SaaS entrepreneurs that are founding a startup for the first time may feel overwhelmed by the number of articles, blog posts, podcasts, videos, and other materials available on this topic. However, their content can be boiled down to several statements.
Three Primary Business Startup Tips for SaaS Entrepreneurs
- Concentrate on providing a useful product.
Only the best solution for the customers’ pain points will make you stand out from the competition. The best opportunities lie in the B2B space, i.e. catering to business owners and groups of employees.
Our first advice for startups is to do market and customer research incessantly. Instead of guessing, reach out to your ‘ideal customers’ through face-to-face conversations, video calls, surveys, emails, etc.
Validate your concept before you build it. For example, show your prototype to 10-30 ideal customers, get their feedback, and ask what price range they would pay. Get ready for repeating validation processes consistently.
Limit your minimum viable product (MVP) to one core task or use case that customers will pay for. It may be incomplete, buggy, or hard to use, but it’s vital to get a living product as quickly as possible to collect user feedback and prove it has traction in the marketplace.
Spend time with every customer to learn about their problems and your product’s weak points. Improve your software to help your customers, and they will help you. However, don’t let your free users’ feedback lead you. Build new features only when dozens of paying customers, beta users, and prospects explicitly demand them.
If you want high-profile customers, be prepared to offer big sets of useful features, impeccable service, accountability, maximum security, etc.
Throughout a product’s life cycle, keep your customers informed of the improvements, analyze their feedback, and do whatever you can to keep them engaged and satisfied. When many customers churn, a SaaS business fails.
- Be flexible but ambitious about your revenue model and pricing.
Early-stage startups are often hesitant about charging customers. By split-testing various pricing levels, you can understand people’s perception of your product and their readiness to pay for it.
Customer research, surveys, and feedback during sales calls can help you determine the models and prices to settle on.
Avoid freemium unless virtually all businesses can use your product. Other SaaS pricing models include flat rate, tiered pricing, per active user, per feature pricing, etc. Businesses appreciate the ability to forecast costs and plan their budgets. For example, per-usage pricing makes it difficult, whereas in per-user models, the subscribed users enjoy an unlimited activity, and the company can predict costs easily. Besides Enterprise pricing, big clients may also be looking for custom pricing options.
Offering monthly or quarterly pricing can be beneficial. Still, your goal is to lock in customers for a longer period at the annual tier, driving in more cash and reducing early churn.
Your price is optimal when the biggest percentage of customers say your product is expensive, but they are ready to pay for its value. Learn their reasons: they might find your service valuable in ways you didn’t envision.
Once the SaaS product feels like a premium one, you can set prices according to the maximum that most of your target audience can pay. Don’t be afraid to experiment with plans up-front. It’s safe to raise prices until 15-20% of your qualified prospects resist this.
Ask focus groups to review and evaluate your pricing pages: often, leads churn just because they can’t decipher all options and layers available. Set up a chatbot to provide help.
- Track the right SaaS business metrics and act on the insights.
The already mentioned customer satisfaction, feedback, or churn are just some of the key performance indicators that SaaS entrepreneurs need to understand, monitor, and analyze.
Successful startups are data-driven and track everything. In the beginning, it will be enough to concentrate on 5-10 key SaaS business metrics. For example, you should be really concerned with churn and active product usage. If customers are not using your software much, they will cancel their subscriptions soon. If your expenses on acquiring them far exceed the revenue they generated, your business is in danger.
SaaS business startup tips always start with building a software product that best solves businesses’ everyday problems. Launch it quickly and improve relentlessly.
A SaaS product is validated only when it generates revenue. Start charging early and price on customer behavior and what they value. Experiment with your pricing: it should evolve as your company grows.
What is the SaaS metrics function? These numbers and statistics will show you how good your software is for your customers and how smartly you price it.