business plan for saas

How To Create A SaaS Business Plan In 11 Steps: Full Guide

• November 17, 2023
• Fundraising

Software as a service (SaaS) is the fastest-growing market segment of the past 5 years: the overall spend per company on SaaS products was up +50% in 2021 compared to 2018!

Yet, SaaS do require significant upfront investment before they can turn out a profit. Whether you are raising capital or applying for a grant, you will need a solid business plan for your SaaS startup.

Whilst every business is unique, we strongly recommend to follow a clear structure vetted by dozens of high-profile VC firms globally. Having a powerful and clear business plan will maximise your chances of raising capital from potential investors.

In this article we walk you through the 14 sections you must have in your SaaS business plan.

No te: If you are looking for a pitch deck instead, read our guide here . Although business plans and pitch decks are similar, they are also very different in their format. If you aren’t sure what is best for you, we recommend to read our article on the key differences between business plans and pitch decks .

SaaS Business Plan: The Template

If you are creating a business plan for your SaaS startup, we recommend you follow the following structure:

• Executive Summary
• The Problem
• The Solution
• Market Opportunity
• Competitive Landscape
• Business Model
• Intellectual Property
• Marketing Strategy
• Financial Plan

1. Executive Summary

The executive summary is the introduction of your SaaS business plan. This is a section you should spend a lot of time on as it’s the first impression investors will have when looking at your business plan.

The executive summary should fit in 2 pages maximum . Make it to the point, concise, and make sure to answer the following questions:

• What is the problem you want to solve?
• What is your solution?
• Who are the co-founders behind the project?
• Do you have early traction?
• What are you asking for (capital from investors, government grant application, etc.)?

Expert-built financial model templates for tech startups

2. The Problem

This is the “why” of your business. Explain in this section what is the problem you are trying to solve.

The greatest businesses are solving big problems, yet they aren’t necessarily obvious . For instance, if your SaaS startup aims to solve the pain points of HR administrative tasks (human errors, low digitalisation, time-consuming, etc.) make it clear here. Not everyone is knowledgeable about companies’ support functions processes, let alone HR.

Ideally you would list the 2/3 friction points you aim to fix. For instance, digitalisation usually fixes multiple problems at once: it is fast, seamless and accessible (vs. slow, prone to errors and non-readily available / accessible solutions).

3. The Solution

Your startup builds and commercialises a product and/or a service which solves the problem explained earlier.

This section should not explain in detail your product nor how it works. Instead, it should focus on the benefits for your customers .

Ideally, you should compare the pain points explained on section 2 (the Problem) to the benefits your solution brings to your customers. That way,  it is crystal clear to investors your solution really adds value to potential customers .

4. Market Opportunity

Here, you need to clearly identify 2 very important metrics:

• Market size :  how big is your market?
• Market growth:  how fast does your market grow?

If you are operating in a niche market, chances are that you will face some challenges: the information might not be publicly available. In any case, you should be able to make a high-level estimation of your market.  Read our article on market sizing and how to estimate TAM, SAM and SOM for your startup .

When looking for these metrics, you have multiple sources of information: public reports, specialised press, etc. Even public companies publish press releases and annual reports including some of their proprietary market estimates so be sure to look there too.

5. Competitive Landscape

How fragmented is your market.

Are there 3 big players sharing 90% market share or thousands of small players? Here, refer to public market reports and your own understanding of the competitive landscape.

A few questions you could ask yourself, among others:

• Who are your competitors?
• Are they local, regional, national or global?
• Do they have mobile and/or desktop applications?

Where do you position yourself vs. competition?

Is your solution a game changer other competitors don’t have (yet)? Do you have competitors with similar products/services?

Ideally, you would create a small table with, for each type of competitors (e.g. global diversified companies, small pure players, etc.) the main characteristics they share or not. For instance, do they all a global presence? Do they have a on-premise or a SaaS solution? Do they offer both a desktop and mobile app, or just desktop? What is their relative price positioning (expensive vs. accessible)?

6. Business Model

This section is very important. Now that we have clearly identified the problem you are solving and the benefits of your solution, let’s have a closer look at your product.

This is where you clearly explain 2 key things:

How does your product work?

Explain what your product is and how it works. For instance, is it a desktop and/or a mobile SaaS application? Who is it for exactly (is this a FP&A application only for CFOs or a Slack-like collaboration tool for any type of user)?

Pricing model

SaaS businesses have different types of pricing models: per-user, per-usage, flat-tiered, etc. For a full list of the different pricing models, refer to this great article here .

7. Intellectual Property

This section is optional: only include it if you already have a MVP. If so, you have a strong argument for product-driven investors which will give a lot of credit to your tech.

Be careful not to go into too many specifics though: investors aren’t always engineer by training. Do not put things like the programming language you have chosen (e.g. React, Python) or the database provider (PostgreSQL, MongoDB).

Instead, include things such as:

• whether you have a white-labelled solution or a proprietary back-end / database
• how many full time front/back-end engineers you have
• how much you invested already in your tech

8. Marketing Strategy

This section explains how you acquire customers .

Are you selling a SaaS solution to B2B customers? Or is this a B2C product? This will determine whether you have an inbound or outbound acquisition strategy, or both:

• Inbound acquisition : fully digital acquisition. It can be either paid (paid ads e.g. Google Ads) or organic (content, SEO). Essentially, you convert customers from leads who land on your landing page. This strategy is most common for B2C SaaS businesses
• Outbound acquisition : you acquire customers thanks to your sales team who contact potential customers via phone, emailing or in-person sales efforts. This strategy is very common for B2B SaaS businesses

Once you have clearly explained your acquisition strategy and what tools you are using (e.g. Google Ads for paid search, Instagram and/or newsletter for content), ideally you can show, among others:

• Your average Customer Acquisition Cost (only if you have early traction)
• The number of sales people you have today
• How many customers your sales people close per month in average
• Your monthly paid ads budget
• The number of followers you have on social media
• Your newsletter count

The roadmap tells investors where you are going and how is product going to evolve in the future. You can either keep it high-level (e.g. your long-term strategy) or more detailed (e.g. the pipeline of the near-future product features).

Investors do not just invest in your product as it is today. For example, you might only have developed a MVP with limited features for  early-adopters  while your product could be tweaked and serve a much larger customer base in the future.

Note: if you choose to include your product pipeline, keep it very simple. Your SaaS business plan isn’t your product manager’s presentation to engineers.  Instead of features, focus on the additional benefits and customer segments you might target  as such. For instance, if you plan to launch a messaging feature, focus on the fact it will open new growth opportunities (e.g. network effects).

In this section you should focus on the people behind the company. Unlike in the executive summary, the team section of your SaaS business plan should not be limited to the cofounding or management team.

Instead, you should explain the current organisational structure of your company, the different teams, who they report to and their relative size.

For the people, keep it short. Keep biography to a minimum and only to key people (cofounders and management team). As rule of thumb, 5 lines per team member are enough, 10 a maximum.

When it comes to biographies, only include what is relevant: name, position, years of experience and/or previous companies is more than enough.

What about advisors?

Do you have angel investors with significant experience who advise you on strategy? Do you have a PhD who acts as advisor to your SaaS startup (on regulation and market access matters for instance)?

Any advisor should also be included here, with the same level of detail as for the management team.

Demonstrating in your SaaS business plan that not only team members but also experts are advising and/or sitting on your board is a strong selling point.

Note: add a clickable link to the respective Linkedin profiles so investors can refer to a more exhaustive resume for your team members (if relevant)

11. Financial Plan

Along with your product and the team, this section is highly important. Unfortunately, many startups overlook the importance of financial projections in their SaaS business plan.

Think about your audience: investors (venture capital firms or angel investors) are financially literate individuals . As such, they invest in your business to generate returns. Logically, they care a lot about your financials and more especially, the expected financial performance of your business .

Do not expect investors to make up their own plan for your startup if you haven’t. As CEO, founder or entrepreneur alike, you should have a clear idea of where you are going .

As rule of thumb, the more advanced your startup is, the more granularity you should include here. Pre-seed startups might keep it short (1 slide) yet we recommend seed and Series A+ startups to include 2 slides instead.

Common SaaS metrics you should include in your financial plan slide are:

• Monthly Recurring Revenue (MRR)
• ARPU and ARPPU
• LTV and CAC

For a complete list of the 8 most important metrics for SaaS businesses, refer to our article here .

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SaaS Business Plan Template

Written by Dave Lavinsky

SaaS Business Plan

You’ve come to the right place to create your SaaS business plan.

We have helped over 10,000 entrepreneurs and business owners create business plans and many have used them to start or grow their SaaS companies.

Saas Business Plan Example

Below is a saas business plan template to help you create each section of your own business plan.

Executive Summary

Business overview.

All In One is a startup B2B SaaS company located in Los Angeles, California. The company is founded by Melissa Johnson, a business strategist with more than fifteen years of experience helping other businesses develop their operations and processes to optimize customer management, sales and marketing, and project flow. Melissa has garnered a positive reputation of helping companies become more profitable by using SaaS technologies to improve their efficiency. Now, Melissa is ready to venture out with her own SaaS platform. As the name implies, All In One will be a one-stop-shop SaaS platform to help enterprises of all sizes to streamline their saas business operations.

Melissa has enlisted the services of a software developer, Paul Smith, to be the Chief Technology Officer of the company and manage the technical aspects of the SaaS platform. Melissa plans on recruiting a small team of highly qualified professionals to help manage the day to day tasks of running a SaaS company including sales and marketing, customer support, financial reporting, and technology maintenance and optimization.

All In One will provide a comprehensive array of SaaS services beneficial to any business owner who wants to improve their efficiency. All In One will allow each client to ensure that every aspect of their enterprise is being managed seamlessly. All In One will be the ultimate choice for B2B SaaS services while being the most user-friendly platform around.

Product Offering

The following are the solutions that All In One will provide:

• Customer Relationship Management (CRM)
• Project Management (PM)
• Enterprise Resource Planning (ERP)
• Sales Funnel Management
• Financial Management
• Human Resources Management (HRM)
• Communication Solutions
• Automated Marketing Solutions

Customer Focus

All In One will target all small-to-medium (SMEs) and corporate businesses in the United States. They will target businesses in every industry and sector. They will also target companies that already use other SaaS platforms as well as companies brand new to SaaS solutions. No matter the client, All In One will deliver the best interface, customer support, and net profit.

Management Team

All In One will be owned and operated by Melissa Johnson. She has recruited an experienced software developer, Paul Smith, to be her Chief Technology Officer and help manage the SaaS technology.

Melissa Johnson is a graduate of the University of California with a Bachelor’s degree in Strategic Management. She has been helping other businesses develop their operations and processes to optimize customer management, sales and marketing, and project flow for over fifteen years. Melissa has garnered a positive reputation of helping companies become more profitable by using SaaS technologies to improve their efficiency. Melissa’s strategic skills and diligence have allowed her to develop a network of loyal clients.

Paul Smith has been a software developer for over a decade. He has a Software Development degree from New York University and has created a dozen successful software applications for B2B purposes. Melissa relies on Paul’s technical expertise and ability to transform her vision into an easy-to-use platform.

Success Factors

All In One will be able to achieve success by offering the following competitive advantages:

• Helpful, knowledgeable, and efficient sales and customer support team that will be available 24/7 to answer customer questions, help troubleshoot any issues that arise, and record feedback to improve the platform.
• Full suite of solutions to manage all aspects of business operations in one user-friendly, streamlined platform.
• All In One is an intuitive smart SaaS platform that learns the more it’s utilized, so each user can have a personalized experience that works best for them.

Financial Highlights

All In One is seeking $250,000 in debt financing to launch its SaaS business. The funding will be dedicated towards UX design and other software development. Funding will also be dedicated towards office equipment, supplies, and materials. Additional funding will go towards three months of overhead costs to include payroll of the staff, rent of an office space, and outbound marketing costs. The breakout of the funding is below:

• UX design and software development: $100,000
• Office equipment, supplies, and materials: $10,000
• Three months of overhead expenses (payroll, rent, utilities): $120,000
• Marketing and Customer Acquisition Costs: $10,000
• Working capital: $10,000

The following graph below outlines the pro forma financial projections for All In One.

Company Overview

Who is all in one.

All In One is a newly established B2B SaaS company dedicated to helping businesses of all sizes achieve optimal efficiency in their operations through technology. All In One is based in Los Angeles, California, but will be available to companies across the United States. All In One will be the most reliable, user-friendly, and efficient choice for business owners of small-to-medium enterprises (SMEs) and large corporations in any industry. All In One will provide a comprehensive menu of SaaS solutions for any business owner to utilize. Their full-service approach includes a comprehensive set of sales and marketing, project management, human resources management, and customer relationship management solutions all in one easy-to-use platform.

All In One History

All In One is owned and operated by Melissa Johnson, a business strategist with more than fifteen years of experience helping other businesses develop their operations and processes to optimize customer management, sales and marketing, and project flow. Melissa has garnered a positive reputation of helping companies become more profitable by using SaaS technologies to improve their efficiency. Melissa’s strategic skills and diligence have allowed her to develop a loyal client base.

Since incorporation, All In One has achieved the following milestones:

• Registered All In One, LLC to transact business in the state of California.
• Has a contract in place to lease a small office space.
• Reached out to numerous contacts to include former clients and business owners to begin getting beta users for the new platform.
• Began recruiting a small team of sales and marketing associates, customer support associates, an accountant/bookkeeper, and a technology officer.

All In One Services

Industry analysis.

The global SaaS industry is valued at an estimated $152B (USD). The market is expected to grow to $208B by the year 2023. According to Statista, there are over 15,000 SaaS companies in the U.S. The largest industry players include Adobe, Microsoft, and Salesforce.

SaaS is a major component of cloud computing. Businesses rely on SaaS for everything from video conferencing to sales and marketing automation and customer relationship management. As more companies grow to depend on these services, demand for SaaS offerings will continue to increase. Industry trends include an increased use of artificial intelligence, big data, and integrated cloud services.

The market is highly fragmented with many companies offering similar services. Industry operators can achieve a competitive advantage by developing recognizable and memorable branding and marketing campaigns, providing exceptional customer support, and offering value-add services in addition to the SaaS platform itself.

Customer Analysis

Demographic profile of target market, customer segmentation.

All In One will primarily target the following customer profiles:

• Small-to-medium enterprise (SME) business owners in any industry/sector.
• Corporate/enterprise businesses in any industry/sector.
• Business owners who are looking for a better SaaS platform than what they are currently using.
• Business owners who have never used Saas, but would like to get started to improve their operational performance.

Competitive Analysis

Direct and indirect competitors.

All In One will face competition from other saas businesses with similar business profiles. A description of each competitor company is below.

Get Customers: Sales and Marketing SaaS

Get Customers provides a SaaS platform catering to businesses of any size. The company’s main offering is for automated sales and marketing solutions, but they have recently branched out to offer more comprehensive services including human resource, customer relationship, and financial management tools. Based in Seattle, Washington, Get Customers offers its solutions to businesses and organizations across the United States.

Get Customers’ promise is to deliver a reliable SaaS solution, effective communication, honesty and integrity, and 24/7 availability of the customer support team. Get Customers’ team of experienced SaaS developers and business professionals assures the platform will allow the business operations of its clients to be run smoothly, freeing the business owners from day-to-day operational hassles.

Competitive SaaS Solutions

Competitive SaaS Solutions is a Los Angeles-based B2B SaaS company that provides outstanding business solutions for small business owners. Competitive SaaS Solutions takes the headache out of dealing with multiple SaaS platforms that are not always compatible. They provide comprehensive SaaS services in one place. SaaS solutions included in the platform are CRM, HR, PM, ERP, automated marketing, financial reporting, and video conferencing. The owners of Competitive SaaS Solutions are seasoned business owners and technology professionals so they understand how SaaS is best built, implemented, and managed.

Better Built SaaS

Better Built SaaS is a trusted B2B SaaS company that provides superior service to businesses of all sizes. They are able to provide a one-stop shop for business owners who are interested in optimizing their operational processes through automation. Better Built SaaS is able to serve new businesses and startups from the beginning and established corporations looking to improve their profit margins. They are also able to ease the stress of managers who are overwhelmed by the day to day hassles and complexities that come with running a business.

Their pricing structure is simple and straightforward. Better Built SaaS offers three pricing tiers for their services – the Basic Plan, the Premium Plan, and the Comprehensive Plan. Business owners can choose the plan that best suits their needs and change their plan at any time.

Competitive Advantage

All In One will be able to offer the following advantages over their competition:

• Helpful, knowledgeable, and efficient customer support team that will be available 24/7 to answer customer questions and troubleshoot any issues that arise.
• An intuitive platform that works for any business size in any industry.
• Comprehensive solutions that can be customized to best fit each client’s needs.

Marketing Plan

Brand & value proposition.

All In One will offer the unique value proposition to its clientele:

Promotions Strategy

The promotions strategy for All In One is as follows:

Word of Mouth/Referrals

Melissa Johnson has built up an extensive list of contacts over the years by providing exceptional service and expertise to her clients. Many former clients have communicated to Melissa that they are interested in signing up for the new SaaS and are happy to help spread the word of All In One to their network. Additionally, All In One will use a customer referral program and provide existing clients with discounts for referring new clients.

Website/SEO Marketing

All In One will recruit an in-house marketing director to design and maintain its website. The website will be well organized, informative, and list all their services that All In One is able to provide. The website will also list customer support contact information, pricing plans, and demo videos.

The marketing director will also manage All In One’s website presence with SEO marketing tactics so that any time someone types in the Google or Bing search engine “B2B SaaS company” or “SaaS business solutions”, All In One will be listed at the top of the search results.

Social Media Marketing

All In One will use social media platforms including TikTok, YouTube, Twitter, Instagram, LinkedIn, and Facebook to promote the brand and attract customers. The company’s in-house marketing director will oversee the social media implementation.

Content Marketing

The company will use content marketing on its website and social media to help drive traffic and convert customers. Content will be high quality, informative, and keyword optimized.

The pricing of All In One will be moderate and on par with competitors so customers feel they receive value when purchasing their services.

Operations Plan

The following will be the operations plan for All In One.

Operation Functions:

• Melissa Johnson will be the Owner and CEO of the company. She will oversee all customer support staff and manage client relations. Melissa has spent the past year recruiting the following staff:
• Paul Smith – Chief Technology Officer who will provide all technical support for the platform.
• Bill Brown – Accountant/Bookkeeper who will provide all client accounting, tax payments, and monthly financial reporting.
• Kelly Jones – Marketing Manager who will work on all sales and marketing initiatives for All In One, including customer acquisition.

Milestones:

All In One will have the following milestones complete in the next six months.

8/1/2022 – Finalize contract to lease the office space.

8/15/2022 – Finalize personnel and staff employment contracts.

9/1/2022 – Complete software development of the platform.

9/15/2022 – Begin networking and outbound marketing efforts.

9/22/2022 – Begin moving into the office.

10/1/2022 – All In One opens for business and launches the beta platform.

Financial Plan

Key revenue & costs.

The revenue drivers for All In One are the SaaS subscription fees that will be charged to the clients for use of the SaaS platform and services. All In One will have a tiered subscription model with a basic, standard, and premium subscription options. In addition, the company will have customized service options for an additional fee.

The cost drivers will be the overhead costs required to maintain a SaaS platform and staff the office. The expenses will be the payroll cost, rent, utilities, office supplies, and marketing materials.

Funding Requirements and Use of Funds

All In One is seeking $250,000 in debt financing to launch its SaaS business. The funding will be dedicated towards UX design and other software development. Funding will also be dedicated towards office equipment, supplies, and materials. Additional funding will go towards three months of overhead costs to include payroll of the staff, rent of an office space, and marketing costs. The breakout of the funding is below:

• Marketing and customer acquisition costs: $10,000

Key Assumptions

The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and in order to pay off the startup business loan.

• Average number of monthly subscriptions: 15
• Average fees per month: $50,000
• Office lease per year: $100,000

Financial Projections

Income statement.

Balance Sheet

Cash Flow Statement

SaaS Business Plan FAQs

What is a saas business plan.

A SaaS business plan is a plan to start and/or grow your SaaS business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.

You can easily complete your SaaS business plan using our SaaS Business Plan Template here .

What is the Main Type of Saas Business?

There are a number of different kinds of SaaS, some examples include: Horizontal SaaS and Vertical SaaS.

How Do You Get Funding for Your SaaS Business Plan?

SaaS are often funded through small business loans. Personal savings, credit card financing and angel investors are also popular forms of funding.  This is true for a business plan for any Saas company, including a B2B Saas business plan.

A well crafted Saas business plan is essential for securing funding from any type of potential investor.

What are the Steps To Start a SaaS Business?

Starting a SaaS business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.

1. Write A Saas Business Plan - The first step in starting a business is to create a detailed Saas business plan that outlines all aspects of the venture. The business plan should include market research on the Saas industry and potential target market size, information on the services or products you will offer, marketing strategies, pricing details and a solid financial forecast.  

2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your Saas business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your Saas business is in compliance with local laws.

3. Register Your SaaS Business - Once you have chosen a legal structure, the next step is to register your Saas business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws. 

4. Identify Financing Options - It’s likely that you’ll need some capital to start your SaaS business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms. 

5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where your saas business will be based should it become necessary in the future as well as what kind of space would be suitable for your operations. 

6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events. 

7. Acquire Necessary SaaS Equipment & Supplies - In order to start your SaaS business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation. 

8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your SaaS business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising.

SaaS Business Plan Template

Written by Dave Lavinsky

SaaS Business Plan

Over the past 20 years, we’ve helped over 10,000 entrepreneurs create successful SaaS (Software as a Service) business plans. This step-by-step guide will show you how to start and grow your SaaS business. You’ll learn how to make a plan that outlines your business idea, target customers, customer acquisition strategy, revenue model, and expenses. Let’s get started on building your SaaS company today!

Download our Ultimate SaaS Business Plan Template here >

What is a SaaS Business Plan?

A traditional business plan provides a snapshot of your SaaS business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your customer acquisition strategy for obtaining new clients. It also includes market research to support your business concept.

Why You Need a Business Plan for a SaaS Company

Having a comprehensive business plan is a critical step for any SaaS startup or company looking to scale. It acts as a roadmap, guiding the development and growth phases by setting clear, actionable objectives. A well-structured business plan not only helps in aligning the organizational activities towards achieving business goals but also plays a pivotal role in securing funding. Investors and lenders often require a detailed business plan to understand the potential of your SaaS business before committing their resources. Additionally, a business plan enables you to anticipate challenges and plan effective solutions in advance, thereby reducing risks and increasing the likelihood of success.

Here are several key reasons and benefits for creating a comprehensive business plan for a SaaS startup or an existing company:

• Helps Secure Funding : A solid business plan is essential for attracting potential investors and securing loans.
• Guides Decision Making : It serves as a blueprint for making informed decisions and navigating your business towards its goals.
• Facilitates Growth : Helps in identifying growth opportunities and outlining strategies to capitalize on them.
• Reduces Risks : By anticipating potential challenges, a business plan allows for the development of contingencies to mitigate risks.
• Enhances Understanding of Market : Through research, it provides insights into the competitive landscape and customer needs.
• Improves Communication : Acts as an effective tool to communicate the vision and strategy of your SaaS business to team members and stakeholders.

Finish Your Business Plan Today!

How to write a business plan for a saas company.

Your SaaS business plan should include the following 10 key elements:

Executive Summary

• Company Overview

Industry Analysis

Customer analysis, competitive analysis, marketing plan, operations plan, management team, financial plan.

Your executive summary provides an introduction to your SaaS business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of SaaS business you are operating and the status; for example, are you a SaaS startup, or do you have an existing business that you would like to grow?

Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the SaaS industry. Discuss the type of SaaS you are offering. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing strategy. Identify the key members of your team. And offer an overview of your financial plan.  

Company Analysis

In your company analysis, you will detail the type of SaaS you are offering.

For example, you might offer the following options:

• Horizontal SaaS – This SaaS business model allows big SaaS businesses to serve a varied customer base from a multitude of industries. Services can be expanded to incorporate a variety of software categories.
• Vertical SaaS – This business model includes solutions that are created for a specific customer type of industry. This software focuses solely on that industry’s needs.

In addition to explaining the type of SaaS you provide, the Company Analysis section of your business plan needs to provide background on the business.

Include answers to question such as:

• When and why did you start the business?
• What is your mission statement?
• What milestones have you achieved to date? Milestones could include usability goals you’ve reached, number of new subscriptions, etc.
• Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

The Software as a Service (SaaS) industry in the United States is a significant and rapidly growing sector. As of 2023, the market value of the SaaS industry in the U.S. is approximately $108.4 billion . This industry is expected to continue its growth trajectory, with projections indicating that it could reach a market value of $225 billion by 2025, solidifying the U.S. as the world’s largest SaaS market.

In your industry analysis, you need to provide an overview of the SaaS industry. While this may seem unnecessary, it serves multiple purposes.

First, researching the SaaS industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your business strategy particularly if your research identifies market trends.

The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your SaaS business plan:

• How big is the SaaS industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential market for your SaaS service? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

The customer analysis section must detail the customers you serve and/or expect to serve. This includes identifying your target market and their characteristics such as age, income, location, etc.

By using customer segmentation techniques, you can further refine your target market and tailor your marketing efforts to specific groups of customers. Examples of segmentation in the SaaS industry may include the following customer segments:

• Small and medium-sized businesses
• Enterprises
• Startups/entrepreneurs
• Non-profit organizations

It’s essential to have a deep understanding of the needs, pain points, and preferences of your target audience. This knowledge will help you develop a product that meets their specific requirements and effectively market your SaaS solution.

In addition to demographics, you should also consider the psychographics of your target market, such as their behavior, values, and lifestyle. This information can give you insights into how to position your product and messaging to resonate with potential customers.

Conducting customer surveys and market research can be helpful in gathering this data. You should also analyze your competition’s customer base to identify any gaps or opportunities within the market.

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Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other SaaS services that offer similar features and target the same market segments as your product. Understanding these competitors involves analyzing their product offerings, market position, strengths, and weaknesses. This analysis will help you identify opportunities for differentiation, allowing your SaaS solution to stand out in a crowded market.

Indirect competitors are other options customers may use that aren’t direct competitors. This includes customized software solutions and open-source software. You need to mention such competition to show you understand that not everyone who needs software will subscribe with a SaaS company.

For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

• How many customers do they serve?
• What types of software do they offer?
• What is their pricing strategy (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of this section is to document your competitive advantages. For example:

• Will you provide superior products?
• Will you provide services that your competitors don’t offer?
• Will you make it easier or faster for customers to use your products?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Traditionally, a detailed marketing plan includes the four P’s: Product, Price, Place, and Promotion.

This section should include the following:

Product : in the product section, you should reiterate the type of SaaS business that you documented in your Company Analysis. Then, detail the specific solutions you will be offering. For example, in addition to Customer Relationship Management solutions, will you also offer Email Marketing solutions?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the services you offer and their prices.

Place : Place refers to the location of your SaaS company. Document your location and mention how the location will impact your success. For example, is your SaaS production or support office located in the US or in India, etc. Discuss how your location might impact customer attraction or retention.

Promotions : the final part of your SaaS marketing plan is the promotions section. Here you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider in your marketing mix:

• Search Engine Optimization (SEO)
• Advertising in trade magazines
• Reaching out to associations that correspond with the industry or industries you are targeting
• Publishing articles or writing guest posts on relevant blogs
• Social media marketing
• Radio and/or TV advertising

Understanding and Managing Customer Acquisition Cost (CAC) In the SaaS industry, the Customer Acquisition Cost (CAC) directly impacts profitability and long-term success of your business. Customer acquisition costs are the total cost of the sales and marketing plan that is needed to acquire customers. To keep this cost low, companies should focus on:

• Efficient marketing strategies like inbound marketing, which attracts customers through content creation, social media, and SEO.
• Leveraging customer referrals by incentivizing existing users can significantly reduce acquisition costs, as satisfied customers are likely to spread the word.
• Implementing a robust customer relationship management system to nurture leads and personalize the customer journey can also increase conversion rates, thereby lowering the overall CAC.

By focusing on these strategies, SaaS businesses can optimize their spending and improve their return on investment in customer acquisition efforts.

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your SaaS business, such as attracting customers, running the customer helpdesk, processing paperwork, etc.

Long-term goals are the milestones you hope to achieve using key metrics. These could include the dates when you expect your 100th subscription, or when you hope to reach $X in sales revenue. It could also be when you expect to hire your Xth programmer, or when you expect to launch a new solution.  

To demonstrate your SaaS business’ ability to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

• Upper Management – In this section, introduce your CEO and other top-level executives. Detail their experience in the industry, leadership skills, and any relevant achievements.
• Development Team – Describe the members of your development team and highlight their technical expertise and any previous successes related to SaaS or software development.
• Sales Team – Introduce your sales team members, emphasizing their experience with SaaS products and their track record of generating sales.
• Support Team – Detail the members of your customer support team, highlighting their knowledge of your SaaS solution and their ability to provide excellent customer service.

By showcasing a strong and well-rounded management team, you not only demonstrate the potential for success but also instill confidence in potential investors or partners.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in software development or deployment, and/or successfully running small businesses.  

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you have 10 enterprise subscribers or 500 individual subscribers? And will subscriptions grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $200,000 on building out your SaaS solution, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $200,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt. For example, let’s say a company approached you with a $100,000 customization contract that would cost you $75,000 to fulfill. Well, in most cases, you would have to pay that $75,000 now for employee salaries, hosting, utilities, etc. But let’s say the company didn’t pay you for 180 days. During that 180 day period, you could run out of money.

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing an SaaS business:

• Location build-out including design fees, construction, etc.
• Cost of equipment like computers, design and project management software, etc.
• Payroll or salaries paid to staff
• Business insurance
• Taxes and permits
• Legal expenses

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office design blueprint or location lease.  

Free Business Plan Template for a SaaS Business

You can download our free business plan template PDF . Our sample SaaS business plan is another free resource to help you get started on your own SaaS startup business plan.  

SaaS Business Plan Summary

Putting together your own business plan will improve your company’s chances of success. The business planning process will help you better understand your target audience, your competition, and your business strategy. You will also develop the marketing strategies needed to better attract and serve your target market, an operations plan to focus your efforts, and financial projections that give you business goals to strive for and keep your company focused.

Growthink’s Ultimate SaaS Business Plan Template allows you to quickly and easily complete your Saas Business Plan.

Sources of Funding for SaaS Businesses

With regards to funding, the main sources of funding for a SaaS business are personal savings, credit cards, bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.

The second most common form of funding for a SaaS business is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan.

Additional Resources For SaaS Business Owners

• SaaS Marketing Strategies
• SaaS Pricing Strategies To Consider
• SaaS Accounting: Finances For A Subscription Model Company

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.   Click here to see how Growthink’s professional business plan consulting services can create your business plan for you.

Other Helpful Business Plan Articles & Templates

• Sample Business Plans
• IT, Staffing & Customer Service

SaaS Business Plan

Congratulations! You have found an innovative software solution and are on the brink of launching your SaaS business – that is commendable.

Whether it is a new product that you are introducing or looking to revamp existing SaaS software, a sound SaaS business plan is your essential guide to climbing the ladder of success.

We understand that crafting a business plan for your SaaS business can seem challenging. That’s why we’re here with our SaaS business plan template , to simplify the planning process and assist you in creating a roadmap for your SaaS.

Key Takeaways

• A SaaS business plan helps you define your marketing strategy, customer acquisition strategy, retention strategy, and strategies to achieve your business goals.
• Craft an impactful executive summary that outlines the type of your SaaS business, marketing approach, financial outlook, and team expertise to attract potential investors and partners.
• Conduct thorough market research to understand market trends, consumer preferences, and the needs of your target market.
• To ensure efficient daily operations, provide in-depth operational plans that incorporate staffing, additional services, and customer service.
• Create realistic financial projections for sales revenue, expenses, and profit forecasts while considering contingencies & emergencies.

Why do you need a SaaS business plan?

For entrepreneurs who jump into business directly without writing a business plan is like delaying their success. Here are some reasons why you need a SaaS business plan:

Writing a business plan helps you work out and make clear your business strategy. Do you want customers to pay upfront? Or maybe you’re thinking about the “freemium” idea where some stuff is free, but others need a paid upgrade. Writing this down from the start helps your team understand where you’re headed.

Finances are important

Sometimes, it takes months or even a year to cover customer acquisition costs. So, you need a plan with a solid financial forecast. A good plan lets you play with different situations, so you know how much money you need for both the long and short term.

Acquiring customers

A good business plan outlines how you’ll get new customers. It could be a detailed marketing plan included in your business plan or strategies for how to acquire customers.

Retaining Customers

Getting customers is just part of the game for a subscription business. SaaS businesses need to keep their customers coming back, especially in a competitive market.

Knowing Your Market

A business plan lets you identify your ideal customer profile. Knowing your customers is crucial, and having a deep understanding of your customers helps you make the correct updates to your product in the future.

What to include in your SaaS business plan?

1. executive summary.

The executive summary is basically an introduction to the entire business plan. Entrepreneurs prefer to write it at the last because till then, they will have the full knowledge of the business plan.

Start your executive summary by engagingly introducing your business, and include all other elements like

• Saas company brief introduction
• Market Opportunity
• Vision & mission statement
• Target market
• Your products and services
• Marketing strategy
• Management team
• Financial Outlook
• Call to action

For instance here is an example of Saas company’s product introduction with the help of Upmetrics:

Remember, your readers might not read the whole business plan, but they will definitely go through the executive summary. So, make sure to keep it simple and engaging.

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2. Company Overview

In the company overview section, introduce your business in detail. It includes legal structure, name, location, business history, and everything about your Saas company.

First, provide the basic details of your Saas business – what is the name and what type of Saas business do you own; for example, your Saas business might be:

• Horizontal Saas: This Saas business model allows Saas businesses to cater services to various customer segments.
• Vertical Saas: Here the solutions are created for a particular customer segment of the industry.
• Collaboration Saas: This type of Saas business allows teams to work together. They also enable document sharing, project management, communication, and more such functions.

After that, mention the owners of your Saas startup along with the qualifications. Add the mission statement of your business and do not forget to include business history (if any) & future goals.

This section should provide an in-depth understanding of your business and business owners.

3. Industry Analysis

In the industry analysis section of your SaaS business plan, it is essential to provide a comprehensive overview of the SaaS industry. While this may seem unnecessary, it gives you a deep understanding of your industry which will help you in business planning.

Here are certain questions that will help you in the analysis:

• What is the current size of the Saas industry in terms of revenue?
• What are the current trends of the Saas business?
• Who are the leading SaaS businesses in the industry?
• What is the growth forecast for the industry?

For example, look at this industry and the size of the Saas industry with the help of Upmetrics:

Conduction this industry analysis will educate you about the market and help you prepare marketing strategies according to the market trends.

In short, your industry analysis will provide a clear and comprehensive view of the SaaS market, helping you make informed decisions and easily communicate your business’s positioning and potential.

4. Competitive Analysis

Competitive analysis will help you understand your business better and identify the strong points of your product.

Start by specifying who are your competitors – both companies like yours (direct competitors) and other choices customers might consider (indirect competitors).

Now, let’s focus on your direct competitors, those similar to your SaaS service. Provide an overview of each competitor, including their size and where they’re based.

Next, look at their strengths and weaknesses. Find out:

• Which customer segment do they serve?
• What kind of software services do they offer?
• How do they price their services?
• What are their strengths and strong points?
• What do they need to work on, according to their customers?
• What is their customer acquisition cost?

A better way to conduct this analysis is by seeing things from a customer’s viewpoint. You might even ask your competitors’ customers what they like and dislike about them to better get insights about them.

This way you can get to know the unique selling proposition of your SaaS company. Think about all the areas where you will outperform your competition and make sure to include that in your strategies.

Your USP might be:

• Ease of use
• Customization
• Attractive pricing structure
• 24*7 customer support

In short, through this analysis get to know about your USPs and competitors.

5. Market Analysis

In this section, dive into the market where you will provide SaaS services.

Start your market analysis section by providing the details of your target customers. Your target market can be:

• Small to medium-sized businesses
• E-commerce retailers
• Enterprise level companies
• Nonprofits or NGOs

After mentioning your target market, give a detailed overview of the market size and growth potential of the industry. For example: here is the market size of wages and salary sales workers for a customer relationship management solutions provider software SaaS company:

Now focus on market trends too. Mention what your target customers prefer and what new are they looking for. For example, people might be looking for:

• Remote work solutions
• AI and machine learning integration
• Hybrid cloud solutions

At the end of the market analysis, do mention the regulatory environment your SaaS business needs to follow.

6. Product Offerings

After mentioning your target customers, give details of products that are supposed to make life easier for the target customers. So, make sure your products are easy to use and efficient.

Your product might provide one of these:

• Customer Relationship Management (CRM)
• Project Management (PM)
• Enterprise Resource Planning (ERP)
• Sales Funnel Management
• Financial Management
• Human Resources Management (HRM)
• Communication Solutions
• Automated Marketing Solutions

7. Sales and Marketing Plan

Writing the sales and marketing section means jotting down all the customer acquisition strategies and the tactics for how to retain them.

First, you need to identify and understand your target market, then need to know your USPs because these two elements will be at the base of all your strategies.

Now it is time to mention your customer acquisition strategy as in whether you will go for inbound acquisition or outbound acquisition.

Inbound acquisition

Inbound strategies are fully digital and are necessary to fully convert potential customers into existing ones.

They include acquiring customers or retaining existing customers with the help of content marketing, search engine optimization (SEO), social media marketing, email marketing, etc.

Outbound acquisition

Outbound strategies are all about going to the potential customers directly rather than waiting for them to come to you. This can only happen with a proper sales team by your side.

These strategies include cold emails, cold calls, LinkedIn outreach, direct mail, trade shows, etc.

Once you have noted down how you will acquire customers, then mention below things too:

• Customer acquisition cost
• How many customers do your salespeople close per month on average
• Your monthly paid advertisement budget
• Number of followers you have on social media

8. Management Team

Knowing who is behind your SaaS business will increase the appeal of your business plan.

The management team tells you about the people in charge of the SaaS business. It should explain each manager’s experience, what they’re good at, and what their jobs are.

Here is an example with the help of Upmetrics of how to mention your key managers:

Whether you are going for a traditional business plan or a modern lean plan, do not ignore mentioning your management team. 

9. Operations Plan

This part is like a map that shows how you will make your SaaS business work. It’s divided into two sections:

Everyday Work:

This is what you do every day to keep the business running. Like getting customers, helping them out, and dealing with paperwork. You have to explain how you’ll do all these daily tasks efficiently.

For example here is the purchasing procedure for CRM software with the help of Upmetrics:

These are the important things you want to achieve in the future. It could be reaching a certain number of customers, making a lot of sales, hiring more team members, or launching new features.

Here, you have to show your plan for reaching these goals, including when you aim to get there and what you’ll do to make it happen.

This operations plan is like a guide for handling your everyday tasks and making big dreams for the SaaS business come true.

10. Financial Plan

SaaS financial plan needs to have a 5-year financial forecast. For the first year, break it down into monthly or quarterly details, and then summarize it annually. This forecast should cover your income statement, balance sheet, and cash flow.

Income statement

An income statement, often known as a Profit and Loss statement or P&L, displays your earnings and then deducts your expenses to know the profitability of your business.

When crafting your income statement for SaaS sales growth, you have to make some assumptions. Here is an example of an income statement with the help of Upmetrics:

Balance sheet

Balance sheets display your assets and liabilities. Although they can contain a lot of details, like equity, goodwill, other intangible assets, etc.

Cash flow statement

Your cash flow statement helps you see how much money you need to start or grow your business and avoid running out of money.

Surprisingly, you can make a profit but still face financial problems that could lead to bankruptcy. Therefore, you will need proper cash flow planning to avoid such circumstances.

SaaS Industry Highlights 2023

• Growth forecast: The Software as a Service (SaaS) market was to hit $141.40 billion in revenue by 2023 and is expected to maintain a yearly growth rate (CAGR) of 5.64%, reaching a market size of $186.00 billion by 2028.
• USA’s growth: When compared on a global scale, the United States is expected to generate the highest revenue, reaching $141,400 million in 2023.
• User spending: Spending by end-users on SaaS was to reach $208.08 billion in 2023, making up 35% of all spending on end-user public cloud services.
• Leveraging AI: Around 40% of businesses were prepared to integrate AI technology into their operations in 2021, and the forecasted expansion of cloud AI in 2023 is expected to be five times greater than it was in 2019.

Download a SaaS business plan template

Ready to kick-start your business plan writing process? And not sure where to start? Here you go, download our free SaaS business plan pdf , and start writing.

This intuitive, modern, and investment-ready template is designed specifically for SaaS businesses. It includes step-by-step instructions & examples to help in creating your own SaaS business plan.

The Quickest Way to turn a Business Idea into a Business Plan

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If you’re not great with financial formulas, Upmetrics helps you make accurate money forecasts for 3 years or more.

Whether you’re beginning a new business or trying to expand an existing one, Upmetrics is all you need to create a successful and pro-business plan that matches your goals.

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Frequently asked questions, where can i find a saas business plan template that investors will take seriously.

To secure funding and impress potential investors, an engaging SaaS business plan is necessary. Here are some resources from where you can find business plans:

• Business plan software
• Government website 
• AI business plan generators
• Consultants and advisors
• Business plan writers

How do I define my target audience in a SaaS business plan?

While defining the target audience of your SaaS company, you have to mention their:

• Demographics
• Physiographic
• Needs & pain points
• Purchasing habits
• Localization

What are common mistakes to avoid in a SaaS business plan?

Here are some common mistakes you need to avoid while you write a business plan:

• Not conducting enough market research
• Poor vision
• Not having proper financial projections
• Wrong pricing model
• Insufficient ROI analysis

What technical details should be included in a SaaS business plan?

Technical elements you should include in your business plan are:

• Technology stack
• Technology architecture
• Data storage and security
• Scalability
• APIs and integration
• Data backups & recovery

Should I focus on the short-term or long-term goals in my SaaS Business Plan?

SaaS businesses need to focus on both short and long-term goals as both are important to know your near and far future goals with financial projections and budget.

About the Author

Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more

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The Ultimate Guide to Writing a SaaS Business Plan with Examples and Templates

Explanation: We fact-check all of our content to ensure you have reliable and up-to-date information for your eCommerce business decisions. Learn about our fact-checking steps .

Whether you’re an aspiring entrepreneur or a seasoned veteran, there’s no denying that writing a SaaS business plan is a critical step in launching your SaaS startup . In this article, we’ll give you the lowdown on what goes into writing the ultimate SaaS business plan.

Introduction

Did you know that 70 percent of businesses that follow a strategic business plan manage to survive for five years? 

But here’s the deal — the way you write your SaaS business plan differs a little from the way you might write plans for a more traditional “lifestyle” business. There are unique considerations that can help your business succeed or fail.

It’s necessary to validate your business idea and build a compelling case for investors. If you’re starting a SaaS business, there is an even greater need to create a solid business plan because the resources required to fund growth are often higher relative to other types of online businesses. 

An excellent SaaS business plan lays out essential aspects of your business, from mission and values to marketing strategy and financial projections. It also helps you consider any potential risks and create contingency plans.

If you are considering developing your own SaaS business, this guide discusses what a SaaS business plan should include and how to create an outstanding one. 

We’ll cover areas like your business model examination, marketing, financials, and how to make sure your plan doesn’t include any holes.

What is a SaaS Business Plan?

A SaaS business plan is the roadmap for your software-as-a-service (SaaS) business. With this plan, you can specify steps you need to take to make your business succeed. It basically helps you stay organized and keep track of your progress.

When creating a SaaS business plan, you must consider many factors, including customer segmentation, customer acquisition strategy, pricing structure, marketing, and operational costs. It’s also essential to set short-term and long-term goals to stay on track. 

Moreover, the plan is vital for communicating with potential investors and customers, giving them a clearer insight into the product and its value.

Why Do You Need a SaaS Business Plan?

1. increased clarity.

A SaaS business plan creates clarity around your goals and objectives by articulating them in an understandable format. This plan gives you the foundation for making decisions moving forward, helping you identify potential challenges or opportunities down the road. Whether it’s for yourself, investors or shareholders, having a well-thought-out business plan can be invaluable when it comes to mapping out your trajectory for success.

2. Assign Responsibility

A SaaS business plan focuses on the project and keeps it organized, on track, and ultimately profitable. If your organization lacks a plan, you may find that progress is slow. Projects may get sidetracked or confused, and you may have trouble communicating goals to the team.

With a plan in place, your management team can see who’s responsible for what tasks, when those tasks need to be completed, and how their efforts are contributing to the overall project. It makes it easier to measure performance and set up rewards. 

And at the same time, if someone falls behind or is underperforming, it’s also easier to identify which area needs improvement—all thanks to having a well-defined SaaS business plan.

3. Manage Change

When running a SaaS business, you must always be ready for a pivot. Having a detailed plan helps you prepare for any curve balls that may come your way. A plan is also helpful when expanding or trimming staff or services—it ensures that everyone is on the same page and understands your ultimate goals.

4. Secure Funding

Having a business plan is critical if you’re trying to secure funding for your SaaS project. Investors want to know that you have accounted for all aspects of your project. 

Most are particularly interested in seeing your business model and product, competitive edge, customer acquisition strategy and financial projections. These insights help them to determine the potential profitability of your venture. 

Your business plan typically shows investors how much money they will need to invest in getting the project off the ground.

Pro tip! Discover the techniques and best practices of price anchoring , a pricing strategy you can use in your business plan.

Crafting a Winning SaaS Business Plan Outline

We’ve mentioned earlier that a SaaS business plan is the roadmap you need to create a successful software as a service company. With the right plan, you can identify your target market, outline your strategy, and secure the resources you need to get started. 

Here are the ‘must-haves’ in your outline to get started on the right foot.

1. Executive Summary

The executive summary is a “30-second pitch” that encapsulates the key elements and essential information about your business in a few short paragraphs. It’s the first chapter of your SaaS business plan, setting the tone for the rest of your document. 

The executive summary should be clear and concise while providing enough detail to paint a vivid picture of your business concept and goals.

Potential investors or partners should be able to quickly understand your business goals and concept, as well as your competitive advantages and mission. Hence it’s best to keep your text concise.

You should;

• Include all the essential points and briefly explain how you plan to reach your objectives. 
• Communicate why your company will succeed in this space relative to competitors in the market at large. 
• Finally, don’t forget about visual aids—add charts and other visuals that can help illustrate your points throughout your executive summary to strengthen its impact and clearly present information.

                                                                        Image source 

You can see that this very brief executive summary includes an overview of the product, market, and mission. 

Describing your product and market are particularly essential because they provide a framework for writing about your business model in a way that is focused on your target audience and clear to potential investors.

2. Identifying the Problem

The problem statement clarifies why you create your product or service and why customers need it. It should be succinct and designed to establish your company’s unique purpose and value proposition in the marketplace. 

To write a comprehensive problem statement, you need to research and analyze industry trends to identify the unique problems that your product will solve.

Tools such as the Google Trends search engine or the Pew Research Center are excellent resources for conducting industry research. You can use Google Trends to view the relative popularity of search terms over time, while the Pew Research Center provides access to industry-specific survey data. 

Tools like these can help you identify gaps in the current marketplace to help you create a compelling problem statement.

After your research, use straightforward language to articulate the primary issue your product or service addresses. Remember to keep it Simple. Refrain from overloading readers with too much information; keep it straightforward and easy to understand.

3. Asserting Your Solution

Once you’ve detailed the problem, you need to create a case study for why your solution is the ideal one. Solutions in a SaaS business plan typically refer to the product or service your company provides. 

In this section of the business plan, you must clearly articulate how your solution will be better, faster, or cheaper than the competition. 

As you explain the advantages of your solution, provide concrete data, such as customer testimonials, to back up your claims. It is also important to emphasize the value proposition and the differentiating characteristics that set your solution apart from the competition.

Ultimately, convincing potential customers that your product is better than any alternative will be a key part of gaining their trust. The more information you provide in this section, the more likely potential customers are to understand the value of your product and choose your solution over the competition.

4. Market Opportunity

Market opportunity refers to the potential size and growth of the available market for a business’s services or products. It is an important consideration in the business plan as an essential part of determining the potential success of the business concept. To assess and identify market opportunities, you must first understand your target market.

Check out this graph to find out the approximate global SaaS market growth:

Understanding your target market involves researching the product or service, the target customer demographic, and the market situation for similar products or services. Websites like US Census Bureau , Answer The Public , and Statista can help you uncover actionable insights to identify opportunities, such as untapped markets or customer subsegments that may be more receptive to your SaaS product. 

It is also essential to consider any potential trends or changes in the market, such as new laws and regulations, technology, or changes in customer behavior, that could impact the market. Trend research can help inform pricing and marketing strategy for better long-term success.

You can see that this outlines the potential trend and growth of the cybersecurity market following an analysis by IBISWorld. 

5. Competitive Analysis

The next section of your SaaS business plan should be a competitive analysis. In this part, you look at—and compare yourself to—your competition. This survey helps you understand the current market, identify areas of advantage and disadvantage, and develop strategies to help you stand out from the competition.

Writing a good competitor analysis begins with identifying who your competitors are. Tools like Similarweb can help you find direct and indirect competitors who offer similar services or products differently. For each competitor, you listed, describe the services they provide and their strengths and weaknesses.

Next, spell out the differences between your offer and your competitor’s. Analyze their pricing structures too. Are customers willing to pay more for specific product features? How often do copycats come along? Is there a demand for cheaper alternatives? Understanding these dynamics can help you create better pricing strategies for your SaaS business plan. Popular SaaS pricing strategies include penetration pricing , trial pricing , and psychological pricing .

You can also conduct an SEO competitor analysis   to get a better understanding of your competitors’ strategies. This, in turn, will help you craft a more strategic marketing plan to outperform your competitors’.

6. Business Model Examination

Business model examination in a SaaS business plan involves analyzing and defining how the company plans to generate revenue and create value for its customers. This section includes an in-depth study of key elements of the company’s revenue model, such as pricing strategy, target market, cost structure, sales and marketing channels, and customer acquisition strategy.

The business model examination allows you to ensure that your assumptions are solid and strengthen weak areas. It also validates ideas and visualizes how they stand up compared to competitors in the market. Here, you’ll typically answer important questions such as:

• What value does the SaaS offering provide to its customers?
• How will the company monetize its SaaS offering?
• Who are the target customers, and what are their needs?
• What are the key costs associated with delivering the SaaS offering, and how will these costs be managed?
• How will the company acquire and retain customers, and what is the customer acquisition cost?

7. Marketing Plan and Strategy

This section details a comprehensive strategy for attracting and retaining customers by communicating the value of the company’s offering. It outlines the steps the company will take to build awareness and demand for its product and how it will retain its existing customer base.

A typical marketing plan in a SaaS business plan includes the following components:

• Target market analysis : Identify the target customer segments, their needs, and how the SaaS offering addresses those needs.
• Competitive analysis : Identify the competition and assess the company’s competitive advantage.
• Value proposition: Define the unique value the SaaS offering provides customers and how it differentiates from the competition.
• Positioning strategy : Determine how the SaaS offering will be positioned in the market and how the company will communicate its value proposition to its target customers.
• Marketing mix : Define the marketing mix, including product, price, place, and promotion, and how they will be used to achieve the marketing objectives.
• Marketing budget : Establish the marketing budget, including the cost of marketing campaigns and tactics and how the budget will be allocated to different marketing channels.
• Marketing KPIs : Define key performance indicators (KPIs) to measure the marketing plan’s effectiveness and track progress.

To learn more about measuring your marketing KPIs, read our comprehensive guide on essential SaaS metrics to track and improve growth.

8. Timeline and Map

A timeline is a visual representation of the key milestones and events the company intends to achieve in a specified period. 

The timeline should outline the significant events such as;

• product development
• marketing campaigns
• key hires, as well as the expected completion dates for each event. 

The timeline provides a roadmap for the company, ensuring that the business stays on track and meets its goals.

To create a comprehensive timeline in your business plan, determine what you want to achieve with your SaaS business. Next, identify the key events that need to happen for your business to achieve its goals. These events can include product development, launch, marketing campaigns, and key hires.

After identifying key events, assign a realistic time frame for each milestone, considering any dependencies or constraints. This step will help you to determine the expected completion dates for each event. 

Finally, choose a format for your timeline that is easy to understand and visually appealing. A Gantt chart is a popular choice for creating a timeline, as it provides a clear and visual representation of the timing of each event. You can use a tool like TeamGantt to create Gantt charts.

9. Your Team

Your management team, composed of founders, executives, and everyone in between, are responsible for turning your brilliant idea into a reality. That’s why exploring how your team and plan mesh together is essential to create something truly unique.

In this section, you’ll want to talk about the experience and qualifications that your team brings to the table — including relevant work history and industry knowledge. You’ll also want to talk about how roles are divided among team members and how those roles might evolve.

If the company has a board of directors and advisors, this section should describe their background and experience and how they will contribute to the business’s success. The team section should also outline the company’s plans for future hiring and how the new hires will fit into the company’s overall strategy.

10. Financial Plan

A financial plan is one of the essential parts of your SaaS business plan. It lays out your current and future financial needs so that investors know where you are now and understand where you intend to be in the near and distant future. Here are some key elements to include when writing the financial plan section.

• Projected income statement: Provide a detailed projection of the company’s revenue and expenses over a period, usually 3-5 years.
• Projected cash flow statement: Show the company’s expected cash inflows and outflows over the same period as the projected income statement.
• Projected balance sheet: This section should show the company’s projected assets, liabilities, and equity at the end of each year. 
• Break-even analysis: Show the point at which the company’s revenue will equal its expenses and how long it will take to reach that point.
• Assumptions and risks: Outline the assumptions and risks underlying the financial projections, such as changes in the economy, competition, and customer behavior.
• Capitalization table: This section should show how the company will be funded, including equity investments, debt financing, and other funding sources.

In today’s world, the process of creating a business plan has become much easier. You can find freelancers online who can help handle time intensive parts of the process like research and formatting, making it possible for you to focus on what matters most — your business strategy. 

You can also find templates online that allow you to plug in your own information and print out pages with everything you need.

For example, SCORE provides fillable worksheets to help you cover these key pages in your business plan. The US Small Business Administration (SBA) also offers sample templates for both modern lean startup and traditional business plans. Additionally, you can find free templates on PandaDoc . 

Pro tip! Trial pricing method is another pricing approach you can use when writing a winning SaaS business plan.

Final Thoughts

Now you see, you don’t have to be an excellent wordsmith or planner to craft a winning SaaS business plan. The steps in this guide will help you to organize your thoughts and create a comprehensive plan for your business.

Adaline Lefe Mary John

A great researcher and creator, Adaline is responsible for planning and managing content for all our websites. She has over 10 years of experience in creating and managing content.

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SaaS Marketing

SaaS is a hectic industry. It’s an ever-growing, straight-talking, constantly innovating world of solutions that help people and businesses do better, every day. That’s why we love it.

And if you’re an entrepreneur, you’ll also love the fact that it’s a market worth billions of dollars that is literally taking over the world.

Perhaps you have an idea for a SaaS product, and you’re looking for resources to help you put your ideas into action and get the wheels turning. It’s been a crazy year, but technology is still moving and you don’t want to get left behind.

We’ve put together some helpful SaaS business strategies, plans, and advice to help you with setting up your business and planning the scale-up journey.

Let’s get started.

Define: SaaS Business

SaaS (software as a service) products play an important role in our personal and professional lives.

It’s a market worth $105 billion in the US alone and it grows by 30% each year . If you’re an ambitious entrepreneur, that’s all you need to hear.

SaaS businesses stretch across all industries, from music to team management to healthcare, so you’ll find innovative software solutions in every specialized sector and niche.

So, how do we know something can be classed as software as a service?

SaaS is a software product that…

• Is accessed via an online platform or app
• Solves a particular problem
• Targets a particular group of people
• Uses a subscription model

We have cloud computing to thank for the evolution of SaaS businesses.

It’s a simple concept nowadays – software is stored and maintained in the cloud, and businesses pay for access to this software.

But it’s taken some serious technological advancement to get here, a point where high-performance software is readily available to anyone with an internet connection.

I’ve got a simple (maybe too simple) analogy for explaining SaaS businesses compared to other, older, methods of software use. You can use it when your parents ask you why you’re moving out of their cup noodle-littered basement and into your super yacht.

Let’s say you want a pizza. Because let’s be honest, everyone wants a pizza, all of the time. I’m so hungry, man.

You have two options:

• Planting some wheat
• Picking up the phone

You could buy a farm. You plant all your crops and take care of all your livestock. You harvest the grains, store them, and grind them to make flour. Etcetera. You now have all the ingredients required to make a pizza – all from your own premises. This is like “On-Premise” software. It’s installed, stored, maintained, and run on-premises.

You could also call your local pizza place, order your favourite – Hawaiian, obviously – and enjoy a delicious pizza within half an hour. The quality is always good, you don’t have to know anything about yeast, and it’s pretty cheap.

This is SaaS. Fresh, hot, Hawaiian pizza, delivered to your device.

SaaS Vs. Legacy Systems

Businesses in every industry, if they weren’t already built with cloud-based software, are making the switch to SaaS from traditional legacy systems.

To your average business owner, particularly if they’re a boomer, legacy systems are what they’ve always known.

It’s a scary thing to learn that all data is now stored in ‘the cloud’, but they’re starting to realize that competitors are moving faster because they’re using more modern tools.

Take wealth management, for example. It’s an old industry and it’s often run by older people (who are very good at what they do and have decades of experience).

The thing is, a shocking amount of wealth management takes place using clunky, ancient legacy systems (I’m talking about the software, not the people).

Heck, billions of dollars in assets might be tracked using a mission-critical spreadsheet. Let’s say old wealth manager Joe presses the wrong button in Excel – beep boop, he’s lost his client’s data.

This is where SaaS businesses save the day. When presented with the pros and cons, it’s a no-brainer:

In every industry – banking, beauty, education, finance, music, travel – SaaS businesses are riding the wave of cloud computing to offer businesses (and consumers) a far more advanced tool that is much simpler to use and, critically, far cheaper to run.

So, Mr/Ms. Entrepreneur, what kind of SaaS are you going to sell?

What Is Your SaaS Business Going To Look Like?

When mapping out a SaaS strategy for your startup, there are some fundamental parameters that should be in place.

• Solving a specific problem
• Catering to an audience you know and respect
• Pricing that demonstrates value

Your SaaS product is only going to be valuable if it solves a real, tangible problem for people. A problem that is so crucial that the solution is an urgent requirement.

At the most basic level, your SaaS business should be selling a product that helps other businesses make money.

Then there’s the audience for your SaaS business. You’ll get the best results from targeting a group of people that you know very well and, most importantly, that you respect.

Why? Because, if you want to succeed, you’re going to have to talk to them. A lot.

Now, price is obviously an essential factor because that’s how you make a seamless transition from your current clunker to a golden lamborghini. But it’s also how people perceive the value of your product.

If your product is valuable enough, if it truly solves a problem and helps businesses make money, they’ll be willing to pay for it.

Creating Your SaaS Business Plan

Okay, so you’ve got the concept for your SaaS business, you might have even started to dabble in development.

But you’ve got to get investors on board. To do that, you need a clear SaaS business plan that’ll persuade even the meanest dragon in the den that your product is the one.

SaaS Startup Business Plan: Traditional Vs. Lean

When you approach creating a business plan, you’ve got two options:

• Traditional Business Plan
• Lean Business Plan

A traditional business plan is a full-scale, 40-odd page manifesto that covers the following essential aspects of your SaaS business.

By the end of it, you’ll have a very serious-looking document that’ll have you feeling like a very serious business person.

The thing is, this is quite an old school method of business planning that doesn’t suit the environment where SaaS thrives.

In this industry, the entire market will shift, new competitors will emerge, new technologies will be invented, all in the time it takes you to write a 50-page document to send to Peter Jones.

So how do SaaS businesses plan their growth strategy without pinning themselves down? A Lean business plan.

Why A Lean Business Plan Suits SaaS Businesses

You’ll still need to cover the essentials, but there’s more wiggle room around areas that are constantly changing in the SaaS world.

Lean SaaS Business Plan Template

As well as your SaaS business plan, you need to provide two things:

• Clear vision and goals
• Assurance of profitability

Showing clarity and decisiveness around your business goals not only gives your business direction and momentum but impresses potential investors who will share your confidence in your SaaS business.

Of course, confidence is all hot air without proof of profitability. Make sure you’ve defined a clear path to profit and know your numbers because that’s what it boils down to when gaining investors.

Understanding The SaaS Business Model

So, we’ve established that SaaS is not like other girls because it sits on the cloud and, instead of investing a ridiculous amount into on-premise tech, businesses pay a small fee to access the data on a subscription.

All the major hallmarks of selling a tech product go out the window with SaaS – no physical product, no end-user license, no infrastructure needed to host the software – just log in on a web browser and maybe an app download.

Therefore, the core business model of any SaaS business is recurring subscription fees.

One-off sales are no longer the goal, instead, the focus is on the lifetime value of a customer. There are a number of ways a SaaS business can grow to maximize revenue, such as up-selling, partnerships, and affiliate marketing, but the core moneymaker is the subscription.

This is where the value of your product is everything, and I’ll circle back to the essential ingredient – helping businesses make money.

Think of the top SaaS businesses out there right now: Salesforce, Monday, Zendesk

If your software product is valuable enough, a business will:

• Use it for vital business activity – from task management to CRM organization to selling products
• Start building processes around the program – so even if a competitor comes along, they’ll stick to what they’ve been using
• Become reliant on the service it provides
• Pay just about anything to continue using and benefitting from it

SaaS leaders have cracked this code – and you can too, but there are many challenges to overcome (and that’s if your product is decent).

The SaaS business model sounds relatively straightforward, but it comes with many challenges. Let’s go over them:

Yikes. No wonder 92% of SaaS startups fail . That super yacht looks so far away when you’re deep in the Valley of Death, running through the last of your capital, and desperately pitching to investors while sleeping on your friend’s couch.

Knowing Your SaaS Business Has Made It (Key Metrics)

So, how do you know if you’ve made it? What are the SaaS marketing metrics for success if you’re running a SaaS business?

Let’s run through them. You should know these figures off the top of your head when you’re approaching investors.

• Customer acquisition cost
• Monthly recurring revenue
• Average revenue per account
• Customer lifetime value
• Customer retention rate

Churn is the most powerful metric for measuring SaaS success.

Customers will inevitably unsubscribe, whether it’s because they’ve found a better solution, they can’t afford the subscription, or they simply no longer need your product.

To calculate churn for a specific period, simply divide the number of unsubscribed customers by the total number of customers.

If your churn rate is increasing each month, you know you’ve got a problem.

Customer Acquisition Cost (CAC)

This is a great indicator for profit.

Divide the total cost in marketing and sales by the number of acquired customers.

Monthly Recurring Revenue (MRR)

A simple way to predict incoming revenue so you know how you’re tracking, without taking into account fluctuations in churn and customer acquisition. Multiply the number of customers by the average revenue each month.

Average Revenue Per Account (ARPA)

The average revenue acquired from one client each month or year. Calculated by dividing the total MRR by the number of customers.

Customer Lifetime Value (CLV)

This one’s a bit more complicated, but it’s one of the most important SaaS business metrics to track. It represents the average amount of revenue you can squeeze out of customers for the amount of time they stay with your company. Multiply the average revenue per account by the percentage gross margin, then divide it by the average churn rate.

Customer Retention Rate (CRR)

This just shows how many customers have stuck to using your software over time, proving the success of your marketing efforts and the value of your product. Divide the number of customers currently using the software by the total number of customers at the start of the specific time period, then multiple by one hundred to get the percentage.

The Marketing Approach To SaaS

You’ve developed your SaaS business plan, you know it like Chewbacca knows the Millennium Falcon, and you’re ready to send that sh*t into hyperspace.

SaaS growth is serious business. Every SaaS company navigates it differently, but it tends to look like the following stages:

When it comes to growing your SaaS business, you need a killer SaaS go-to marketing strategy.

This is obviously our area of expertise, so we’ll share our top SaaS marketing strategies and show you how to tackle the challenge of attracting customers with marketing.

Build Your Audience First

To truly master SaaS marketing, you should be thinking about it right at the start of your startup journey.

Before you start perfecting and developing your MVP, we highly recommend you start investing in your marketing essentials, including:

• Social media profiles
• Email marketing campaigns
• Product demonstrations

We’re not suggesting you invest in an inbound marketing agency right at the start, that wouldn’t be wise at all, you need that early capital.

But simply investing time and some resource into your marketing essentials, particularly your website, helps you build your audience alongside product development.

This helps you achieve a number of things:

• Test your USP
• Increase awareness of audience pain points
• Establish a relationship with your ideal customers
• Develop your brand voice
• Build anticipation for your product launch

By keeping marketing in mind from day dot, you save yourself from crafting an entire brand personality at a time where your product is ready and marketing should just plug and play to get the results you want.

It might mean doing a fair amount yourself, from writing the odd blog to posting on LinkedIn and setting up a mailing list.

For example, this fintech startup has been publishing high-quality blog content on its beautiful website since way before they started scaling up this year.

This means that, by the time they hit the hyper-growth phase and customer acquisition skyrockets, they’ve got a goldmine of epic content ready to make sure none of that organic traffic goes to waste.

Outbound vs. Inbound SaaS Marketing

Okay, so you’ve figured out how to start a SaaS business. You’ve got your MVP ready to go, some investors on board, and it’s time to start building an online presence to attract customers.

You know this means marketing, and you know that costs money, but you’re unsure how to best use allocate your funds to maximize results. The last thing you want to do is throw all your marketing spend at an ineffective campaign.

When it comes to B2B SaaS marketing, you’ve got two methods:

• Outbound marketing
• Inbound marketing

Outbound marketing uses tactics that directly target your audience, reaches into their day to day world, and initiates a conversation.

Traditional forms of outbound marketing involve radio ads, infomercials and those insidious cold calls at dinner time that provoked your Dad to swear in your presence for the first time.

Today, outbound marketing is all about social media and Google Ads. Companies pay to have their content displayed in front of users who Google, Instagram, LinkedIn, or Facebook recognize as belonging to their target audience.

Outbound marketing had a bad reputation for being manipulative and too in-your-face, which says a lot about a society that is sick to death of looking at advertisements. I mean, 81% of people will close their browser due to a pop-up ad.

But outbound marketing can be useful for businesses, particularly startups who need some traction with their online presence. It’s a useful way to track ROI – you pay a certain fee and get a certain amount of engagements.

Then there’s inbound marketing. Inbound marketing tactics are subtle – where outbound deals in flashy fonts, inbound provides education, subtlety, and value.

Rather than selling your SaaS product outright, inbound marketing educates your audience about the product and topics relating to it – how it works, how it solves a problem they face, what they can achieve with it, why it’s better than other products, why they should care about it.

Rather than persuading people to ‘buy now’, inbound marketing methods seek to gently steer your audience towards your product and showcase it’s value – with the goal that they’ll know where to find you when they need the product.

The most powerful form of inbound marketing is SaaS content marketing – words that work wonders for your business.

Inbound marketing is highly valuable to B2B SaaS for numerous reasons:

• SaaS products require more explanation for people to understand their value
• B2B customers take longer to make decisions so need more to read
• B2B decisions require discussion so need well-researched content
• SaaS relies on recurring revenue so customers need consistent value from content

There are many SaaS inbound marketing examples out there, all of which demonstrate the long term ROI that comes from building a goldmine of valuable content for your audience.

What’s more, SaaS inbound marketing is far more strategic. Different tactics and types of content can be engaged to guide leads down the marketing funnel to the point where they make the decision to purchase.

The SaaS Marketing Funnel

In every B2B SaaS marketing and lead generation guide , you’ll learn about the marketing funnel.

Basically, the funnel maps out every stage in a buyer’s journey from just noticing your product, to buying it and raving about it.

At its most basic level, the B2B SaaS marketing funnel has three stages:

• Consideration

By taking the time and using your knowledge of your customer persona, buyer journey, and your product, you can create an inbound marketing strategy that leverages the right content to attract customers at each stage of the marketing funnel.

With a future-proof inbound marketing strategy and a team of SaaS marketing experts by your side, your scale-up journey can be supported by high-value content that takes care of new leads and turns them into sales.

Conclusion: Let’s Get Down To Business

Let’s face it, inbound marketing is a serious long-term investment. To build a goldmine of content to nurture your leads, you’re gonna need a serious amount of high-quality blogs, case studies, landing pages, and videos.

If you’re an entrepreneur who’s just figuring out how to start a SaaS business, you likely won’t be able to hire an inbound marketing agency for a little while.

But that doesn’t mean we can’t help out. We want to support entrepreneurs looking to take SaaS further with solutions that’ll shape the world we live in tomorrow.

That sounded pretty cheesy, but we mean it. If you’re putting together inbound marketing strategies for your SaaS startup, let’s talk .

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Chris Onyett

Chris is one of the managing partners at Roketto. His area of expertise is digital marketing and loves sharing and educating on topics like Google Ads, CPC bidding tactics, Google Analytics, and marketing automation. When Chris isn't in the office, he enjoys playing volleyball, mountain biking, and hiking with his American Eskimo.

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How to Start and Operate a Successful SaaS Company

For those aspiring to venture into the dynamic world of SaaS, we’ve created this guide with a step-by-step roadmap bridging the gap between vision and execution.

From the initial stages of ideation, emphasizing the significance of addressing genuine challenges, to the detailed processes of devising your business plan and selecting an appropriate structure, each step is crucial. We’ll also cover the importance of a user-first approach, effective pricing methodologies, and strategic brand positioning, along with KPI’s and important metrics to track.

What Makes a SaaS Company Successful

Every enterprise, regardless of its niche, thrives on certain foundational pillars. When it comes to SaaS, these pillars not only determine its initial breakthrough but also its long-term viability. So, what makes a SaaS venture stand out?

Prioritizes Customer Success

For SaaS companies, customer success isn’t merely about meeting expectations—it’s about exceeding them. Given the subscription-based model of SaaS businesses, retaining customers is paramount. By ensuring that users derive continuous value from the software, successful SaaS companies bolster loyalty, reduce churn rates, and increase lifetime customer value. They invest in excellent onboarding processes, ongoing customer support, and regular feedback loops to adapt and improve.

The SaaS Company Understands Their Market

A deep understanding of the market is the bedrock of any successful enterprise. For SaaS companies, this translates into recognizing not only who their ideal customers are but also their pain points, desires, and how the product fits into the larger industry ecosystem. By consistently aligning product development with market demand, these businesses ensure that they remain relevant and competitive.

Grows at a Steady Pace

While rapid growth might seem attractive, it can sometimes lead to unsustainable practices or missed opportunities to solidify the product-market fit. The most successful SaaS companies focus on steady, scalable growth. This approach ensures that as the company expands, it remains adaptable, maintains high service quality, and continues to meet its users’ evolving needs.

Is Starting a SaaS Company Without Technical Skills Possible?

Venturing into the realm of SaaS might seem intimidating, especially if you’re not armed with coding skills or a tech background. However, the truth is that while technical know-how is undeniably advantageous, it’s not an absolute requirement. Many successful SaaS founders started with a vision, a clear understanding of their market, and the drive to solve a pressing problem. Partnering with technical experts, outsourcing development, or leveraging no-code platforms are just a few routes one can take. Remember, at the heart of every great SaaS product is a solution to a genuine problem; if you can identify and address that, the technicalities can always be managed.

12 Steps for Building a Succesful SaaS Company

While understanding the core principles behind a successful SaaS venture is vital, actionable steps are what transform that understanding into a thriving business. Here is a 12-step roadmap to establish your very own SaaS company.

1) Build a Product That is a Solution to a Common Problem

The most successful SaaS products are not just software; they are solutions to pervasive problems that users face. Starting with a problem-first approach ensures that there’s a genuine demand for your product. Instead of convincing users to adapt to your software, you’re providing a tool they’ve been actively seeking. This positions your product as essential rather than optional.

Real-Life SaaS Example

For instance, imagine if workplaces had to juggle multiple platforms for every communication need. It would be chaotic and inefficient.

This is precisely the problem Slack aimed to solve. Before its introduction, many teams relied on a patchwork of emails, texts, and various apps for communication. Slack provided a centralized platform where teams could seamlessly chat, share files, and integrate other tools, making team communication coherent and streamlined. Their problem-first approach is a significant reason for their widespread adoption and success.

2) Decide on a Name for Your Company

The name of your SaaS company is not just a label; it’s the first impression, the identifier, and often, the first interaction a potential user has with your brand. A well-chosen name can set the tone for what customers can expect, reflect the essence of your software, and play a role in your brand’s memorability. Conversely, a hastily picked or misaligned name can create confusion or even deter potential users. Given its significance, naming your company is a decision that warrants careful consideration.

Tips for Choosing a Company Name:

• Simplicity is Key: Choose a name that’s easy to spell, pronounce, and remember. Complex names can make it difficult for potential users to search or pronounce when talking about your product.
• Relevance: Ensure the name resonates with the solution your product provides or the problem it addresses. It doesn’t have to be overly descriptive, but some level of relevance helps.
• Check Domain Availability: In the digital age, your online presence is paramount. Before settling on a name, make sure the domain is available. A .com or .io is often seen as the most professional, but with the possibility of other domain extensions, you can also get creative. Visible has chosen .vc and AI companies often use .ai.
• Avoid Copying Competitors: Your company name should stand out and not be easily confused with existing SaaS products. A distinct name can help avoid legal issues and distinguish your brand in the market.-
• Scalability: Think long-term. Choose a name that won’t pigeonhole your company if you decide to expand or pivot your product offerings in the future.
• Solicit Feedback: Once you have a shortlist of potential names, seek opinions from colleagues, potential customers, or mentors. Their perspectives can provide insights you might have overlooked.

Remember, while a name is significant, it’s the value and utility of your software that will ultimately define its success. The name is the hook, but the product is the substance.

3) Create a Business Plan or Write a Lean Plan

Every successful venture starts with a blueprint—a comprehensive strategy that outlines the company’s objectives, methods to achieve those objectives, potential pitfalls, and ways to mitigate them. This blueprint is known as a business plan. However, in the fast-paced world of SaaS, sometimes a traditional business plan can be overly detailed. In such cases, a Lean Plan, which is a distilled version of a business plan, might be more appropriate. Both provide clarity, focus, and a roadmap, but they differ in depth and detail.

How to Write a Business Plan:

A business plan is a detailed document that provides an in-depth analysis and strategy for your SaaS venture. Here’s what it typically includes:

• Executive Summary: A brief overview of your company, including the mission statement, product description, and basic information about your company’s leadership team, employees, and location.
• Market Analysis: Detailed research on the industry, market size, and your competitors. This should outline who your target customers are, what they need, and how your product addresses those needs.
• Organization & Management: A breakdown of your company’s organizational structure, details about the ownership, profiles of your management team, and the qualifications of your board of directors.
• Product Line: Detailed descriptions of your product or service, including information on the product’s lifecycle and intellectual property rights.
• Marketing & Sales: Your strategy to attract and retain customers—this could be through online marketing, partnerships, or traditional advertising.
• Financial Projections: Forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets for the next five years.
• Appendix: Any additional information, graphics, or charts that supplement your business plan.

How to Write a Lean Plan:

A Lean Plan is a concise, dynamic document (typically one page) that highlights the essential components of your business without going into minute details. It’s particularly useful for startups looking to iterate rapidly. Here’s what it covers:

• Value Proposition : A clear statement describing the problem you’re solving, the solution, and the target customers.
• Key Partnerships and Resources: Who will you be working with, and what are the essential tools and resources for your business?
• Channels: How will you deliver your product to your customers?
• Customer Segments and Relationships: Who are your primary customers, and how will you interact with them?
• Revenue Streams: How will you make money? This can include subscription models, licensing, or affiliate partnerships.
• Cost Structure: A breakdown of the major expenses and where resources will be allocated.

The choice between a business plan and a lean plan will depend on your specific needs, the nature of your SaaS product, and the stage of your startup. Both are invaluable tools, but the lean plan’s flexibility makes it more suitable for businesses that anticipate frequent changes and rapid iterations.

Related resource: The SaaS Business Model: How and Why it Works

4) Choose Your Business Structure

Selecting the appropriate business structure is pivotal. This choice influences your day-to-day operations, how much you pay in taxes, your ability to raise funds, the paperwork you need to file, and your personal liability. Each business structure comes with its own advantages and disadvantages, and the ideal choice will depend on your company’s unique needs, your business goals, and your personal preferences.

Should You Form an LLC?

An LLC (Limited Liability Company) is a hybrid business entity that blends elements of partnerships and corporations. Here’s what you should know:

• Liability: One of the primary benefits of an LLC is that it offers limited liability protection to its members. This means personal assets, like your home or car, typically aren’t at risk if the LLC faces debts or lawsuits.
• Flexibility: LLCs offer flexibility in management and don’t require a board of directors or annual meetings.
• Taxes: Profits and losses pass through the business to the members, who report this information on their personal tax returns. This avoids the “double taxation” faced by corporations.
• Decision: If you’re looking for liability protection, taxation flexibility, and less rigid formalities, an LLC might be right for you. It’s especially favored by smaller SaaS startups.

Related resource: Fobes: Best LLC Services Of 2023

Should You Form a Sole Proprietorship?

A Sole Proprietorship is the most straightforward business structure, best suited for solo founders.

• Control: As the sole owner, you have complete control over the business decisions.
• Taxes : Income from the business is treated as personal income, and you’ll be responsible for all the taxes. There’s no distinction between the owner and the business.
• Liability: The major downside is unlimited personal liability. If the company incurs debts or is sued, your personal assets can be at risk.
• Decision: If you’re starting a small SaaS business on your own and are comfortable with the risks, a sole proprietorship might be a good fit. However, due to the liability concerns, many solo founders eventually transition to an LLC or corporation as the business grows.

Related resource: Sole Proprietorship: What It Is, Pros & Cons, Examples, Differences From an LLC

Should You Form a Corporation?

A Corporation is a more complex business structure that treats the business as a distinct entity separate from its owners.

• Liability: Shareholders (the owners) have limited liability. This means their personal assets are protected from company debts or legal actions.
• Taxes: Corporations face “double taxation.” The corporation itself pays taxes on profits, and shareholders also pay taxes on the dividends they receive.
• Raising Capital: Corporations can raise capital more easily by issuing stocks. This is often necessary for large-scale SaaS ventures that require significant investments.
• Formalities: There are more rigid requirements, like having a board of directors, annual general meetings, and more extensive record-keeping.
• Decision: If you plan to scale your SaaS company significantly or anticipate raising a lot of capital through investors, a corporation might be the best choice. It’s a common structure for larger startups aiming for significant growth or an eventual IPO.

The choice of business structure will significantly impact your SaaS company’s operations and growth potential. It’s essential to consult with legal and financial professionals to determine the best fit for your specific situation.

5) Test Your SaaS Idea: Will this Product Disrupt the Market?

Before diving headfirst into development and scaling, it’s imperative to validate your SaaS idea. The last thing you want is to invest time, resources, and money into a product only to realize there isn’t a sizable market demand for it. Engaging potential customers in conversations and conducting a competitive analysis will help you ascertain the potential of your idea and identify any gaps in the market or areas for improvement.

Chatting with Customers: This is your direct channel to understanding the needs, pains, and preferences of your target audience. By engaging with potential customers, you can get feedback on:

• Features they deem essential.
• The price they’re willing to pay.
• The challenges they face with current solutions.

These conversations can guide product development, pricing strategies, and marketing approaches.

Competitive Analysis: This helps you gauge the current market landscape. Who are the major players? What do they offer? Where do they fall short? How can your product fill the gaps or provide a better solution? Understanding your competition can give you a strategic edge and help refine your unique value proposition.

How to Conduct a Competitive Analysis Study:

• List Down Competitors: Start by identifying your direct competitors (those offering a similar solution) and indirect competitors (those solving the same problem but through a different method).
• Analyze Product Features: Break down the features of each competitor. Identify where they excel and where they lack.
• Customer Reviews: Dive into customer reviews on platforms like Capterra or G2 Crowd. These can provide insights into what users love and what frustrates them about existing solutions.
• Pricing Structures: Understand the pricing models of competitors. Are they subscription-based? One-time purchase? Freemium? This can help you position your product competitively.
• Brand Perception: How do competitors market themselves? What’s their messaging? Understanding their brand perception can help you differentiate and position your product.
• SWOT Analysis: Conduct a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis for each competitor to have a holistic view of the competitive landscape.

Pro Tip: Use tools like SEMrush or Ahrefs to analyze competitors’ online strategies. These tools can reveal keywords they rank for, their content strategy, backlink profiles, and more. Leveraging this information can give you a competitive edge, especially in your digital marketing efforts.

By taking the time to validate your idea and understand the competitive landscape, you set the stage for a product that not only meets market needs but has the potential to disrupt and innovate within its space.

6) Create a Pricing Model for Your Service

The pricing model for your SaaS product isn’t just about determining a number; it’s a strategic decision that can influence your brand’s positioning, perceived value, and revenue streams. Too low, and you might be undervaluing your service or not covering costs, leading to financial strain. Too high, and you might deter potential customers. A well-considered pricing strategy ensures that you’re offering value to your customers while also achieving profitability.

How to Determine Price for Your Service:

• Cost-Based Pricing: At the most fundamental level, you need to cover your costs. Calculate the total cost of delivering your service, including development, hosting, support, marketing, and any other overhead. Ensure that the price you set covers these costs and leaves room for a healthy margin.
• Value-Based Pricing: Understand the value your service provides to your customers. If your software can save a company $50,000 a year in operational costs, they might be more than willing to pay $10,000 a year for it.
• Competitor Analysis: As discussed earlier, knowing what your competitors charge can provide a ballpark figure. If your software offers more features or better support, you might be able to charge a premium. Conversely, if you’re entering a crowded market and want to penetrate quickly, undercutting might be a viable strategy.
• Tiered Pricing: Offer multiple packages with different feature sets. This can cater to a broader range of customers, from small businesses to large enterprises. For instance, a basic package might offer core features, while a premium package might include advanced analytics or priority support.
• Freemium Model: Provide a basic version of your service for free and charge for advanced features or more extensive usage. This can be a way to get users in the door and upsell them later.
• Pilot Testing: Before finalizing your price, consider doing a soft launch or pilot test. Offer your service to a select group at a discounted rate in exchange for feedback. This can provide real-world insights into what customers are willing to pay.
• Feedback and Adjustments: Pricing isn’t static. Periodically gather feedback, monitor how your pricing affects sales, and adjust accordingly. Markets, competitors, and costs change, and your pricing strategy should be flexible enough to evolve.

Your pricing model is more than just a figure—it’s a reflection of the value you provide, the market you operate in, and the strategy you adopt. Approach it thoughtfully, and be prepared to iterate as you gather more data and insights.

7) Gather Customer Feedback & Focus on User Experience

The road to a successful SaaS company is not paved solely by a great product idea. It’s continuously refined by listening to your users and iterating based on their feedback. In the realm of software, a small usability hiccup can be the difference between a delighted customer and a frustrated one who churns. Emphasizing customer feedback and a stellar user experience (UX) is paramount in ensuring that your SaaS product isn’t just functional, but also enjoyable and intuitive.

Why User Experience is Important:

• First Impressions Matter: A user’s initial experience with your software can set the tone for their entire relationship with your product—and by extension, your brand. A well-designed, intuitive user interface can make users feel empowered, while a clunky, confusing one can lead to frustration.
• Reduction in Support Costs: A software that’s easy to use and navigate can significantly reduce the volume of support queries and tickets. This not only reduces operational costs but also leads to happier customers.
• Increased Retention Rates: Retaining customers is often more cost-effective than acquiring new ones. A great UX can lead to increased user satisfaction, resulting in higher retention rates.
• Enhanced Credibility and Trust: A polished, professional user interface can enhance your product’s credibility. Users are more likely to trust and continue using a product that appears well-designed and user-centric.
• Boost in Referrals: Delighted users are more likely to recommend your software to peers. Word-of-mouth referrals, often spurred by an exceptional user experience, can be a potent channel for organic growth.
• Feedback Loop: By actively seeking and implementing user feedback, you demonstrate that you value and listen to your customers. This not only helps improve your product but also fosters a deeper connection between users and your brand.
• Market Differentiation: In a crowded SaaS market, a superior user experience can set you apart from competitors. While features and pricing play a role, the ease and pleasure of using a software can be a significant differentiator.

User experience is the backbone of user satisfaction. By focusing on UX and actively seeking customer feedback, you position your SaaS product to not just meet user needs but to exceed their expectations. This proactive approach can lead to higher loyalty, increased referrals, and a strong market position.

8) Establish Your Brand & Make it Stand Out

In the vast sea of SaaS products, establishing a strong brand identity is crucial for recognition, recall, and emotional connection with your target audience. Your brand is more than just a logo or a catchy tagline; it’s the cumulative experience that customers have with your company, your product, and even your content. A well-crafted brand evokes trust, differentiates you from competitors, and gives potential users a clear sense of what you stand for and what they can expect.

Ways to Differentiate Your Brand from Your Competitors:

• Unique Value Proposition (UVP): Clearly define what sets your SaaS product apart. Is it unmatched customer support? Groundbreaking features? Exceptional affordability? Your UVP should be front and center in your branding and marketing efforts.
• Visual Identity: Consistent use of colors, fonts, and design elements can make your brand instantly recognizable. This consistency should extend across your website, product interface, marketing materials, and social media platforms.
• Brand Voice and Personality: Whether it’s professional, playful, or somewhere in between, the tone and style of your content can give your brand a distinct voice. This includes everything from website copy and blog posts to email campaigns and social media updates.
• Content Leadership: Sharing valuable content that addresses user pain points or industry trends can position your brand as a thought leader. This not only attracts potential users but also establishes trust and credibility.
• Community Engagement: Engaging with your user community through forums, social media, or user groups can help foster loyalty and give users a sense of belonging. This engagement can also provide valuable insights and feedback.
• Customer Success Stories: Showcase testimonials, case studies, and success stories. Real-world examples of how your product has benefitted users can resonate deeply with potential customers.
• Ethical Practices and Values: In an age where consumers are more conscientious about the brands they support, showcasing your company’s commitment to ethical practices, sustainability, or community involvement can make you stand out.
• Exceptional Customer Service: Often, the post-purchase experience is what users remember most. Offering stellar customer service can turn users into brand advocates.
• Continuous Innovation: Regularly updating your software with new features, improvements, or addressing pain points can show users that you’re committed to offering the best product possible.
• Interactive Branding Elements: Tools like quizzes, interactive infographics, or branded games can make your brand memorable and provide value at the same time.

While the SaaS market is crowded, there’s always room for brands that resonate, provide value, and stand out. Differentiating your brand is not about being different for the sake of being different; it’s about genuinely understanding your target audience, what they value, and delivering that in a way that’s uniquely you.

9) Start Your Fundraising Journey

Launching and scaling a SaaS company often requires capital – for product development, hiring talent, marketing, infrastructure, and other operational expenses. While some entrepreneurs manage to bootstrap their startups, many look for external funding to fuel their growth. The fundraising route you choose should align with your company’s goals, the stage of your business, and your personal preferences. Here’s a breakdown of popular fundraising options:

Should You Pitch an Angel Investor?

Angel Investors are affluent individuals who provide capital to startups in exchange for ownership equity or convertible debt. They often invest their own money, unlike venture capitalists who manage pooled funds from many investors, and limited partners (LPs).

• Flexibility: Angel investors, being individuals, might offer more flexible terms compared to institutional investors.
• Mentorship: Many angel investors are former entrepreneurs themselves and can provide valuable advice and connections.
• Speed: The process can be faster than traditional venture capital fundraising.
• Limited Funds: Angel investments are typically smaller than venture capital rounds.
• Due Diligence: As with all investors, angels will scrutinize your business model, which might extend the fundraising timeline.

Should You Pitch Venture Capitalists?

Venture Capitalists (VCs) are professional groups that manage pooled funds from many investors and LPs to invest in startups and small businesses. They typically come in when you have a proven business model and are looking to scale.

• Larger Investments: VCs can invest significant amounts, often millions, allowing for rapid scaling.
• Expertise and Network: Established VCs bring industry connections, mentorship, and expertise.
• Credibility: Securing VC funding can enhance your startup’s credibility in the market.
• Equity Sacrifice: VCs often ask for a considerable stake in your company.
• Loss of Control: With a significant stake, VCs might influence company decisions or direction.
• Pressure: VCs expect a return on their investment, often pressuring companies for rapid growth.

Is Bootstrapping Right for Your Company?

Bootstrapping refers to starting and growing a business without external investment or financing. Entrepreneurs rely on personal savings, revenues, or other organic sources to fund their venture.

• Full Control: Entrepreneurs retain complete control over their business decisions and direction.
• Ownership: No dilution of equity since you’re not bringing in external investors.
• Flexibility: You can pivot or change direction without external pressures.
• Limited Resources: Growth might be slower due to resource constraints.
• Financial Risk: Personal assets might be at risk if the business doesn’t succeed.
• Missed Opportunities: Lack of funds might mean missed market opportunities or being outpaced by funded competitors.

The fundraising path you choose is a strategic decision. It’s essential to weigh the pros and cons of each option, considering both the immediate needs and long-term vision for your SaaS company. Remember, the goal is not just to raise funds but to build a sustainable and successful business.

10) Develop or Start Building Your Service

While a solid idea and funding are foundational, they’re just the beginning. The heart of your SaaS venture is the service itself. At this step, you bring your vision to life, transforming concepts and wireframes into functional, user-friendly software. This stage requires meticulous attention to detail, continuous collaboration between teams, and an unwavering commitment to user needs.

Best Practices for Building Your Service:

• Start with MVP (Minimum Viable Product): Begin with a simplified version of your service that incorporates the core features. This allows you to test the market, gather feedback, and iterate before investing more time and resources.
• Prioritize User-Centered Design: Ensure your service is designed with the end-user in mind. Prioritize intuitive navigation, clear call-to-actions, and an aesthetically pleasing interface.
• Continuous Testing: Regularly test your software for bugs, performance issues, and usability hiccups. This includes unit testing, integration testing, and user acceptance testing.
• Adopt Agile Development: Using agile methodologies allows for iterative development, regular feedback loops, and the flexibility to pivot when needed.
• Invest in Security: Ensure that your software is secure and compliant with relevant regulations. Regularly update and patch your systems, and consider third-party security audits.
• Cloud Integration: Consider building your service to be cloud-compatible, ensuring scalability, and reducing the need for significant infrastructure investments.
• Feedback Loop: Keep channels open for user feedback even during development. This ensures that any design or functional misalignments are caught early.
• Documentation: Maintain thorough documentation for your service, both for internal use (for developers and support teams) and external use (for users). This aids in training, troubleshooting, and user onboarding.
• Stay Updated with Tech Trends: The tech landscape is ever-evolving. Be open to adopting new tools, technologies, or methodologies that can improve your service’s functionality or user experience.
• Collaborative Approach: Foster a collaborative environment where designers, developers, marketers, and other stakeholders frequently communicate and align on objectives.

Building your SaaS service is an exciting, dynamic process. It’s where vision meets reality. By following best practices and maintaining a user-centric focus, you can ensure that your service not only meets but exceeds market expectations. As you roll out your service, remember that continuous improvement, based on real-world feedback and technological advancements, will be key to long-term success.

11) Create a Go-To-Market Strategy

The culmination of your ideation, development, and preparation efforts rests heavily on the effectiveness of your go-to-market (GTM) strategy. This is the blueprint that will guide how you introduce your SaaS service to the market, acquire customers, and scale your business. Without a well-thought-out GTM strategy, even the most innovative product might struggle to gain traction or achieve its potential.

What is a Go-To-Market Strategy?

A go-to-market strategy is a comprehensive action plan that outlines how a business will sell its products or services to customers. It defines the target audience, details the value proposition, and lays out the sales and marketing tactics the company will employ to achieve its goals. In the SaaS realm, a GTM strategy is especially vital given the competitive nature of the market and the unique challenges and opportunities presented by software subscription models.

How to Create a Go-To-Market Strategy:

• Define Your Target Audience: Understand who your ideal customers are. Create detailed buyer personas based on demographics, job roles, pain points, and purchasing behavior.
• Clearly Articulate Your Value Proposition: Clearly define what sets your SaaS product apart from competitors. What problem does it solve? Why should customers choose your product?
• Choose Your Distribution Channels: Decide where and how you’ll sell your product. This could be through a direct sales team, digital channels, partnerships, or a combination of multiple channels.
• Pricing Strategy: Based on market research, competitors, and perceived value, decide on a pricing model. Will you offer tiered pricing, freemium models, or one-time licensing?
• Promotion and Marketing: Outline your marketing campaigns. This includes content marketing, PPC advertising, social media marketing, email campaigns, and more.
• Sales Strategy: If you’re using a direct sales approach, how will you structure your sales team? What will be their pitch? Will you use inbound or outbound sales strategies, or both?
• Customer Onboarding: Consider how you’ll introduce new users to your product. This could involve tutorials, webinars, documentation, or in-app guides.
• Feedback Mechanism: Ensure there’s a system for collecting feedback from early users. This will help in iterating and improving your product.
• Scale Strategy: Plan for growth. How will you handle increased demand? What’s the strategy for entering new markets or segments?
• Regular Reviews: Continuously review and refine your GTM strategy based on performance metrics, feedback, and market changes.

Creating a compelling go-to-market strategy is a mix of art and science. It demands a deep understanding of your market, a clear vision for your product, and the agility to adapt as you learn from real-world execution. Remember, the landscape is dynamic, and while a GTM provides direction, it should never be set in stone. Flexibility and responsiveness to change are paramount to long-term success.

12) Determine KPIs to Measure Growth & Success

While your SaaS product might be top-notch and your go-to-market strategy well-defined, without the right metrics to track progress, you’re navigating the expansive seas of business without a compass. Key Performance Indicators (KPIs) act as this compass, allowing businesses to measure, analyze, and assess the success of their operations and strategies. KPIs enable businesses to make informed decisions, rectify shortcomings, and capitalize on strengths.

Related resource:

• Our Ultimate Guide to SaaS Metrics
• How To Calculate and Interpret Your SaaS Magic Number

KPIs That Measure Success:

• Monthly Recurring Revenue (MRR): This is the total revenue your SaaS business can expect to receive every month. It’s a pivotal metric for any subscription-based service.
• Annual Recurring Revenue (ARR): A projection of your MRR over a year, providing insight into your yearly revenue from subscriptions.
• Customer Acquisition Cost (CAC): The average amount spent to acquire a new customer, encompassing marketing, sales expenses, and any other related costs.
• Lifetime Value (LTV): An estimate of the total revenue a business can expect from a single customer account throughout their subscription.
• Churn Rate: The percentage of subscribers who stop their subscriptions within a certain time frame. A lower churn rate is indicative of customer satisfaction and product viability.
• Net Promoter Score (NPS): A measure of how likely your customers are to recommend your product to others. A high NPS typically signifies high customer satisfaction.
• Active Users: This can be daily active users (DAU) or monthly active users (MAU). It helps gauge the engagement and stickiness of your product.
• Customer Retention Rate: The percentage of customers you retain over a specific period, excluding new customers.
• Sales Conversion Rate: The percentage of leads or potential customers who end up making a purchase or subscribing to your service.
• Average Revenue Per User (ARPU): The average revenue generated from each active user. It provides insights into how much value each user brings to the business.
• Feature Usage: A metric to identify which features of your SaaS product are most and least used. It’s invaluable for future development and iterations.
• Support Tickets & Resolution Time: The number of support tickets raised by users and the average time taken to resolve them, indicative of product stability and customer service efficiency.

Establishing, tracking, and analyzing these KPIs provide a granular view of your SaaS company’s health, growth, and customer satisfaction. They act as early warning systems for potential problems and as validation of successful strategies. Ultimately, while there are many KPIs to consider, it’s crucial to focus on those most aligned with your business goals and objectives, ensuring that you’re always moving in the right direction.

Start Your SaaS Fundraising Journey with Visible

From ideation to development, and from market entry to growth measurement, building a successful SaaS company is a journey of many pivotal steps. Every phase holds its unique challenges and rewards. And while our guide has aimed to arm you with the foundational knowledge to navigate this voyage, one of the most crucial aspects is securing the necessary funding.

Fundraising can be complex, but with the right partner, it can become considerably more manageable. That’s where Visible steps in. As a platform designed to streamline and optimize the fundraising process, Visible offers tools, insights, and connections that can be invaluable for budding SaaS entrepreneurs.

Ready to kickstart your fundraising journey? Discover how Visible can be the partner you need in turning your SaaS vision into a reality. Try Visible for free for 14 days .

How to Create a Business Plan for a SaaS Company

• July 25, 2024
• Articles , Blog , Business Investment , Capital Raising

You’ve decided to expand your software company, and your current venture needs more funding. If you’re in SaaS, you’re going to want a SaaS business model to show potential investors the value in what you offer. When considering the vastly different financing needs of Software as a Service (SaaS) companies compared to traditional commercial businesses, it follows that the SaaS business plan has similarly unique needs.

Types of Business Plans

Generally, there are two main types of business plans a company will use: traditional and lean plans. When you write a business plan, you should set out to include all the most important information about your business growth, how you are planning to scale, and most importantly, information about the types of problems your product fixes.

Traditional Business Plans for SaaS Companies

These types of business plans are generally longer and require in-depth information about not only your product, but the target audience you are looking to serve. Generally, these include the following sections:

• Executive summary : This is where you get to talk about you, your company, and why it is valuable.
• Company Description : Here, you build on your executive description by explaining more about the mission of your company and the problems your product is aiming to solve.
• Market Analysis : This is where you use data to explain the different sectors of your market and how your product appeals to them.
• Organization Structure : Here, you explain the legal organization of your company’s ownership. Depending on the size of your company and the number of your products, the complexity of this section varies.
• The Product : simple and straightforward– explain your product and why it’s amazing.
• Marketing Plans : Simple and straightforward—explain your product and why it’s amazing.
• Finances and Funding : Finally, you set out your financial needs to get your plan off the ground. This can include both shorter-term funding in addition to other needs that come with scaling your company.

Lean Business Plans for SaaS Companies

Lean plans are best for companies that are in earlier stages of development or who plan to change their product regularly. For some SaaS companies, this plan often leaves more room to accommodate different product lines, packages, and changes that will eventually happen over time.

Advantages of a Lean Business Plan

• Explain Partnerships, Activities, and Resources : For many in the SaaS community, offering a product that serves many functions is an important aspect of your value. This is where you should explain the various offerings you can give to your clients, in addition to the kinds of working partnerships you will secure to get there.
• Determine Product Value : Here, you explain not only why your product is awesome, but how it fares better than your immediate competition.
• Outline your Audience : Through market research, you will show which groups of individuals will most likely benefit from using your product.
• Outline your Cost Structure and Revenue Stream(s) : For many SaaS companies, your cost structure and revenue streams are going to look different from companies selling a physical product. Here, you want to outline where, when, and how much funding you will need, in addition to the different ways in which you will bring revenue in (such as different tiered products, subscription duration, etc.)

Now that we know a little more about the different types of models you will use for your business plan, we will discuss in greater detail what information you will need most.

How to Create a SaaS Business Plan

If you are looking for a business plan template , the internet has many options to offer. However, it’s good to remember that not every template will fit the needs of every business (or every investor, for that matter), so it’s always best to make sure you know not only what information you should include, but why it’s important to pitching your company.

Know Your Niche and Their Pain Points

One of the detrimental mistakes many SaaS businesses make is developing a product before developing an audience. This is the business equivalent of trying to wear your pants as a sweater. The reason is simple: if you don’t offer a compelling solution to a problem your audience already has, there is no reason to buy your product.

Calculate CAC for SaaS Products

What many entrepreneurs don’t realize about SaaS products is that they follow a different growth curve than many other types of products. This is largely because SaaS companies rely on recurring subscriptions rather than a one-time purchase.

In the beginning phases of a SaaS company, it takes a heavier financial push to see growth than other industries. You need to acquire leads that convert, which will eat up a large part of your early revenue. Making this initial investment, however, is an important step. Ensuring your leads are hot and your customers are likely to stick with you over the long haul is integral to building the bedrock of your financial stability.

As you acquire customers, they become the foundation of your recurring revenue. Over time, the initial cost of acquiring these customers begins to pay for itself.

Define Your Pricing Mode

For the reasons mentioned above, having a pricing model  that works for both your audience and your product is an essential component of your business plan. Here, you will want to first decide and state what your product will actually cost and how those costs contribute to your overall revenue. This usually involves a tiered pricing model featuring a free (or low-cost) package, complemented by other “premium” plans with more usable services.

Here is also a good point to outline your growth prospects and how you plan to achieve your goals. This not only shows business viability but also a way for you to show you are knowledgeable and well-informed about the future prospects of your business.

Prove Your Profitability

In addition to building a pricing model, show your long-term profitability. This most often includes different levels of products you would like to offer in the future, different business ideas related to your main product, and even ways in which you could monetize your company going forward. This step looks different depending on your industry and your overall goals for your company. The important aspect of this step is showing the ability to conceptualize your product over time and many iterations.

About RevTek Capital

RevTek Capital is an industry-leading capital provider that offers strategic debt financing of $2MM to $20MM+ in tranches to innovative companies with predictable annual recurring revenue (ARR) of $5MM to $75MM. The funding is used for sales growth, acquisitions, and enhancing infrastructure for scaling operations. Each company’s debt structure is customized to its unique accomplishments and circumstances.

RevTek leverages years of lending and entrepreneurial experience. This allows them to provide customized credit solutions to growing companies with predictable recurring revenue nationwide. We aim to help entrepreneurs grow their businesses while maximizing enterprise value for owners, management teams, and shareholders. In addition, the professional team at RevTek has many years of experience in marketing and operations to assist their clients.

Key Benefit Summary

• Cost-effective capital for growing tech-enabled companies • Company leadership retains control • Repayment is structured into simple and manageable monthly payments • Faster access to funding—closing in as little as four weeks

If you need capital to give your tech-enabled business the next boost it needs or need more advice on how to grow your business, please get in touch with us at RevTek Capital. To learn more about RevTek Capital, please visit www.revtekcapital.com .

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Creating a Foolproof SaaS Business Plan w/ Examples

Did you know that having a business plan creates a 30% greater chance of growth ?

A strong business plan is the foundation of success for businesses. But if you have a SaaS, a business plan is even more crucial to attract potential investors that you’ll need for growth. 

Here at FounderPath , we know the importance of a robust business plan for SaaS companies. Keep reading below to find out why a business plan is crucial, what you need to consider and how to put one together.  

What is a SaaS business plan?

A business plan gives an overview of your business. It covers where your business is currently, where it’s projected to go and how you’re going to get there. A business plan details your business strategy, marketing plans, customer acquisition tactics and more.

If you’re venturing into SaaS, your business plan needs to be specific to the industry you are tackling and it must cover the sections featured in this article. SaaS is continuously online, which may affect how you plan your business. You need to consider how the online landscape changes in a way that other businesses don’t. 

Why a SaaS business plan is important

There are plenty of reasons why a business plan is crucial for your business and potential investors down the line.. Let’s take a look at some of them now. 

A business plan stops you from floundering and keeps you focused and on track. It helps you make confident decisions in line with your goals, identify any potential weaknesses and have a strong reference when you talk to potential stakeholders. A good SaaS business plan will provide: 

• A roadmap for the success of your business, including your financial and marketing processes
• Evaluation of your company’s status and growth over a specific timeframe
• Details on what customer problem you’re trying to solve
• Solutions to SaaS specific problems, such as scaling growth, data capacity, storage and customer support

For investors

SaaS investors or quick cash lenders, like FounderPath , need to know what they’re putting their money behind and when they’ll see a sizable return. A business plan shows them that their money is in safe hands. It does this by: 

• Explaining why your SaaS business will succeed
• Highlighting your businesses’ advantages over your competitors
• Giving an overview of your financial plans and records
• Demonstrating how you’ll attract new customers with your marketing strategies

Some things to consider in your SaaS business plan

Target audience.

You need to know who your target audience is in order to reach them properly. Your product is trying to solve a problem that your target audience has. Without understanding what their problem is, you won’t be 100% sure that your company can aid them.

Competitor research

To understand how your product stands out, look at where your competitors are failing. What are their customers saying about them? Look at websites like Capterra to find your competitor’s weak points and how you can do it better .

Your USP and positioning

With 73% of organizations using SaaS products, you need to know what gives your product the edge over its competitors. This is how you’ll position yourself in the market. 

For example, there are plenty of video editing platforms out there, but VEED’s focus on ease of use and simplicity helped them target users who were looking for a simpler alternative to the overly complex video editing platforms such as Adobe Premiere Pro. This eventually led to a $35 million investment from Sequoia .

Acquisition and retention

The success of a SaaS business largely depends on how well you can scale your customer acquisition and retention process. 

Assessing product-market fit

You need to provide a way to indicate that you will be actively assessing your product-market fit, or, in other words, the viability of your platform to exist and grow as a business. 

This includes measuring key metrics that show a clear indication of your trajectory, finding ways to collect user feedback, and developing a roadmap based on what your (potential) users want.

The financial side

With most startups, you’ll need a sizable chunk of change to start you off. You need to consider whether you’re going to try and attract investors or use a short-term lender like FounderPath . FounderPath looks at your current business performance, scores it and lends you money with terms related to this performance. It’s a great option for those looking for a quick cash injection. 

In your plan, you’ll need to break down how much you’re projected to make and how you’re going to reach that goal, so investors have no doubts about backing your project. 

How to write your SaaS business plan

Executive summary.

The executive summary shouldn’t be longer than 2 pages. Keep it concise and to the point by answering the following questions.

• What problem do you aim to solve?
• How are you going to do that?
• Who makes up your team?
• Do you have any current interests?
• What are you asking for? Is it investments, a government grant, or something else?

The Problem

Why did you start your business? Some of the best businesses are solving problems customers didn’t even know they had. Here, you need to cover 2-3 main problems your ideal customer is facing and why it’s a major problem for them. 

For example, in AirBnb’s pitch deck, the problem it was trying to solve is clear : to provide a more affordable and authentic alternative to booking hotels . 

The Solution

This section should focus on the benefits for the customers. Continuing the Airbnb example, their users would no longer have to pay ridiculous hotel prices or settle for somewhere that wasn’t up to standard. And homeowners or those with an extra room could make extra money on the side. 

Cancel out the pain points listed in your “problem” section and really highlight those customer benefits. 

Market Opportunity

Here, you need to state how big the market you can address and how fast the market is growing. It’s important to cite facts and figures, so investors can clearly see a revenue projection over time. 

Competitive Landscape

This section is where you define your market and how it’s made up. Do 2 or 3 large companies dominate nearly 85% of the market? If so, how are you going to position yourself to take over?

Try creating a product comparison table to show what you do differently. Clearly highlight the differences and similarities based on features and show how you solve a problem the others don’t. You can even demonstrate problems your competitors are causing for customers and how you’ll solve them. Here is an example from Cheddar on enterprise-targeted marketing automation SaaS platforms:

Business model

What will your business model look like? There are three main business models for SaaS companies that you can follow. 

• Subscriptions . With this model, companies charge their users a regular monthly or annual fee to use their service. Companies like Canva, Spotify or Grammarly use this model. Each month or year, you’ll have guaranteed income from recurring customers and the chance to grow with new ones .
• Ads and featured listings. Online marketplaces like Etsy, eBay and Amazon use this model. Think about the last time you scrolled through social media or searched for a particular product online. Chances are you’ll have seen a paid ad placement for one of these sites featuring something you’re looking for. 
• Commission model . This is when the SaaS company splits its revenue with its partners. For example, Uber offers a 75% cut to its drivers while the company keeps 25%. If a company’s users are doing well, so will they. And it gives users incentives to use the platforms as they’ll be getting a cut of the profits. 

Marketing Strategy

How are you going to get your customers to notice you? When devising the marketing strategy, do keep in mind to include:

• Your distribution channels. SEO, email, social media, cold emailing, etc.
• How you will get your first clients . Examples include offering your product for free to get user feedback, trial and demos, etc.
• The timeline . How long would you need to get things running?
• Budget . How much would you need to execute your strategy?
• Your key performance indicators . Focus on essential ones, such as recurring revenue, churn and retention rate, month-on-month growth.
• Marketing tools you’ll use (optional). Obvious ones include Stripe, Mailchimp, etc.

Measuring your marketing strategy and its effectiveness is crucial to the success of your business. With Founderpath’s customer metrics tool, you’ll be able to calculate whether your strategies are pulling in new customers.You can even see how much you’re spending in order to acquire new customers. 

This section explains where you’re going and how your product is going to evolve. Investors are interested in your product’s future, and more importantly, whether or not it has one. How are you going to stay relevant to customers? How will you adapt to changes in the market?

You can be as detailed and forward-thinking as you like in this section. 

Financial Plan

Some common figures you can include in this section are:

• Monthly recurring revenue
• Average customer value
• Customer lifetime value
• Customer acquisition costs

Your financial plan is one of your most crucial sections and should include a lot of detail. Include here what type of funding you’re looking for. 

FouderPath raised over $145 million for SaaS companies to use to grow their businesses in 2022. Borrowers retain 100% of their company and can track everything through their FounderPath dashboard. 

The takeaway

A SaaS business plan is crucial for your development as a company. It keeps you on track and focused and drives out wasteful activities. 

There are several things to consider in your business plan, including marketing strategies, research and a financial plan.  For more help with finances, consider a SaaS-specified lender, like FounderPath. Contact them today to find out how they can help your business grow.

Related Posts

Saas project management tools: everything you need to know + examples (2023), successful project management: how it benefits your saas, why report saas is so important (and the metrics you should track).

Advice for SaaS founders heading into 2023

How to Start a Successful SaaS Company

Candice Landau

33 min. read

Updated March 19, 2024

Free Download:  Sample SaaS Business Plan Template

If you’re interested in starting a software as a service (SaaS) business, you’ll want to start by outlining your needs. If you’re unsure of what you’ll need to launch and want an idea of what entrepreneurs in this industry do, then you’re in the right place.

I interviewed SaaS entrepreneurs from all over the world, including our own COO Noah Parsons, who has been a key figure in the making of LivePlan, our own SaaS product. With these insights we’ll dive into 10 steps you’ll need to take to plan, launch, and grow a successful SaaS company. 

• What is a software as a service company?

Let’s start by defining what exactly a SaaS company is. SaaS (software as a service) means that users access the software through their internet browser or a web-based app. The software maker hosts their product on their own servers, which is why SaaS products are sometimes referred to as a “hosted solution” or “web-based solution.”

It’s also common to hear SaaS products talked about as “cloud-based” solutions. In contrast, a desktop-based model is where an individual or company would install software on their computers and run it on their own servers. For your own business, you’ll need to be able to quickly explain this general benefit and elevate it with the value proposition of your specific solution.

• Can you start a SaaS company without technical expertise?

If you have an idea for a software as a service business, but you don’t have the technical expertise to build your app yourself, it’s still possible to run a successful business. In his book “ Lost and Founder ,” Rand Fishkin talks about his journey as a non-technical CEO of Moz, a service company he founded and transformed into a SaaS company.

He emphasizes how important it was for him to learn (and keep learning) enough about the technical aspects of his business so that he was able to make good hires and understand technical roadblocks when they surfaced. And it’s not completely impossible to learn to code yourself — but 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.

• 10 steps to start a software as a service company

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:

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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’d prefer to work through the lean plan on your own, you can either use our free business pitch template or read our guide on how to build your pitch. Regardless of the method you choose, here’s what you’ll want to cover:

In the strategy section you will want to include:

• A one or two-line description of your business— your unique value proposition.
• A description of the problem you’re solving for your customers, and your solution to the problem, which is usually your product or service.
• A description of your target market or the different market segments you’re targeting.
• Your competition, and a brief description of how you differ from them.

In the tactics section, list your sales channels and describe how you will be selling your products. You’ll also want to list out marketing activities that will drive customers to your door. List key partners and resources you will need, and then list your core team as well as their roles. If you don’t yet have a team yet, list the roles you need to hire for.

The business model

While it’s useful to be able to have a sales forecast and expense budget early on, it’s not something you need until you’ve validated your idea. At this stage, simply list what you think your primary revenue streams and your key expenses are. Later you will want to come back and create a proper sales forecast, cash flow forecast, and expense budget. In this section, you really just want to document how your business will make money.

In this section, you’re going to outline your action plan for moving forward with building your business. Your action plan will include a schedule of tasks or milestones . These will be mapped onto dates, responsibilities, and budgets so that you hold yourself accountable. Given the iterative nature of planning a business, you will likely come back to your action plan and add more steps as you go.

Once you’ve got your ideas in one place and a clearly defined problem and solution, you’re ready to move on to phase three—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. 

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
• 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.

Test to find the right price

Growing SaaS companies are always testing their pricing models. You need to be willing to shift your pricing to fit what your customers are willing to pay. And in a crowded industry, you’ll likely need to be ok with offering your services, even if they’re better, for far less when starting out.

If you’re not sure where to start with your pricing, start with your competition. For Uwe Dreissigacker, founder and CEO of InvoiceBerry, looking into the competition was a good way to figure out how to price the company’s services. “Once you identified your competitors you can determine the lowest, highest, and average price your competitors charge for their services in order to determine a good starting point for your pricing.”

Your pricing model should be something you’re considering and testing during the validation phase, but you may need to treat that element of testing separately. A separate strategy, separate customer acquisition funnel, and separate goals you’re hoping to accomplish. Now there are a lot of different ways to get customers in the door to kick the tires, from offering free trials, to freemium services with upgrade options. You can check out the Bplans guide to SaaS pricing models for more on how to get started.

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. In fact, we’ve got a hands-on guide to building a brand right here on Bplans. You can also leverage tools like Canva to workshop designs, brand colors, and logos with little to no design knowledge. But before you start putting together mockups, here are a few branding elements you’ll need to consider. 

Brand to stand out

For UpKeep founder Ryan Chan, spending some time on the branding process helped set his company apart from the competition. “There are a lot of competitors in this space, many with much more money than us. However, we have been able to differentiate [ourselves] and also excel by making enterprise software fun and enjoyable. Our biggest differentiator has really been our design, from the ease of use to our playful tone.”

If you want to learn more about how to develop your own unique tone of voice, check out this article by branding expert Elicia Putnam.

Brand to clarify your vision

Branding isn’t only a design-oriented initiative. In fact, it can be used to get everyone on board and ensure messaging is consistent. GreenPal co-founder Gene Caballero says it’s a great way to get buy-in from partners, “In our case, we had to make sure that our vendors knew our vision and that we had a plan to execute.”

If you’re working closely with partners who are helping you distribute your product, it’s especially important to make sure they understand who you are, how you speak, and who you serve. If you don’t have a brand guide , it may be worth putting one together. This will make mixed messaging much less likely, and make it that much easier for your partners to help you spread your message.

The importance of a domain name

For Gabriel Kuperman, founder and CEO of CuePin, finding a good domain name was a key part of his branding strategy. Gabriel says, “With an online SaaS business, it starts with a powerful domain. I recommend sticking with a short .com domain that’s easy to spell and [that is] memorable.”

If you find the domain name you want is taken, Gabriel suggests turning to a domain marketplace that sells premium domains. He says, “Spending a few thousand on a domain could make a big difference long term, and give you the credibility and advantage over the competition, especially in the very beginning and early stages of the business.”

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.”

You can read more about setting up a C-Corp in Delaware here; 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!

Also, be sure to read our guide on how to register your business name . 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.

Circle back and create a more detailed forecast

Before deciding on which funding and investment routes you’ll pursue, the best thing you can do is develop a more detailed financial forecast. The reason we advised holding off on creating a detailed forecast until now was that you hadn’t yet validated your pricing or your market and hadn’t fully explored startup costs.

What if you’d found out your customers wouldn’t be open to paying your initial price? Or, what if you’d learned you were charging much less than people were willing to pay? Your forecast would have been for nothing.

But if you’re planning on seeking out a loan, pitching your company to investors, or even self-fund, a detailed forecast is necessary. For investors and funding organizations, having a thorough and well-thought-out forecast can improve your chances of actually getting funded. For your own use, it acts as a management tool that can help you better understand the health of your business, set milestones, and guide decision making.

A few resources you may want to check out include:

• How to Forecast Your Sales
• A Complete Guide to Forecasting Sales for Your Monthly Subscription Business

According to Noah Parsons, “Without a real sales forecast and budget, you have no idea how much money you’re going to need to get your business off the ground. After all, with a subscription business, you’re only going to get a small payment every month from each customer, and you don’t know how long customers are going to subscribe, so you have to constantly update your forecast as you learn more about your customers. This forecast will help you predict how much cash you’re going to need to fund your growth.”

Sales forecasting isn’t impossible, or even all that difficult. Anyone can do it so long as they know their customers and their market. The great thing about the sales forecast is that it will really help you, and investors, answer that central question — Can my business really be a business?

Once you’ve done your forecast, don’t forget to go back and update your lean plan. You will do this throughout the life of your business, so get used to it and enjoy it.

Do it yourself

If you have the ability and the passion to do the work yourself, you can save yourself a lot of money. Joe Kindness, co-founder at Agency Analytics, says, 

“Since Blake and I were both developers (and still are), we were able to create this company without any funding or additional resources. We set a goal to be profitable within one year and if that did not happen, we would move on. After about a six-month development cycle, we launched a beta version in July 2010, and three months later, started earning revenue that grew each month. The real motivation in all this was passion. Sure it was great (and essential) to be validated with revenue, but ultimately we enjoyed what we were creating so much that it resulted in a very nice product.”

If you can use your own savings or get a small bank loan, or even fund yourself via a third-party platform, you can avoid taking on too much risk. Gabriel Kuperman, CEO of CuePin, says, “Try testing an idea with a small budget that you can obtain through your own savings, a small bank loan, or even a Kickstarter campaign. Bringing in investors too early, before proof of concept is hard and may be unnecessary. You might also be giving investors too much equity early on, as the risk is extremely high for them in the beginning stages of growing a SaaS company.”

Taking the slow and careful approach can also save you from making some costly mistakes, says David Batchelor, President, and co-founder of DialMyCalls. “[Doing this] helps you really learn and get a feel for your industry, and lets you make mistakes on a smaller scale. It’s not as sexy as getting a big VC investment upfront and takes a bit longer, but at the end of the day, it has been much more rewarding for us to build it with our own capital.”

Seek out venture capital funding

In the event that you’re seriously thinking about pitching for VC funding (scary statistics aside), it’s useful to know a bit more about what venture capitalists are looking for. You can start by reading a few (or all) of these 17 venture capital blogs, reading Tim Berry’s thoughts on what venture capital firms want, and his advice on finding venture funding.

Even though Konstantinos Bratanis, co-founder and CTO of Goodvidio, and his partner started the business with their own hard-earned money, they were able to eventually raise VC funding. The great thing about raising money after they’d already started was that they’d had time to validate their idea and start building a team of good employees.

Konstantinos says, “As we were validating the value of our solution and recruiting early adopters, we started talking to a few VC firms. At the time, we didn’t have a sales pipeline yet or revenues coming into the firm. What encouraged us, was learning that at such an early stage VCs are more interested in the people behind the new company and their potential to build a viable business. They have modest expectations when it comes to cold hard sales and revenue numbers, so they want to see that there is a healthy team spirit behind the wheel that has the potential to reach growth. They want to see commitment, drive, vision, and hard work. Thanks to a combination of these traits we were able to secure a first-round of six-figure VC funding, which gave us a jump-start to start developing our sales and marketing channels.”

Just be sure that when you approach investors that you have your updated business plan, financial documents , and a refined pitch deck ready to go. These will help you prepare and give investors more holistic documentation to reference as you pitch your business.

8. Build your product

In this section, we’re briefly going to cover some of the things that are worth keeping in mind as you 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. I highly recommending checking out Joel’s article as he also gives some actionable tips on what to do instead of outsourcing the development process.

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.”

At Palo Alto Software, we rely on tools like Slack, Trello, Basecamp, and Jira to keep us all abreast of what is going on in the company.

9. Develop your go-to-market strategy

There are many ways to market a SaaS product — from paid advertising and affiliate partnerships, through 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.

Do your own PR

Whether or not you’ve got the budget, doing your own PR to start with is a good idea. After all, who knows your business better than you?

“The media is always looking for new content to write about,” says Gene Caballero. “Just ask. We sent press releases to all of the cities that we launched in and easily got press in all of them.” Start building up a list of writers and journalists interested in news you may have to share, that you can reach out to. Use Twitter’s advanced search feature, and sites like Contently to find people who may be a good fit.

Participate in online communities

You can also spend some time participating in relevant online communities. Noah Parsons says, “Become an expert. Start participating in relevant discussion groups, comment on relevant blog posts, and start your own blog. You can get a little initial lift through sites like ProductHunt. Otherwise, it really depends on your industry. Figure out where your prospective customers hang out online and work to get coverage in those locations.”

Konstantinos Bratanis, co-founder of Goodvidio, offers much the same advice. He says, “When you start your SaaS business, you’re hit with a cold hard truth that you’re just a spec of dust in the universe of fast-paced tech and innovative ideas. Nobody knows your company’s name or what you do, especially if you’re providing a solution that is very new for your market. So, your first task is to get your name out there.”

For Goodvidio, this meant starting with a local community. Konstantinos says, “Since our market is online retailers, we approached our local eCommerce association and started interacting with the community. We asked for feedback about our software and our growth ideas and took part in the conversation. Taking part in the daily life of the community and learning how the ecosystem worked paid off because we started getting referrals, word-of-mouth, and endorsement from community leaders. That’s a good approach to meet early adopters and people who will be willing to work with you. This helped us get traction in the first year of business.”

Go the content route

Today, it’s particularly important for SaaS companies to do content marketing, and it’s even relatively affordable. Content marketing, as defined by the Content Marketing Institute, is “the marketing and business process for creating and distributing relevant and valuable content to attract, acquire, and engage a clearly defined and understood target audience — with the objective of driving profitable customer action.” It’s a marketing strategy that has seen immense growth over the past decade.

Noah says, “Find your prospects and work to help solve their problems. Use content marketing to share your knowledge on a topic and attract prospects that way.”

It’s relatively easy to get started doing content marketing by simply maintaining a company blog your target audience will find useful and interesting.

CEO Uwe Dreissigacker says, “SaaS companies should definitely operate their own blog. We blog at https://blog.invoiceberry.com, in case you want to pop by and read about small business and freelancing. It is also useful to get listed on all the big SaaS directories early on in order to get websites linking to your product and to receive initial product feedback. Producthunt.com is a great resource for viral marketing for the product launch as well as community feedback.”

That’s two votes for Product Hunt from two separate entrepreneurs. It’s not hard to see why, especially as it surfaces cool new products on a daily basis. Be sure to check it out.

Do a bit of everything

How will you know what works for you, unless you try it? Online, there are so many different ways to do your marketing and it’s simply not feasible, especially when you’re just getting started, to do them all. You have to try them, see how they go, and then pick the best performing of the lot.

“In terms of marketing, you should try to stretch your budget to a few different advertising channels. Putting all your eggs in one basket is not ideal,” says Gabriel Kuperman, CEO at CuePin. “This way, you can see which marketing channel gives you the most value. Make sure you’re tracking ‘conversions’ so you can see which marketing channel has the best conversion rate. A good online campaign should include paid search engine advertising, social media advertising, email marketing, and a PR campaign.”

Don’t forget real-life products

Don’t forget the value of using real-life products to market your business. Yes, even for a SaaS company. Many SaaS companies send stickers, or small “thank you” present to their best or most loyal customers, and many if not most founders and key team members have business cards. 

Start with beta testing

Yet another great way to get started doing marketing is to launch a beta product. It’s also a good way to learn before the real thing is out there. Gabriel says, “Create a beta version of your app or software and get it released when it’s fully-functioning and bug-free. I’ve seen too many SaaS companies delay their launch because they continuously add features that they ‘want’ before they can release the first version. My advice is to get it to market when it’s in a usable and respectable form and let your beta users give you feedback and help shape the future of the software.”

10. Establish metrics for success

Whether or not you consider yourself a fan of numbers, if you run a business, you’re going to have to get used to looking at them.

For many people, tracking metrics can seem scary, boring, or time-consuming. But the truth is, these numbers are going to become your best friends. They’re going to help you make informed decisions, which will in turn take a lot of the weight of guesswork off your shoulders. Tracking your key metrics will also help you figure out how to grow, and whether or not it’s a good time to do so.

We use LivePlan’s Dashboard feature to keep track of our own metrics.

The benefits of tracking key metrics

In order to monitor your business’s health, it’s essential to understand what these metrics can tell you about your business. It’s also imperative that you monitor how these metrics are performing on a regular basis so that you can make better decisions and plan proactively for the future.

A few of the benefits of tracking your metrics include:

• Improving your current performance
• Improving future performance
• Catching things before they become problems
• Getting real feedback related to your goals and milestones
• Making decisions with more confidence

For those business owners who don’t keep an eye on the numbers, the statistics are not pretty. According to the SBA, 28 percent of businesses fail due to problems with the financial structure of their company, including keeping poor accounting records. If you don’t keep these records, or have a system in place that allows you to monitor them, you could run into problems.

The benefits of regular plan review meetings

At Palo Alto Software, we review our metrics in monthly plan review meetings. These meetings don’t take more than an hour, but they do provide insight into what is going on in the company. We use these meetings to ensure that we’re on track and in line to meet our goals. If we’re not, or something else has come up, we adjust our plan.

Here’s a brief summary:

1. We take some time to review the overarching numbers. How did we do compared to our forecast? How did we do compared to last month? Last year?

2. Review major milestones. Did you meet them? If not, how should they be adjusted?

3. Review long-range goals and strategy. Are you still on track to meet these goals? You may need to revise your long-term strategy based on the trends you notice in your numbers.

In order for your monthly plan review meeting to be successful, make sure to put it on your calendar, follow a repeatable agenda (so that everyone knows what is up for discussion), and be prepared to change your plan. These meetings aren’t about sticking to the plan if it no longer works, but rather about adjust the plan based on what the numbers reveal.

• Starting a SaaS business takes time

While the startup process for a SaaS business can be condensed down to these 10 steps, each component will take time, testing, and refinement. You may even find consistent overlap between steps that have you complete specific elements in a completely different order. Funding, for example, may be something your startup doesn’t seek out until years after you’ve launched, and developing your business plan will be a constant process you revisit throughout the life of your business.

If you take away anything from this guide, just know that the most important thing for a SaaS startup is to get your product out there. As long as you have a working plan, metrics to track success, and a willingness to iterate, the more likely your business will survive and stand a chance against the competition.

Candice Landau is a marketing consultant with a background in web design and copywriting. She specializes in content strategy, copywriting, website design, and digital marketing for a wide-range of clients including digital marketing agencies and nonprofits.

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Starting A SaaS Business: A Guide to Plans, Templates, and Models

• RocketHub Team
• November 12, 2021

Are you starting a SaaS Business? Did you know that people in the SaaS industry are the only ones who are always looking for new innovative ideas? They strive and pour their hearts out to make a good product into the best. Lucky for them, the road to success is paved with lots of money! It makes all the blood, sweat, and tears are 100% worth it at the end of the day.

If you’re just testing the water in the SaaS industry or planning to launch SaaS in the near future, then you are landing on the right page! We will be tackling all the nitty-gritty things anyone should know when starting a SaaS business. Take this as your trusted guide and let’s get started!

Creating Your SaaS Business Plan

SaaS is still a relatively niched industry where a lot of money can be made. The SaaS market is growing rapidly and we can just see how advanced and ambitious it can be. You might think that it’s a saturated market because there are plenty of SaaS products out there. However, most of them still need improvements in the healthy competition inside the niche. That is why you need to have an innovative idea and go ahead with it! There’s still enough fish in the water for you too!

Nowadays, if you have a good product, the market size you can jump into can be huge. Due to the high level of digitalization, the entire world is experiencing a strong need for SaaS products. There are various sectors such as education, marketing, or healthcare that use SaaS products to be more efficient and discoverable.

But wait , getting into the SaaS business isn’t as easy as opening a coffee shop!

Zero is your business plan. While it sounds very fancy and pretentious, this step is vital and shouldn’t be missed. A business plan is basically a business strategy. A guide with goals and processes that will help your product become successful over a certain period of time. You can actually browse to find a business plan template or tutorial in seconds – thanks to the almighty internet! However, if that doesn’t work for you, hiring someone with experience would be a great help.

Why a Lean Business Plan Suits SaaS Business

While you’re trying to realistically map out your business plan, make sure to include several essential things below:

• What problem your product is solving?
• Who will buy your product?
• What type of pricing will work best?

Those three questions above will help you to set up a clear goal for your SaaS to survive the startup phase as well as be profitable at the same time and make your business grow. Make sure that you really understand these things before you embark on the journey.

The question about your target customers is highly important because it will help you find the right pricing for your product. Decide how you’re going to start selling the product to – will it be regular customers (B2C) or will it be other businesses (B2B)? When you’re selling to a regular customer, the price will definitely be different than when you’re selling to a business or company.

A lean business plan will outline the functions and main benefits of your product, the USP, the pricing model, and even your estimated revenue. This is why your business plan should clearly state the visions, goals, and profits you are estimating to make over a certain period of time.

A business plan will help you to stay on track and also attract investors and partners that would be translated as… MONEY! While some investors will demand to see more than just a plan and some numbers, having the confidence and the right process beforehand will significantly help you to achieve your goals.

Understanding The SaaS Business Model

By now you’ve probably figured out the difference between the SaaS industry and any other business you’ve ever seen before. The product, infrastructure, pricing, and even the business model for SaaS are different. It’s a different world with different rules.

Everyone knows that in this industry the core of any business model is recurring users aka subscribers. That is the main strategy all SaaS products go by because it’s highly effective. One-off sales are not sustainable, because, for each product, there is a limited amount of people that will buy, therefore you want them to keep buying the subscription for months on end as you expand your audience.

Another thing worth mentioning is the fact that your product needs to be at least decent if not great in order to have monthly subscribers and grow. Whether it’s used by other businesses regularly, or simply filling a need in the market, the product has to entice the user to pay almost any fee just to use it.

The giants in the SaaS industry can give some good advice about how to succeed, and it sounds a little like this:

• Invest in developers and marketing from the beginning – if you want customer retention
• Early profits should be reinvested in the company in order to scale it
• Explain the value of your product with the help of your USP

Given this advice, no wonder that so many startups fail in their first year of existence – it’s definitely not an easy job!

SaaS Business Key Metrics

Metrics are a key part of any successful story just like in any other business. It’s a kind of data that has a lot of insights to help you make the right decision in reaching your goals. If you don’t know what metrics to follow, no worries – we got you covered! Here are the main key metrics that you and your team should focus on.

Have you ever heard about churn? It’s a valuable and powerful metric that everyone in the SaaS industry religiously follows. Churn rate is the rate at which customers stop doing business with you. In a way, it’s the rate at which people unsubscribe or stop using your SaaS product or service.

We all know that customer loyalty is hard on everyone no matter what you do – they just won’t stay with you forever. Sadly, you have very limited actions to take in order to stop the customer to go away.

Calculate your churn rate by dividing the number of subscribers in a month by the total number of customers. Keeping track of your churn rate each month can help you make certain business decisions or detect fluctuations in the rate.

Customer Acquisition Cost (CAC)

CAC is a great indicator of your profit because most of these metrics go hand in hand with your marketing efforts and costs. We are all aware that you need to spend money to acquire new customers and ideally the costs get lower and lower with time.

In order to find out what your CAC is, do this simple math: divide the total cost you spend on marketing and sales by the number of acquired customers over a certain period of time which is usually by month.

Monthly Recurring Revenue (MRR)

Most metrics give you financial insights, but nothing like your MRR. This metric is telling precisely how much money you’re making each month, and that is something any business manager should know by heart. This metric can be calculated by multiplying the number of customers by the average revenue each month. 

Of course, like anything in this world, this metric can fluctuate due to churn rates and customer acquisition costs. Following MRR you can predict growth rates and persuade investors to join you.

Average Revenue Per Account (ARPA)

Another key insight into your financial status is ARPA or average revenue per account. It’s a long name but you’ll want to monitor this one closely each month.

What ARPA does is tell you the average revenue acquired from one client each month or the year. You can see the amount by dividing the total MRR by the number of customers. Easy as that!

Customer Lifetime Value (CLV)

All metrics are important, but some are more crucial and relevant than others. For instance, CLV or customer lifetime value gives you precious information about just how much revenue one single customer can bring you. In SaaS, users come and go on the regular, so by following this metric and CAC you’ll know how much money you’re spending to get new customers and how much money each of those customers brings you. 

If CLV is lower than CAC, then you have a big problem. CLV is calculated by multiplying the average revenue per account by the percentage gross margin, then you divide it by the average churn rate. It’s easy math you can do in Excel or use a 3rd party app.

Customer Retention Rate (CRR)

This one is about those loyal customers that have stuck with you over time, those who pay the subscription every month. If this metric is stable or increasing each month, you can pat yourself and your marketing team over the back for doing a great job. It’s important to know how many new customers come and go each month, but also how many stay with you. 

Since it’s a percentage you can calculate it by dividing the number of customers currently using your product or service by the total number of customers at the start of the specific time period. Then, multiply by one hundred to get the percentage.

The Marketing Approach to SaaS

Navigating the waters of SaaS growth can be tough and oftentimes overwhelming, but if it wasn’t also fun and exciting nobody would do it, right? From the startup stage to the stable one it can take some long years, but if you have a good marketing strategy and a steady business plan you can do it. 

Since we live in such a digital area, marketing is really something you don’t want to be frugal about. It might seem like a big investment, but with any business, you need to have a long-term vision. Needless to say that since you sell a product that will be used on a digital device, such as a smartphone or computer, you cannot miss out on online marketing and ads. People spend a lot of time on their devices, and if you target them with smart ads and good copy they will come and check you out.

If you’re wondering what marketing efforts to include in your strategy try building your audience, decide if you need to invest in inbound or outbound marketing, and invest in your marketing funnel. We’ll elaborate on each one of these elements, so you can better understand why they’re so important. 

Build Your Audience First

No matter what type of business you run, but especially the SaaS ones, you need to focus a lot on building the audience. To do this you’ll need to invest some time and money into your website and blog, your social media channels, your product demos, and email marketing campaigns. 

It might seem like a lot, but all these elements will draw your ideal client and convert them into customers. And the best part is that you can build your audience without damaging your budget or hiring a marketing agency. 

Out of the things we mentioned, a good website is one of the most important, because it’s the final step of each conversion. Whether you’re advertising on social media, sending emails, or posting a blog article, everyone will end up there, and it needs to be perfect. Steady daily efforts, along with data will help you get there.

Most SaaS companies spend a lot of time creating content for their blogs. Optimized blog articles can bring in thousands if not millions of users, and some of those users will be curious to know more about your product. It’s a very common SaaS growth strategy .

Spend Your Money Wisely

You want to grow and scale your business, but you don’t really know or you’re not sure how to get the best bang for your buck. A 5:1 ratio is usually a good ROI, but the question still stands, what marketing efforts are suited for you?

Inbound marketing or outbound marketing? Let’s see. 

Traditional outbound marketing includes radio ads, commercials, and whatever way of interrupting someone’s activity in order to start a conversation about your product you can think of. Nowadays outbound marketing includes paid and organic social media content, in the form of Google Ads, Facebook Ads, or feed posts. 

The goal with outbound marketing is to grab people’s attention, make them curious and make brand awareness. For any business, these tools are very useful and can help you better understand your audience.

There is also inbound marketing which includes blog articles, other forms of content, and email marketing. They help you educate your audience and showcase just how much they need your product in their lives because it solves a problem. It’s a less aggressive approach that needs more time to show results. People who buy SaaS products need more time to finalize the purchase, and in that time you have to provide them with all the resources to convince them. Only after they’ve done some serious research and thinking will they be ready to buy.

The SaaS Marketing Funnel

As you make your way into the SaaS world of marketing and lead generation, you’ll hear people talk about the marketing funnel. To make it easier for you to understand, a marketing funnel is a process that maps out every step of a customer’s journey from getting to know your brand to purchasing the product. It’s theoretically shaped like a funnel because you start with a broad audience that gets acquiesced with your product, but only a few of those end up purchasing it. 

You don’t need to be an expert to create a marketing funnel but it sure helps to know what you’re doing. One of the most important things everyone needs to know about funnels is that you need to know who your customers are, what they like, and what their problems are. Only then you can create a good funnel and attract them.

The basic structure of any funnel has 3 stages: Awareness, Consideration, and Decision. And if you create the right strategy and content for each stage of the funnel you can significantly increase your revenue over time.

Hopefully, this article gave you a little insight into how it’s like and what it takes to start a SaaS business these days. It’s not an easy job, but someone’s gotta do it. Remember that the hardest part of any project or business is to start.

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SaaS business model: Stages, pros & cons + essential tools to get ahead

The SaaS business model is unlike the traditional business model in many different ways. Perfecting it can be difficult without the right tools. Explore the fundamentals of how SaaS works, including models, metrics, and tools for SaaS growth.

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Ever since John Koenig first coined the term “SaaS” back in 2005, the software-as-a-service industry has been one of the fastest-moving and creative in the world. And with the field having undergone a couple of “ knockout expansion years ,” with more revenue pouring into SaaS than ever, it has never been a better time for a young SaaS company. The SaaS business model powering all of this activity is startlingly unique, still young, and inextricably tied to the power of cloud computing. Understanding the fundamentals of how SaaS works is vital when building out a plan for your company’s forward growth.

SaaS, or software as a service, is a delivery model in which a centrally hosted software is licensed to customers via a subscription plan. Any company that leases its software through a central, cloud-based system can be said to be a SaaS company. A SaaS company maintains responsibility for the servers, database (and the data they contain), and other software that allow their product to be accessed and used. The subscription plans offered to customers can vary considerably within separate companies; some SaaS company business models involve offering multiple applications within their product, with different subscription plans giving access to different services.

How does the SaaS business model work

The reason we’re distinguishing between the SaaS business model and the rest is that the SaaS model includes a number of factors peculiar to it, such as:

Recurring payments

In SaaS, clients do not buy hardware. The software-as-a-service business and pricing model involves providing a  subscription  service to use the app, so you will have to worry about paying the yearly or monthly subscription as opposed to only once. Recurring payments take the form of monthly recurring revenue, otherwise known as MRR. Because a  SaaS company  provides a service, not a product, accounting for revenue properly can be difficult. When your customer signs the contract and subscribes, you may get some cash upfront, but that cash cannot be counted as revenue until you've earned it. Until then, it is a liability—money that your customer can ask to be returned at any point if you don’t deliver your service. As a result,  revenue recognition  is a fundamental part of the SaaS business model.

Heightened customer retention

All businesses care about customer retention, but in the SaaS revenue models, it is 10 times more important because retention of paying customers is the only thing that keeps you afloat. As we said above, you can’t lay claim to all of your clients’ subscription money until you’ve provided a complete term of service, so if you’re signing customers up for 12 months who are then leaving after 2, then you’ll be without the other 10 months of recurring revenue. As a result, the SaaS business model puts tremendous value on cultivating customer relationships and upselling. An existing SaaS customer spends more, on average, than a new customer, and are more than seven times more likely to churn (leave your business) to go to a competitor because of poor customer service than they are for a better product.

Consistent updates

While other products may come out with “next-gen” product versions, SaaS consistently provides smaller and more frequent upgrades to their services to keep the end-users happy and have better customer lifetime value. Part of this comes from the nature of being in the software business: software vulnerabilities can put customer information at risk from hackers, so continually assessing the state of security fixes is a top priority in the SaaS model. Hosting their own products also means SaaS companies can push updates whenever they need to, releasing new features, enhanced versions of old ones, and new product enhancements. By combining this with good customer communication, SaaS companies can be highly responsive to the  needs and feedback  of their customer base.

As we’ll see shortly, highly successful SaaS businesses can boast valuations in the $100 millions, serve a huge number of customers, and completely change the way in which entire industries think about aspects of their business. That, however, is the final and most successful stage of the SaaS business model. Broadly speaking, a SaaS business’s life can be broken down into three stages:

1. Early-stage

In the early stage of your SaaS business, you as the business owner or entrepreneur are still operating at the bare-bones level. You’re unlikely to have many customers, and your product will still be in its early  developmental stages . You may be seeking your first round of pre-seed  funding , or you may have decided to go for the  bootstrapping  approach to maintain better control of your operations. In the early stage, your staff roster will still be small, you will more than likely still have only one product you’re focusing your attention on, and you may not have started to turn real profit yet. At this stage, you should be asking yourself these main questions: Am I tracking metrics, bringing in new users, and looking to optimize pricing? Have I begun developing my own personal business model that will enable me to seek the right kind of funding and use it well?

2. Growth stage

The growth stage is where things start to get exciting. You’ve built something that’s growing fast, your product is gaining subscribers, and you’re beginning to bring in MRR and possibly positive cash flow. To kick off your growth stage and to continue powering through it, you will need to begin raising serious funds that will allow your company to grow its team, invest in product development and iteration, and scale. There are a number of funding types that serve the SaaS business model, including:

• Venture Capital:  The glamour means of procuring funds for your startup, venture capital is provided by firms or funds that see high growth potential or a strong track record of recent growth in a SaaS company, enough to merit substantial financial assistance.
• Angel Investors:  An angel investor is a single operator with substantial financial means who is prepared to make an investment in your company. They can be ideal for startups looking for their first big investment, although, more recently, so-called “super” angels have begun to play a decisive part in later funding rounds too.

Venture capitalists and angel investors are not the only routes to growing your business. Some companies go through  incubators  in their very early days; other, slightly more established SaaS companies find startup  accelerators  that meet their needs and use them for a different kind of funding experience. Some companies continue to bootstrap for a much longer time, and others are so adept at raising revenue from the start that they find they don’t need external funding until much later.

Now, you should be asking yourself these questions: Have I established key performance indicators (KPIs) to ensure I’m primed for further scaling? Do I have a strong monetization strategy in hand for when I do decide to seek some form of investment?

3. Mature stage

A SaaS company that has reached the mature stage has proved itself and can consider itself established. A company at the mature stage has a well-defined target audience that it’s catering to and has a reliable product that it’s making updates to. The company is bringing in good MRR, and all the other key KPIs (more on those to come) are stable. Mature-stage companies might still seek and receive investment, but it’ll be of a much larger order, aimed at breaking new markets or buying out competitors. The main question a SaaS company should be asking itself at this stage is: When is the last time we checked our pricing strategies? SaaS companies often reach the mature stage and settle into a sense of complacency, thinking that, because their business is solidly profitable, it must be running at its maximum potential. In fact, mature-stage SaaS companies are often positioned on a pile of potential revenue that they’re wasting with  poorly chosen price points .

The variety of successful SaaS-type businesses is astonishing; there are examples of tremendous success in the B2B and B2C spheres, in AI and video hosting, in e-commerce, in data analytics, and more. To show you just how broad success in SaaS can be, we’ve compiled a list of a few SaaS businesses that have made a serious impact in their fields — or, in some cases, created new ones!

Wistia is a company providing video-hosting services for businesses, from uploads to tracking performance to building audiences and brand attention. Brendan Schwartz and Chris Savage founded the company in 2006 and got their first client, a medical devices company, that year. In 2019, the picture is pretty rosy for Wistia. Despite taking relatively little investment in its early days, it's now the video-hosting service of choice for more than 300,000 businesses across 50 countries that depend on Wistia, bringing them more creative and authentic communications .

Shopify is an e-commerce platform for online stores, allowing businesses to create online stores without needing to know how to code. Shopify has completely revolutionized the way businesses think about e-commerce in the process; now, any retailers, big or small, looking to sell online, on social media, or in person have a single integrated solution that can meet their needs. Shopify has been amply rewarded for its innovations in e-commerce. It made over $1 billion in 2018 and have well-exceeded that total in 2019. Since then, Shopify has grown to 4.4 million active merchants in 2023 .

Artificial intelligence has been one of the primary growth areas in SaaS during the late 2010s, and no company exemplifies the potential of that field more strongly than Chorus.ai . Chorus is a leading conversation intelligence platform for sales teams. The company’s solution functions as a plug-in to video-calling services, allowing sales teams to record their business calls and extract meaningful data.By recording and analyzing the contents of sales calls, commercial teams are able to refine their approach to selling, curate new training surveys , and regimes for their reps, and come up with new in-depth strategies for better communicating with clients. Chorus’ solutions are used by world-class revenue teams at other great (SaaS!) companies like Zoom, Adobe, Asana, and Segment.

Just when you thought recruitment was one of those fields that could never change, a SaaS company came along and changed everything. Lever revolutionized the recruitment sphere with its streamlined processes for sourcing, attracting, and hiring new talent. Its talent software makes it easier for employers to vet candidates, take care of talent marketing, and foster connections between employers and employees through the company’s cloud service. Much like Chorus, proof of Lever’s success comes with it being used by such seminal companies such as Shopify, Eventbrite, and Netflix to fill their offices with the best employees.

Clearbit creates products and curates data APIs aimed at providing insights throughout the customer life cycle to help businesses grow. There are few industries where clear communication between client and customer is more vital than in SaaS, and Clearbit’s resolution to help those who work with it “ understand [their] customers " has made it a vital asset to those they work with. Clearbit’s ability to do this, as well as their cutting-edge means of identifying future leads and personalizing marketing approaches, has led it to be designated one of the fastest-rising companies in SaaS.

UiPath is a platform for  robotic process automation . Its use of robotics and sophisticated scripts allows you to automate repetitive or redundant tasks from your schedule, and its innovations in drag-and-drop architecture will bring entirely new possibilities to front-office intelligent automation. Much like the rest of the companies on our list, they’re not doing badly, either. UiPath has a yearly revenue of over  $300 million  and was ranked first in the  Deloitte Technology Fast 500  on November 6, 2019.

Segment is a single API tool that allows you to collect, standardize, and activate customer data, providing a data foundation for growth. As the volume of data possessed by companies becomes increasingly sprawling and unmanageable, and as the public desire grows for clarity and integrity in data handling, Segment has slotted seamlessly into an area of need in the SaaS market. Segment, like Clearbit, is a real up-and-comer and is valued at $1.5 billion —its done it by attending to real practical and ethical needs in the industry.

Truework’s product automates employment- and income-verification requests for HR teams. In a not totally dissimilar way as Segment, Truework identified a series of pain points at which sensitive personal information tends to be exchanged—for example, when you change banks, buy a house, start a new job, or found a company—and saw a need for greater security in these transactions. Through this, the company has built “a network for verified identity that puts consumers in control of their sensitive personal information,” emphasizing “privacy and ownership.” Truework is at a considerably earlier stage in their success, but having received their first Series A funding round less than two years after being founded, it's surely destined for great things.

Thrive  is a software company that develops cutting-edge applications to help recruiters and talent executives make better hiring decisions. Its platform features collaborative, easy-to-use database capabilities that combine the best elements of a CRM and an  applicant tracking system  in one, seamless, cloud-based solution. The firm’s clients include several of the most valuable U.S. tech companies, and it has helped place more than 6,000 managers, professionals, and board members since its launch in 2015.

The SaaS business metrics to keep an eye on

SaaS companies are powered by data, and success in the field is predicated on how you maintain awareness of key metrics, how they interact, and how to improve then. The following are five key business metrics that determine the health and potential of a SaaS business.

Lifetime value, (LTV)

LTV is the total amount you’re due to receive from a customer over the life of their account with your product. The  LTV  of a user is one of the  most important metrics  for a SaaS business, and it’s vital that you  calculate it the right way . Retention-rate numbers (which we’ll come to shortly) are important but leave gaps in your understanding of how much retained customers are bringing in each month and won’t tell you much about the success you are (or aren’t) having with upselling. LTV brings you this precise understanding.

Customer acquisition cost (CAC)

CAC is the total cost of sales and marketing efforts that are needed to acquire a customer.

The fact of the matter is that bringing on new customers costs—and it’ll be a considerable time after bringing a new customer on board that the additional MRR offsets the cost of winning that new customer. You need to keep tabs on your CAC to ensure that your LTV is able to comfortably outpace it. Being too conservative with how much you’re willing to spend on CAC can lead to missed opportunities for revenue and growth from new customers; but being too reckless with it can lead to often critically low profitability.

Monthly & annual recurring revenue (MRR & ARR)

MRR and ARR are the lifeblood of a SaaS business. They measure the total amount of predictable revenue that a company expects on a  monthly or yearly basis. Many companies manage to make a mess of their MRR, nevertheless. A survey hosted by ProfitWell showed that one in five SaaS companies were not  reporting expenses  correctly when accounting for MRR; two in five were incorrectly including trialing or free users in some manner in their MRR; and a majority were making mistakes when differentiating between monthly, quarterly and annual payment timelines. There is no excuse for slackness with MRR, regardless of the fact that it’s not a figure you need to report to a government entity. It is a key statistic that allows investors to monitor the status of your company and is as important for you when plotting your trajectory.

Churn rate is the percentage of your customers leaving your service over a given period. It’s the nightmare statistic in the SaaS business model; even a little bit can be extremely damaging to a company’s hopes for sustaining the momentum of its growth. In fact, churn can be ruinous for companies  even when all of their other metrics are reasonably healthy. Knowing the foundation of your customer churn rate and the means by which you can reduce it could not be more important in SaaS. It can be a complex metric to get a full picture of. Breaking down your churn into segments and cohorts will reveal the different drivers behind your churn, while failing to correctly account for trialers or episodic/seasonal customers when plotting churn can muddle the picture. At our last count, there were 43 different ways public SaaS companies were accounting for the metric.

Retention rate

Your ability to retain customers is your  foundation for growth  in subscription-based services; churn is the flip side of retention, and keeping retention high is as important as keeping churn low. You may have noticed a pattern emerging in our speculations on key  SaaS metrics —and, yes, like all the rest, there’s a serious tendency among SaaS companies to calculate their retention rates incorrectly, too. Both user and MRR retention need to be calculated in tandem, so you can account for both the effects of your product, marketing, customer service, and pricing and the likelihood of sustaining profitability. You might not be taking care to differentiate between customer life-cycle stages when calculating retention rate, either, or between the plans your customers are on. In short, there’s a lot that can go wrong with your retention-rate calculations.

3 tools that help SaaS businesses grow

Now that we have a pretty solid understanding of the SaaS business model, you might already have started wondering what’s available to allow your business to get the best of the competition and really start to grow. We’ve got a few tools here at Paddle that can really help young SaaS companies grow.

Billing software

The SaaS business model is based on recurring billing, so you won't get very far without a decent recurring billing tool. There are a variety of solutions for managing subscriptions and recurring billing out there, but in many cases, you'll need to integrate these tools with a broader payments stack to manage payments and revenue. This can get messy fast. Or you can take an all-in-one approach and use a merchant of record .

As we saw above, your grasp on your data informs your success as a SaaS company: a well-organized, powerful  analytics solution  can make all the difference. Continued insight into the drivers behind your growth is fundamental for success in the SaaS business model: which customer segments are driving and detracting from subscription growth, which features in your product command the highest willingness to pay among your customer base, which features are leaving customers at more persistent risk of churn.

Retention software

For all their importance when gauging the health of your SaaS business, churn and retention rates are seldom completely understood by young companies. Identifying customer cohorts and tracking revenue retention, MRR churn, and delinquent churn can be difficult to do without resorting to a plethora of spreadsheets.  Tools  that aid your retention rates and help drive down churn, while minimizing the chances of human error or misreporting, are vital.

The range of applications in SaaS is virtually limitless, and with the means of fundraising continuing to diversify, it has never been a better time to join the field. Still, all of the most successful software-as-a-service companies underpin their success by adhering to a few fundamentals in the SaaS business model: a reliance on good statistics and the use of the right tools and solutions. Apply the same principles to your business and you might find yourself heading in the same direction.

Take the headache out of growing your software business

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What is SaaS business model?

SaaS business model is based on selling cloud-based software for a subscription fee. The cloud-based software is usually accessible via mobile, desktop, and web apps, and the subscription fee is usually monthly or annually.

What is SaaS revenue model?

The SaaS revenue model is based on regular and ongoing payments to use software or a different digital product or tool. The payments have a defined period, and the most common two are monthly and annually.

Is Netflix a SaaS?

It may sound unusual initially, but yes, Netflix is indeed a SaaS. Netflix sells the software to stream movies and TV shows, both licensed through distribution deals and produced by Netflix.

What are the benefits of using Saas?

There are many benefits to SaaS software. The biggest include cost-effectivity, scalability, better security, no licensing management, and more scalability.

Related reading

SaaS Business Plan Template [Updated 2024]

SaaS Business Plan Template

If you want to start a SaaS business or expand your current SaaS business, you need a business plan. Our team has helped develop over 100,000 business plans over the past 20 years, including thousands of SaaS business plans.

The following SaaS business plan template and example gives you the key elements you must include in your plan. In our experience speaking with lenders and investors, the template is organized in the precise format they want.

You can download our SaaS Business Plan Template (including a full, customizable financial model) to your computer here.

SaaS Business Plan Example

I. executive summary, business overview.

[Company Name] is a SaaS business that provides hosting software services throughout [location]. [Company Name] offers customer management, accounting, and project management software at an affordable subscription fee. Moreover, it’ll be responsible for updating and monitoring the provided software. The Company will operate in the heart of the city, conveniently located in the center of the business district.

Products and Services

[Company Name] will provide management, accounting, and project management software. The Company’s custom software is available across various industries including construction, financial services, manufacturing, retail and restaurants.

Customer Focus

[Company Name] will primarily serve small to medium-sized businesses, from new ventures to well-established businesses and individual clients. The clients are further categorized into the following categories:

• Financial service providers
• Construction companies
• Manufacturing businesses
• Restaurants
• Retail Establishments
• Other businesses that may need SaaS technology

Management Team

[Founder Name] has a bachelor’s degree in Technology. He is a certified SOC 2 – Trust (SOC 2 is designed specifically for SaaS operations) and has over [x] years’ experience working as a senior software engineer prior to starting [Company Name].

[Company Name] will also employ an experienced assistant to work as a business analyst and help with various administrative duties around the office.

Success Factors

[Company Name] is qualified to succeed due to the following reasons:

• The Company has a competent, technically sound team with analytical and critical thinking skills that can help them find creative solutions for clients when they request customized software apps.
• The US has a robust business environment with a large number of businesses going the way of technology, and software as a service (SaaS) is indispensable in the value chain of the infotech industry.

Financial Highlights

[Company Name] is seeking a total funding of $200,000 of debt capital to open its office. Specifically, these funds will be used as follows:

• Office design/build: $40,000
• Software development: $90,000
• Working capital: $70,000 to pay for marketing, salaries, equipment and lease costs until [Company Name] reaches break-even

II. Company Overview

Who is [company name], [company name]’s history.

In the past few years, a number of IT businesses have opened in [location], and many startups have flourished. SaaS solutions are among the fastest-growing segments in the IT industry. In [year], [Founder’s Name] decided to meet this market need by investing in business providing SaaS solutions to various types of companies and startups.

Since incorporation, the company has achieved the following milestones:

• Developed the company’s name, logo, and placeholder website located at [website]
• Determined the list of services to be offered
• Determined equipment and development requirements

[Company Name]’s Products/Services

The following are the services that [Company Name] will provide:

• Customer Management Software
• Accounting Software
• Project Management Software
• Software Training: Training sessions on how to use the software solutions and integrate them into their businesses

III. Industry Analysis

The SaaS industry is booming. Over the past five years, the SaaS industry has been one of the fastest growing industries in the U.S. In fact, end-user spending on public cloud services will reach $482 billion over the next five years.

Among cloud options, the outlook for SaaS is the brightest. The overall growth of the SaaS industry will remain consistent through these years as more companies adopt SaaS solutions for a variety of business functions, extending far beyond the initial SaaS territories of core engineering and sales applications.

The demand for subscription-based pricing models, however, is spurring legacy companies to rapidly migrate their software solutions to a SaaS consumption model.

IV. Customer Analysis

Customer segmentation.

[Company Name] will primarily serve small to medium-sized businesses, from new ventures to well-established businesses and individual clients. These businesses typically gross from $8 million to $80 million in annual revenues and can invest up to $100,000 to $150,000 in their IT infrastructure. Clients are segmented as follows:

V. Competitive Analysis

Direct & indirect competitors.

Cloud Partners Cloud Partners was founded in 1999. It has been a reliable SaaS company in [location] for more than fifteen years. The company is known for its wide range of services that serves many people. With its large number of experts focused on delivering customer satisfaction, the organization maintains its high standard of services. Cloud Partners provides business software on a subscription basis. It develops enterprise cloud computing solutions with a focus on customer relationship management.

Software Solutions Software Solutions is a cloud computing and hosting platform. The company offers cloud infrastructure services, such as compute, storage and content delivery, database, and networking services, platform services that include analytics, enterprise applications, mobile services, and internet of things, and developer tools, management tools, security, and identity services, and application services. It has also introduced a pay-as-you-go cloud computing model that scales to provide users with computing, storage, etc.

SaaS Partners Inc. SaaS Partners Inc. provides integrated cloud applications and platform services. Its products and services include applications and infrastructure offerings delivered through various IT deployment models, including on-premise deployments, cloud-based deployments, and hybrid deployments. The company serves automotive, financial services, healthcare, hospitality, retail, utilities, construction, etc. It provides solutions for enterprise resource planning, banking, human capital management, etc.

Competitive Advantage

[Company Name] enjoys several advantages over its competitors. These advantages include:

• Management: [Founder’s Name] has been extremely successful working in the SaaS industry and will be able to use his previous experience to provide the best service experience. His unique qualifications will serve customers in a much more sophisticated manner than [Company Name’s] competitors.
• Relationships: [Founder’s Name] knows many of the local leaders, business managers, and other influencers within [location]. With his [x] years of experience and good relationships with business leaders in the area, he will be able to develop an initial client base.
• Innovative: The Company will add new data sources to expand on new valuable insights, launch new advanced features like benchmarking, predictive and prescriptive analytics, and self-guided data discovery. Adding embedded analytics creates a new way to innovate continually.
• Client-oriented service: [Company Name] will have full-time customer service and sales managers to keep in contact with clients and answer their everyday questions.

VI. Marketing Plan

The [company name] brand.

[Company name] seeks to position itself as a respectable, upper-middle-market competitor in the SaaS industry. Clients can expect to receive the best services at competitive prices. The [Company Name] brand will focus on the Company’s unique value proposition:

• Client-focused SaaS services that are customized for every client
• Service built on long-term relationships
• Thorough knowledge of the clients and their varying needs

Promotions Strategy

The Company’s promotions strategy to reach the audience includes:

Advertisement Advertisements in print are an excellent way for businesses to connect with their audience. The Company will advertise its company offerings in popular magazines and news dailies. Obtaining relevant placements in industry magazines and journals will also help in increasing brand visibility.

Social Media Marketing Social media is one of the most cost-effective and practical marketing methods for improving brand visibility. The Company will use social media to develop engaging content in terms of various forms and technologies of SaaS industry and post customer reviews that will increase audience awareness and loyalty.

Direct Mail [Company Name] will blanket businesses with direct mail pieces. These pieces will provide general information on [Company Name], offer discounts, and/or provide other enticements for people to use SaaS services.

Pricing Strategy

[Company Name]’s pricing will be moderate, so customers feel they receive great value when availing of Software services. The customer can expect to receive quality software services at a more affordable price than what they pay at an ultra-premium SaaS company.

VII. Operations Plan

Functional roles.

[Company Name] will carry out its operations at its headquarters in [Location]. The business will require the following job functions:

Administrative and Service Functions

• General & administrative functions including marketing, bookkeeping, etc.
• Software development
• Software and customer support

VIII. Management Team

Management team members.

[Founder Name] has a Bachelor of Technology. He is a certified SOC 2 – Trust (SOC 2 is designed specifically for SaaS operations) and has over [x] years’ experience working in the SaaS industry as a senior software engineer before starting [Company Name]. [Company Name] will also employ an experienced assistant to work as a business analyst and help with various administrative duties around the office.

Hiring Plan

[Founder’s Name] will serve as the CEO. He will hire the following personnel to maintain an effective and profitable SaaS business:

• Programmers and Software Developers [Number]
• Account Executive
• Business Development
• Customer Care Executive

IX. Financial Plan

Revenue and cost drivers.

[Company Name]’s revenues will come primarily from software development. The staff will earn competitive salaries allowing [Company Name] to hire experienced workers. In the initial years, the company’s marketing spend will be high, as it establishes itself in the market. Moreover, rent for the prime location is also one of the notable cost drivers for the [Company Name].

Capital Requirements and Use of Funds

[Company Name] is seeking a total funding of $200,000 of debt capital to open its office. The capital will be used for funding capital expenditures and location build-out, hiring initial employees, marketing expenses and working capital.

Specifically, these funds will be used as follows:

Key Assumptions

  5 Year Annual Income Statement

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SaaS: The Ultimate Guide to Software as a Service

Learn how the SaaS industry works and discover everything you need to know to launch and grow a successful SaaS product

GROWTH STRATEGY TEMPLATE

Outline your corporate growth plan with the help of this detailed template.

Published: 04/06/23

If you've been thinking about launching a SaaS product, now is the time to do it. The SaaS industry is expected to be worth roughly $195 billion U.S. dollars by the end of 2023.

This market offers an incredible opportunity, but to succeed in it, you'll need at least some basic knowledge about its dynamics and intricacies.

Luckily, that's what you'll learn in this guide. We'll help you understand how the SaaS industry works. You'll also discover what you need to know to launch and start growing a SaaS product.

Keep reading to learn more, or use the chapter links below to jump ahead.

What is SaaS?

What is a saas company, types of saas products, saas sales, marketing, and service, saas pricing models.

SaaS Resources

Software as a Service (SaaS) is a software distribution model that gives customers access to applications over the internet, rather than requiring a physical media and custom installation.

How does SaaS work?

SaaS products are centrally hosted by a provider, who also maintains and updates the software automatically. Customers access and use them via the web and mobile browsers.

Benefits of SaaS

Without a doubt, SaaS has revolutionized the software delivery model.

In the past, it was a hassle to introduce a new application to an organization.

From the lengthy sales process to complex on-site installation to custom development to training, it could easily take weeks — if not longer — before employees could start using a new tool effectively.

With SaaS, this can happen in a matter of days or less.

As a result, SaaS is rapidly becoming the model for the delivery of core business applications. In fact, even traditional on-premises software vendors are building SaaS products, and often expand their offering by acquiring SaaS companies .

A few examples include Microsoft Teams, Amazon Chime, or Oracle buying Opower for $532 million.

A SaaS company is a type of business focusing on creating, developing, hosting, and maintaining a proprietary Software as a Service product. The core benefits of running a SaaS company include instant access to an unrestricted, global market and the ability to scale without having to raise product delivery cost proportionally.

Although they often share the same name, SaaS companies aren't synonymous with their products.

A typical SaaS company develops and maintains their product. A great deal of its operations, however, also revolves around sales, marketing, and customer success.

SaaS applications come in different sizes, shapes, and serve various purposes. Most, however, fall under one of the below three categories.

Packaged SaaS

These are products that help manage a specific process in an organization such as improving employee engagement, strengthening customer relations, or boosting marketing effectiveness.

HubSpot is an example of a packaged solution. We offer tools companies use to manage sales, marketing, and customer relationships.

Collaborative SaaS

These applications help improve how teams work together. From messaging and video conferencing to collaboration on documents , these platforms support collaborative efforts.

Zoom, Paper, and Basecamp are some examples.

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Technical SaaS

These applications offer tools to manage or improve development or technical processes.

Cloudsponge, for example, allows developers to include a contact importer in their products effortlessly. Algolia offers a search API that helps other apps improve the search experience.

Venture investor Tomasz Tunguz categorizes SaaS products by the value they deliver, as well.

For him, some apps assist in increasing a company's revenue . HubSpot helps companies to more effectively market, sell, and service prospects and customers. This, in turn, leads to higher growth and revenue.

Other apps reduce costs . Basecamp, for example, offers multiple tools in a single package, eliminating the need for using additional products.

The third group, productivity software , falls somewhere between the two. These products also help increase revenue or reduce cost. However, their effect is less obvious.

For example, Zoom.us allows companies to run meetings over the Internet.

While using the product will likely reduce costs and could provide a platform for new revenue-generating ideas, this result is not as evident as in the case of products in the other two categories.

SaaS Examples

Let's dive into five examples of SaaS solutions to give you a better understanding of what this all means.

HubSpot offers a CRM platform complete with all the tools and integrations you need for marketing, sales, content management, and customer service.

HubSpot's Marketing hub was awarded one of G2's Top 100 Highest Satisfaction Products in 2020.

Since HubSpot's product infrastructure is hosted on Amazon Web Services (AWS), a cloud platform, it is an example of a SaaS company.

For more examples, here are our top SaaS companies and products to watch in 2023.

Slack offers an incredibly popular chat tool for businesses, which can be used for internal messaging, video conferencing, and productivity bots. The tool is used by major brands, including Netflix and Uber.

With an internet connection, you can easily install and begin using Slack's application. No special hardware or software is required, and because the application is web-based, security and performance is managed by Slack directly.

Zoom provides video conferencing tools for hosting remote meetings. The company has seen exponential growth in the past few years as the world adjusted to a primarily remote workforce as a result of the pandemic.

For the ongoing fiscal year 2023, the company is expecting between $4.53 billion and $4.55 billion in revenue.

The platform is cloud-based, so it's easy to install and begin using across devices.

Square is a credit card processing app that lets businesses easily accept credit payments without a cash register.

Square's software can be easily plugged into a computer or tablet to transform it into a credit card processor, and the company offers various products for commerce, banking, payroll, and more.

Square's expected to see roughly 80% annual revenue growth at the end of 2021 — much faster than its growth has been historically at roughly 40% year-over-year for the past five years.

5. Atlassian

Atlassian's products, including Jira, Confluence, and Trello, are aimed at improving software development, project management, collaboration, and code quality.

Many Atlassian products are cloud-based, while others are server and data center products.

Atlassian emphasizes the importance of transparency by creating tools that enable teams to work openly — so everyone within a team or organization at-large has visibility into what's happening.

How Do SaaS Brands Attract Users?

For a new SaaS company to take off, it needs to find, attract, and convince new people to try their product.

Moreover, it needs to do so fast.

According to a McKinsey report , SaaS companies must achieve annual growth rates greater than 20% if they want to survive.

That speed of growth is hardly a small task when you consider how much SaaS marketing differs from other industries.

Here's why.

In SaaS, you promote a product with nothing tangible to show for it. Your potential customers can't hold it in their hands. As a result, your marketing efforts must convince them that your product works and can solve their problem.

Users decide whether to try out a SaaS product in a blink . They often conduct a quick online search, compare some solutions, and make their selection. It can all take no more than a couple of hours.

Your marketing, therefore, must target every stage of the buyer's journey and offer relevant information that can convince someone to test your product.

So many consumers, however, commit little effort to discovering the new tool . Many new users log in to an app once, never to return to it again. Most don't realize the full value of the app before moving on to another solution.

Your promotional efforts must also help customers realize your activation point — the true value your product delivers.

You also rely on different sales models. Buying a self-serve SaaS product, one which customers sign up to by themselves, can take hardly any time at all.

In a sales-driven approach, a customer goes through most of the process on their own. However, in the last stage, they typically engage with a sales team that helps guide and recommend the best plan.

This process can naturally take longer and might require additional resources.

Finally, the enterprise cycle could easily take months, if not longer, before a contract is signed.

All in all, however, typically, SaaS companies have the below objectives for their marketing strategies.

SaaS Marketing Objectives

Objective 1: attract the right audience..

To kickstart its growth, a SaaS company must connect with potential users and bring them to their site first.

However, these shouldn't be any visitors. Rather, people who already experience a specific problem your product aims to solve.

So, the first objective is to understand what challenge you're solving for your users. Then, devise a strategy to entice them to learn more about the product.

Objective 2: Build a relationship with leads.

Marketers are responsible for nurturing leads. Using a combination of content, emails and other channels, a new SaaS company should position themselves as an authority, and convince leads to test their product.

Objective 3: Remove roadblocks to sign up.

In SaaS, marketers often optimize conversions around various website goals — from trial sign up to on-boarding to converting free users into paying customers.

Objective 4: Engaging users.

For most SaaS apps, users sign up for a trial, free, or demo version of the product first. It's often a marketer's job to ensure they convert into paying customers.

Typically, marketers accomplish this by optimizing the free or trial plan to help a person get to the activation point, where they realize the true value of the product.

Objective 5: Increase customer lifetime value.

Since most SaaS companies charge customers on a subscription model, it's imperative that a person remains a user for as long as possible.

SaaS marketing strategies are often aimed at increasing customer lifetime value by reducing churn and moving customers to higher priced plans.

SaaS Marketing in Practice: The Most Effective SaaS Marketing Channels

SaaS companies have a plethora of opportunities to introduce their products to potential users and achieve initial traction. Below, we've listed the most effective SaaS marketing channels that can help spark initial growth.

Inbound Marketing

Inbound marketing strategies aim to attract strangers to your product and convert them into new customers. And it all starts with content. Blog posts, guides, resources, and other content types help attract new visitors and then convert them by adding value at every stage of the buyer's journey.

Search Engine Optimization (SEO)

Today, almost everyone turns to search engines for answers. It doesn't matter whether a person is looking for a product recommendation or guidance on solving a problem, they know that they can find it on Google.

SEO is a practice that helps position your site and content in front of potential users at every stage of the buying cycle.

Content Marketing

Publishing engaging content helps you position your brand or product as a credible authority and helpful resource in the industry. And, in turn, you'll build meaningful relationships that can convert prospects into paying customers.

Online Advertising

SaaS companies place online ads to attract and entice potential users to sign up.

Many also use paid ads, from pay-per-click (PPC) channels like Adwords to social media ads to display or banner advertising to drive potential users to lead generating assets or a product sign up.

These days, PR is more than just publishing and distributing press releases. Modern public relations focuses on improving almost every aspect of a brand's online visibility. From search results to brand mentions, online reviews, and much more, PR strengthens brand awareness and recognition.

Viral Marketing

Viral strategies focus on getting existing customers to refer and promote your product to others. These programs focus on getting your users to invite their friends, family, and connections to sign up and try out the product as well. Common types of viral marketing strategies in the SaaS space include referral, or affiliate, programs or viral loops .

User Actions

For some apps, users can naturally expand a customer base by introducing the product to their clients. For example, Xero discovered that, on average, a single accountant using their product introduces anywhere from 6 to 31 new users to the platform .

App Stores, Resellers, and Affiliates

Some SaaS companies can also take advantage of app marketplaces like Intuit, Apple Appstore, or Google Play to promote their products to new audiences.

Many others launch affiliate or reseller programs that reward anyone willing to promote their products with cash or other rewards.

SaaS Customer Service

When you work for a customer support team within a SaaS company, the types of complaints you field are going to look different than they would for another type of business, such as an e-commerce brand.

For instance, with e-commerce you're primarily dealing with customers who are unhappy with their purchases and would like to make exchanges, or who need help making a purchasing decision.

With SaaS customer support, on the other hand, you're helping customers use your product to solve for their unique challenges, and assisting them in both their pre- and post-sale journeys.

Ultimately, good SaaS customer service will make or break the success of your business, since many SaaS customers will require advanced support to see results from your software.

Additionally, SaaS businesses can see higher churn rates than normal — in fact, the average churn rate in the SaaS industry is 5% , while a "good" churn rate is considered 3% or less.

SaaS customer support can help reduce churn rate and increase customer satisfaction by communicating your brand's values and mission to your customers, demonstrating empathy, and going above and beyond for your customers.

If you're interested in learning more about SaaS customer service, our beginner's guide explores the differences between SaaS customer service and traditional support, building a strong SaaS customer support team, and optimizing your SaaS customer service workflow.

Free Sales Pricing Strategy Calculator

Determine the best pricing strategy for your business with this free calculator and template.

• Cost-Plus Pricing
• Skimming Strategy
• Value-Based Pricing

Before attracting any visitors, a new SaaS company must decide how it is going to charge for their product. This is important for two reasons:

A pricing model will affect a potential user's willingness to consider their solution.

And it could affect a company's rate of growth. As PwC reported , it takes two years for a typical SaaS company to break even.

So, let's review various pricing models you could use in your product.

1. Freemium

The freemium model offers a significant number of features for free, along with additional paid packages. Slack, Dropbox, or Airstory are examples of freemium-based SaaS products.

Most users can use them at no cost. But when they need more than the basic feature-set, they must upgrade to a premium package.

2. Flat-Rate Pricing

In this pricing model, a company offers a single product with a standard feature set for a flat rate.

Basecamp, for example, charges a flat fee of $99 per month for which a person can use all its features.

3. Tiered Pricing

By far, the most common pricing practice among SaaS brands is to offer multiple packages. Each package includes a different feature set, designed to suit various user needs.

This is the model we use here at Hubspot.

4. Per-User Pricing

Some SaaS companies offer a different option depending on the number of users.

Instead of paying a flat fee or choosing a feature-set, they can pay per user. Asana, for example, charges companies a flat rate for every person they sign up to the app.

5. Usage-Based Pricing

Finally, some products charge for usage, rather than feature sets or users. Companies using Stripe, for example, pay for every transaction processed.

SaaS Learning Resources

Want to learn more? We've pulled together some of the top online resources that cover everything SaaS to help you expand your knowledge.

1. Tomasz Tunguz

Tomasz Tunguz is a venture capitalist at Redpoint Ventures, and writes extensively about SaaS on his website.

This includes topics such as "the identity crisis facing open source companies in the cloud" and "How a Merger of Salesforce and Slack Would Change the SaaS Landscape."

You can subscribe to the newsletter to ensure you never miss a post, or scroll through his SaaS posts to learn more about the SaaS industry.

2. Hitenism

Hiten Shah has started three successful SaaS companies: Crazy Egg, KISSmetrics, and Quick Sprout.

He also offers a weekly SaaS newsletter, Hitenism, and writes compelling SaaS-related articles such as "We Haven't Hit Peak SaaS" and "3 Lessons that SaaS Founders Should Learn from David Cancel."

As someone who has a proven record in the SaaS space, Hiten is a fantastic resource to learn from.

SaaStr is the world's largest community of SaaS executives, founders, and entrepreneurs.

The company offers a variety of SaaS content in the form of blog posts, ebooks, podcasts, and videos, plus annual events for 15,000+ SaaS entrepreneurs.

Whether you're looking for content to get started or seeking out industry connections, SaaStr is a great starting place.

4. Startup School

If you're interested in starting your own SaaS business, Startup School is a powerful online program to check out.

Startup School offers a curriculum, a progress tracker to analyze the progress of your startup, a co-founder matching program, and access to more than $100,000 worth of deals on AWS, GCP, and more.

5. For Entrepreneurs

Voted #2 on Forbes List of 100 Best Websites for Entrepreneurs, For Entrepreneurs was started by David Skok, a serial entrepreneur who has founded four companies.

Here, you'll find articles aimed at helping both startup founders and SaaS entrepreneurs.

6. Chaotic Flow

Chaotic Flow stands out in this list due to its segmentation of four separate SaaS categories: SaaS Marketing, SaaS Product, SaaS Sales, and SaaS Metrics.

It's easy to find highly technical and specific topics for any of your SaaS needs, whether you're looking for articles on aligning SaaS customer acquisition or SaaS product-market fit.

The website offers SaaS go-to-market strategies and tactics, and was started by Joel York, who has spent 20+ years in the SaaS industry.

7. Sixteen Ventures

In the "Library of Awesomeness" on Sixteen Ventures site, you'll find articles ranging from good SaaS churn rate to emotional disconnect during customer onboarding.

The website, created by customer-centric growth expert, consultant, and thought leader Lincoln Murphy, is a great starting place when looking for customer-centric strategies in the SaaS industry.

8. On Startups

We may be biased (the founder of this site is also the founder of … well, HubSpot).

But On Startups, a website created by Dharmesh Shah, stands out as an impressive website if you're looking for content about software startups.

The website includes a list of software startups Shah has invested in, videos such as "From Day 0 to IPO: What Went to Plan, What Most Certainly Didn't", and content for both startup founders and investors looking to learn what's next in the SaaS startup space.

9. Predictable Revenue

Predictable Revenue offers content in a variety of formats, including podcasts, webinars, blog posts, and ebooks, and even provides case studies so you can learn how other SaaS companies have succeeded.

If you're interested in consuming video or audio content, this is a good option for you, with podcast episodes like "How to write proposals that sell" and videos like "How To Not Suck At Demo Calls".

SaaS offers an incredible business opportunity. Adoption of the software as a service model continues to grow rapidly.

However, with high demand and competition, founders must understand the intricate dynamics of the market and work to stand out by providing unique solutions and immense value to users.

As you continue to explore SaaS and make your introduction into this multi-billion dollar industry, remember to keep these goals at the core of your offering.

Don't forget to share this post!

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How to Write a Business Plan for a SaaS Company

If you are on this page, perhaps you are already well aware of the benefits of composing a business plan when starting a venture. It allows you to stand firmly on the ground at every stage of business development and present your idea to investors correctly.

What could possibly bring you here is the question of how a business plan for SaaS is any different from a regular business plan and what to pay attention to when working out a SaaS business strategy . Let’s figure it out.

Table of Contents

Saas vs legacy systems, making first steps toward your saas business plan, composing a traditional business plan for saas, composing a lean plan for saas.

• As a General Conclusion

What Is a SaaS Business Model?

SaaS or Software-as-a-Service is a type of software maintained in the cloud, and to access and use it, B2B and B2C customers have to pay for a subscription. Subscription is the main source of revenue for the Software-as-a-Service business model which assures a high ROI for startups of this kind.

The most common SaaS examples are Salesforce, Slack, AWS, HubSpot, Mailchimp, Dropbox, and a lot more – their names are all around. SaaS end-user spending is set to reach $208.1 billion by 2023 – the growth is impressive considering the past year’s number, $152.18 billion.

More and more commonly, companies are looking to SaaS-ify their legacy software. It would not be so if SaaS sustained no value and benefits legacy systems have not.

Legacy systems are pieces of software and hardware that still manage to work (usually, supportability problems are present) but are not as scalable compared to cloud-based SaaS whose scalability has no upper limit .

Some may find the idea of storing their business software in the cloud quite disturbing. Risks frequently associated with cloud-based software are possible attacks and client data leaks. These aspects without a doubt have to be approached seriously with all the safety precautions observed.

However, it would be unfair to ignore the fact that on-premise systems have their own vulnerabilities and need proper protection measures too. Consequently, security concerns are not a downside of SaaS but just something to bear in mind.

The recommended measures for security protection are SaaS Security Posture Management (SSPM) tools that identify integrity issues, excessive user permissions, and other cloud-related risks. What we mean is that appropriate steps toward security protection can lift a lot of concerns of a business thinking about SaaS-ification.

The answer to what your SaaS business will be like has to be clear before starting a SaaS company business plan, not the other way around. With a clear SaaS concept in mind, start thinking of how the business plan will manage to break down the following:

• What problem of users is it designed to solve?
• Who is your target audience and how will you approach them?
• How will your product help businesses make more profit?
• Why customers should choose your proposition over similar ones?

See also: SaaS business case by Anadea

SaaS Startup Business Plan: Traditional VS Lean

Time to pass from reasoning to action and translate everything you have been thinking over into a well-rounded plan. There can be two approaches to it. Below, we will review each.

How many pages should a business plan be? A traditional, practically academic approach to composing a business plan suggests it should have 30–50 pages of plain text, graphs, and argumentation. The proposed structure for a traditional SaaS business plan is:

1. Executive Summary

Essentially, this is the elevator pitch about your SaaS key perks and ability to fulfill its purpose. At this stage, your task is to capture the reader’s attention, and for that, it is necessary to know who your reader is.

Related read: What Is the User Persona and How to Define It

Include supporting data from research on your topic and be concise. Ironically enough, the introduction in its core, the ideal executive summary can be read as the conclusion with your business’s audience, relevance, and funding clearly outlined. This is why entrepreneurs are frequently suggested to compose the executive summary after the plan is finalized.

2. Mission and Vision

No matter who you will be looking to outreach, bear the right mission statement in mind. To sound convincing and clear to your customer, speak less about your product and more about the customer and the problem SaaS is going to solve. Probably your end-user will be happy to know how great your product is, however, they will be 100 times happier to find out how they can benefit from it.

In a nutshell, it should be not the ‘here’s my great SaaS and what it does’ narrative but ‘you will get this, this, and that when using the product.’

3. Product and Service Description

In this section, you are expected to break down all of the product functions as detailed as possible. When reading this section, the reader has to get a clue about what your product is and why they should bother.

4. Industry Analysis

Here, present an overview of the market you are about to rush into. The context matters: explain to your reader why it is high time to embrace the niche you are embracing, provide them with numbers and recent statistical findings, and show what a promising market it is.

If no such supporting data is available, prove to the readers that the industry you are targeting is overlooked for no reason. The industry is not getting the attention it deserves due to some terrible misunderstanding – this is the impression the reader should have after they look through this section.

5. Competitive Analysis

After you spoke about the market prospects, you will need to give your reader some examples of successful SaaS products already out there. Be very careful here: your task is to show how well your SaaS business will supplement the product range, how beautifully it will fit in, and fill the gaps in the market. This will not work if what you are offering is a copy of a successful solution. Launching a startup similar to an existing one is fine, but launching one with no competitive advantage is pointless in an oversaturated market.

So here it is necessary to understand how different your SaaS will be from competitors and, which is just as important, in what are your rivals competing with each other.

6. Sales and Marketing Plan

Tesla has no marketing department – their product is that good that it sells itself. This is what you can often hear here and there. Does it mean Tesla cars are really that great? Yes, it does! Does it mean your SaaS does not need marketing if you find it as awesome? No way.

In the case of Tesla, the advantage that granted the brand its recognition is the unarguable uniqueness of the product, which really few businesses can boast of. Besides, the ‘0 dollar marketing budget’ statement can be a kind of strategy itself. You can not do without a sales and marketing plan when drawing up a B2B SaaS business plan if only because essentially, the business plan is the sales document by nature. With your plan, you are selling your idea to investors and customers.

So by the plan as a whole , you will need to present your product in all of the possible aspects, and by the sales and marketing part of it, focus on your customer persona, the ways to gain their attention, and the resources you have at your disposal for this purpose.

7. Financial Plan

In the financial section, specify and justify the amount of money needed for the development of your SaaS, allocation of budget for marketing and human resources, and the funding needed.

Put down simply, the main components to include in the financial plan are:

• Cash flow projections (money expected to come in and out of your business in a period of time);
• Income statement (operating expenses, total net profit or loss, a.k.a. gross margin);
• Balance sheet (assets, or available resources, liabilities, or what you owe, and the amount of money generated).

Since it is SaaS we are talking about, there is no better place to remind ourselves what is its main source of income – paid subscriptions. SaaS pricing should be clearly defined based on the info you get at the stage of competitors’ analysis.

How to price a SaaS product and be reasonable? The 10x rule often used in business can be applied to deciding how much to charge for a SaaS.

For the 10x principle to work, make sure the profit given by your SaaS is at least 10 times greater than you charge for it. Put crudely, if your SaaS helps a company save $10.000 per month, you have every reason to charge a $1.000 monthly payment. Few businesses can resist the x10 ROI.

And still, given all this, it is difficult to be 100% precise when estimating financial projections. In fact, when it comes to planning a SaaS business launch, in a niche so rapidly growing and changing, the lean plan might work just as well as the classical approach to writing a business plan. This does not change the significance of traditional business planning – on the contrary, both approaches are provided for you to choose from without us pushing you to take sides.

Contrary to the elaborated business plan described above, the lean plan is all about being concise and compact about wording. Forget the 30–50 page volume. The ideal lean plan can fit on one page.

When writing a lean business plan, your goals (apart from trying to use little space) are:

• Be clear about the vision and goals;
• Prove SaaS profitability to the reader.

See the lean business plan for the SaaS template. Step by step, let’s figure out what should be specified in each section using the example of invoicing SaaS.

SaaS startup business plan template

Identity. This is what defines you as a business and sets your value for customers. Mind the ‘less we, more you’ principle. ‘Seamless integrations, automated proration & recovery of lost revenue’ sounds more selling than just ‘We are a great invoicing tool.’

Problem worth solving. The pain that forced your customer to look into possible solutions is the problem than needs to be identified as well. For example, your customer is struggling with data syncing which causes incomplete invoicing information collection.

Our solution. This section has to convince the reader that the proposed SaaS will never let bad syncing or whatever they struggle with happen.

Target market. Describe your ideal customer and how many of them are out there if you know it.

The competition. If not your SaaS, what do people with the same problem use to solve it? How are you better than the alternatives?

Sales channels. How will you sell SaaS to your customers? Describe particular sales channels: website, outreaching the potential customers directly, etc. Who will be involved in the sales process?

Marketing activities. If marketing activities will take place, specify the channels and approximate cost of marketing your SaaS.

Revenue. Here, list the means that turn your SaaS into a profit-generating business. For SaaS, this is perhaps the easiest section to fill – the subscription.

Expenses. List the sides of setting up a SaaS business that require investment. When it comes to building custom software which SaaS is, web development services are something that should be considered first.

Milestones. Your achievements within the next few months. What goals do you expect your Software-as-a-Service to hit and what will you do for that milestones?

Team and key roles. List those who will help you launch and develop your SaaS business if any.

Partners and resources. If there is another business that will help you launch, indicate it in this section. Your competitive advantages such as support from, say, other financial businesses, if we are still speaking about invoicing SaaS, are worth listing here too.

too long; didn't read

Every successful SaaS has grown from an idea and then a business plan. No matter how many business plans templates you see online, they do not have to be followed strictly – all ideas can be customized to give a good showing for your project.

Good luck with your undertaking! We’ll be happy to see you again when your plan is ready and build a great SaaS together.

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SaaS Business Plan Sample

Published Aug.28, 2013

Updated Apr.24, 2024

By: Noor Muhammad

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Table of Content

SaaS business plan for starting your own company

Are you thinking about starting a business that will have an enormous scope in the near future? Well, you must opt for a SaaS business then. SaaS stands for software as a service and includes providing software such as CAD or content management with their key or license on a subscription basis to many customers, even at the same time, and hosting and upgrading them while sitting on your location. These days several startups and businesses require different software to make their tasks easier. But not all of them want to buy them. So, they prefer to contact SaaS businesses and pay on a monthly or weekly basis to use their software services instead of spending a heavy amount in making a purchase. If you have made up your mind to start this business but have no idea about how to start or how to write a business plan SaaS, you can take help from here. This sample SaaS business plan provides all the crucial details while relating them to a SaaS business startup, Techware, based in Houston.

Executive Summary

2.1 the business.

Techware will be a registered and licensed SaaS business responsible for hosting software services throughout Houston and nearby cities. Techware will be offering management, accounting, and engineering software on affordable subscription fee. Moreover, it’ll be responsible for updating and monitoring the provided software from time to time.

2.2 Management

Tom Will, the owner, has decided to manage his business by himself. Knowing the importance of good management structure in business, he decided to include that in his business plan for SaaS startup. Tom will hire experienced software engineers, IT experts, computer experts, account managers, sales executive, and other personnel to run his business. Later in this sample SaaS business plan package, we will be listing company’s employees along with their job description and average salaries.

2.3 Customers

Before making a business plan for SaaS company, it’s essential to know your customers. Having a clear idea about your target groups helps you in devising SaaS business continuity plan template, which can help in specifying ways to deal with possible losses/threats by approaching another group of customers if one fails to satisfy your sales. After analyzing the market, Techware identified that every group which will be associated with any small or large business, company or institute will be its target customers.

2.4 Business Target

Our main business targets are to add two new software services every 3 months, expanding our business network and increasing our sales by 20% every 6 months.

Company Summary

3.1 company owner.

Tom Will, owner of Techware is a software engineer who did an MBA from London Business School after his graduation. Tom has worked in Symantec for two years as a product manager. But he resigned as he wanted to start his own business. No doubt, he possesses all the qualities that enable one of starting their own business such as talent, knowledge, management skills, experience and wealth.

3.2 Why the SaaS Business is being started

In this age, no business and company can survive without the usage of the latest software. But not every startup can afford to buy them. So here comes the scope of SaaS companies who buy expensive software and host their services on any location specified by the customers on a subscription basis. So, Tom who always wanted to start his own business couldn’t have come up with a better idea than initiating a SaaS business. As it offers him the platform to blend his software knowledge with his management skills to generate huge gains.

3.3 How the SaaS Business will be started

The only way to avoid confusion at every decision making stage is to formulate a proper saas business plan. Your business plan for saas company must cover the details of your investments, advertisement costs, strategy to reach your customers, management structure and financial plan. Recognizing the importance, Tom created a thorough software as a service business plan . According to which, the company’s office will be based in Houston, but its services will be offered in nearby cities too. The office will be decked by first-class equipment and the latest networking system. Initially, the company will be providing services for some major software such as office software, payroll processing, customer relationship management, and collaboration, etc. Moreover, it will hire highly experienced personnel to ensure the perfect running of the business and skilled web developers to ensure a strong web presence.

The detailed startup requirements are given below:

Services for Customers

Deciding your services is a step that must be taken before crafting a marketing plan for your saas business. Your investments, purchases, hired staff and many more things will just be dependent on your services, so you must state them clearly in your saas startup business plan.

Choosing your services at the initial stage will also help you in devising saas lean business plan and finding ways to minimize wastage of resources.[/important] Services which will be provided by Techware are given in this standard business plan saas company.

• Providing Management Software: We’ll be offering software services for management software like accounting, invoicing, enterprise resource planning, content management, office software, human resource management, payroll processing, customer relationship management, and collaboration.
• Providing Engineering Software: Software that are used in engineering institutes and companies will also be offered by us such as Adobe Font Folio, AutoCAD, Visual Studio Ultimate with MSDN, VxWorks, etc.
• Providing Construction Software: We’ll provide services for following expensive software used by construction companies such as Oracle Primavera P6, Esticom, Buildertrend, FINALCAD, etc.
• Graphic Designing Software: We’ll offer services in graphic designing software such as Adobe Illustrator CC, Adobe InDesign CC, CorelDraw Graphics Suite, Corel PaintShop Pro, etc
• Training Sessions: Our software engineers will also give training sessions on the latest software at our customer’s location.

Marketing Analysis of SaaS Business

If you want to opt for a SaaS startup, you must first search out whether the market you’re choosing has the potential to bear your startup or not. It’s better to research to know if there are already-established such businesses because it’ll be difficult for you to strive then.

Operational and Strategic Planning

5.1 market trends.

In this current age, usage of software in various sectors has increased which has helped in increasing productivity and keeping pace with the fast-going world. Almost all companies and businesses require some sort of software. But usually, enterprises don’t prefer to purchase them for a lifetime and opt for seeking the services of SaaS companies instead. So you don’t have to bother at all about the scope or trend of SaaS business, you’ll just need to have a look at your budget. If it is not too large then you can start with just one type of software such as business software.

5.2 Marketing Segmentation

Before you think about how to find clients, you must be clear upon who will be your clients. To understand their demands and meet their expectations, it’s essential to do a thorough marketing segmentation in your saas business plan template.

The detailed marketing segmentation done for Techware is given in this part of startup saas actual business plan.

5.2.1 Companies: Our first target will be the companies that will be needing our services to have the latest payroll, coordination, and management systems. Besides the general software, they are also expected to use our services for software which will be specific to their works.

5.2.2 Startups: Our second target will be the startups who just can’t afford to make huge investments on the software especially when they have a better option to get them hosted by SaaS companies.

5.2.3 Institutes: Our last category will be institutions such as those who carry out research work on some engineering-related projects. They will surely be needing diverse software, some for a smaller span of time and some for a larger, thus, will obviously prefer to use our services.

The detailed market analysis of our potential customers is given in the following table:

5.3 Business Target

Setting SMART: specific, measurable, attainable, realistic and time-bound goals for your startup is necessary to keep up the spirit of working hard and harder.

Our business targets are as follows:

• To achieve a net profit margin of $15k per month by the end of the first year
• To increase our services by adding new software in our package after every 3 months
• To increase our overall sales by 20% every 6 months
• To attain an average rating of 4.5/5 by the end of the first year

5.4 Product Pricing

To maintain the quality of our services Techware found it essential to not compromise on the money. So, our prices will be in the same range as that of our competitors.

OGS was professional

OGS was professional, efficient and timely! The research and responsiveness is second to none. I was a little scared to entrust this work to someone that had not been recommended but the moment I contacted Alex he listened to me carefully and I knew he was the person I could entrust this part of my project to. The results are over and above anything I could have imagined. I recommend him and will be turning to him for all my other projects and pointing everyone I know to him.

SaaS Marketing Strategy

Before writing a saas business plan, you must research what your competitors are doing. This will help you in coming up with diverse and better services. If you are looking for saas business plan example to get an idea about what strategy can make you more preferable than your customers, you can take help from this saas business plan template free of cost.

6.1 Competitive Analysis

Our biggest competitive advantage lies in our wide range of services and the skills of our employees. Secondly, we are highly customer service oriented. Besides providing them with just our software services, we’ll offer training sessions by our software engineers, so that they can learn about working on it. We’ll be providing our services in various regions so we expect to attract more customers to our site. Lastly, we’ll be extremely careful about protecting our customer’s data.

6.2 Sales Strategy

We’ll advertise us by the following methods:

• By ensuring a strong web presence
• By providing a 5% discount on our services for the first two months
• By personally sending our representative to our target customers
• By providing a 2-day free training session to help those persons who don’t have hands-on on the latest software

6.3 Sales Monthly

Our monthly sales are forecasted as follows:

6.4 Sales Yearly

Our yearly sales are forecasted as follows:

6.5 Sales Forecast

Our forecasted sales are given below.

Personnel plan

It’s not just the role of management which must be played efficiently. No business can survive until devoted and talented employees invest their tireless efforts in it. So, it is necessary to hire suitable persons for your business. In this saas business plan sample we’re listing personnel plan of Techware to help those who have no idea about how to writing a saas business plan.

7.1 Company Staff

Tom will be the manager himself and will hire the following persons:

• 2 Network and Information Security Managers to ensure network security
• 1 HR Manager to coordinate staff
• 2 Software Engineers to maintain and upgrade software
• 4 IT experts to host software services
• 2 Technical Assistants to maintain equipment
• 2 Accountants to maintain financial and other records
• 4 Sales Executives to market and reach target groups
• 1 Web Developer to manage company’s sites
• 2 Customer Representatives to interact with customers off/online
• 1 Cleaner to ensure a healthy environment
• 2 General Assistants to carry out day-to-day tasks

7.2 Average Salary of Employees

The following table shows the forecasted data about the salaries of the employees for the next three years.

Financial Plan

Since a SaaS business requires a large investment for purchasing licenses of costly software thus it’s necessary to get its business plan written by a financial expert. The financial expert must be adept at playing with figures and stats and finding ways to cater possible capital losses. As for Tom, he wanted a business plan saas that could enable him of making a heavy investment every 3 months to increase his services as well as generating profits after spending money on all possible expenses like salaries and system maintenance. So he sought help from a financial consultant. Thus the financial plan which is provided below is the result of combined efforts of Tom and his hired financial consultant.

8.1 Important Assumptions

8.2 Brake-even Analysis

8.3 Projected Profit and Loss

8.3.1 Profit Monthly

8.3.2 Profit Yearly

8.3.3 gross margin monthly.

8.3.4 Gross Margin Yearly

8.4 Projected Cash Flow

8.5 Projected Balance Sheet

8.6 Business Ratios

Download SaaS Business Plan Sample in pdf

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OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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The SaaS factor: Six ways to drive growth by building new SaaS businesses

Many companies have a growth challenge: They expect to get as much as 50 percent of their revenue from new businesses and products by 2026 but are not on a path that will take them there. Among the strategies nontech incumbents should consider is taking a close look at developing software-as-a-service (SaaS) products.

We know from our previous work that one of the most important factors in driving growth is operating in a sector or area that’s growing. SaaS checks that box. The global SaaS market is currently worth about $3 trillion, and our estimates indicate it could surge to $10 trillion by 2030. The median revenue growth rate of 100 public SaaS companies in the United States with revenues above $100 million was 22 percent as of mid-2021, with the top quartile’s growth rates above 40 percent .

There’s a lot to like about SaaS beyond its revenue potential. For one thing, the asset-light nature of SaaS means it has lower overhead and logistical costs than physical products. Second, it frees traditional companies from doing some of the most complicated technical work by themselves—they can partner with major cloud service providers. And third, since software at its core is a series of 1s and 0s, it’s easy to scale, especially when combined with the cloud’s extensibility and elasticity.

As exciting as the SaaS new-business-building opportunity is, however, nontech incumbents aren’t set up to transform themselves quickly into SaaS operators. In fact, these companies’ long-standing practices in product management, funding, governance, and performance management may be hindrances to launching SaaS businesses.

Our experience in helping more than 20 nontech incumbents build new SaaS businesses highlights six key areas they should focus on to succeed.

1. Innovate through rapid test-and-learn cycles

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Leap by McKinsey works with established organizations to imagine, build, and scale new businesses—and develop the capabilities needed to do it again and again. We bring together a global network of experts to build dynamic, innovative businesses that can reinvigorate entire organizations.

Learn more about Leap by McKinsey .

Large incumbents have for years honed tried-and-true processes for product development that have served many of them well. But those approaches are not always well suited for the faster learn-and-adapt cycles that are the foundation of innovation at successful software companies and core to SaaS product development. Like any good product or service development, it’s crucial to start with the customer.

While many incumbents have a strong understanding of their customers, they often lack the creativity to translate that understanding into innovation. Their approaches often focus on “how to improve X” rather than on completely rethinking “how to create Y.” This is partly why they have proven so vulnerable to start-ups. Incumbents often treat customer data as “inputs” that are translated into requirements and only infrequently consult the customers themselves. Innovators, however, go deep on understanding pain points and work much more closely with customers along the development journey, from testing and adjusting minimal viable products (MVPs) with real customers to co-creating products with them. For B2B solutions, getting feedback from the first four to five customers is particularly valuable because it amplifies the customer voice in shaping the product by defining customer needs before the product is launched broadly.

The key point in enabling this more iterative and collaborative approach is to bring software engineers, data scientists, and designers into the ideation process from the very beginning. They are then on hand to not only get a much deeper appreciation of customer needs but also rapidly adjust the prototypes based on real customer feedback. These test-and-learn cycles can take as little as a day and should be driven by a “fail-fast” ethos.

The Washington Post Company embraced this co-creation approach when it decided to offer its proprietary content-management system, Arc XP, as a SaaS product. It first offered it for free to about ten universities, both to understand how they each wanted to use it and to determine what would be required to support it for each institution. As it learned how to support multitenant architectures and resolve customer issues, it started working with increasingly larger players, including Canada’s Globe and Mail , which committed to working with the Post’s developers to improve the product. 1 Peter High, “How the Washington Post made its publishing platform a revenue driver,” Forbes , April 29, 2019. The Arc XP platform now powers more than 1,900 sites around the world, reaching more than 1.5 billion unique users each month.

Would you like to learn more about our business-building practice, Leap by McKinsey ?

2. capitalize on existing digital and data assets.

One of the biggest assets nontech incumbents have is their own data and digital tools. However, they are not always aware of this and, indeed, sometimes take quite a narrow view of the value potential in digital assets they own. A maker of construction equipment, for example, might see its data as merely an aid to internal reporting instead of as a proprietary asset that can generate significant revenue. An insurance company may send out ad hoc reports or analyses that could instead be enhanced, automated, and turned into a SaaS product.

This too-narrow focus is reflected in the fact that most nontech companies don’t have a clear and comprehensive view of their data. Some of it may be under the control of IT teams, while, in other cases, operations manages it. This is a missed opportunity. Top companies look across all their digital and data assets to identify those that aren’t readily available in the marketplace but meet a specific customer need. This review is a creative business process—not finding something that already exists but imagining something completely new—to identify possibilities and courses of action. In some cases, for example, it requires assessing data gaps and how to fill them by adding data from the outside, or implementing smart devices to generate the data that’s missing. The leadership of a data strategist and product manager is generally necessary to get to this level of sophistication.

Anheuser-Busch InBev (AB InBev) saw an opportunity to create a new SaaS business on the back of its existing millions of data points, from its logistics and distribution networks to its customers’ purchasing habits. It launched a B2B SaaS e-commerce platform called BEES, a partner portal that small and medium-size retailers can access by an app to do a range of tasks, from ordering products to tracking customer preferences locally to monitoring the delivery of their orders. BEES also uses machine learning based on customers’ previous interactions with AB InBev to provide personalized recommendations through “suggested order” features. Launched in 2020, the platform is live in 17 markets, with 2.7 million monthly active users as of Q1 2022.

3. Plan for scale from day one

While the digital nature of a SaaS product allows it to scale much more quickly than other products, that advantage can be captured only when companies put in place two key elements:

• A dynamic and detailed road map. SaaS product road maps differ from the typical road map in that they incorporate much more flexibility and rapid turnarounds. Tracking progress happens daily in many cases, with leaders reviewing what pivots, if any, are necessary and what to test next. This allows teams to course correct quickly and build momentum. SaaS product road maps also have explicit plans for feature innovation based on specific key performance indicators (KPIs), an important element for customers who want to know that the product they’re buying will not just be supported but will continually get better. The road map should also explicitly lay out how to grow beyond the first five or ten customers, which are often existing relationships and might not provide a full representation of the larger marketplace. That means identifying multiple new customer segments, based on feature and functionality needs as well as their willingness to pay. Johnson Controls has taken this approach with OpenBlue, the digital platform that it launched in 2020. The 137-year-old company created a road map that laid out a vision for launching a suite of connected solutions that enable services, including clean air, energy optimization, and advanced safety monitoring. By thoughtfully and deliberately sequencing the solutions it rolls out so that it can build on previously developed capabilities, the company has been able to expand the range of services it offers to customers. 2 “Johnson Controls launches OpenBlue,” Johnson Controls, July 31, 2020.
• Flexible technology architecture. For a SaaS product to be able to continually evolve and grow, companies need to put in place a technology architecture that scales. Human-capital-management software provider Workday focused from the beginning on separating out its platform development from its application development so it could scale. This allowed it to continue to iterate on applications even when it had to make changes at the platform level, enabling the business to grow and scale quickly. This means building around microservices and APIs that create simple and well-defined interfaces to data, algorithms, and processes. This is what enables teams to quickly swap out features. Partnering with the right hyperscaler to take advantage of platform as a service (PaaS), including services such as data and AI, and infrastructure as a service (IaaS) is a critical component of scaling the infrastructure. To take advantage of cloud , nontech companies must develop capabilities in “CloudOps” (cloud operations) to deliver, adjust, optimize, and manage the performance of workloads and services that run in the cloud. Incumbents will also need to master FinOps (financial operations) to track and manage consumption, storage, and network costs, which can vary significantly from on-premises models.

SaaS, open source, and serverless: A winning combination to build and scale new businesses

4. target talent by going deeper and wider.

Finding good SaaS talent is a well-known challenge, especially for critical roles such as product managers, software developers, and data scientists. There is simply not enough supply to keep up with accelerating demand, which is driven by competition from software companies and nontech companies going through digital transformations.

To better compete for talent, nontech incumbents can shift and expand their current talent sources. Getting involved with communities such as GitHub or open-source communities and arranging hackathons, for example, can attract different kinds of tech talent. Some companies have turned successfully to coding competitions to identify prospective job applicants.

Others are combining databases of talent information (such as those from colleges and career portals) and using analytics to help identify trends in skills to better anticipate needs. Still others are identifying relevant current employees for upskilling, while the most progressive firms are partnering with workforce-development companies to identify often overlooked workers who have aptitude and ambition but lack access to traditional pathways.

The other important factor in finding the right talent is to target traits, not just skills. Our research has shown that successful software developers are mission driven and have a passion to build things that end users want rather than just “work on platforms.” Nontech companies have found success by focusing on candidates with a deep interest in the company’s sector—healthcare, aerospace, or energy, for example—and the work the company does. This approach helps avoid direct competition with Silicon Valley businesses.

To make themselves more attractive to the best talent, companies need to update their employee value proposition to emphasize, for example, variable and tailored career paths, use of advanced cloud-based coding practices, and opportunities for people to build their skills and networks.

5. Orient pricing and selling around product usage

The ability to integrate tracking mechanisms at almost every feature level in a SaaS product allows companies to understand the value of a given feature based on how it’s used, which is a big difference from the typical product or service. With these insights, companies can then be much more targeted and flexible about pricing based on customers’ feature needs and usage—essentially, on how much the customer values that feature. That brings possibilities of subscription pricing, cost per use, cost by volume of usage, cost by time of day, cost based on value the customer captures, and so on. By the same token, companies can tailor or create SaaS product features to be responsive to customers, even easily testing and trialing them to see how customers actually respond. Some human-capital software providers, for example, tie their pricing to employee satisfaction or experience.

In this way, companies can be much more responsive to their customers’ actual needs while also opening up new revenue streams. In fact, leading SaaS businesses put as much attention into caring for existing customers as they do into acquiring new ones. For this reason, they also invest heavily in customer-success managers, who provide their customers with support throughout the entire sales process and help ensure a successful customer experience.

To support this more flexible model, companies need to train their sales reps to sell differently. Many sales reps are offered incentives to sell products, but compensation instead needs to be tied to actual software consumption by their customers. New training, product collateral, support, and digital-product demos need to be developed with a clear eye on customer preferences. McKinsey research indicates, for example, that eight in ten B2B decision makers say that omnichannel is as or more effective than traditional methods, which means salespeople need to know when to engage with customers directly and when to offer them digital options.

6. Protect the funding, and focus on leading growth metrics

Every new business needs dedicated funding. Companies tend to expect particularly fast results from SaaS businesses, however, and when they don’t materialize, the temptation is great to pull back funding. Patience and continued support are needed, which is why it is crucial to protect funding and tie it to performance.

Making this work requires companies to step away from some of their established capital-commitment yardsticks, which are usually focused on lagging indicators, such as margin and revenue. In SaaS, in order to avoid stifling the budding business line, it’s crucial to use growth-oriented leading indicators, such as number of interested partners, the volume of interested leads, and the success rates of concept tests. One of the most important metrics to track, in fact, is net retention .

Some companies have turned to external partners for capital and expertise. Besides helping to spread risk, this approach brings in an external voice with additional experience to push the SaaS business forward and guard against loss of focus.

Launching new SaaS businesses needs to become a priority for nontech incumbent companies looking for new sources of growth. Their existing capabilities, expertise, and position in their own markets give them a great head start. To succeed, however, incumbents need to understand and embrace the unique needs of SaaS products.

Chandra Gnanasambandam is a senior partner in McKinsey’s Bay Area office. Ari Libarikian is a senior partner in the New York office, where Cem Turkeli is an associate partner.

The authors wish to thank Todd Horst, Ayush Jain, and Sid Tandon for their contributions to this article.

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SaaS management guide: strategies and best practices

August 22, 2024

Have you ever wondered, “What does SaaS stand for?” ‘Software as a Service’ is a cloud-based software accessed through the internet, rather than installed locally. Instead of buying the software outright, you subscribe to a service for a specific period that hosts and manages the application online.

SaaS has revolutionized how businesses operate through its flexibility, scalability , and accessibility benefits. From small startups to large enterprises, organizations are increasingly relying on SaaS applications to streamline processes, boost productivity, and cut costs.

In this guide, we cover what SaaS management entails, effective strategies to optimize your SaaS stack, and best practices for streamlining SaaS applications. You will gain a clear understanding of how to harness the full potential of your SaaS investments to drive a successful and productive business.

What is SaaS management?

SaaS management is the practice of proactively managing and optimizing all cloud-based software applications within a company’s portfolio. This process involves tracking software usage, costs, licenses, and users to ensure maximum efficiency and ROI.

Gartner forecasts a 20% surge in SaaS spending to $247.2 billion in 2024. Reliance on cloud-based software is growing, making SaaS management critical for businesses to optimize costs, mitigate risks, and boost performance.

Why do businesses need a process for SaaS management?

Businesses use a wide variety of software programs to enhance operations and productivity. This abundance often leads to a complicated, costly technology stack. In fact, the average company uses 323 cloud-based applications, totaling up to $65 million spent on SaaS each year. This proliferation of tools can quickly spiral into an environment of overlapping functionalities, underutilized subscriptions, and escalating expenses.

Effective SaaS management is the key to gaining visibility into your organization's software landscape. Through strategic oversight and governance, you can control costs, enhance security, improve efficiency, and drive innovation.

Key components of SaaS management

SaaS management requires establishing clear processes, policies, and tools to guide the safe and efficient use of a businesses’ applications. From managing software licenses to monitoring user access, there are pivotal components of the practice.

Application inventory and discovery

The first step to effective SaaS management is gaining complete visibility into your organization's software landscape. This requires keeping a comprehensive inventory of all SaaS applications currently in use. Your list should include:

• Application name and description: Provide a clear understanding of each software's purpose.
• Vendor information: List contact details, contract terms, and renewal dates.
• Cost: Itemize subscription fees, additional charges, and overall spending.
• Departmental ownership: Identify who is responsible for each application.
• Number of users: Assess usage levels to identify potential optimization opportunities.
• Integration points: Understand how the application connects with other systems.

License management

License management involves tracking software licenses during its entire lifecycle, from onboarding through end date. It helps optimize software spending by tracking usage, identifying unused licenses, and aligning expenses with actual usage. Key practices include:

• Keep a centralized license repository: Maintain a comprehensive database of all software licenses, including purchase dates, expiration dates, and terms of use.
• Conduct regular audits: Conduct periodic audits to compare the number of owned licenses with the actual number of users.
• Optimize licenses: Identify opportunities to consolidate licenses, downgrade unused features, or negotiate better terms with vendors.
• Leverage automated license management tools: Utilize software solutions to streamline oversight and improve accuracy.

User access and security

Properly managing user permissions is crucial for safeguarding sensitive data within a SaaS environment. Controlling who can access specific information and the actions they can perform significantly reduces the risk of data breaches and compliance violations. This component includes:

• Using role-based access controls: Assign permissions based on job roles and responsibilities, granting the minimum permissions needed for users to perform their duties.
• Completing regular access reviews: Periodically assess user access rights and revoke unnecessary permissions.
• Implementing strong authentication methods: Utilize multi-factor authentication (MFA) to enhance security.

Related Read:  What you need to know about user authentication and advanced security

Cost optimization

Uncontrolled SaaS spending can erode profit margins. Cost optimization techniques are essential to guarantee that every dollar invested in software delivers maximum value. To manage SaaS costs, organizations must:

• Centralize SaaS procurement: Establish a streamlined purchasing process to gain visibility and control over spending.
• Integrate spend management tools: Utilize software solutions to track expenses, identify cost trends, and generate detailed reports.
• Carry out regular audits: Review SaaS subscriptions at specified times to identify opportunities for cost reduction or elimination.
• Negotiate contracts: Leverage purchasing power to negotiate better deals with vendors, including discounts and extended contract terms.

5 steps to build an effective SaaS management strategy

Now that we've explored the key components of SaaS management, here is a step-by-step approach to building a comprehensive strategy. Use the following to help effectively optimize your SaaS investments and drive operational success.

1. Assess current SaaS usage

The foundation of a successful SaaS management strategy is a clear understanding of your current tech stack. This involves conducting an initial audit of all SaaS applications in use.

To build a complete picture, consider the following components:

• Application inventory: Create a detailed list of all SaaS applications used within your organization, including names, vendors, departments, and the number of users.
• Spend analysis: Calculate the total cost of ownership for each application, including subscription fees, implementation costs, and ongoing maintenance.
• Usage analysis: Assess software utilization rates to identify underused or redundant applications.
• Contract review: Examine contract terms, renewal dates, and potential negotiation opportunities.
• Security assessment: Evaluate the security posture of each application, identifying potential risks and vulnerabilities.

By gathering this information, you can establish a baseline for measuring the effectiveness of your SaaS management efforts and identify areas for improvement.

2. Set goals and objectives

With a clear roadmap of your current SaaS landscape, the next step is to define your SaaS management goals and objectives. These should align with your overall business strategy and priorities.

Consider setting goals in the following areas:

• Cost reduction: Specify target savings percentages or dollar amounts.
• Efficiency: Outline desired productivity gains or process optimization metrics.
• Risk mitigation: Define security and compliance objectives.
• Data-driven decision making: Establish goals to improve your approach to sourcing insights from data.

3. Implement SaaS management tools

SaaS management platforms are designed to streamline various aspects of SaaS optimization, from discovery and inventory to cost management and security. Successfully managing a complex SaaS environment often requires the support of specialized tools and technology.

When selecting a platform, consider the following factors:

• Functionality: Ensure the tool aligns with your specific needs.
• Integration capabilities: Verify compatibility with your existing systems.
• Scalability: Choose a platform that can accommodate your organization's growth.
• Cost: Evaluate pricing models and total cost of ownership.
• User experience: Consider the platform's ease of use and adoption.

With the right tools, you can save time, improve accuracy, and enhance decision making.

4. Establish policies and procedures

To build a consistent SaaS management process, it's essential to create guidelines governing how SaaS applications are used and managed.

A usage policy should:

• Define guidelines for acceptable use of SaaS applications.
• Outline data security and privacy requirements.
• Establish guidelines for sharing and collaboration.
• Specify procedures for reporting security incidents or unauthorized access.

Additionally, SaaS procedures for procurement and management must:

• Create a formal approval process for acquiring new SaaS applications.
• Determine criteria for evaluating SaaS vendors and solutions.
• Identify contract negotiation and management responsibilities.
• Catalog procedures for cost allocation and budgeting.

Well-defined policies and procedures help you reduce risks, improve efficiency, and verify compliance with relevant regulations.

5. Ongoing monitoring and improvement

SaaS management is an ongoing operation that requires continuous attention and adaptation. To ensure the long-term success of your strategy, it's essential to:

• Monitor usage and spending: Keep track of software utilization and costs to identify trends and potential areas for optimization.
• Review and update policies: Stay ahead of emerging threats and industry best practices by regularly reviewing and updating your SaaS policies and procedures.
• Evaluate tool performance: Assess the efficacy of your SaaS management tools and make necessary adjustments.
• Foster a culture of optimization: Encourage employees to be mindful of SaaS usage and suggest ways to save costs or enhance efficiency.

SaaS management best practices

Once you’ve built your SaaS management strategy, use the following best practices to maximize the value of your investments.

Centralize SaaS management

Consolidate subscription management under one team (e.g., the IT department ) to standardize processes, reduce costs, and enhance data protection. This approach empowers teams to control user access, optimize usage, and negotiate better deals with vendors.

Regularly review and rationalize SaaS apps

The dedicated team must continually monitor application usage to optimize licensing, identify underperforming software, and assess employee satisfaction. Analyzing and understanding this data lets you make informed decisions about software investments and training needs.

Encourage cross-department collaboration

Make sure representatives from various departments are involved in the SaaS decision-making process. Diverse perspectives help identify opportunities for optimization. This collaborative approach fosters a shared sense of ownership and accountability, leading to stronger decision making and improved outcomes.

Educate and train employees

Investing in employee training is fundamental to SaaS management. When employees have the knowledge and skills to use SaaS applications efficiently and securely, its value is maximized and risks are minimized. Comprehensive training programs enhance user adoption, reduce support costs, and foster a culture of innovation.

Improve how your business manages its SaaS

SaaS applications are essential for businesses to thrive. However, the rapid increase in software used can quickly lead to rising costs, security risks, and operational inefficiencies. Effective SaaS management is crucial for mitigating these challenges.

Be sure to regularly review your software portfolio, focusing on cost optimization and security. SaaS management is an ongoing journey — one that should be continuously evaluated and refined. Revisit this framework and guide to help you unlock the full potential of your software investments and achieve your business goals.

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Crushing SaaS sales in 2024 — how to craft your team’s winning strategy

Anthony Esposito Senior Account Manager at PandaDoc

Reviewed by:

Keith Rabkin Chief Revenue Officer for PandaDoc

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Businesses worldwide seek to overcome the limitations of on-premise software and plan to transfer over 60% of their workflows to the cloud by 2025.

Given this, the market for SaaS products is expected to skyrocket alongside cloud adoption.

Where does your SaaS business fit?

Are you looking to enhance enterprise SaaS sales, scale up a medium-sized business, or boost your startup growth?

Remember, the SaaS niche is highly competitive (as a SaaS company with tens of thousands of clients, PandaDoc knows this firsthand), and you need an advantage to take the lead in it. 

Below, we break down how to supercharge your SaaS sales strategy, which model will work best for you, and what tools can help make sales processes more efficient.

Key takeaways

• Startups with a SaaS model attracted 47.6% of all venture capital investments in 2023, evidence of market demand for SaaS solutions.
• There are three common SaaS models — self-service, transactional, and enterprise — that you can leverage based on your business size and goals.
• The SaaS sales cycle can be a quick sprint or a marathon — it all depends on your product type and level of customer engagement.
• Using sales automation software , your sales team can streamline processes and track such crucial metrics as conversion rates, customer acquisition costs, and lifetime value.

What does SaaS sales stand for?

SaaS sales is the art of selling software-as-a-service (SaaS), focused on methods to obtain new customers while retaining/upselling existing ones. 

This new standard delivery model for business intelligence software utilizes cloud-hosted SaaS platforms like Google Workspace , Adobe Creative Cloud, and PandaDoc , allowing users to access and benefit from regularly updated software from any location. 

What makes selling SaaS products different from other types of sales?

Selling SaaS pivots from traditional sales models, and here’s why:

• When your team sells a SaaS product to a customer, they de facto sell a subscription to a product, unlike one-time payments for on-premise software typical in traditional product sales.
• SaaS sales reps prioritize long-term customer relationships and retention, measured by customer churn, while sales teams in other industries often concentrate on acquiring new customers for one-time sales and less on post-sale engagement.
• SaaS sales reps typically offer customers upgrades of subscriptions (upselling) and additional products (cross-selling), while in traditional sales , salespeople have limited opportunities to extend an initial offer after purchase.

Understand the SaaS sales process and lifecycle

Selling SaaS products, your sales team blends strategic actions with tools to enhance engagement and retention. 

The SaaS sales process

The steps to convert leads into paying customers include the following:

• Identify and qualify leads using various channels
• Start initial contact with a potential customer
• Showcase your product, focusing on a subscription-based model
• Understand prospects’ pain points and explain how your product can help solve them
• Offer a trial period and provide case studies to demonstrate your product’s value 
• Provide clear explanations and tips to address any user concerns 
• Negotiate contract terms and close the deal
• Focus on providing excellent customer support and consider cross-selling and upselling options 

Salespeople must fully convey the product’s value, such as its enhanced security, competitive pricing, and integration capabilities .

Reps also use hyper-personalized sales documents like proposals and case studies that adapt to different features, price ranges, and order volumes to provide consistent and accurate information to prospects.

The SaaS sales cycle

Likewise, the length of a SaaS sales cycle will fluctuate. A typical lifecycle will encompass the following:

If you’re in sales, you already know: salespeople handle massive volumes of documents during the entire selling process.

With the help of workflow automation software , your team can streamline their document handling processes, including the automatic drafting, sending, and signing of sales documents.

They can use just one platform that integrates smoothly with top CRM systems, such as Salesforce and HubSpot , to sync sales documents directly with customer data and sales pipelines.

This integration allows salespeople to keep every piece of client communication customized and efficiently tracked.

To ensure that contracts are processed quickly and securely, your team can use real-time collaboration tools and e-signature features.

The combination of tools and features saves time and adds strategic value, improving the number of deals closed.

Choose the right SaaS model for your product

Let’s see how the following three SaaS sales models fit various customer needs.

Self-service model

SaaS platforms like Dropbox or Canva offer easy sign-up and free trials, allowing the product to demonstrate its value directly to a wide range of users, from startups to enterprises, without salesperson involvement.

This model allows the product to speak for itself, demonstrating to users its value.

Transactional sales model

Imagine a SaaS service like a mid-market CRM system.

In this model, a salesperson might reach out to potential clients using video calls or emails to present the product’s benefits and hit the prospect’s inbox with personalized pitches

This model requires a SaaS sales team trained to effectively communicate their product knowledge to prospects and be able to offer the best customization options.

For example, in a CRM system designed for real estate agencies, a salesperson can use advanced analytics to identify hot leads based on data such as the frequency of website visits or interactions with property listings.

Using this information, salespeople can customize video calls to highlight properties that meet the specific interests of prospects. 

Enterprise SaaS sales model

When enterprise-level clients adopt new, custom solutions, this often transforms business processes across their entire ecosystem. 

Picture an international corporation rolling out a new global CRM system to enhance customer interactions across all touchpoints.

Their sales crew can use the CRM’s segmentation tools and tailor their communications to the unique needs and behaviors of different customer segments. 

This strategic personalization helps boost customer satisfaction and loyalty.

Enterprise sales demand a top-tier, synchronized effort of your sales, marketing, and product experts to build long-term relations with customers and foster customer loyalty.

How to run a predictable SaaS sales organization

Running a predictable SaaS organization is just like running a real marathon — it takes dedication during ups and downs in sales volumes.

Here are three techniques to ensure the sturdy growth of your SaaS sales team.  

Solve customer’s pain points

Sales reps should by all means emphasize the value of a product to clients and become well-versed in their prospect’s or client’s needs and ways to resolve them — and keep in mind that nearly half of potential clients will prioritize price when choosing a SaaS product.

Commitment, persistence, and knowledge are key and will help win more deals and turn first-time clients into loyal ones.

Build predictable sales pipelines

Constructing a reliable sales pipeline hinges on three aspects: referrals, marketing campaigns, and targeted prospects.

To master all three, sales reps should flexibly adapt to ongoing clients’ needs, use analytical data to optimize their approaches, and ensure quality content marketing efforts .

Empower your team

Another driver behind an organization’s success is when a team feels like they are decision-makers themselves.

Motivate your employees with support from the ground up, encourage their efforts to include new tools that improve the SaaS sales process, and always promote a positive, productive, and inclusive company culture.

What tech can help with SaaS sales?

Technology is here to assist you and your team! Here are some specific examples of tools and tips you can start implementing today .

Integrate your CRM

When you sync up your CRM , you’re giving your sales team superpowers: they can smoothly access centralized customer data, track interactions with documents — and quickly boost sales efficiency . 

You can join 22,000 clients who have already integrated PandaDoc solutions with CRM platforms like Salesforce and HubSpot to take their sales to the next level.

Adopt e-signature

Using e-signature is crucial to speed up the agreement process.

It helps your sales teams securely send documents for signing electronically , reducing the time to close deals.

Incorporate version history and document tracking

SaaS proposals and contracts undergo numerous revisions, and keeping track of versions is essential.

That’s where document tracking software comes in to provide an audit trail. 

Using the version history feature, both sales teams and customers can stay on the same page — to date, nearly 19,000 PandaDoc accounts keep all their sales documents current, minimize miscommunication, and ease negotiations and approvals.

SaaS sales key metrics to track

Let’s take a look at the core contract performance metrics that will help you measure the return on investment (ROI) of the SaaS sales model you choose.

Elevate your SaaS sales game with PandaDoc

Having a great product is not enough in the SaaS niche — fine-tune your SaaS sales strategies for peak efficiency. 

PandaDoc offers a suite of sales tools meant to supercharge your team’s performance.

With our document repository , you can pull together all your sales documents into a centralized hub to have sales collateral, proposals, and contracts at your fingertips.

Due to the platform’s multiple integrations , you can seamlessly connect your existing solutions with over a dozen popular SaaS products to enjoy automated data entry and ensure a smooth, secure workflow . 

Using professional business templates , your salespeople can create compelling proposals and customize them as per the specifics of each deal. 

Let your team sell more while spending less time on document management tasks.

Connect with us today and schedule a demo to see how our solutions can empower your sales team.  

PandaDoc is not a law firm, or a substitute for an attorney or law firm. This page is not intended to and does not provide legal advice. Should you have legal questions on the validity of e-signatures or digital signatures and the enforceability thereof, please consult with an attorney or law firm. Use of PandaDoc services are governed by our Terms of Use and Privacy Policy.

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Rubicon required to initiate sale process after it sold fleet technology business

Following the transaction, Rubicon entered an agreement with lenders in May to pursue a take-private plan for the whole company within 10 months.

Dive Brief:

• Digital waste brokerage firm Rubicon entered an agreement with lenders in May to pursue a sale of the business, according to its most recent quarterly earnings filing .
• The company was given 300 days to complete a sale of all or most of its assets and repay its debts. The agreement was made in conjunction with Rubicon’s sale of its software-as-a-service business to a company backed by two of its major investors.
• Rubicon has used the proceeds from the latter deal, which it announced on May 7 , to pay down some of its debt. A spokesperson for Rubicon did not respond to a request for comment on the take-private offer.

Dive Insight:

Rubicon took the deal for its software-as-a-service business to stabilize the publicly traded company's financials . Its stock was delisted from the New York Stock Exchange in June, and its C-suite has seen an overhaul this year.

In February, Chief Operating Officer Renaud de Viel Castel left the company amid a larger round of layoffs . Rubicon’s president and CFO, Kevin Schubert, resigned effective June 1 . CEO Phil Rodoni resigned the same month. 

The company is now led by interim CEO Osman Ahmed , who was previously the CEO of the special purpose acquisition company that merged with Rubicon to take the company public in 2022. Ahmed served as the lead independent director on the company’s board following that transaction. 

Ahmed began serving as interim CEO on June 27 with a base salary of $500,000. He is eligible for a transaction bonus also worth $500,000 if the company is sold, recapitalized or otherwise involved in a transaction for all of its assets within a year of his stepping into the role. 

The deal for Rubicon’s software business netted the company $61.7 million in up-front cash. It also included a transaction in which investor Jose Miguel Enrich acquired $20 million worth of stock in the company, growing his stake to 59.5% of the company. The deal also offered additional payouts based on the performance of the software business through the remainder of the year, and an additional $2.5 million payout if Rubicon agrees to sell to an entity controlled jointly by Enrich and Andres Chico, another major investor.

Rubicon has used the combined proceeds from that transaction, which totaled about $81.7 million, to pay down its debts. That included $57 million to pay down the balances of a June 2023 term loan set to expire next year and a June 2023 revolving credit facility. The latter provided Rubicon with access to $90 million in capital, but it had only about $200,000 left available by the second quarter. 

When Rubicon finalized the sale of its software business, it also struck a deal with its lenders to sell “all or substantially all” of the company assets within 300 days of May 7. That agreement includes two milestones: Rubicon must enter into a letter of intent for a sale within four months and it must consummate the sale and repay all debts in full within 10 months.

Enrich had previously offered to buy out Rubicon in a take-private deal in March. At the time, the company had reported progress on its profitability plan but was still negotiating to keep its position on the New York Stock Exchange. The company’s sale of its software business happened about two months after that offer was made public. 

The sale of Rubicon’s software business helped boost the company’s financials in the second quarter, according to an earnings release . Rubicon reported its revenue was down 5.1% to $163.1 million, and its gross profit was down 54.6% to $4.5 million. But the company’s net income — $27.3 million — was up 219% compared to the second quarter of last year.

“We’re thrilled with our Q2 performance, where our team’s relentless focus on customer success and strategic account management has paid off,” Ahmed said in a release. "By signing new customers and unlocking upsell opportunities within our existing base, we have demonstrated that when our partners win, we win. We look forward to building on this momentum and achieving even greater success going forward."

The company reported uncertainty about its ability to meet its financial needs for the next 12 months — as of June 30, it had $8.2 million in cash on hand. Rubicon reported focusing on operational efficiencies and cost reductions in the quarter. It also signed some new clients, including The Army & Airforce Exchange Service, Fortune Brands, TK Elevators and the Veterinary Emergency Group, and it renewed its contract with “a leading big-box retailer” across more than 1,800 sites through 2027, according to its press release.  

The company did not schedule an earnings call for the second quarter.

Recommended Reading

• Rubicon exits software, city business in deal with major shareholders By Jacob Wallace • May 7, 2024

• Major Rubicon shareholder looks to take the company private By Jacob Wallace • March 15, 2024

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Environmental services segment still has plenty of M&A runway

Republic Services, Clean Harbors, Crystal Clean, Reworld and other companies have been very active with M&A in recent years. Here’s why analysts and executives expect that to continue.

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