“ Software as a service is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. ”
According to Statista, the total size of the cloud Software-as-a-Service (SaaS) worldwide market reached the level of $157 million in 2020 compared to $69 billion in 2015.
This means more and more SaaS applications emerge daily due to the convenience of its delivery model. No installation, configuration, updates, and compatibility issues make SaaS products a beneficial choice for multiple users.
Statista also stated that the global number of installed SaaS workloads is predicted to reach 380 million by 2021.
These facts provoke a huge interest for entrepreneurs to create a SaaS application and deliver value to a larger audience. But here comes the questions:
- How to build a SaaS app?
- What are the key steps to building a SaaS product from scratch?
In this article, we want to unveil a detailed plan for creating Software-as-a-Service products with an introduction to the SaaS definition, types, and benefits of this delivery model.
What is a SaaS Platform
Let’s see what is SaaS product according to Wikipedia:
Simply put, SaaS stands for a cloud computing model which provides users with access to the application’s functionality by paying monthly/yearly subscription fees.
A web browser and an Internet connection are the only requirements to start using a SaaS product.
One of the key win-win strategies of SaaS technology for both users and entrepreneurs is the remote cloud hosting of products by dedicated servers.
This means that entrepreneurs can save much funds on costly hardware maintenance and support while users can avoid installation, configuration, and update challenges they experience with mobile or desktop applications.
Surely, you have heard or personally used multiple top SaaS products like Google Drive. It stands for a cloud-based office-suite platform that allows you to store files on their servers, synchronize files across devices, and share files.
Among other popular and successful SaaS applications are as follows:
SaaS Product Types
The technology market is constantly growing, and users are becoming more and more demanding of the software quality and flexibility.
For these reasons, SaaS applications currently cover most of the business spheres that may benefit from the Software-as-a-Service technology.
Now let’s take a look at the most popular types of SaaS products and their examples:
- SaaS e-commerce platforms
This software type allows businesses to create a cloud-based e-Commerce product with a wide range of features like inventory management, payment integration, easy-to-use checkout process.
Among the top SaaS e-Commerce products are BigCommerce, Shopify, and Volusion.
- Vertical SaaS
Vertical SaaS products are cloud-based software solutions that cater to a specific market niche. Simply put, these SaaS applications aim at meeting the distinct needs of users within a single industry.
The most famous vertical SaaS companies are Veeva (life sciences research), HotSchedules (restaurant management), and ClearCare (home care management).
- SaaS collaboration tools
This type of software helps companies and teams improve communication, increase productivity, and boost a company’s culture.
The most wide-spread SaaS collaboration software are Slack, Zoom (it has a cloud-based web version), and Trello.
- CRM SaaS software
Cloud-based customer relationship management SaaS software allows businesses to track lead flow, contact clients, automate and boost sales whenever and wherever they are.
For sure, the most famous CRM SaaS solutions are Salesforce, HubSpot, and ZenDesk.
- ERP SaaS software
Fast-growing cloud-based enterprise resource planning software provides companies with advanced features to manage their business process in real-time.
Popular ERP SaaS software includes Odoo, Oracle ERP Cloud, and Scoro.
- SaaS billing software
Cloud-based billing software provides users with a payment gateway, merchant account, and subscription management platform that can also include advanced analytics features.
Best SaaS billing software includes Stripe, Braintree, and Recurly.
Benefits of SaaS Business Model
Let’s discuss the key advantages of Software-as-a-Service that stimulate entrepreneurs and startups to build a new SaaS product and roll it to the market.
We believe these benefits will bring you closers to realizing the key steps to building a SaaS product.
#1 Time and Cost Savings
The usage of cloud-based environments does not implicate your business to purchase a license as in the case of packaged software.
What’s more, there are+ no hardware maintenance costs that are required when dealing with on-premises software. So, you pay exactly for what you use.
#2 Facile Updates
The cloud environment always provides end-users with the most up-to-date version of your custom software. It means they do not need to update and install the latest version as it’s done in the background.
#3 Recurring Revenue
Compared with multiple other business models, SaaS technology allows your business to generate recurring revenue and always keep track of your monthly/yearly earnings.
It becomes possible with a subscription model which means that your clients pay a specific fee each month or year while other business models require constant user acquisition as most users pay a one-time fee for the software.
Once you attract a solid base of customers to your SaaS app that provides you with recurring revenue, you can focus on expanding and growing your business without any worries about your bottom line.
How to Build a SaaS Platform from the Ground Up
#1 Analyze the market
Once a legendary film director, producer, screenwriter, and one of the most influential filmmakers in history, Alfred Hitchcock, said:
“ Always make the audience suffer as much as possible. ”
What Are the Mind-Blowing SaaS Startups in 2021?
Wondering how to build a SaaS app? Start with a competitor analysis. Learn the list of 11 mind-boggling SaaS startup companies that astonish the market in 2021, combine their best features, and start building SaaS products that amaze.
This resonant and double-natured phrase means a lot to understand the steps to building a SaaS product. It’s about identifying the core values, pains, and dreams of your future software target audience to provide them with a one-stop-shop solution that covers all potential needs.
First, conduct a market research to find clear-cut answers to the following questions:
- What challenge(s) will my SaaS app solve?
- What is my target audience, and could I segment it?
- Who are the top competitors of my SaaS application?
- What unique features and value do they provide to end-users?
- Could I build a more trouble-solving solution with unique killer features?
- What business model do my competitors adopt?
Once you get the answers to these requests, you will be clear on your high-level target audience, competitors, and market demand.
One of the key aspects here is to realize why users will choose or intend to pick your SaaS product. In order to verify your business idea at the start, you can greatly benefit from performing the following activities:
#1 Set up focus groups
This marketing approach means that you gather a certain number of users of your target audience that have similar geographical, social, demographic, and other parameters to interview them based on the same questions.
It’s one of the most time- and cost-consuming solutions that can provide you with a qualitative measurement of your project idea.
#2 Interview via social media
This approach is much easier and cost-effective compared to focus groups. You just need to select a group of 10-20 users with similar geo, social, and demographic characteristics to interview them by the same questionnaire.
We recommend you prepare a small bonus for the selected users like commenting, liking, or sharing their content to make it beneficial to spend time and help you with the questions.
What’s more, you can find LinkedIn, Facebook, Twitter groups, and Reddit subreddits with topics relevant to your product and submit a poll with a basic set of questions that will help you verify your SaaS product idea better.
#2 Create a Business Plan
When you decide to build a SaaS app from scratch, you should carefully prepare a detailed business plan. It is a clearly defined scope of operational and financial objectives that you want to reach.
A business plan is a detailed description of how to launch a SaaS business within your specific niche.
Simply put, you need to find solutions for all the steps to building a SaaS product. Let’s discuss the key aspects that you should go through in your business plan to know clearly how to build a SaaS app:
Monetization strategy (pricing model)
The SaaS technology offers multiple options to make a profit within your future product. Defining the monetization strategy is crucial at the beginning of SaaS software development.
It directly influences the way you will build a SaaS app functionality and help you realize how to sell SaaS technology products after release. So, here are the most wide-spread monetization strategies:
This monetization model means that your SaaS product provides limited features for free. If a user wants to access more functionality and opportunities, they can upgrade to a pro-paid plan.
Freemium is a great business model to start with as it allows your company to hook multiple users so that they sign up and give your SaaS app a try. The most important thing here is to provide enough free features that will allow your end-users to start getting benefits.
What’s more, carefully divide your SaaS product features into free and paid so that you get the highest conversion rate by suggesting pro-paid plans ONLY when users are greatly involved.
Among the top freemium SaaS companies are Zapier, Mailchimp, and Dropbox.
- Flat Rate Pricing
This model is probably the easiest for both your SaaS technology product company and users. It means that you provide a single set of features for a single price.
The most popular flat-rate pricing SaaS products are Basecamp, Consider, and Adobe Creative Cloud.
- Per-User Model
This business model means that your charge fees will depend on the number of users that utilize your SaaS app. The more people use your software, the more favorable pricing they get.
Here is an example of Slack pricing plans:
- Per-Storage Model
This monetization strategy means that charge fees depend on the amount of storage space users need. This model provides high flexibility as you can adapt to customers’ fluctuations and provide an individual amount of storage space if required.
Among the top SaaS per-storage model companies are Sync, Google Drive, and OneDrive.
- Pay As You Go Pricing
Also known as usage-based pricing, pay as you go model means that the more customers use, the higher the charges increase and vice versa. This strategy provides a huge user LTV (lifetime value) as you can always adopt pricing to their current revenue performance.
The leading pay-as-you-go SaaS apps are Chargify, ConvertKit, and SendGrid.
#3 Identify SaaS Requirements
The features of your SaaS app are the key value you will provide to end-users. Depending on your niche and pricing strategy, the functionality can hugely vary but should include the core principles of a good SaaS product. They will help stand out from the competition in a beneficial way.
Let’s briefly discuss them:
As you store customers’ data in the cloud, you should ensure high security against multiple vulnerabilities and hack attacks. It includes identity management, multi-factor authentication, access control, and others.
Try to make your SaaS application as easy-to-use as possible. Ease of use means that you offer customers simple navigation, high page load speed, and intuitive UI/UX design.
Try to avoid complex and large text blocks, many JS scripts and CSS styles that cut down your SaaS product performance, lots of motion design that also converts your app into a heavyweight appalling website with a low conversion rate.
Real-Time Support and Maintenance
Any software generates bugs and mistakes from time to time and SaaS products are no exception. We recommend you choose the SaaS programs providing ongoing support for customers so that you will be able to overcome any challenges your end-users will cope with.
SaaS technology multi-tenancy is one of the key principles that drives cloud computing. It stands for a system with multiple companies or tenants that share a single SaaS installation platform.
In order to find the key specific features for your niche SaaS application, analyze market competitors. We recommend you create a list of exact features that you personally want to implement and complement them by the ones from market rivals.
Focus on the must-have functionality that directly meets end-users’ needs and solves their challenges. It should become the core basis of your future minimum viable product (MVP).
Let’s discuss what is an MVP and why is it crucial for successful SaaS application development and launch.
#4 Define an MVP for Your SaaS Product
What is one of the most important steps to building a SaaS product? For sure, MVP development should become your coachfellow in the SaaS development life cycle.
Simply put, the minimum viable product is a feature-limited version of your SaaS application that still offers enough functionality to users so that they provide valuable feedback. This is a beneficial approach to verify your idea and value proposition without much time and fund spending.
So, here are the key objectives of building an MVP for your SaaS app:
1. Collect feedback and verify your business idea
The core goal of an MVP approach is to collect early users’ feedback and realize what did they like/dislike, what features to add/remove/update.
2. Sound out the market situation
Once collected the feedback from your potential customers, you can conclude whether your value proposition is in demand among your target audience in the market.
Here is crucial to answer the following questions: Will users opt for your SaaS app along with multiple other products in the market? Is there enough demand for your SaaS product?
3. Test different approaches
MVP is about testing not only your SaaS application features but the business concept as well. Try to collect users’ feedback on your product’s idea which may help you define the better way to move your business.
#5 Build a Development Team or Outsource
In order to transform your business idea into a successfully launched SaaS product, you need to solve the technical side of your project – SaaS development.
Here are several options that can help you succeed and ultimately roll out the product to the market. Let’s check each of them in detail.
1. Create your own in-house team
This option is probably the most time- and cost-consuming. First, ideally, you need to find a CTO or technical partner that will help you hire software developers in a fast and efficient way and further manage SaaS product development.
Most often, such professionals can cooperate as business partners or employees with fixed wages. It means that you should be prepared for one of these partnership models beforehand.
The key acquisition channels to find a reliable and experienced CTO that knows how to create a SaaS website are LinkedIn networks, groups, and related Reddit subreddits where startups are looking for partners and vice versa.
Here are some of the most popular business-related subreddits:
A CTO or technical partner will be responsible for hiring SaaS web developers, conducting an interview, and further leading SaaS application development and team management processes.
So, you find the required technical specialists and start creating a SaaS business product internally.
2. Hire freelance software engineers
This option is one of the riskiest as you cannot fully control the individuals that are responsible to build a SaaS app for your company.
Remote teams, time zone differences, cultural differences, and other factors can greatly impact the final SaaS product quality.
We recommend performing daily meetings to update on the project development status and know exactly what is done/going to be done/collapsed.
What’s more, you can request frequent progress reports with screens or access to the staging environment which will allow you to personally check the project progress.
These websites collect thousands of professionals with internal ratings, portfolio, case studies, client reviews, etc.
3. Outsource software development to an IT agency
A custom software development company that has deep expertise in building SaaS products can become a great choice for your company.
First, an IT agency with solid experience in building SaaS applications is a huge boost by default as they know most of the nuances and aspects beforehand. This can greatly help you save much time and funds for SaaS application development.
Second, a software development consultancy can not only build your SaaS online application but also provide consulting services that will help you change a strategy even before the development process.
Third, software development outsourcing allows you to avoid active involvement in the SaaS development process if you want to focus on building your marketing strategy or finding investors for your project.
Looking for a reliable SaaS development company?
We have deep expertise in building SaaS products and will be glad to help transform your SaaS ideas into a breakthrough software product. Just answer a few questions and get an estimate!
We hope the discussed steps to building a SaaS product will help you successfully launch and scale your software-as-a-service application. All these stages require testing and adapting to your specific niche.
So, don’t just blindly dive into these steps directly, but try to get the essence of our words and implement them efficiently within creating a SaaS business.
Are you looking for a software development company that knows how to develop a SaaS application? We will be glad to facilitate your SaaS-based product development for your company within any engagement model you prefer. So, check our case studies or just drop us a line to discuss your business idea.
Daniil specializes in content marketing and has a deep knowledge of promoting the company's products and services through high-quality content. On the Ascendix blog, Daniil shares his tricks and tips on custom software development, provides technology trends and insights, and helps you get valuable content to make your business even more successful and profitable.
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