Modern companies acknowledge the value in employing digital systems to conquer organizational challenges. Growth-minded businesses are always pursuing inventive, novel ways to make technology work in their favor; at the absolute least, companies witness the tremendous edge Software as a Service and similar database management solutions offer competition.

In fact, all signs point toward a forthcoming SaaS renaissance: a Forbes review estimates that the industry is slated to ingest an $18 billion upsurge in annual revenue, from 2015’s $49 billion to $67 billion by 2018.  

Founding CEOs responsible for guiding SaaS startups from the unforgiving waters of fledgling irrelevance to the balmy tropics of serious profitability begin their enterprises armed with a collage of blueprints, expectations and motivations. But among all their difference, SaaS founders retain a single, integral commonality: they believe their insights into a particular issue mean they can offer the best fix on the market.

“Identify that glitch that you can personally relate to, and solve a problem, and get more people around as customers as you are solving the problem for them,” says Krish Subramanian, CEO and founder of ChargeBee, an SaaS company which markets itself as “the smartest way to set up subscription billing.”

Tech experts looking to turn a genius idea into the next SaaS success story can too easily trip over their own enthusiasm, stumbling due to a simple, preventable oversight. To stifle failure before it happens, smart entrepreneurs start by laying out a strategic plan, and continue by settling on a practical approach to testing ideas, and earning necessary legal and financial backing.

Step One: Outline a Plan

Circumstances change, and keeping the planning process lean enables quick, painless adaptation to shifting situational variables. As such, a short pitch is preferable to a dense, ultra-detailed manifesto.

The pitch should handle strategy, tactics, a brief business model, and a general time frame estimate.

Strategy

This piece of the pitch is simply a few lines describing your company’s value: how you propose to offer customers a valuable, valid fix to a specific problem, which market you’ll be targeting, who you’ll be competing with, and how your product sets itself apart.

Tactics

List out which stores, online markets, distributors, or other channels you’ll plan on offering your product through, and also brainstorm potential marketing strategies to draw consumer interest.

Business PlanBusiness model

Clarify how exactly your business will bring in revenue: for now, focus on cataloging prime revenue streams and key expenditures. Once you’ve done a bit of preliminary testing, it’s a great idea to re-evaluate your model, accounting for sales and cash flow forecasts, and expense budgets.

Time frame

Create a rough map of ideal milestone dates, considering budgets and prospective tasks. Be sure to formulate sections for testing product feasibility and executing requirements to establish an operational business, as well as planned moments of review, where you’ll reassess the previous sections, and implement necessary changes.

Step Two: Test Your Concept

Once you’ve outlined your approach, you’ll need to determine whether your blueprint can really generate the revenue needed to feed your company’s future growth. An easy, risk-free method of obtaining feedback is to go out and meet with potential customers.

Discuss products with potential users

A fatal flaw too many SaaS startups fall into is draining all resources into stats, studies, and other secondary market research, while forgetting to focus on face-to-face, direct conversations with the people for whom your product is intended to help. Brilliance from your perspective could easily amount to foolishness in the public eye. You’ll never really know without asking. Gene Caballero, co-founder of lawn care bid compiler Greenpal, states of his company’s interpersonal research “We went door to door and even rented a kiosk in the mall to get feedback to see if people would use a product like ours. It’s a very humbling process.”

Keep an eye on competitors

Watching how competitors approach your market will also aid in fine-tuning your approach; you’ll have the advantage of entering the market equipped with examples of failed and successful systems. Uwe Dreissigacker, founding CEO of InvoiceBerry, mentions how “you can determine the lowest, highest, and average price your competitors charge for their services in order to determine a good starting point for your pricing.”

Build a minimum viable product

Using the observations you’ve accrued throughout the previous steps, you can now create a small-scale, basic prototype of the software service you’ll provide, and distribute it to the customer base you’ve started to collect through market research. Not only will this progress the customer-service provider relationship and further invest interested individuals in your concept, it will also allow you to refine your forecasts for sales, cash flow and expense projections.

Step Three: Create a Stand-Out Brand 

The promise of exponential growth entices many with wise ideas and clever methods to enter the SaaS sphere. Where some fly, and others falter is often at this step. When they fail to cement a product identity, founders resign their brilliant solutions to a short-lived fate as just another face in a blurry crowd.

Market to guarantee a clear message

Consider crafting a “brand guide,” a sort of written lightning rod through which to ground and materialize your vision for a product. Doing so will ensure clarity and uniformity in messaging among your company’s own infrastructure, as well as its distributional scaffolding.

Choose a powerful domain name

Picking a great domain name was integral to the success of CuePin, according to its CEO and founder Gabriel Kuperman, who says “With an online SaaS business, it starts with a powerful domain. I recommend sticking with a short .com domain that is easy to spell, and memorable.”

Kuperman also adds that investing in a premium domain from an online marketplace is likely worth the (often steep) price, as it “gives you the credibility and advantage over the competition, especially in the very beginning and early stages of the business.”

Step Four: Look Into Legal Regulations

SaaS supplies a broad range of industries, some of which hold regulations which must be learned and observed as you proceed.

Decide on and register your company’s structure

Picking the right structure is all about pinpointing goals and necessities. For Ryan Chan, founder of UpKeep, the model of a Delaware based C-Corp meshed perfectly with his company’s aspirations. He says “We created an LLC at first, but after realizing that we wanted to take on venture capital, we decided to move to a Delaware C-Corp.”

Many venture capital endeavors find Delaware’s C-Corp structures ideal due to the state’s flexible corporation law, allowance of a single member board of directors and company voting rights for preferred investors, and the ability to set up shop and access US venture capital without requiring US residency.

Step Five: Locate Financing

Gaining funding for SaaS companies involves a choice between risking substantial individual resources (either money or time), or reaching out to exterior avenues for assistance, often with the promise of ROI.

The Individual Route

Startup_Financing_Cycle

For those who can’t afford to risk savings, going it alone by simply handling all physical work is an option for those with the drive, expertise, and free-time to see a colossal undertaking through, much like Joe Kindness, co-founder of Agency Analytics, who describes his efforts alongside a cofounder: “Since Blake and I were both developers (and still are), we were able to create this company without any funding or additional resources. We set a goal to be profitable within one year and if that did not happen, we would move on. After about a six-month development cycle, we launched a beta version in July 2010 and three months later, started earning revenue that grew each month. The real motivation in all this was passion.” 

Other Options

Pitching to venture capitalists for funding isn’t the only way SaaS startups can win financial backing. Alternative choices include using “bootstrapping” tactics (such as renting out a home, or crowdfunding), obtaining a small bank loan, gaining the confidence of an “angel investor,” or asking friends and family for support.

Conclusion

Adhering to these steps is by no means a guarantee of prosperity for your SaaS startup, however those who follow the advice of those tried and proven in the SaaS sector apply the insights of success to shield themselves from failure, providing their great, innovative ideas the environment and stimuli necessary to thrive into a highly profitable, industry-respected enterprise.