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8 min read

Category: Business

27 May 2021

27 May 2021

8 min read / Category: Business

How to build a SaaS product? A beginner’s guide

Angry Nerds

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From this article, you'll learn what a SaaS product is, what advantages it has over on-premises software and how to build a successful SaaS business.

By the year 2023, the Software as a Service (SaaS) sector is expected to reach $623 billion at a compound annual growth rate of 18%. This currently represents the largest market segment of the global public cloud services industry.

Trends show that SaaS will soon replace traditional software license buying. It's the future and a tribute to users who require comfortable, secure, and fast solutions.

Are you ready to capitalize on this opportunity? You've come to the right place to learn how to build your own SaaS product. We're going to show you all the do's and don'ts to reassure you about making the right moves.

What is a SaaS product?

SaaS is a cloud-based software delivery model that enables providers to develop and maintain software for customers via the Internet on a subscription basis.

Basically, the software is available from any device that has a web browser and an Internet connection. The data and applications are stored on remote servers, so SaaS users don't have to worry about updates, compliance, or security issues.

SaaS software vs. on-premises software

What are the differences between SaaS and on-premises software? Two main factors separate them from one another:

Pricing model: SaaS users subscribe to a piece of software and pay, e.g., monthly or annual fees. After that they have immediate access to the program. With traditional software, users pay a one-time fee and then have to install the software on their own devices.

Accessibility: Users can access SaaS solutions wherever they are located. The software is hosted in the cloud, so subscribers have access to all their saved data, no matter what device they’re using at any given moment. With traditional software, users are limited to using the product on a single device.

how to build a saas product

Advantages of SaaS

As they are cloud-based, SaaS applications provide many advantages over on-premises software solutions. SaaS users and developers most often benefit from:

Easy access - software is available at any time and limited only to having an Internet connection. Instant access to all available data, which is automatically recorded across multiple devices.

Lower costs - SaaS solutions are associated with savings in purchase costs and maintaining expensive hardware. There is no lengthy and costly app implementation process.

Security - SaaS services are provided by IT systems that make secure copies of customers' data.

Reliability - servers can be located anywhere globally, so even if one of them goes down the rest will continue working.

Scalability - systems are easy to upgrade or downgrade as and when needed.

Integration - SaaS products can be integrated with various other tools, creating a whole software ecosystem.

Build a new SaaS product: a step-by-step guide

How to build a SaaS product from the ground up? Here is a set of steps that you should follow to ensure that you don’t overlook any critical points of developing a SaaS solution.

1. Hit on an idea

If you already have an idea for a SaaS product then skip this step and go on to the next point. If you do not, we have the solution for you. Consider putting creativity aside and taking a more task-oriented approach. What options do you have?

Turn traditional software into SaaS. It can sometimes be pointless to try to find something new. Make use of existing ideas - find software that operates under an on-premises model, simplify it, and turn it into SaaS. However, this can be tricky. Traditional software solutions are usually the products of giants, so you need to have an unbeatable price or exclusive features else your product may struggle to stand out.

Turn a service into SaaS. Another option is to find a service that can be successfully transformed into a SaaS product. The task is challenging, yet if there is demand for service then you can assume that there will also be buyers for your product.

Meet your own needs. It's a perfect recipe for success. You cannot find the solution you are looking for, so you decide to solve a problem by developing your own product. Being your own client is a huge advantage because you know what you need and you appreciate both sides of the arrangement.

Find a niche. Easy to say, hard to do. As an example, you could conduct interviews through which you discover the needs and problems of people. Then, you fix them with software. Remember that it’s a niche, so there's a good chance that someday you'll hit a glass ceiling and struggle to grow further.

saas advantages

2. Identify your competitors and do market research

Before diving into creating a new product, you need to remember one crucial element - market research. Will your product be better than what is already available? You should know your competitors well and notice all the factors and features that you will change or improve. It'll help you a lot to listen to their customers as well. Read what they have to say, what they like, and what they don't about your competitors. Keep trying to avoid making the same mistakes.

Find out whether the market has room for your product. Who are your potential customers? What's its USP? It would help if you had a clear idea about what your product will look like along with a target market description. Insightful market analysis provides a solid basis for answering whether or not the venture makes sense at all.

3. Specify your SaaS requirements

It's time to analyze aspects such as features and integrations. A previous market analysis will allow you to understand your customers' needs and the most important things for them. Make a plan of customizations and maximize the security of your future customers, as this is the foundation of a good SaaS solution.

Keep in mind that the needs of your consumers will constantly change, and you need to be able to adjust to them quickly. This will give you an edge over your competitors and help you to grow. What requirements should your SaaS product cover?

• Easy to customize and personalize
• Fast data transmission
• Comprehensive cloud-based security
• Built-in analytics capabilities

4. Define the MVP

A minimum viable product (MVP) is a low-cost version of a product that helps SaaS developers obtain feedback and validate their ideas, ensuring they develop in the right direction. You need to determine the core features that will provide value to your customers at minimal costs incurred.

What does it mean in reality? You build, launch, and scale up a new product until you find the most accurate version. Sometimes the first product will turn out to be the right one. An example of an MVP that turned out to be a success is Dropbox.

dropbox

5. Select a tech stack and SaaS developers

Selecting a technology stack is like picking the materials from which your SaaS product will be made. They need to be of high quality and match well with the product. Frontend, backend, cloud provider, database - success relies on all of these elements. Ultimately, your choice will impact the product’s future work and possibilities, as well as the costs and efforts you’ll incur. Prepare your product for growth so that the software does not become overloaded.

The next step is to find a team of developers. They will work on developing the product and staying on top of what’s happening in the technology world so that they can adjust your product to these changes. SaaS businesses commonly outsource software development (Slack does), and it brings a lot of benefits such as helping to reduce costs and cut development times.

6. Choose a pricing strategy

Your platform's price strategy may be a matter of "to be or not to be." The SaaS industry has no hard and fast rule as to which pricing strategies work best, though some have proven more successful over time.

Pay as you go model - if customers use the service more, they pay more; if they use it less, their bills reduce.

Per feature/user pricing - this strategy uses features or number of users as a value metric.

Freemium - offers a free-to-use product, supplemented by additional paid packages.

There's one more thing to remember when it comes to SaaS pricing. Remember that people want to test out the product for free first. 44% of SaaS companies offer a free trial or demo. This is an excellent way to get potential customers to try your product out and become your loyal customers.

7. Develop, launch, and scale

We have now reached the final stage of developing a SaaS product. Though these three words already appeared here before, they should be repeated once again at the end. Technology is an ever-changing environment, so you must improve your product and make sure that it is always a step ahead of your competitors.

SaaS challenges

So now you need to be ready for the less enjoyable part of building a SaaS product - the risks. What challenges might you face after launching your SaaS product? There are some that SaaS solutions encounter most frequently.

Churn rate: The percentage of customers who leave you within a given period of time. The churn rate varies consistently by SaaS business size and maturity, and it is hard to calculate. To reduce the churn rate, you can up-sell to customers by offering a higher plan or more options, etc.

Client onboarding: Do you show customers your product and teach them how to use it well? You can tell this by the conversion from a free to paid version. If it's low, then your free version may be adequate, or you have a solution that customers do not understand.

Lifecycle: To avoid becoming outdated, you have to prepare a long-term plan. The challenge in this industry is longevity. Some years ago, we didn't have all the SaaS solutions that we use now. Don't get left behind when the new wave of SaaS arrives.

Top SaaS examples

You probably use SaaS solutions daily, even if you have never thought of them as SaaS. Take a look at some of the most innovative and popular SaaS applications.

1. Google Drive

google drive

2. Canva

canva

3. Spotify

spotify

4. Netflix

netflix

5. Adobe Creative Cloud

adobe creative cloud

SaaS is the future

SaaS solutions have become the future of software development. Most people prefer straightforward and flexible solutions they can use anywhere, like SaaS products. You are ready to enter this market and create the next solution that will solve people's problems. Good luck!

You may be also interested in:

Monetization Strategies for SaaS
How to build an MVP. A Guide to Minimum Viable Product
6 common risks in software development projects – and how to avoid them

Angry Nerds

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