How to Build a Successful SaaS Business: The 10-Step Guide

Are you thinking about starting your own SaaS Business? Well, buckle up. It’s probably going to get bumpy.

Let me introduce myself in a few words: My name’s Philipp Wolf and I am the founder and CEO of Custify. 

Back in 2017, I launched Custify because I figured out the market needed a tool to help founders, customer success managers, product managers, or account managers better meet their customers' needs, reduce churn and increase lifetime value. I saw an opportunity after seeing how companies spend big money getting new clients without a systematic approach making sure these clients are also successful. 

Besides consistently growing the company 300% year-over-year, I also managed to make it a Top 5 Customer Success solution across industry standards. Custify is one of the few Customer Success solutions on G2 to be rated 5/5. 

Here are the 10 steps and lessons I learned while building a successful SaaS...

1. - Find something that’s missing and define your idea  

To some, this may seem like a no-brainer, but I find myself compelled to say it again and again: the first and most important step you need to make if you want to build a successful SaaS business is to identify an actual and actionable need in your preferred industry that can afterward be met by your product. Basically, you need to find your “why”.

When formulating your idea, you should be able to couple it with an actual need in the market, so your target customers will also be willing to pay for your SaaS product. Because, at the end of the day, that’s what matters.

Articulating your vision is especially important during meetings with investors if you aim to make a good impression and secure the funds you need to get your SaaS company off the ground.

2. - Do in-depth market research and polish your idea

The long-term success of your product depends on good market research, so this should be the obvious next step when building your SaaS business. It’s tedious, but it’s crucial. Why?

Because at this point you’re basically creating a hypothesis of what the market wants. So you want to make sure you know your market well enough, namely, your target audience, competition, and channels.

And after you’ve figured out your target audience, you’ll also have to adjust your pricing model to best meet their needs. You’re basically asking the question, “Will people actually buy this thing?”

Deciding on a pricing strategy for a SaaS is often not as easy as it looks. There are a lot of popular SaaS pricing strategies [1] you can choose from. You just have to find out which one works best for you.

Also, there are a few things you’ll have to definitely watch out for at this point, too:

• The intense competition out there in the sector - It’s no joke. It’s expected that the SaaS industry will expand by a further 21.2% by 2023 [2], so of course, it’s still going to attract entrepreneurs and investors.
• Going for an inefficient pricing model - Getting the pricing strategy for your SaaS right is a challenge. It involves a deep understanding of your product and how it fits into the customer/ market ecosystem.
• Bad actors that cause trust issues for the entire industry - If you do the groundwork thoroughly, establish a product-market fit and you foster a deep understanding of your customers to identify problems, then you shouldn’t worry about them. Your value and mission will speak for itself.
• Top features you can't add now - It’s best to keep your product at an essential level at this point, then add features as you go along, taking into account the feedback you’ll get from your customers.

3. - Plan for the long term, don’t look for quick hacks 

Starting your own SaaS business is similar to sailing off on a ship. You’ll need to know where to look in the night sky to not get lost on the way and successfully reach land. In this regard, a good business plan is like your personal roadmap through the development process. 

You’ll need to put together a business plan, be it a traditional one or a lean business plan [3]. There are no quick hacks that can get your business growing tenfold in the span of just one year, so your best bet at this stage is to plan for the long run. 

Determine the type of business plan you wish to go after and create it. Not to mention that you’ll also need to think about co-opting one or more valuable people to help you with the initial stages of building your successful SaaS business. 

Plan strategically and in measurable results, for example: “My business will get to $10m in ARR, growing 80-100% or more Year-over-Year, and have happy customers AND a good team to build with.” - well, if you’ll have all of this, you can’t be stopped.

You will inevitably change some directions on the way over time, so the most important thing now is to just get started on your journey.

4. - Create a software prototype, test it, find investors

It’s one thing to create a software that solves a problem, but it’s a whole different thing to offer a product that people will actually pay for. If your product doesn’t solve a problem that’s worth investing in, your ship will sink fast. 

So you’ll have to introduce your SaaS prototype to potential investors to showcase your idea alive and running and basically show it off and create lots of hype around it. This is where the tests begin. 

I cannot stress this enough: building a prototype allows you to get yourself acquainted with the way your target users will interact with your future product. This will help you immensely in the long term, as validating your idea as early on as possible, ideally before it enters production will save you a large financial burden.

Consequently, your dev team should collect your first clients’ feedback after these tests and make the necessary alterations and adjustments to your product. 

Before starting Custify, my co-founders & I had hundreds of conversations with Customer Success Managers to understand their day-to-day workflows, which helped us shape the product UI, UX, and features. 

5. - Sell to your ideal client first & don’t overextend

As in most startups, the early phase is challenging and critical. 

When you’re just starting off with your SaaS business, your first goal is not to build everything. Instead, what I strongly recommend is to build just a “skeleton” of your product that will help you move further with your desired customer persona [4]. Then, only add tweaks once there’s been enough desire so that you’re sure it’ll truly bring value to your software.

There’s no running from it: you’ll definitely get approached by potential clients all the time, saying they need extra X or Y features that aren't on your roadmap. As tempting as it may be to take their money, the reality is that the subsequent opportunity cost will kill your SaaS in the long run.

The biggest challenge at this point is to get the product right for its target market. 

6. - Small markets can become large opportunities

Just because a market is small doesn’t mean it won’t present very big pain points that your product can solve. And the smaller the market, the quicker the word-of-mouth gets around. So that’s a big plus.

Be sure that you take the time to explore and understand how customers and competitors from that respective smaller market solve the problem you’re addressing and look for a way in from there.

7. - Find your people, process, and co-founders

Now that you have your product, audience, and market, you need to find the right people to join you on your journey. The first step would be hiring a technical lead to take you through the whole process. Then, slowly, you can go on hiring talented people around that leader. Since you are building your SaaS product from scratch, you will for sure require a full-cycle development team.

Hiring people for the first time, it’s better to focus on a small team of experts & people that you understand versus relying on a large team that will be way more difficult to manage and coordinate. Then, when you get to establishing the working processes and internal flows, make sure you also determine the type of development process you’ll go for (DevOps, agile, etc.), based on how your team works most efficiently.

Also, make sure to work closely with your hired experts before looking for opportunities to promote them to co-founders. Even if it takes longer, I recommend you hire someone who believes in your values & mission, has experience in your technology, and actively wants to grow within your SaaS company. Be patient and find your great co-founders.

8. - Launch a minimal viable product (MVP) and make sure it’s what you promised

This is the right time where you’ll have to build out a bare-bones version of the actual SaaS product you’re planning to launch. And this step can definitely take you a lot of time. 

A minimal viable product (or MVP) is not necessarily an alpha or beta version. It serves more as a learning tool for yourself. You offer it up at the price point you are looking to sell your final product at. The goal is to test if people pay for it or not; test if it matches what you promised your customers in the first place. 

And this is exactly why you shouldn’t exert all your effort into the early stages. Because if your MVP isn’t validated by your target audience, they won’t pay for it. Which puts you and your team at risk of going out of business.

The key here is to follow up with your pilot customers and to see if your idea will actually hold water.

9. - Settle on name, brand book, & marketing. And don’t oversell!

These days, the SaaS market is super competitive, with over 80% of businesses already using at least one SaaS application [5] in their day-to-day work. So how can you make sure you’re building a SaaS business that will stand out in the crowd?

First things first, you want to pick a memorable name, that will easily stay top-of-mind. Then comes the fun part of choosing a color scheme, a logo, your USP, and tone of voice for all your messaging - basically, all that goes into your own brand book. This isn’t a process you have to outsource to a brand agency necessarily, it’s one that can begin in-house. 

Once the product is almost ready, work on the launch and marketing strategy should begin. Your SaaS startup launching strategy should also include a ProductHunt [6] moment.

All in all, figuring out how to brand yourself and stand out in a crowd is key.

10. - Take a step back, rest, and then improve your SaaS

There you have it. You’re all set with your SaaS business. 

Not so fast, though. After a long, tedious development process & launch, resting and recalibrating might be a good first step towards a continuous improvement process.

There’s always a caveat with launching in this industry and virtually any other: the failure rate for startups is remarkably high. This is especially true for SaaS businesses, with an estimated 92% of these companies failing within their first 3 years [7] despite ample funding and growth.

Zoom out and evaluate your progress. Establishing key metrics [8] for your SaaS business will be of great help here. These numbers are going to help you make informed decisions, which will in turn take a lot of the weight of guesswork off your shoulders in the long run. 

If you don’t keep track of these records, or you don’t have a system in place to monitor them, you could be ignoring big churn risks that need to be addressed ASAP.

More personal advice from a SaaS Founder that’s been through thick and thin...

While the startup process for a SaaS business can be condensed down to these 10 steps, each component will take time, testing, and refinement. 

We’re all here to learn - and I’ve been learning constantly for years and will continue to do so. But if I could say some things to my younger self, I’d say the following:

• Focus on the long-term results and don’t try to hack your way into the market. There’s no quick-fix to becoming successful. It’s a lot of blood, sweat, and tears;
• If you can't put your life savings in your company, you're not fully committed;
• Don’t sacrifice quality, even if it means scrapping your work at the 11th hour;
• Go visit your clients. Even before starting out, find your ideal clients and go see their process in detail - you’ll gain valuable insights that will, in turn, help you with designing the right product for them;
• There’s no 4-hour work week, more like 12-hour workdays. We all love the book, but most of the times, it’s proven to be a fantasy;
• There are incredible highs and lows. But going through a “business winter” will toughen you up and, ultimately, make you better in the long run;
• Starting up is unpredictable - Things never go to plan and honestly, you can never be “too ready” for the challenges you’re going to face;
• Everyone has unsolicited advice - It could be from your family, friends, or even other professionals in your network. But it doesn’t mean it’s good advice. Here’s a tip: try the Mom Test;
• Mentors are necessary, you can get immense value from others’ experience that will help you out a lot in the future.

Ideas are great but ultimately not worth much. Execution is key. The right team, the best research, and your ability to keep going will help your SaaS business run a much lower risk of failing.

The Road to Success Is Only Starting 

Now, just to be clear, I’m not here to warn you or scare you off. Instead, I’ve told you a bit about all the lessons I’ve learned while battling my way through becoming a first-time founder building a successful SaaS business. 

Designing a product is difficult - and launching it successfully in a market that’s continuously expanding doesn’t make it any easier. The industry’s entry barrier has been at an all-time low for some time, thus making SaaS an alluring prospect for any passionate entrepreneur.

Your successful SaaS business should present a solid product-market fit. Your product should be perfected as much as possible before you start marketing it. Oh, and one last thing - keep in touch with your customer as much as possible, as their feedback will help you grow the fastest.

And remember - you’re not alone. 

Got any more questions? Hit me up and I’ll be happy to chat!

References:

[1] https://www.custify.com/pricing-strategies-for-your-saas-and-how-to-pick-one

[2] https://www.businesswire.com/news/home/20181114005369/en/Global-Software-as-a-Service-SaaS-Market-Outlook-2018-2023-Expected-to-Register-a-CAGR-of-21.1---ResearchAndMarkets.com

[3] https://www.entrepreneur.com/article/226417

[4] https://www.custify.com/the-framework-for-developing-customer-success-personas

[5] https://99firms.com/blog/saas-statistics/#gref

[6] https://www.producthunt.com/e/launching-your-startup

[7] https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/grow-fast-or-die-slow

[8] https://www.custify.com/customer-success-metrics