Do you want to start a SaaS company from scratch? If YES, here is a complete guide to starting a profitable SaaS business with no money and no experience.
Okay, so we have provided you an in-depth sample Saas startup business plan template. We also took it further by analyzing and drafting a sample Saas startup marketing plan backed up by actionable guerrilla marketing ideas for Saas companies. In this article, we will be considering all the requirements for starting a SaaS company. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- 1 Why Start a SaaS Business?
- 2 Starting a SaaS Business – Market Research and Feasibility Studies
- 3 Starting a SaaS Business – Legal Matters
- 4 Is Professional Certification Needed to Run a SaaS Business?
- 5 Starting a SaaS Business – Technical and Manpower Details
- 6 The Service Delivery Process of a Software as a Service (SaaS) Company
- 7 Starting a SaaS Business – The Marketing Plan
Why Start a SaaS Business?
If you are a software developer or you have an interest in the ICT industry and you are looking for a business to start, then you need not look far because there are loads of businesses in the industry that you can successfully start and one of them is a software as a service (or SaaS) company.
Software as a service (or SaaS) is an emerging paradigm business model or concept that enables software to be delivered as a service. This is an arrangement that enables companies to expand their network capacity, and run applications directly on a vendor’s network.
It offers a host of advantages with the most primary being radically lower IT costs. The lower budgetary requirements and commitments allow even smaller companies to piece together an IT project without spending on purchasing legacy server, and storage systems.
However, due to the technical nature of this business and the need to understand what you will be getting into from the business aspect, it would be wise to consult with a business consultant. If your business concept is a great one, the business consultant would offer you tips and suggestions on the way forward.
If you have been pondering on starting your own software as a service (or SaaS) company, but do not know how to go about it, then you should consider going through this article; it will give you the needed guide and direction.
Starting a SaaS Business – A Complete Guide
- Industry Overview
Software as a service (or SaaS) is part of the Business Analytics and Enterprise Software Publishing industry and players in this industry consist of companies that are into ERP software, bi software, crm software, scm software and other software development and they may decide to strictly adopt the Software as a services (SaaS) business model.
A recent report published by IBISWorld shows that the Business Analytics and Enterprise Software Publishing industry has grown steadily due to favourable demand conditions caused by high corporate profit and investment. Over the five years to 2018, industry revenue rose at an annualized rate of 7.1 percent, driven by businesses’ increased technological complexity and eagerness to adopt efficiency-enhancing software.
The report also shows that many industry products, such as customer relationship management and enterprise resource planning software systems, have become basic tools in the management of large companies. In 2018, industry revenue is expected to rise at 2.6 percent to $55.4 billion. The world’s largest software companies have spent the past five years acquiring high-performing enterprise software vendors, cloud companies and data.
The report further stated that over the past five years, the Business Analytics & Enterprise Software Publishing in the US industry has grown by 7.1 percent to reach revenue of $55bn in 2018. In the same timeframe, the number of businesses has grown by 10.0 percent and the number of employees has grown by 10.2 percent.
The Business Analytics and Enterprise Software Publishing industry is indeed a growing industry and pretty gaining ground in most countries of the world. Statistics has it that in the United States of America alone, there are about 2,869 registered and licensed business analytics and enterprise software publishing companies (Software as a service (SaaS) business model inclusive) in the country, responsible for employing about 139,347 people and the industry rakes in a whooping sum of $55 billion annually.
The industry is projected to grow at 7.1 percent annual growth within 2013 and 2018. The companies holding the largest market share in the Business Analytics & Enterprise Software Publishing in the US industry include SAP SE, International Business Machines Corporation, Salesforce.com Inc. and Oracle Corporation.
Some of the factors that encourage entrepreneurs to start their own Software as a service (SaaS) business could be the growing recognition of economic and operational benefits and the efficiency of this business model. As companies ease out gradually from economic uncertainties and financial shackles, widespread adoption of Software as a service (SaaS) is in the offing.
The pragmatic and successful adoption of this technological concept by early adopters will pave the way for mass enterprise adoption in upcoming years.
The transition of enterprises from virtual machines to the cloud will additionally extend the impetus required for strong growth of Software as a service (SaaS). Poised to score the maximum gains will be end-to end cloud-computing solutions that offer complete functionalities ranging from integration of internal and external clouds, automation of business-critical tasks, and streamlining of business processes and workflow, among others.
Over and above, starting a Software as a services (SaaS) company requires professionalism and good grasp of the ICT industry. Besides, you would need to get the required certifications and license and also meet the standard security expected for players in the industry in the United States; the industry is heavily regulated to guard against fraud and criminality.
Starting a SaaS Business – Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographics composition of those who require the services of Software as a services (SaaS) company is not restricted to people and organizations in your immediate community or state, but it cuts across people and organizations that have one or more things to do with the internet from all over the world.
This is because Software as a services (SaaS) is an internet – based business hence the ability to work for people and organizations all across the globe.
So, if you are looking towards defining the demographics of your Software as a services (SaaS) company, then you should make it all encompassing. It should include business – oriented people and organizations within and outside the United States who run a 21st century business or any individual who make use of one software app or the other.
List of Niche ideas Within the SaaS Business That You Can Specialize in
Niches or ideas that may make you stand out in this vast industry include;
- ERP software
- BI software
- CRM software
- SCM software
- Other software
The Level of Competition in the Industry
The level of competitions in the Business Analytics and Enterprise Software Publishing industry does not in any way depend on the location of the business since all Software as a service (SaaS) companies can operate from any part of the world and still effectively compete in the global market.
When it comes to Software as a services (SaaS) business, distance is never a barrier when competing for clients. What most clients want is safe, secured and seamless service, hence they are ready to subscribe to your services no matter the part of the world you operate from, as long as you have good track record and can deliver excellent results.
There are several Software as a services (SaaS) companies scattered all around the United States and in the cyber space. So, if you choose to start your own Software as a services (SaaS) company in the United States, you will definitely meet stiff competition. Besides, there are larger Software as a services (SaaS) companies that determine the trends in the industry and you should be ready to compete with them for clients.
List of Well – Known Brands in the Industry
In every industry, there are always brands who perform better or are better regarded by customers and general public than others. Some of these brands have been in the industry for a long time, while others are best known for the uniqueness of their products/services and how they treat their customers.
These are some of the leading Software as a Services (SaaS) companies/brands in the United States of America and also in the globe;
- Google Inc.
- Workplace by Facebook
- Cisco Webex
- Veeva Systems
- Atlassian Corporation
- The Ultimate Software Group
Irrespective of the business that you intend starting, your ability to get your costing and economic analysis right will go a long way to determine the profitability of the business and Software as a Services (SaaS) business is not an exception.
Part of what you need to pay attention to when starting a business is a reliable ICT infrastructure that can support your business model. As a matter of fact, you are expected to minimize downtime in your business to the barest minimum so as to retain your existing customers and of course continue to welcome new subscribers.
Good enough, with Software as a Services (SaaS) business model, you can comfortably predict the outcome of your business as it relates to the revenue you are expected to generate and also budget base of the prediction.
Starting Your Software as a Services (SaaS) Company from Scratch vs Buying a Franchise
When it comes to starting a business of this nature, you don’t have any option other than to start from the very scratch. This is because the nature of the business does not give room for franchising since a company operating the Software as a Services (SaaS) business model can be based in the United States of America and have clientele base that covers different cities of the world.
Possible Threats and Challenges You Will Face When Starting a Software as a Services (SaaS) Company
If you decide to start your own Software as a Services (SaaS) company today, one of the major challenges you are likely going to face is the presence of well – established Software as a Services (SaaS) companies that are offering same services that you intend offering. The only way to avoid this challenge is to create your own market.
Some other threats that you are likely going to face as a Software as a Service (SaaS) company operating in the United States are unfavourable government policies, the arrival of a competitor within your location of operation and global economic downturn which usually affects purchasing/spending power. There is hardly anything you can do as regards these threats other than to be optimistic that things will continue to work for your good.
Starting a SaaS Business – Legal Matters
- Best legal entity to use for this type of business
When considering starting a Software as a Services (SaaS) company, the legal entity you choose will go a long way to determine how big the business can grow; some Software as a Services (SaaS) companies design their business and services for regional / community market, some for national market, while others for international market.
You can either choose a general partnership, limited liability company which is commonly called an LLC, or a sole proprietorship for your Software as a Services (SaaS) company. Ordinarily, general partnership should have been the ideal business structure for a small – scale Software as a Services (SaaS) company especially if you are just starting out with a moderate startup capital.
But if your intention is to grow the business and have clients from all across the United States of America and other countries of the world, then choosing general partnership is not an option for you. Limited Liability Company, LLC will cut it for you.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the company that will be at risk. It is not so for sole proprietorships and general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholder meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your Software as a Services (SaaS) company; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and of course taxes.
If you take your time to study the various legal entities to use for your Software as a Services (SaaS) company, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your Software as a Services (SaaS) company so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures.
Catchy Business Name ideas Suitable for a Software as a Services (SaaS) Company
When it comes to choosing a name for a business, it is expected that you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.
If you are considering starting your own Software as a Services (SaaS) company, here are some catchy names that you can choose from;
- Silver Cloud Software as a Services (SaaS) Company, LLC
- Fred Moore Software as a Services (SaaS) Company, LLP
- Triple P Software as a Services (SaaS), LLC
- Trend Zone Software as a Services (SaaS) Company, Inc.
- Peter Pan Software as a Services (SaaS), LLC
- Global Network Software as a Services (SaaS), LLP
- Orange Group Software as a Services (SaaS), Inc.
- Amy Snow Software as a Services (SaaS)
- Stan Lee Software as a Services (SaaS) Company, Inc.
- Prime Edge Software as a Services (SaaS), Inc.
- Rex Boston Software as a Services (SaaS) Company
- Red Line Software as a Services (SaaS)
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is imperative to create a budget and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your Software as a Services (SaaS) company.
Here are some of the basic insurance policies that you should consider purchasing if you want to start your own Software as a Services (SaaS) company in the United States of America;
- General insurance
- Health insurance
- Liability insurance
- Workers compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
- E&O Insurance.
- Cyber Liability Insurance (Data Breach Insurance).
- Fidelity Bond Insurance.
- Employment Practices Liability Insurance.
Intellectual Property Protection/Trademark
IT professionals know that handing data over to a third-party is always risky, but Software as a Services (SaaS) creates unique concerns for clients. Protecting your intellectual properties can be stressful but in the modern world where ideas and patents are being stolen on daily basis you need to consider protecting your hard-earned intellectual property rights.
If you want to protect your intellectual properties; company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO.
Is Professional Certification Needed to Run a SaaS Business?
Aside from the results you produce, professional certification amongst key members of staff is one of the main reasons why some Software as a Services (SaaS) companies stand out. If you want to make an impact in the Software as a Service (SaaS) industry, you should work towards acquiring all the needed certifications in your area of specialization.
These are some of the certifications you can work towards achieving if you want to run your own Software as a Service (SaaS) company;
- SOC 2 – Trust (SOC 2 is designed specifically for SaaS operations)
- ISO 27001 – Information security management
- PCI DSS – Payment security (For all SaaS providers that handle card payments, PCI DSS is a legally required certification)
- ISO 22301 – Business continuity
- com Certified Professional — Salesforce.com
- VMware Certified Professional – Vmware
- Red Hat Certificate of Expertise in Infrastructure-as-a-Service — Red Hat
List of Legal Documents You Need to Run a Software as a Services (SaaS) Company
The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized. It is a fact that you cannot successfully run any business in the United States without proper documentations. If you do, it won’t be too long before the long hand of the law catches up with you.
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own Software as a Service (SaaS) company in the United States of America;
- Certificate of Incorporation
- Business License and Certification
- Business Plan
- Non-disclosure Agreement
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Consulting contract documents
- Apostille (for those who intend operating beyond the United States of America)
- VAT registration
- Federal tax identification number
Financing Your Software as a Services (SaaS) Company
No doubt when it comes to financing a business, one of the first things you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labour yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for startup capital for your Software as a Services (SaaS) company;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.
Choosing a Suitable Location for your SaaS Business
Software as a Services (SaaS) business does not necessarily require that you see physically with your clients hence it can be located anywhere since most of your business deals are conducted over the internet.
The fact that you can operate your Software as a Services (SaaS) company from your home does not mean that location has little influence on the success of your company. If you have taken your time to study the industry, you will realize that players in this industry are willing to pay expensive rents in order to stay in a busy business district or ICT hub; a place where business and ICT activities are at its peak.
It is important to note that a business facility in good location does not come cheap hence you should allocate enough fund for leasing / renting in your budget. You can to talk to a business consultant or a realtor to help you look out for a suitable company location.
Starting a SaaS Business – Technical and Manpower Details
It might interest you to note that Software as a Service (SaaS) is changing the way organizations work. SaaS products distribute data online to be accessible from a browser on any device, which allows those companies to continue to host the software and provide constant IT support.
This allows for stronger network security, greater collaboration, more features, and straight-forward, upfront prices. It’s the future, and companies developing SaaS are being prized now more than ever, as long as they can keep up their customer lifecycles.
When it comes to choosing between renting and leasing an office space, the size of the Software as a Service (SaaS) company you want to build, and your entire budget for the business should influence your choice. If you have enough capital to run a standard company, then you should consider leasing a facility for your office.
As regards the number of employees that you are expected to kick start the business with, you would need to consider your finance before making the decision. Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Software Developers, ICT Consultants, Business Development Executive / marketing Executive, Customer Service Officer or Front Desk Officer, and Accountant.
You would need a minimum of 8 key staff to effectively run a medium scale but standard Software as a Service company.
The Service Delivery Process of a Software as a Service (SaaS) Company
Software as a Service (SaaS) is changing the way organizations work. Software as a Service (SaaS) products distribute data online to be accessible from a browser on any device, which allows those companies to continue to host the software and provide constant IT support.
This allows for stronger network security, greater collaboration, more features, and straight-forward, upfront prices. It’s the future, and companies developing Software as a Service (SaaS) are being prized now more than ever. Some Software as a Service (SaaS) companies have stood out from the crowd this year as exceptional — which is a tough feat.
The distribution of power and storage capacity is often controlled by a backend software OS/system. The server admin would be able to log into the backend via terminal and check CPU load of all the machines, along with other vital system information.
This process is called virtualization which provides a layer of abstraction between the software and hardware components. Cloud server administrators can easily optimize the cluster for storage efficiency, optimal energy usage, data backups and more.
It is important to state that a Software as a Service (SaaS) company may decide to improvise or adopt any business process and structure that will guarantee them efficiency and flexibility; the above stated business cum services process is not cast on stone.
Starting a SaaS Business – The Marketing Plan
- Marketing ideas and Strategies
As a Software as a Service (SaaS) company, you would have to prove your worth over and over again before you can be awarded contracts from clients. So, if you have plans to start your own Software as a Service (SaaS) company, it will pay you to build first build a successful career in the ICT industry.
So, when you are drafting your marketing plans and strategies for your Software as a Service (SaaS) company, make sure that you create a compelling personal and company’s profile. Aside from your qualifications and experience, it is important to clearly state in practical terms what you have been able to achieve in time past as it relates to Software as a Service (SaaS) and the organizations you have worked for. This will help boost your chances in the market place when sourcing for Software as a Service (SaaS) contracts.
Please note that in most cases, when you bid for Software as a Service (SaaS) contracts from corporate organizations, you will be called upon to defend your proposal, and so you must be pretty good with presentations. Here are some of the platforms you can utilize to market your Software as a Service (SaaS) services;
- Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, small scale businesses and the international business community in the United States
- Promptness in bidding for Software as a Service (SaaS) contracts from corporate organizations
- Advertise your business in relevant ICT magazines, radio and TV stations (make yourself available for ICT related talk shows and interactive sessions on TV and Radio)
- List your business on local directories / yellow pages
- Attend international ICT expos, seminars, and business fairs et al
- Create different packages for different category of clients in order to work with their budgets
- Leverage on the internet to promote your business (when you blog regularly on key issues as it relates to your business, people who consider you an expert in the field)
- Join local chambers of commerce and industries around you with the aim of networking and marketing your services; you are likely going to get referrals from such networks.
- Engage the services of marketing executives and business developers to carry out direct marketing
Possible Competitive Strategies for Winning your Competitors
The Software as a Service (SaaS) industry is competitive, and you must come up with a unique and highly creative strategy to be able to outsmart your competitors in the industry. Part of what you need to do in order to stay competitive in the industry is to continue to make available safe, highly – secured, seamless and affordable services for your clients.
Organizations and people will always run to you if they know that you have a better option especially as it relates to producing results. Another strategy that you can adopt is to ensure that your organization is well positioned, key members of your team are highly qualified and certified ICT consultants.
Possible Ways to Increase Customer Retention
When it comes to business, no matter the industry that you choose to pitch your tent in, one of the easiest ways to increase customer retention and perhaps to attract new customers is to produce results and satisfy your customers always. If your customers are satisfied with your service delivery, they can hardly source for alternative service providers or products.
Statistics has it that one of the major reasons why clients source for alternative service provider or product is when there is a drop in quality. Another reason is poor customer service.
If you can continue to improve on the security of data in your care and your customer service delivery, then you won’t struggle to maintain loyal customers.
Part of what you need to do to achieve this is to track progress, results or outputs with the aim of improving on them quickly as the case demands. When it comes to managing your customers, and building loyal clientele base, you should purchase a customized CRM software.
With a customized CRM system, you can easily stay in touch with your clients (you can carry out quick survey, you can introduce new products and prices to them without any hitch, you can felicitate with them on their birthdays and other anniversaries, you can keep track of their progress, you can send bulk sms and customized e – mails and above all, you can easily receive compliant and feedback from them).
Strategies to Boost Your Brand Awareness and Create Your Corporate Identity
If you are in business and you are not deliberate about boosting you brand awareness and communicating your corporate identity, then you should be ready to take on whatever the society portrays your business to be. One of the secrets of larger corporations is that they are willing to spend fortunes to boost their brand awareness and to continue to communicate their corporate identity the way they want people to perceive them to be.
If your intentions of starting a Software as a Service (SaaS) company is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on promotion and advertisement of your brand.
In promoting your brand and corporate identity, you should leverage on both print and electronic media and also social media (the internet). As a matter of fact, it is cost effective to use the internet and social media platforms to promote your brands, besides it is pretty much effective and wide reaching.
Below are the platforms you can leverage on to boost your brand and to promote and advertise your business;
- Place adverts on ICT magazines and related newspapers, radio and TV stations.
- Encourage the use of word of mouth publicity from your loyal customers
- Leverage on the internet and social media platforms like; YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat, Badoo, Google+ and other platforms to promote your business.
- Ensure that you position your banners and billboards in strategic positions all around your city
- Distribute your fliers and handbills in target areas in and around your neighbourhood
- Contact corporate organizations, small businesses and the international business community by calling them up and informing them of your organization and the services you offer
- Advertise your business in your official website and employ strategies that will help you pull traffic to the site
- Brand all your official cars and ensure that all your staff members and management staff wear your branded shirt or cap at regular intervals.
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