If you are an entrepreneur with a mind to get yourself in on the SaaS revolution, there are a few things you ought to be aware of. The first is that competition in the SaaS world has become intense. If you decide to launch a SaaS startup, it would be unwise to underestimate just how crowded this space has become.
That’s not to say you shouldn’t enter the SaaS market if you have a great idea that will solve a business problem (the biggest demand for SaaS is B2B commerce) and the technical acumen to make your brainchild into a living, breathing reality. It’s just that with any new venture, it’s good to know what you’re up against and what you should focus on to avoid a swift exit into the failed-startup graveyard.
Here are 6 essential things to know before starting a SaaS business. They all have one thing in common: a focus on customer retention. SaaS dreamers always talk about getting new signups, which is obviously important, but remember that SaaS companies rely on customer retention. In fact, marketing evangelist Neil Patel has gone so far as to say that “in SaaS, customer retention is everything.”
If you can handle these 6 things, then you’re in the right business.
#1: Downtime Can Sound the Death Knell
According to software architect Justin James, neither planned nor unplanned platform downtime should be allowed to interrupt the user experience of SaaS customers. James explains that no situation exists in which downtime of more than a few minutes per year would be acceptable. When customers depend on your software to support their own core business, downtime will quickly erode their confidence and they’ll be off to another provider before you can pucker up to kiss them goodbye.
In short, customer retention demands that your SaaS offering can keep business users online through everything from an upgrade deployment to the outage of a database or application server. Before you start accepting customers, make sure you have the server-side down pat.
#2: Better Make it Special
Just to add another challenge, the SaaS market is one in which most of the power rests with the buyers. To succeed, your product will need to be special, because the fact that it’s SaaS is not going to help you differentiate it from the competition. You’ll need to define a unique selling proposition that’s compelling enough to entice new buyers and woo established users away from other products that do the same as yours—and which have the benefit of market share and proven reliability (see point #1), to boot.
I’ll use the example of my own company, ClickDesk. Live chat software is a competitive market but what makes us special is our live voice and video chat features that most of our competitors lack. By including and emphasizing those features for real-time audio and visual communications, we’ve been able to stand out from the crowd.
Think hard about your SaaS idea and make sure you can explain what makes it special. Otherwise, it’s back to the drawing board.
#3: Gamification? It’s Not a Gamble if You Do It Right
Getting SaaS customers to engage with your brand is about more than convincing them to part with a particular sum of money each month. You need them to invest emotionally and psychologically in your product as well. The art of gamification is a great option for reaching these goals for total user engagement. When done right, gamification also serves as a unique selling proposition. As noted in the article linked above, there are a ton of different ways to gamify your marketing, including loyalty programs and friendly competition among your customers.
While gamification is becoming an increasingly popular way to engage customers, it hasn’t yet been done to death. Therefore, if you’re prepared to make the extra effort and stand the cost of gamifying your SaaS product, you might be able to pull off a customer-engagement feat similar to that which made Dropbox a winning brand in file storage and sharing. Gamification still happens mostly with ecommerce brands and similar businesses. When you do it for SaaS, you gain an edge.
#4: Monthly Recurring Revenue: It’s a Trust Thing
The beauty of a SaaS business model, if you get it right, is the way in which it generates monthly recurring revenue (MRR). All you need is that unique selling proposition, a robust product, and a third ingredient to generate sales that recur automatically month after month after month. That third ingredient is called trust and, as David Passiak from Quote Roller suggests in his Kissmetrics Blog post Seven Steps to Selling SaaS like Socrates, you need to build that trust from your prospects before you even start to think about selling anything to them.
#5: Don’t Overlook the Importance of SEO
In such a competitive marketplace, getting found through organic searches is not something you can leave to chance. If your product isn’t showing up near the top of search engine pages, then guess who is showing up there? Your competitors. So don’t forget to factor extensive keyword research and website SEO into your SaaS business plan. Know your target audience, learn what they look for and hand it to them on a plate, complete with your unique selling proposition as an appetizing garnish.
#6: You Need Cash Flow to Go
As a final point to note, SaaS is not a business to take on with nothing but holes in your pockets or moths in your wallet. However great your idea, without cash flow it’s going nowhere. Unbounce is great product but let’s face it, without a decent cash flow they could never create the kind of buzz that they recently did in a trade show.
That’s another reason to focus on your content marketing, because some customer churn is inevitable. A good long-term SEO plan will help you to replace those lost customers and avoid a decreasing cash flow issue. But no cash = no cash. Make sure you are prepared for the worst possible situation. Then the best can come true.
Succeeding with a new SaaS business might have been easy awhile ago, but not anymore. However, by taking the above ideas on board and going in with a great idea, some starting capital, and your eyes wide open, success is still possible and furthermore, can lead to lucrative returns. I wish you all the best on your SaaS startup journey!