SaaS has been becoming a very popular software delivery model thanks to its convenience. Most SaaS products are web and mobile applications that do not require installation and users pay a monthly/yearly fee for using the product. Those factors make Software as a Service a great solution for both the provider company and users. In this guide, we will show you how to build a SaaS product.
What is a SaaS product
Software as a service is a new sales model that has been replacing traditional software licenses for quite some time now. A SaaS product is online software that all users have access to. To give you an example, the most popular SaaS companies are DropBox or Google Apps.
To use SaaS platforms users do not need to install anything on their devices since the application is hosted by the server provided. Any updates and further maintenance is performed by the host side and is invisible to the user. The product is not sold with a lifetime license but is distributed via a subscription model.
Advantages of SaaS
The biggest and most obvious advantage of SaaS solutions is that there is no need to have any special equipment. Apart from that, cloud-based web applications give you:
- security - your data is stored in a safe place
- scalability - upgrades or downgrades can easily be done when necessary
- reliability - servers can be located around the world, which means if one of them goes down, the rest continues to work
- regular revenue for developers
- lower costs - SaaS provides lower development costs since there is no need to buy and maintain expensive hardware
- potentially larger customers base due to lower costs and trial periods
- accessibility - the solution is available at all times and is only limited to an internet connection
Types of SaaS applications
There are many available options for cloud-based applications. Some of the most popular ones are as follows:
- eCommerce software helping to run a business online including product management and payment integrations like BigCommerce or Shopify
- vertical SaaS - products specific to a particular niche optimizing business processes
- collaboration software helping in communication and information sharing eg. Miro
- CRM (customer relationship management software) aiming to automate sales and marketing processes eg. HubSpot
- ERP (enterprise resource planning software) managing business processes like Oracle
- project management software aiding PMs in collaborating with their teams eg. Jira or Workflow
- billing software, which covers all payment procedures with a single click like Tipalti
SaaS product development process
How to build a SaaS application from scratch
1. Market analysis - validate your idea
The longterm success of your product depends on good market research, which gives you an insight into your competitors and the demands of your potential clients. This research will give you validation and help you avoid repeating the mistakes of those who failed. You need to make sure your target customers are willing to pay for your product and that your offer meets their needs. Make sure your business model gives them clear and recurring benefits and is attractive to a large audience.
2. Discuss the SaaS requirements
SaaS products have some things in common, so a clear plan of customization, integration options and security is essential. In a SaaS model, it is crucial to ensure maximum security as it is the foundation of a good solution. Consumers’ requirements are constantly evolving so you should be able to adjust to them. Your software should also be built in such a way to handle the increasing amount of users without slowing down.
3. Define the MVP
Having a minimum viable product means to figure out what are the basic core features that will bring value to your customers with minimal costs from your side. An MVP is what the early testers will try out and what will be developed into the final product.
An easy way to define the minimum viable product is to answer questions like what is your user persona, what are the actions the users have in order to solve their problems and what solutions you can propose.
4. Choose your pricing model
There are different pricing models for SaaS solutions that can greatly influence your product’s popularity. The pricing model should be adjusted to your target users’ needs.
You can choose from:
- usage-based pricing - when users pay based on the amount of usage
- pricing per feature - when you offer different sets of features
- freemium - free version with limited features with the ability to upgrade
- pricing per active user - when you charge per user for the entire product
- flat rate - when you offer the entire product or bundle of features under one price, paid on a monthly or yearly basis
It is common for SaaS products to be offered with an initial low price, free trial or promotional prices.
5. Technical aspects
This is the point where you need to determine how your software will be built. You should talk to professionals who will help you define which programming language, tools and platforms are required to create your SaaS product. It is important to have in mind both the long term product and the MVP.
6. Find and create a development team
Now it is time to find or create a development team. Here you can choose to either create a team out of people in your company (providing you have them) or outsource the development fully or partially. Outsourcing to a fully-fledged team will give you lots of advantages and will allow you to focus on business processes like marketing. You can read more on outsourcing in the blog post 4 Reasons Why You Should Consider Outsourcing SaaS Development.
7. Know your budget
After all the steps, by this point, you should have an idea of how much the SaaS development will cost you. Take into account the time needed to create your product and the time needed to start selling. Plan your budget carefully, remembering possible changes and delays. It is better to think about the worst-case scenario and be surprised than the other way round.
How to convert an existing app to a SaaS model
To convert your app to a SaaS business you have to go through 4 major steps:
Evaluate your application potential compared to existing solutions on the market. Go through its features and integrations. Think about whether you want to introduce a new features model or some of it you can get rid of. Think about the conversion process like giving a second life to your product as cloud SaaS.
2. Build a team
Converting to a SaaS platform means that the way you and your team maintain and support the product will change. Train your team in advance, so they are prepared for those changes. You can also look for some external support and outsource SaaS development.
3. Choose a cloud provider
If your product will be available online you need to host it in a cloud environment. Pick a few providers and compare them paying special attention to team experience, number of users and customer service.
The migration itself might take some time, so be patient. This will depend on the complexity of your product, your team’s expertise and necessary integrations. Hiring SaaS experts will definitely shorten the development time.
Also, remember that in some cases moving project to a new technology or rewriting backend/frontend may be necessary, so take it into consideration in estimations.
An example of a conversion from on-premise software to a SaaS business model can be Adobe. Back in the day, you were able to buy a physical copy of Photoshop, whereas now it is connected to a monthly subscription plan that can also gain access to other Adobe products. The fee is much smaller than the cost of a physical copy of the program and allows you to update it. What is more, you can get a free trial period to test out Photoshop with no bounding contracts.
What are the key SaaS metrics you should be tracking?
When you are a business owner you obviously will want to know how it performs. There are many metrics that can inform you about the state of your product. Although using tools like Google Analytics or Hotjar is helpful they are not always sufficient.
Most SaaS businesses focus on KPIs - Key Performance Indicators like:
- monthly or annual revenue
- CAC (cost of acquiring a customer)
- LTV (customer lifetime value) which shows a revenue generated by a customer over the lifetime of their subscription
- NPS (net promoter score) the value customer gain from your product
- customer churn - the percentage of customers unsubscribing on monthly basis
When analysing your metrics remember to divide them into low-touch SaaS and high-touch SaaS. In low-touch products, the software allows subscription via website, e-mails etc with minimum interaction from the sales team. In high-touch products, the sales team is heavily involved in processes like customer acquisition, onboarding and maintenance.
Although building a cloud-based application is not for every business case the model itself is gaining popularity because of its benefits. Many big enterprises switch to this distribution model like Adobe Photoshop or Microsoft Word. It is also worth acknowledging that some of the widely popular applications like Spotify, Slack or Grammarly were built as a SaaS application from the beginning.
No matter if you are considering converting to SaaS or developing a new SaaS product and would to outsource the development, the Selleo team can help you. Our fully-fledged team of engineers will take over the process giving you time and freedom to focus on other business processes.