Some things to consider when getting started with SaaS

May 04, 2017 Saas & Platforms
By Owen Linderholm, Senior Content Strategist
By Owen Linderholm, Senior Content Strategist

new beginning

There’s little disagreement that many of the most dynamic and disruptive businesses have settled on a platform model, specifically a SaaS platform model. Companies like Uber, Airbnb, Salesforce, and services like Gmail, Google Docs and even Microsoft Office have either started out on this model or moved to it. Plus many dynamic niche companies like Ecwid, Freshbooks, Shopify and Box are using the same model. The SaaS platform model is also enabling new approaches to not-for-profit organizations like crowdfunding through platforms like Kickstarter and GoFundMe.

So anyone thinking about entrepreneurship and startups should be considering SaaS. What are the things to consider? We dug around to find some of the best advice to start with around how to think about SaaS from both a business and a technical perspective.

How to build a SaaS company

A good overview comes from Quora where Tim Hamson, the founder of SalesSeek, answers the question, “How can I build a SaaS company?” It is well worth reading his answer and the commentary that follows and also digging down to the second level of articles he links to, but the high points cover making sure that your business idea has a thoroughly researched value proposition and market opportunity. Then you need to build a good team, make a good plan and get engineering expertise that can iterate rapidly to find a better and better solution.

One of the second level of articles mentioned above was the answer from Clifford Oravec, founder of Tamboo, to the same question. His answer is full of strong real world advice like making sure you define your customer and your competition correctly and stressing the importance of doing really good market research.

A key question for any business starting out is the one of money and economics. Is your business really going to be a business? Will it make money? Will it gain traction? David Skok at For Entrepreneurs wrote a great pair of articles looking at the economics of SaaS. The first part looks at the basic economics of a SaaS platform around revenue stemming from a single sales hire. Using that peg he builds up a complete revenue model. The second part builds on that foundation and looks at scaling the SaaS platform via a number of mechanisms from growing the sales team to changing the pricing model. They are a fascinating pair of articles that illuminate the different factors that play into making a SaaS platform work from a business perspective.

An alternative financial approach is presented by Nikos Moraitakis. In an article called “Financial planning for SaaS startups,” he talks about how to build an 18-24 month financial plan for a SaaS startup. He covers models, assumptions, costs, sales and marketing, opex (operational expenditure), COGS (cost of goods sold) and infrastructure as well as incidentals. This article presents a way to build the core financial model around which you could operate a SaaS business.

Operations and Platform

Switching gears, besides the business and financial models you need to plan and operate a platform, you also need an engineering model and approach since the core of a platform business is indeed the platform. There are hundreds of great articles about this that go from  basic to extremely complex and detailed. We picked these two because they provide an overview while still retaining enough specificity that practical ideas and solutions can be gained from them.

Usersnap has an interesting single perspective on building a SaaS platform around Python, MondoDB, RabbitMQ, AWS and more. It’s just one way to do this but the article provides enough information to see the pieces of infrastructure you will need to select in order to build the platform solution you want.

Taking a more product-centric approach, Mukund Mohan writes about the first five steps to take when building a SaaS application. He is focused on a user-centric approach to design and building out an application from there before looking at the stack, which is the reverse of the approach taken in the Usersnap article and a great way to get an alternative perspective and to look more thoroughly at the approach you are taking.  

Last, but not least, Ben Foster takes a look at what NOT to do when building a SaaS startup. It’s more than a cautionary tale, however, it’s a walk through putting all the pieces together and some of the things that can go wrong as you do that.

Resources

In your pursuit of SaaS excellence there are a few blogs and sites that could be good to follow. Here are our suggestions along with a specific useful SaaS-related article in each case.

SaaStr: [3 Simple Tips for Pricing SaaS Products In The Early Days]

Thomas Tunguz: [The 9 Marketing Disciplines Of Great SaaS Companies]

Kellblog: [CAC Payback Period:  The Most Misunderstood SaaS Metric]

The Angel VC: [A KPI dashboard for early-stage SaaS startups]

Chargify: [SaaS Customer Success: The secret to reducing churn and increasing MRR]

Groove: Building a Startup? You Need to Learn to Negotiate

OnStartups: Secret To SaaS Success: Recognize That You’re Not Selling Software

Quora – search for what you need and follow the people making good answers

Hacker News from ycombinator

 

About the author

Owen Linderholm, Senior Content Strategist

Owen Linderholm is Senior Content Strategist at WePay. He has previously held content and editorial roles at Yahoo, Microsoft, IDG and the BBC.

More blog posts by Owen Linderholm