If you wish to launch a software as a service (SaaS) business, you need first outline your requirements. If you’re not sure what you’ll need to start and want to see what other entrepreneurs in this area do, you’ve come to the correct place.

Let’s begin by defining what a SaaS company is. SaaS (software as a service) refers to software that is accessed via a web browser or a web-based app. Because the software developer maintains their product on their own servers, SaaS products are frequently referred to as a “hosted solution” or “web-based solution.”

SaaS products are also frequently referred to as “cloud-based” solutions. A desktop-based model, on the other hand, is where an individual or corporation installs software on their desktops and runs it on their own servers. You’ll need to be able to swiftly explain this basic benefit and elevate it with the value proposition of your individual solution for your own organization.

It is still possible to run a successful software as a service business if you have an idea but lack the technical competence to construct your programme yourself. In his book “Lost and Founder,” Rand Fishkin discusses his path as the non-technical CEO of Moz, a service firm he began and developed into a SaaS company.

He emphasizes the need of learning (and continues to learn) enough about the technical components of his firm to be able to make effective employees and identify technological barriers when they arose. And while learning to code yourself is not impossible, it does take time.

Be mindful of your intellectual property — the code — whether you bring on an employee or outsource the technical work. A good contract can go a long way.

1. Develop a solution for a problem

Before diving into pricing, branding, or building a team, it’s important to make sure you have a clear problem to address and a solution that alleviates it. After all, if you’re not solving a problem, you don’t have a business. 

There are different ways to go about finding a problem worth solving. Here’s what others have to say:

• Fix a problem better than anyone else

“If you can fix a problem for someone and do it better, quicker, and/or cheaper than your competitor, you’re off to a good start.” — Gabriel Kuperman, founder, and CEO of CuePin.

• Solve a problem you can relate to

“The number one rule for any SaaS business should be to solve your own, real problems and not someone else’s problems. Only by solving a problem, you have struggled with yourself will you fully appreciate how to solve the problem in the best possible way.” — Uwe Dreissigacker, founder and CEO of InvoiceBerry.

• Use your knowledge of an industry to solve a problem

“I had industry experience and knew that there was a big void to be filled for small and medium-sized businesses that could not afford to pay for local servers and an IT team. We created UpKeep to fill this void—a cloud-based solution that was affordable for any size business.” — Ryan Chan, founder of UpKeep.

2. Write up a lean plan

There’s no way to get around it, you’ll need a business plan. But instead of sitting down to write a 40-page plan, start with a one-page pitch.

It’s the fastest way to get your idea onto paper, and it’s the very first step in the lean planning process, which is much easier and more iterative than traditional planning methods. It’s also more suitable for SaaS businesses that are constantly testing new ideas.

Your pitch is going to roughly cover your strategy (what you’re going to do), your tactics (how you’re going to do it), your business model (how you will make money), and your schedule (who is doing what and when).

If you use software like LivePlan, you can create this initial “lean plan” in under an hour and then spend your time where it really matters—on validating your idea.

3. Validate your SaaS idea

Now you’ve spent some time creating your lean plan, which is essentially a list of assumptions. In this step, you’re going to find out whether those assumptions are true or false. And then adjust your plan so that it addresses what you’ve learned. 

Read Also: What is SaaS Software Example?

You’ll do this by attempting to answer the following question — Can my idea make money?

Instead of rushing headlong into your first and favorite idea, this step acts as a check. It will help you determine whether or not you have a good idea that can be turned into a viable business.

• Talk to your customers

The best way to do this is to get out and talk to your potential customers.

One of the biggest mistakes companies make is doing mostly secondary market research, instead of primary research (getting out of the building to talk to people face-to-face). But here’s the thing, you can also do this digitally and get similar feedback. It can be as easy as launching a coming soon website, running search ads or even launching a kickstarter to see if you gain any traction.

The important thing is that you are getting real-world feedback and setting parameters for success to determine if your idea has merit.

Gene Caballero, co-founder of GreenPal, validated his idea by getting out and speaking with random people. “We went door to door and even rented a kiosk in the mall to get feedback to see if people would use a product like ours. It’s a very humbling process.”

Through talking to people in real life, you want to learn:

• Have I identified a problem they actually have?
• Do I have a solution that solves their problem, whatever it is?
• What is the best way to sell to them, and what’s the worst way to sell to them?
• What would they pay for my product or service? Have I priced it too low or too high?
• What products do they currently use to solve their problem?

Based on what you learn, you may find you need to go back to your lean plan and revise it or refine it. You may even need to consider another idea if you find there’s no real market for your initial idea.

• Conduct a competitive analysis

Beyond knowing your customers really well, it’s also important to know your competitors. The presence of competitors in your market is actually a good thing. It means a problem has in fact been identified. The trick then is figuring out what part of your competitors’ solution is inadequate. What do customers want that they don’t currently get?

Noah Parsons, COO of Palo Alto Software, says, “LivePlan’s competition is often Word and Excel. We know that Word and Excel are time-consuming, error-prone, and offer no help and resources. Our solution, an automated business planning tool, helps eliminate those pains for customers.”

Keep in mind that your competitors may not be immediately obvious. The industry your entering may simply have very disparate companies currently providing services. Be sure that you take the time to explore and understand how customers and competitors solve the problem you’re addressing and look for a way in from there.

• Create your minimum viable product

Another great, and somewhat necessary testing method in the SaaS space, is creating a minimum viable product or MVP. This is the simplest version of your product.

It’s a particularly popular strategy in the world of product development and is used to quickly and quantitatively test a product or a product feature. Eric Ries, a Silicon Valley entrepreneur and author of The Lean Startup, popularized this strategy for web applications.

Eric says, “The minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.”

If you can get an early prototype built, all the better. If you don’t yet have the resources to do so, you can still create an MVP.

Noah Parsons says, “Start with cheap mockups, wireframes, or even sketches on paper to make sure that your customers are going to want what you build.”

Besides software prototypes, MVPs come in many flavors, including:

• Explainer videos
• Wireframes
• Mockups
• Landing pages

An MVP is a great way to save time and money before you go ahead and build anything, so take the time to make one and run it by your potential customers.

4. Explore pricing models and initial customer acquisition

SaaS products often use a subscription-based pricing model. So instead of paying once for a lifetime of use, your customer pays on an ongoing basis — usually monthly or annually. You can think of it as a software license.

It’s a popular model because of the increased potential lifetime value of each customer. Instead of a flat lifetime value — like $120 for the single sale opportunity you have with each customer or user, you might charge $10 a month per user for as long as your customer uses your service. The longer they stick around, the higher their lifetime value.

You likely spent some time modeling different subscription-based sales forecast scenarios during the creation of your lean plan. It hopefully gave you a rough idea of how reducing churn (the number of canceled subscribers) and other variables can affect your path to profitability. But now it’s time to officially establish a pricing model.

5. Establish your brand

If you’re looking to stand out in an already-crowded marketplace or simply be a memorable company, figuring out how to brand and differentiate yourself is key. You may want to pull from the competitor research you did above to help position yourself.

This isn’t a process you have to outsource to a brand agency — it’s one that can begin in-house. You can also leverage tools like Canva to workshop designs, brand colors, and logos with little to no design knowledge.

6. Make it legal

While you don’t need any qualifications to build software, you may need to comply with the industry you’re looking to serve. Be sure to look into that industry’s specific rules and regulations, as well as legally set up your company including the following elements.

• Choose your business structure

One of the only things you’ll need to do in order to be legally in business is to choose and register your business structure.

In terms of the best business structure, it really depends on your needs. For GreenPal, Gene Caballero says, “We knew that if we ever wanted to be looked at seriously by venture capitalists, we would need to be a C-Corp in Delaware.”

In fact, GreenPal wasn’t the only one that figured it was best to go for a Delaware-based C-Corp. Ryan Chan, founder at UpKeep said, “We created an LLC at first, but after realizing that we wanted to take on venture capital, we decided to move to a Delaware C corp.”

It’s a particular favorite for technology startups, and there are plenty of reasons why:

• The ability to incorporate without needing to reside in the U.S., or even be a U.S. resident. Establishing a U.S. presence via a Delaware-based C-Corp also gives non-U.S. residents access to U.S. resources such as U.S. venture capital.
• Delaware’s corporation law is known to be favorable to owners and is considered more flexible and certain than in most other states.
• Delaware permits a single-member board of directors.
• Delaware does not require the Secretary of State to review and approve filings before they are effective.
• Delaware law gives preferred stock investors of a corporation certain voting rights and control over the corporation.

• Pick a name for your business

You can’t register your business until you’ve given it a name. This is a part of the startup process you may actually enjoy. Ideally, you would have run your ideas by your potential target market first, but if not, there’s still time to figure out what will resonate with them.

Noah Parsons and the team at Palo Alto Software chose “LivePlan” as the name for their business planning product because they wanted the name to reinforce the nature of the product. Noah says, “We wanted a name that would resonate with our customers, help explain what we do, and reinforce the nature of ongoing use.”

If you’re no good at coming up with names on your own, try a business name brainstorming tool. There are plenty to choose from! You need to be sure it’s not already taken, close to another company name, or even just confirm that the website and social channel handles are still available.

7. Financing and funding

How do you get the funds to start your business? There are multiple solutions to this problem. You could bootstrap your startup and do most of the tough legwork on your own. You could also go for a larger sum of capital right from the start by pitching an angel investor or a venture capitalist for funding. And, if all else fails, what about asking friends and family to help out?

On the one hand, bootstrapping your business gives you much more control over it. You get to call all the shots, including how you want to operate the business and who you want to be involved with. On the other hand, it’s a slow process.

On the flip side, getting the right investors on board from the beginning can expedite both your learning and your go-to-market strategy. You might also get immediate access to channels that might have otherwise taken years to break into. But, you’ll give up some control of your company the moment you bring on outside investors.

8. Build your product

• Start as soon as possible

Noah Parsons says, “Start collecting contact information for interested, prospective customers. Develop a landing page, do some lightweight advertising, and generally reach out to as many potential customers as you can.”

In fact, you can even set up the landing page before you’ve finished building the product. Gleam.io has some great growth hacking strategies on their site; use these to give you that early boost.

• Start small

Gabriel Kuperman, CEO of CuePin, also stresses the importance of starting small. 

“When starting our SaaS company, we set out to create and develop the most important features for our launch. As we went through development, we began to accumulate many other ideas for features—both internally and through users who were testing our app. When you’re working with a shoestring budget, you want to release your app, get some real feedback from your targeted audience, and have some funds left over for marketing.”

• Use a development methodology

Noah says, “Agile is what most software companies use. Estimate what it’s going to take to get to a working alpha or MVP.” You can learn more about the agile development methodology on Version One’s site.

• Keep core development in-house

According to Dharmesh Shah, outsourcing core product development is something most startups shouldn’t try doing as there are many risks involved. And Buffer’s CEO Joel Gascoigne believes much the same thing; according to him, a freelancer’s goals are entirely different to your own. They’re not invested in the product like you are, or perhaps like someone with a stake in the business might be. Plus, they’ll be more likely to think about limiting the scope of the project to the allotted time or budget.

However, if you have the option of working and hiring remotely (not necessarily freelancing or outsourcing), do it. Noah Parsons says, “Skip the expense of an office if you can, but invest in great collaboration tools. For example, Buffer, a successful social media company, just closed their only office. There are benefits to in-person collaboration, but unless you can get space very inexpensively, focus on developing your product first. Offices can be very expensive and add little value.”

9. Develop your go-to-market strategy

There are many ways to market a SaaS product — from paid advertising and affiliate partnerships to active outreach to media outlets, and content marketing. Experimenting with a combination of these methods is a good idea. Pay attention to what works and be aware that it may change over time.