the most important things is to make sure there is a demand for your product. Otherwise, you’ll be wasting your time and resources.
In fact, you need to put your market first and your product second. This means finding a prevalent pain point in your target market before developing a SaaS solution for it.
The best way to achieve product-market fit is to validate your idea with potential customers through market research.
This can be in the form of surveys, interviews, or even focus groups.
Once you have validated that there is a demand for your product, you need to start working on developing it. This is where your product development team comes in. They will help turn your SaaS idea into a reality.
Technology & IT Infrastructure
SaaS businesses are heavily reliant on technology. This means that you need to have a solid understanding of the technical aspects of your business.
Are you going to build the software yourself or are you going to outsource it? How will you host your SaaS product? What kind of security do you need in place?
Answering these questions is essential for any SaaS startup. Without a clear understanding of the technology involved, it will be very difficult to launch and grow your business.
Pricing Model & Strategy
Your pricing model is one of the most important aspects of your SaaS startup. After all, it will determine how much revenue you generate.
There are a few different pricing models you can choose from:
- Flat Fee: With this pricing model, customers pay a flat fee regardless of how much they use the SaaS platform. This is a good option if your SaaS product has high usage or if you want to offer a discount for long-term customers.
- Usage-Based Pricing: With this pricing model, customers are charged based on their usage of the SaaS app. This can be based on per user, per storage allocation, per credit, or whatever usage system is suitable for your SaaS product.
- Tiered Pricing: This is where you offer different pricing options depending on the features or usage. This is a good option if your SaaS platform has a lot of features or if you want to target multiple buyer personas.
When it comes to your pricing strategy, you need to come up with a value-based price range for your SaaS product.
This means determining how much your SaaS app is worth to your customers.
You need to outright ask them how much they are willing to pay for a SaaS solution like yours. You can do this by surveying your target market or conducting interviews with potential customers.
Once you have a price range, you can start testing different prices within that range to see what works best for your business.
Your SaaS MVP is essentially a stripped-down version of your SaaS solution that contains only the essential features.
The goal is to get it out to market quickly so you can start collecting feedback from users.
This feedback will be essential in improving and iterating on your SaaS solution. It’s also a great way to reduce development costs as you’ll only be developing the essential features.
To create your SaaS MVP, you need to first define what your core value proposition is and what problem you’re solving for your users
From there, you can start Identifying the essential features that will help you achieve your goals.
There are many types of SaaS MVPs that you can use:
- Landing Page MVP: This is a simple SaaS MVP that’s created around a single landing page. The goal is to validate your value proposition and get user email addresses so you can reach out to them when your SaaS solution is ready.
- Concierge MVP: This type of MVP involves manually providing the SaaS solution to users. For example, if you’re developing a SaaS solution for managing social media accounts, you would need to manually do the work for your users.
- Wizard of Oz MVP: This presents your SaaS MVP as an automated solution. But it’s actually operated manually.
- Piecemeal MVP: This type of SaaS MVP involves using existing tools and platforms to create your solution. For example, if you’re developing a SaaS solution for managing projects, you could use Trello or Asana.
Go-To-Market (GTM) Strategy
Your go-to-market strategy is how you plan on introducing your SaaS product to the market.
This includes everything from understanding your target market down to your SaaS startup marketing and sales strategy.
It’s important to have a solid GTM strategy in place before launching your SaaS startup because it will determine your success in the market.
One of the most important aspects of your GTM strategy is figuring out your target market. Who are the people that are most likely to use and benefit from your product?
Once you’ve identified your target market, you need to start thinking about how you’re going to reach them. What marketing channels will you use? What kind of message will you use?
You also need to create a sales strategy. How will you generate leads and convert them into paying customers?
It’s important to have all of this planned out before you launch your SaaS startup because it will make it much easier to achieve growth.
If you do it right, your brand can become viral even before you launch your SaaS platform.
No man is an island and this is especially true for businesses. SaaS startups require a team of skilled individuals to make them successful.
Do you have a co-founder? Do you need to hire employees? Who’s going to take care of the marketing? The sales? The technical aspects of the software?
Assembling a strong team is crucial for any business, but it’s especially important for SaaS startups.
This is because SaaS businesses are heavily reliant on technology and require individuals with specific skill sets to make it work.
Make sure to take the time to find the right people for your team.
This includes not only finding individuals with the right skills but also people who share your vision and are passionate about what you’re doing.
Of course, any business venture requires some investment. SaaS startups are no different.
You need to have a clear idea of how much money you need to get started and where you’re going to get it from.
Do you have enough saved up? Are you going to take out a loan? Are you looking for seed funding from venture capitalists?
Creating a budget will help you keep track of your expenses and ensure that you don’t overspend. Still, it’s important to be realistic when estimating the costs of starting a SaaS company.
What’s more, SaaS businesses take time to grow and it can be a while before you start seeing any return on your investment.
A good rule of thumb is to have enough money to run your business for at least 12 months.
You should have enough budget to keep your SaaS startup afloat and keep your employees paid throughout that time, even if the business isn’t generating any revenue yet.
One of the first things you need to do when starting a SaaS company is to choose a legal structure. This will determine how your business is taxed and how much liability you have.
The most common legal structures for SaaS startups are sole proprietorships, partnerships, limited liability companies (LLCs), and S corporations.
You should speak with a lawyer or accountant to help you decide which legal structure is best for your SaaS startup. They will be able to advise you on the pros and cons of each option and help you choose the one that’s best for your business.
As we mentioned earlier, knowing your SaaS startup marketing strategy is crucial as you go to market with your SaaS startup.
However, you also need to plan your marketing efforts after the launch.
This includes everything from brand awareness to driving sales.
A good marketing plan will help you achieve your growth goals by outlining the specific actions you need to take.
This can include various marketing strategies and channels, such as:
- Product Marketing: Positioning your SaaS product in the market, creating messaging and value propositions, developing marketing collateral, etc.
- Content Marketing: Creating blog posts, infographics, videos, and other types of content to attract attention and generate leads.
- Search Engine Optimization (SEO): Optimizing your website and content to rank higher in search engine results pages (SERPs), making it more likely for people to find you when they’re searching for keywords related to your SaaS platform.
- Social Media Marketing: Using social media platforms like Twitter, LinkedIn, and Facebook to build relationships and promote your SaaS product.
- Email Marketing: Send promotional emails and newsletters to your subscribers to keep them updated on your SaaS platform.
- Paid Advertising: Invest in paid ads to reach a wider audience and drive traffic to your website.
- Event Marketing: Attending or exhibiting at trade shows, conferences, and other events related to your industry
Make sure to allocate a significant portion of your budget to marketing. SaaS businesses need to invest heavily in marketing in order to be successful.
It’s important to have all of this planned out before you launch your SaaS startup because it will make it much easier to achieve growth.
Most SaaS businesses use inside sales teams to generate leads and close deals.
However, you may also use some field sales strategies, such as going to trade shows and events.
The most important thing is to choose the one that’s best for your SaaS company and focus on executing it well.
Customer Retention Strategy
Once you’ve acquired customers, you need to focus on retaining them. SaaS businesses could easily have high churn rates, so it’s important to put in place policies and procedures to prevent customers from leaving.
This includes the following customer retention strategies:
- Customer Onboarding: Make sure that new customers are properly onboarded and know how to use your SaaS product.
- Customer Support: Provide excellent customer support so that customers are satisfied with your SaaS platform.
- Customer Success: Have a dedicated customer success team that helps customers get the most out of your SaaS app.
- Regular Communication: Stay in touch with your customers on a regular basis to let them know about new features, updates, etc.
- Usage Tracking: Keep track of how customers are using your SaaS solution and look for ways to improve the experience.
- Incentives: Offer incentives, such as discounts and coupons, to encourage customers to stay with your SaaS product.
By focusing on customer retention, you can reduce your churn rate and improve your SaaS startup’s growth.
Launch & Scaling: Milestones In SaaS Startups
After the product launch, there are certain milestones in SaaS startups that you need to achieve in order to ensure their continued growth.
Some of these milestones include:
- Acquiring early adopters
- Gathering feedback
- Growth and scaling
- Moving upmarket
Acquiring Early Adopters
This is the very first milestone for any early stage startup. You need to have a great product that meets the needs of your target market in order to even get started.
In other words, you need to get some early traction.
The best way to get early traction is to offer your product for free or for a good deal. This will help you to attract early adopters who can provide valuable feedback about your product.
Here are some product launch methods that you need to go through:
- SaaS lifetime deal (LTD): A SaaS lifetime deal is when you offer your product for a one-time payment instead of a recurring subscription. This can be a great way to attract early adopters and get some early traction for your product.
- Free Trial: A free trial allows potential customers to try out your product before they commit to paying for it. This is a great way to build trust with potential customers and show them the value of your product.
- Freemium Model: The freemium model is when you offer a basic version of your product for free and then charge for premium features. This is a great way to attract new users and get them hooked on your SaaS solution. Once they’re using the free version, they’ll be more likely to upgrade to the paid version.
Note that offering a free trial or a free plan can be a consistent SaaS startup traction strategy for you. Not just at the early stage of your SaaS startup.
They are both good ways to attract potential customers and deliver value to them, which would likely lead to converting them into paying customers.
If you’ve launched a SaaS MVP or LTD, chances are that you’ve received a lot of comments from your early adopters.
This is important because you need to constantly improve your product based on the feedback that you receive from your customers.
Aside from the two we just mentioned, there are a few different ways that you can gather feedback:
- Customer Surveys: You can launch surveys through email, social media, or even in-app. They are a great way to get detailed feedback from your customers about what they like and don’t like about your product.
- Review Sites: SaaS review sites, such as Capterra and G2, are a great way to get honest feedback about your product from customers who have actually used it.
- Tracking Usage Data: This includes things like how often people use your product, what features they use, and what pages they visit. This data will tell you a lot about how people are actually using your product and what they think of it.
Growth & Scaling
Once you’ve launched your product and gathered feedback from your users, it’s time to start thinking about scaling and accelerating your SaaS startup growth rate.
This is where your customer acquisition and retention strategies will come in handy.
If you want to scale your SaaS business, then you’re going to need to invest in it. And one of the best ways to do that is to raise money from venture capitalists.
This will require creating a business plan for your SaaS startup and pitching it to potential investors.
There are a few different stages of SaaS funding that you can go through:
- Seed Funding: This is the first stage of funding. It’s typically used to finance the development of your product and get your business off the ground.
- Series A Funding: This is the round of funding that you run after you’re shown what your product is capable of. It’s typically used to scale your business by investing in things like marketing and sales.
- Series B Funding: It’s typically used to further scale your business and help it reach profitability.
- Series C Funding: This is the final stage of funding. It’s typically used to help a business scale even further and reach a global market.
When you’re securing your funding, it’s important to know how to value a SaaS startup. This will help you to negotiate with investors and get the best deal possible.
The ultimate goal of any SaaS company is to become profitable. This means that you need to generate more revenue than you’re spending.
There are a few different ways that you can increase your SaaS startup’s profitability:
- Optimize your pricing: Make sure that you update your pricing based on its perceived value. It’s also important to ensure that it’s competitive.
- Reduce your costs: This can be done by automating processes, cutting down on unnecessary expenses, and negotiating better deals with suppliers.
- Increase your revenue: Obviously, you can also increase your profitability by increasing your revenue. This can be done by acquiring new customers and having an effective upsell strategy.
Once your SaaS business is profitable, you may want to start moving upmarket. This means targeting larger enterprise customers who are willing to pay more for your product.
There are a few things that you need to do in order to successfully move upmarket:
- Develop an enterprise-grade product: Naturally moving upmarket would require you to develop an enterprise-grade SaaS product that’s capable of meeting the needs of large businesses. You would also need to be ready to customize your solution based on the specific needs of your enterprise customers.
- Invest in marketing: You would also need to invest more in marketing in order to reach enterprise customers. This could include things like trade shows, content marketing, and account-based marketing.
- Create a dedicated sales team: Sales cycles for enterprises are generally longer than the sales cycle for SaaS startups. This means that you would need to create a dedicated sales team that’s focused on selling to enterprises.
SaaS Startup Metrics
If you want to grow your SaaS startup, then you need to track the right metrics. This will give you the data that you need to make informed decisions about your business.
There are a few key SaaS startup metrics that you should track:
- Website traffic
- Conversion rate
- Annual recurring revenue
- Monthly recurring revenue
- Average revenue per user
- Churn rate
- Customer acquisition cost
- Customer lifetime value
- CLV/CAC ratio
- Net promoter score
Since you’re mostly doing digital marketing, your website is going to be one of your main channels for acquiring new customers.
This is why it’s important to track your website traffic. You need to know how many people are coming to your website and where they’re coming from.
The easiest way to track your traffic is using Google Analytics. With this platform, you can track various aspects of your website traffic, such as:
- Unique Visitors: This is the number of people who visit your website in a given period of time.
- Returning Visitors: The number of people who have visited your website more than once.
- Bounce Rate: This is the percentage of people who leave your website after only viewing one page. A high bounce rate indicates that your website isn’t providing what people are looking for.
- Traffic Source: This is where your traffic is coming from. The main sources of website traffic include organic search, direct traffic, social media, and referrals. Tracking your traffic sources can help you identify which marketing channels are doing well.
The conversion rate is the percentage of people who take the desired action on your website.
This desired action can vary across different stages of your marketing and sales efforts. On content pages, conversion can be signing up for your email list. For your existing leads, it can mean signing up for your free trial.
Various types of conversion rates will help you measure your performance at different stages of your marketing and sales processes.
You may track different conversion rates, such as:
- Visitor-to-lead conversion rate: The percentage of website visitors who become leads.
- Lead-to-MQL conversion rate: The percentage of leads who become marketing qualified leads (MQLs) by having deeper interactions with your marketing assets. These interactions could indicate that they are a good fit with your SaaS product.
- MQL-to-SQL conversion rate: The percentage of MQLs who reach out to your sales team to request a demo or a quote. This makes them sales qualified leads (SQLs).
- Lead-to-opportunity conversion rate: The percentage of leads who turn into opportunities or deals.
- Opportunity-to-customer conversion rate: The percentage of opportunities that turn into paying customers.
Annual Recurring Revenue (ARR)
Annual recurring revenue (ARR) is the SaaS metric that indicates the amount of money that a customer pays you every year.
The ARR is a valuation metric. This means potential investors will take it into consideration when deciding whether or not your SaaS startup is worth investing in.
To calculate your ARR, simply take your total recurring revenue for the year. For multi-year deals and subscriptions, get the annual contract value (ACV) for these deals.
Monthly Recurring Revenue (MRR)
Monthly recurring revenue (MRR) is very similar to ARR, except that it’s measured on a monthly basis.
This SaaS metric is important because it shows you your growth month over month. This can be a useful operational metric that can give you a general indication of your business performance.
To calculate your MRR, take your total recurring revenue for the month. If you have annual or multi-year subscriptions, you can divide the ACV by 12 to get the monthly value.
Average Revenue Per User (ARPU)
The average revenue per user (ARPU) is the SaaS metric that indicates how much revenue you’re generating from each customer, on average.
This number can be useful for comparing different customer segments. For example, you might want to compare your ARPU for small businesses VS medium-sized businesses. Comparing their ARPU will reveal which segment is more valuable to your SaaS company.
To calculate your ARPU, take your total recurring revenue for the period and divide it by the number of users you have.
The customer churn rate is the percentage of customers who stop using your SaaS solution in a given period of time.
This SaaS metric is important because it shows you how well you’re retaining your customers.
A high churn rate indicates that you’re losing customers at a faster rate than you’re acquiring them. This can be a major problem for your business since it’s difficult and expensive to acquire new customers.
To calculate your churn rate, take the number of customers you lost in a given period of time and divide it by the total number of customers you had at the beginning of that period.
Customer Acquisition Cost (CAC)
The customer acquisition cost (CAC) is the amount of money you spend to acquire a new customer.
This SaaS metric is important because it shows you how much it costs to acquire new customers.
A high CAC indicates that it’s expensive to acquire new customers. This can be a problem if your business isn’t generating enough revenue from each customer to cover the cost of acquiring them.
To calculate your CAC, take your total marketing and sales expenses for a given period of time and divide it by the number of new customers you acquired in that period.
Customer Lifetime Value (CLV)
The customer lifetime value (CLV) is the total amount of money that a customer will spend on your SaaS product over the course of their relationship with your business.
This SaaS metric is important because it shows you how much revenue you can generate from each customer. A high CLV indicates that you’re generating a lot of revenue from each customer. This is a good thing because it means your business is sustainable.
To calculate your CLV, you first need to estimate your customer lifetime. You can do this by dividing 1 by your customer churn rate. Then multiply the resulting figure by your ARPU.
The CLV/CAC ratio is the SaaS metric that compares your customer lifetime value to your customer acquisition cost.
To calculate your CLV/CAC ratio, divide your CLV by your CAC.
This number can be useful for determining whether or not your business is giving you a considerable return on investment.
For SaaS businesses, a healthy CLV/CAC ratio falls somewhere between 3:1 to 5:1.
Net Promoter Score (NPS)
The Net Promoter Score (NPS) is a SaaS metric that measures customer satisfaction.
This SaaS metric is important because it shows you how satisfied your customers are with your product. A high NPS indicates that your customers are happy and would recommend your product to others. This is a good thing because it means you have a loyal customer base.
The first step in finding your NPS is to ask your customers a simple question: “On a scale of 1 to 10, how likely are you to recommend our product to a friend or colleague?”
Then you group your respondents based on their answers:
- Promoters: Those who answered 9 or 10
- Passives: Those who answered 7 or 8
- Detractors: Those who answered 6 and below
To calculate your NPS, take the percentage of promoters and subtract the percentage of detractors.
An NPS of more than 30 could mean that you have loyal and happy customers. An NPS of more than 70 is excellent.
Final Thoughts About Growing A SaaS Startup
As you can see, launching and growing a SaaS company takes a lot of work and planning. But if you do it right, it can be one of the most profitable and rewarding businesses you can start.
If you’re thinking about launching a SaaS startup, make sure you have a firm understanding of your target market and a solid business plan.
It may also be worthwhile to plan your exit strategy ahead of time and build towards that.
Are you looking to sell your SaaS company or are you going to take it public?
There’s no right or wrong answer, but having a plan will guide your decisions along the way.
Looking for more guides to help you grow your SaaS business? Visit our blog here.