Starting a Successful SaaS Businesses

Building a Profitable SaaS

One of the first things we tell people wanting to build a SaaS is that you’re not building software, you’re building a business. Some of the first questions you have to ask yourself are:

  • Can you make any money on this thing? How much?
  • Will anyone buy my great new idea?
  • How much is this thing going to cost me to build? Is it even possible?
  • How do I get the word out about my fancy new product?
  • What about all those pesky business questions like:
    • How many people do we need to make a purchase in order to be cash flow positive?
    • Who is going to answer the phone?
    • Do we need insurance? If so, how much will it cost?
    • What is our monthly operating cost?
    • How do we grow the system?
    • What happens when something goes wrong? How much will that cost?
    • How do we get the word out about this system to the right people?
    • How do we manage new versions?
    • How do we know what our customers are asking for?

And of course, the biggest questions of them all:

Are people going to pay for your SaaS, and if so, how much?

These questions all seem like simple, straight-forward questions that anyone should ask before starting any business. But so often people jump into building software systems without clearly thinking through all of this.

So, let’s take a look through some of these questions and the lessons to be learned from them, starting with the big ones first.

Lesson 1: If you can’t presell your SaaS in one way or another, you’re probably selling the wrong thing to the wrong people in the wrong way.

There are volumes written on this question out there. But the easiest way to make a determination on this is to ask people you know to buy what you’re selling. Even before you’ve built it, just ask them to put some money down to make a purchase at a lower cost. If you’re selling water in the desert to thirsty people, they’re going to say yes, no matter the cost. So if you’re selling the right solution to the right people, they’re going to jump at your offer. If people aren’t jumping at your offer, maybe you’re not selling the right thing.

But it’s a great idea!

I know, I know… it’s a great idea. Everyone will love it. It’s going to change the world. So they should be knocking down your door to get you to finish building the thing, right?

The SaaS Marketing Gameplan:

So let’s do a quick experiment to figure out if this thing is going to work. Here’s the gameplan:

  1. Figure out the basics of what you’re doing. Don’t worry about all the bells and whistles, just focus on that one big thing that this does that nothing else does.
  2. Once you know the real core of your system, figure out how your system does it better than anyone else. That means doing your homework! Search the web and really dig deep. Figure out who else does this, check out their systems, figure out their pricing, etc. until you are sure that your system will do a better job or have some aspect that is better than anyone else’s system.
  3. Hire a design company to do a few basic wireframes and mockups and figure out how to say what your system does quickly to the right people. Don’t worry about what platform it’s going to be programmed in, what your future versions are going to have, who is going to be your future CTO, or any of that, just do a nice wireframe or mockup of that big important thing that it does. Also, use a pro for this, don’t do it yourself.
  4. Now take your fancy new design and tagline and advertise it on Facebook, Google, or LinkedIn to your target audience. Don’t worry about a full custom-designed website, just do a Facebook page, Launchrock.com system, or if you’re feeling wild, a Squarespace site. But remember, this is an experiment, so don’t put a ton of time into it.  When people get to your page or site, tell them what you’re doing and ask them to sign up for the system and put some money down to get the system.

If you’re selling the cure to cancer, you’d better believe people are going to be lining up to put money in your pockets. On the other hand, if you’re not getting any interest at all, maybe you need to either re-examine how you’re pitching your product, or that maybe your product isn’t what people are looking for.

PRO TIP: If you think that people just don’t know they have this problem, then remember that your cost to let them know they have a problem is going to be pretty substantial. Build an audience, not a product. Make a private Facebook group for everyone with this problem, then ask them how they would like it fixed. Save yourself a ton of time and lost money and grow your buyers before you grow your product.

Something else you can do is use the Google Keyword Planner to figure out how many people are searching for keywords relating to your product each month. This will tell you about how popular this problem that you’re solving really is. If no one is searching, maybe you need to find a new problem to solve or you don’t understand the market. Either way, you’ll need to reassess the solution. However, if you have a ton of searches and not much competition for those keywords, you may be on to something.

Lesson 2: How much to charge for your SaaS

Figuring out pricing for a SaaS is can be a real pain, and really does take a lot of thought to really get to a final answer. In this article, we’re just talking about how to figure out if your system is going to work though, so this is the first thing to do, not the final thing.

Do everything in Lesson 1 and just add the following questions:

  1. At what price would you think this is underpriced and you wouldn’t trust it?
  2. At what price would you think this is a good deal?
  3. At what price would you think this is a high price, but worth it?
  4. At what price would you think that this is overpriced?

Once you have those prices from about 200 people, then you will have a good idea of what the price should be. There is a ton more than can be said about pricing, but this is a great place to start.

Lesson 3: Figuring out how much your SaaS is going to cost to build

Easy answer here. Somewhere between 5k and 5 million dollars. It’s pretty much impossible to get away for less than about 5k in USD and building a new system just goes up from there.

The number one thing you can do to figure this out is to properly plan your project.

This is SUPER IMPORTANT: What you need is an ARCHITECT NOT A PLUMBER. You would never hire a plumber to build you a house, would you? Of course not. You would hire an architect to plan it, a contractor to manage the build, then a team of professionals at each of their different skill sets. You don’t want the electrician doing your doors, and you don’t want your framers working on your foundation. BUILDING A SaaS IS THE SAME THING.

Find someone who has been doing this for a long time, has business and development experience, and remember that the number one indicator of success in any business is the number of times the person running the business has done it before. This is known as an information architect. Get this person to plan the project for you and help you find the right team to build the project.

The Information Architect

The person you’re looking for is a known as an Information Architect. They usually have experience in business, design, project management, and some development, or some combination of these. A good Information Architect will be able to ask you the right questions about your project in the first conversation and they will generally start off with business-related questions, not development related questions.

Once you have a good Information Architect, they should be able to give you a ballpark number on your budget and ongoing costs. They will be able to help you put together a Scope of Work (SOW) that will break down costs and help you understand exactly where your money is going and why. These people often work at digital agencies but are sometimes freelancers as well.

Lesson 4: If you’re building a SaaS you’re a marketing company

Here’s a riddle for you. Let’s pretend for a second that you built the coolest new piece of software in the world and no one knows about. How much money are you going to make?

If you guessed anything other than nothing, you’re wrong.

There is a direct correlation between how many people know about your product, even if it is terrible, and how much money you make on it. If you can’t market your product you’re not going to make any money at all.  That is why the first step is all about starting to generate interest while simultaneously figuring out if it’s even worth it to build.

Pro Tip: Taking a new product to market generally costs 6 times the cost of developing the product.

So how do you go about marketing your product? There are a few things you may have heard of:

The list goes on…

If you don’t know what these are or haven’t heard of these things, please don’t build a SaaS. Just give me whatever money you thought you were going to spend, then bang your head against a wall 5 to 10 times as hard as you can, and go home. It is going to be a ton less painful, less messy, and way less expensive like this. You may think I’m joking, but I really, really am 100% serious.

Get Comfortable Marketing You SaaS

If you do know what these are, get real comfortable with them, because they are about to be your everyday world.

ProTip: Developers are not marketers. That would be like expecting your electrician to be a real estate agent. They may know some things about real estate, but that doesn’t make them a professional real estate agent. When you’re ready to market, find a digital marketer, not a developer. Or better yet, become one yourself.

If you’re intersetd in learning more about internet marketing, I highly recommend Digitalmarketer.com’s classes and courses.

Lesson 5: Setting up your SaaS business

Here is the answer to all those questions put simply. Figure out how many people are going to buy your SaaS, how much they are going to pay for your SaaS, how much interest there really is in your SaaS, then you can worry about who is going to answer the phone. If you don’t have buyers that will pay you money, it doesn’t matter.


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