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The Complete SaaS Startup Guide

EF Staff Updated on May 4, 2020

The Complete SaaS Startup Guide

In the last two decades, Software as a Service (SaaS) has gained massive attention. Usability benefits, the fast pace of innovation, security, and reduced costs have had a big impact on the rise of the SaaS industry.

The corporate mobile market in SaaS is predicted to amount to $7.4 billion by 2021, and more than 85% of small businesses expected to invest in SaaS solutions this year.

Statista projects the Saas market to hit $157 billion this year; the market hit $141 billion in 2019 compared to $63.19 billion in 2014. These statistics show the immense growth potential of the industry and .

There is no doubt, therefore, that this is a lucrative space to enter. Are you interested in launching a SaaS startup? This guide will arm you with everything that you need to know.

What to do During the Beginning Stages of Researching a SaaS Product

There are certain things that you need to do in this stage. They include the following:

Evaluate your idea

Comprehensive research is the stepping stone to a successful SaaS business. It lays a solid ground for the success of the project. You should start with customer/user research.

Remember, the success of your SaaS product relies on solving your customer’s needs. Thus you must answer critical questions before developing your product. For example:

  • What problem is my product addressing?
  • Am I offering a new solution, or am I making improvements to an already existing solution?
  • How different is my product from my competitors?

Your SaaS product should aim at solving the right and the best problem.

Market research

Market research is a critical aspect of a successful SaaS business. According to C.B. Insights, most startups fail because of a lack of market for their product.

You might consider your product to be the next significant innovation, although it may not be accurate based on the users and the market. Asking the right questions will eliminate the possibility of creating a SaaS product for a non-existent client.

Competitor analysis

Your research should also touch on competitor analysis. Of course, you should not create a duplicate product, not unless you’re creating an “as-a-service” product for an already existing “as-a-product” model.

Competitor analysis helps you to differentiate your SaaS product. Look for missing features in your competitors that will make your product unique to assist in attracting potential customers.

When creating your SaaS product, consider features your potential clients are searching for, such as:

  • Security
  • Customization
  • Integration with other systems

Your product features must adequately solve the problem you’ve identified.

What Determines the Success of a SaaS Business?

The success of the SaaS business model relies on several factors that include customer value, a reliable team, adequate capital, and proactive monitoring and support. Also, Saas must provide robust execution, product differentiation, a feasible business model, and the ability of the software to integrate into business processes.

Identifying Market for Your SaaS Product

Creating a successful product starts with a deep understanding of your target audience. You need to segment your potential buyers based on a variety of factors such as needs, goals, budgets, and problems.

You can employ several methods to identify your buyer personas. For example, you can contract an inbound marketing agency to assist in defining your target audience.

You can also use primary research methods such as surveys, focus groups, and interviews to contact the customers directly. Alternatively, you can opt for secondary research such as industry reports. Our state of the industry report will show you all the trends when it comes to buying and selling online businesses.

Designing and Launching a Prototype

The best way to test your SaaS product is to launch a prototype with limited features. In this phase, you’ll introduce the prototype to the target customers you have met during the market research and get feedback about any undesirable features or limitations.

Feedback will help you identify the strengths and weaknesses of your concept, thus making the necessary improvements before launching your actual product.

Partnering with Contractors

User experience (UX) and design are critical aspects of SaaS. A unique design is crucial in making conversions and promoting customer engagement, thus the need to choose competent designers for your project.

You can locate reliable designers from Carbonmade, Dribbble, or Behance; these are platforms where designers showcase their work.

Prototype validation

You’ll validate your prototype by submitting it to your users, then get feedback. You can rely on your network, cold outreach, or several people that fit into the description of your ideal customers.

Email and LinkedIn are excellent platforms you can use to test your prototype. Ask the respondents what they think about the product, any confusing features, and any improvements you can make on the product to solve their problem conclusively.

Q.A. testing

Before deployment of your SaaS product, it’s vital to subject it to Q.A. testing, either manual or automated testing. Through these processes, the Q.A. testers/engineers will carry out tests to ensure each feature is functioning optimally and recommend changes where necessary.


A good number of SaaS startups consider low pricing as a competitive advantage; do not make the same mistake.

If you enter the market at a low price tag, you’ll have to lower the price even further once the price war rages, which isn’t a realistic business plan. Base your pricing strategy on the value of your product.

When setting a price tag for your product, you should consider the following:

  • Fixed and variable expenses
  • Client’s willingness to pay
  • Competition
  • Your user’s perception of the product (is it affordable, premium or luxurious)

You must find a correct balance between revenue and value when pricing your SaaS product.

SaaS Product Differentiation

The only way to attract and sustain customers is by differentiating your product from your competitors. You may answer the critical questions about why your product is the best, but what makes your product unique?

Your product should include distinct features and capabilities lacking in your competitors to stand out in the competitive SaaS industry. Other ways to differentiate your product include offering exceptional customer service, niche specialization, creating a convenient and easy upsell path, and a seamless purchase flow and sign-up.

Use trusted tools to analyze competition such as SEMrush and Adwords for your content and strategy.

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Positioning and Branding your Product

A thorough understanding of your target personas is vital for positioning and branding your product. You must identify their deepest pains, worries, motivations, and the language they understand. Sales jargon and hype will not help in this phase.

Consider the examples set by winning SaaS companies such as Hubspot, Salesforce, Shopify, and Mailchimp in branding and product positioning. They rely on providing engaging and informative content that ranks highly when their target clients are searching for solutions online.

For example, Hubspot has a blog dedicated to remote working and best practices for sales teams.

Although 89% of SaaS businesses have a blog, only 11% of these businesses invest in content strategy. Thus you can implement a content strategy to stand out from your competitors. Your product-positioning statements should be bold enough to attract the attention of your target audience.

It’s also essential to understand how your direct and indirect competitors have positioned their products. Are there any gaps you can use for your advantage?

Finding Your Unique Product Vision

Your product vision is a statement that explains to your team the benefits the product will deliver to your clients. It should be brief, simple, and realistic.

Each department in your business must fully understand the product vision to deliver it fully.

A clear product vision helps in setting your priorities and allows you to be proactive. It also helps you to focus on your customers rather than competition.

Branding and Naming

Branding and naming your SaaS product can be a challenging and time-consuming task that a professional should handle. Start by brainstorming internally and generating as many ideas as possible.

Your mission, vision, and values are crucial at this stage. These factors can make the naming process more comfortable and stress-free.

Some of the leading examples of exceptional branding and naming include SocialPilot, which is a social management platform; Omnisend, a marketing management platform; and Hubstaff, a project-management, and time-tracking tool. An ideal brand name should be:

  • Brief
  • Easy to pronounce and remember
  • Unique
  • Non-offensive
  • Valid for a domain name

Using Emotions to Connect with Your Customers

The best way to market your SaaS product is to ensure your branding echoes your customer’s emotions, needs, and aspirations; this assists in creating connections with them and establishing loyalty.

When you speak your customer’s language, making conversions becomes easier. Use phrases, screenshots, or any visuals that will assist your clients in visualizing your product and how it’ll solve their problem.

Leverage your product on social media to create a strong brand. Other ways you can connect emotionally with your clients include practicing empathy, telling stories, offering delightful customer experience, and being authentic.

Financing Your SaaS Business

Raising capital is an essential step in the growth of a SaaS business. Although SaaS businesses have many financing options to consider, you shouldn’t seek funding at the wrong time.

You should first develop and refine your product to a point where you can’t progress without funding. The following are some of the common ways you can finance your business.

  • Venture capital
  • Angel investors
  • Incubators/accelerators
  • MMR lines and revenue-based financing

It also essential to remember your SaaS business will require varying funding at different stages of growth.

Funding Ecosystems: Europe vs. the U.S.

Funding ecosystems across the globe do vary. Most of the SaaS businesses concentrate on the leading global powers, i.e., the USA and the U.K., with North America accounting for the most significant proportion.

The USA (North America)

North America accounts for 89% of global SaaS funding; it’s the dominant region for SaaS and cloud economy, representing 63% of all SaaS businesses in the world.

Silicon Valley accounts for the most considerable number of these companies, with the rest spread across California, New York, Massachusetts, Illinois, Texas, and Washington.


Europe accounts for about 22% of the globe’s SaaS companies but only 5% of the world’s SaaS funding. The U.K. leads with $2.3 billion funding and 6.24% of the world’s SaaS companies.

Launching Your SaaS Product and Getting Traction

When launching your SaaS product, you have numerous options to get the word out. SEO and content marketing are among the best methods you can employ to promote your product.

You can also opt for pay-per-click and social media marketing.

Testing User Intentions and Claims

After launching your product, it’s essential to undertake comprehensive testing of the product and set up a feedback mechanism. You should also create a blog, leverage on social media, and set up email marketing to increase your interactions with your target audience.

Besides, set up Google Analytics on your website to monitor vital metrics regarding your audience.

Setting up Business Operations for Your Startup

It’s also vital to set up your business operations covering areas such as finance, marketing, and legal. Experts in these fields equip your business with the right skills to handle any obstacles in your growth curve.

Why SaaS Businesses Often fail Before They Have a Chance to Scale

Although many SaaS startups get set up each year, a considerable number of these businesses never progress to maturity. These startups fail in their early stages because of one or more of the following reasons:

  • Poor management
  • A poor business model
  • Lack of market
  • Cash flow problems
  • Failure to establish a market-fit product

The best way to guarantee your startup survives these challenges is to identify and solve them early enough before they kill your enterprise.

Hiring for Your Startup

Most SaaS startups face serious challenges when it comes to recruitment. Any new business must take the time to recruit competent and reliable employees. The success of SaaS companies relies on having a strong team. Be sure to invest adequate time and energy to hire the right team for your business.

Where do Startups Find the Right People?

Finding the right people for your startup can be tricky. Start by asking for referrals from your networks and advertise the positions on your website. You may also try online job boards or source employees from academic institutions or training programs.

When to Hire Marketers

The right time to hire marketers for your SaaS business depends on your marketing strategy. For SaaS products, you must first develop a robust sales model.

Once your marketing strategy is on course, you can recruit a sales leader to take over from you. The ideal candidate should be creative, innovative, tech-savvy, and have a deep passion for your business, among other critical qualities.

Secrets for Growing Your SaaS Business

Established SaaS business has become successful by implementing the secrets of growth. These include focusing on offering value to clients, exclusive offers, and creating captivating and compelling online content. Other secrets to growth are offering free products or services, leveraging on user feedback, building an incredible team, and learning how to identify and solve problems.

Besides, you may use partner programs to attract and retain customers. Effective business management and monitoring completion and networking are also critical in growing your SaaS business.

Top SaaS Startups of 2020

  1. CoSchedule
  2. Setapp
  3. CompStack
  4. Docurated
  5. FeatureSpace
  6. Netcrumb
  7. ActivTrak
  8. Shopify
  9. Seamgen
  10. Lately
  11. HubSpot
  12. Google
  13. Slack
  14. Microsoft
  15. SurveyMonkey
  16. Freshservice
  17. PieSync
  18. Proofpoint
  19. KnowBe4
  20. Zoom

Buying Instead of Building

The SaaS industry can be highly rewarding. Unfortunately, the failure rate for startups is quite high. Only businesses with the best product and strategy get to enjoy success. Before taking the plunge, do your homework well to increase your odds of success.

Buying a SaaS company that’s already generating profit is one way to alleviate this risk. It also eliminates the hours and hours that go into getting a startup off the ground. Why not visit our SaaS marketplace to see what’s available? Maybe you can use your skills to double or triple the monthly profit?

If this sounds like something you would be interested in you can schedule a call with one of our business analysts. They will be able to talk you through the sales process and help to find the perfect business for you.

Did you know that setting your SaaS company up for sale early on can help you get a higher valuation? Even if you haven’t earned a cent from your company yet, understanding how SaaS valuations work will ensure that you’re operating procedures are running smoother.

This is the foundation that successful startups are built on.

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