4 Things to Consider When Starting a SaaS Company

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Starting a SaaS Business

If you have a great idea for a new piece of software, a common business option is to start a SaaS business. This is where you deliver your software solution through the internet, with users paying for the service using a subscription model. Starting a SaaS business is challenging, mainly because there are lots of other businesses doing it, and there are other established names in the space you will have a hard time competing with.  However, there are some things you need to keep in mind when starting one to ensure its success.

The Type of Software You Want to Create

The type of software you sell under the SaaS model will determine how you run the business. For example, a company that sells accounting software will run very differently from one that sells advertising automation software. To ensure the success of your business, ensure that the type of software you create and the business model you choose are a great fit to make things easier on yourself.

Is There a Market for My SaaS?

Never start the development of software without first ensuring there is a market for it. This is a painful lesson that many businesses have learned. Doing proper research to find out if there is a market for your product will give you something to aim towards in addition to ensuring there will be revenue in the future.

How Much Getting the Software to Market Will Cost

According to the latest estimates, it takes anywhere from five to ten years to get software on the market. There are exceptions to this rule though, but you need to know this so that you can find out if you have enough financing to get a product to the market.

If you have been thinking about the software for a while and have an idea about how it will work, it may take you less time. If you are starting from scratch, it will take longer and require more investment.

Many SaaS founders create a minimum viable product first before they embark on iteration. A minimum viable product helps you start getting your name out there, validating your idea, and even making some money in the interim.

You can add features to this product as time goes on, increasing its value and thus how much you can charge customers for it.

What Will Your Exit Strategy Be?

No one wants to think about the end of a business they have worked on for so long and put so much into, but entrepreneurs have to think about exit strategies at some point. An exit strategy allows you to liquidate or reduce your stake in a company. This is so that the founder, investor, or business owner can use the funds they get from the exit to retire or start another business, even a SaaS one if they wish.

There are several existing strategies to consider including merger & acquisition, Initial Public Offerings, and liquidation. Perhaps the one many SaaS business owners will want to consider is selling to a friendly party. Sales like this often go smoothly because both parties understand each other and the business, but you need a valuation before going forward with this plan. Arriving at a valuation depends on several factors including sales, revenues, operating costs, time invested, and multiples.

To ensure you get the best valuation, you need to keep up with current multiples which can be influenced by various market and operational factors.

Starting a SaaS business is challenging, but these challenges can be avoided and even overcome by thinking about them when starting the business. When you know where the pitfalls may lie and what the future may hold, it gets easier to formulate concrete plans for your new SaaS business.