A profitable SaaS Product is the ultimate North Star for all that desire to pursue this model. But competition is stiff. It’s a race that few win while the majority gamble.
So, how exactly do you go about building a truly iconic SaaS product that grows to curve a name big enough to drown the competition?
The secret is to get the development process right, not necessarily perfect. And this is what we’ll be addressing here.
What is SaaS?
SaaS (Software as a Service) is a type of software that allows users to access and use the application over the internet. It's a web-based application that doesn't require any installation on the user’s computer. Instead, users simply log in and utilize the service using a web browser.
Because SaaS applications are hosted in the cloud, users can access them from anywhere with an internet connection. This makes them a perfect option for businesses or individuals that want to minimize their hardware and software investments.
Advantages of the SaaS Business Model
The greatest advantage of the SaaS business model is that it does not require investment on expensive devices or equipment to build and launch. All you need is the initial capital plus a highly skilled team of software developers and you are good to get into business.
Other advantages include:
- Global Market: You can sell your product to anyone, anywhere in the world without moving an inch or being restricted by state boundaries.
- Consistent Income: A SaaS product can generate consistent monthly revenue without changing anything safe for the routine maintenance here and there.
- Scalability: You can quickly scale the product to accommodate more users or introduce more revenue streams with additional features
- Data Security: Multi-level authentication ensures that your customers' data is secure.
SaaS Development Process Steps
That SaaS is a popular model is true. That is the bright side though. The ugly side is that developing a SaaS product can be a complicated process. There are a lot of steps to take, and even more things to consider. It’s easy to get overwhelmed and not know where to start. That’s where we come in.
We are elated to unveil the entire SaaS product development process, step by step.
Step 1: Define your target market
The first step is to define your target market. Ask yourself whether the world needs this product. It may seem obvious to you and your close friends, but your target market may not agree.
Who are you making this product for? Who is your ideal customer?
Once you have a clear picture of your target market, you can easily develop a product to fit their needs. This involves conducting research and surveys, as well as brainstorming and visualizing different ideas with your team.
Remember, it's important to stay focused on your target market throughout the entire development process. If you start making changes that don't align with your original vision, you run the risk of alienating your target audience.
Step 2: Scrutinize the regulations
You want to be 100% sure that you will be able to fulfill the legal requirements that apply in your target market. While the rest of the steps could be within your control, legal requirements are out of your hands, so you just have to comply.
Please don't rush into starting work on a product before you exhaust this step. Use the help of a lawyer who understands the requirements of that market. An example of such requirements is the GDPR (General Data Protection Regulation) for Europe.
Step 3: Define the problem
Too often, entrepreneurs rush into developing a product without taking the time to understand the problem they're trying to solve. This can lead to products that don't solve a real problem or, even worse, solve the wrong problem.
So, take some time to understand the problem you're trying to solve within your defined target market. Make sure the problem can be clearly defined, it should be a crystal clear problem.
What are people or businesses struggling with? What are their pain points? What are they unhappy with? Define the problem as specifically as possible and make sure it's something you're passionate about solving.
Step 4: Research the competition
Who are your main competitors? What do you want to offer that they don't? What do they offer that you don't? How can you differentiate your product and make it stand out in the market?
It's important to be realistic about this and understand that you won't be able to create a perfect product that does everything—you'll need to focus on what makes your product unique and appealing to your target audience.
Take a look at what others are doing and see what you can adapt or improve upon.
Step 5: Determine the pricing model
You can develop a great product but get it totally wrong on pricing strategy. So it's important to spend some time thinking about the pricing model that you would want to use. A pricing model that resonates with users might actually give you some edge over the competition.
Here are the common pricing models; pick one or try all then choose the one that sits well with your customers:
- Pay Per Active User: Have customers bring in as many users as they want, but only charge for those users that are actively using the product. A good example of a SaaS company that uses this model is Slack. You don't pay for inactive users.
- Pay as You Go: The more a user utilizes your product, the more they pay.
- Tiered Pricing: Offer different packages of features at different prices, mostly 3 packages i.e Low, Middle and High.
- Flat Rate: Offer one recurring price for the entire product with all features. Customers can choose monthly, quarterly or yearly billing.
- Freemium: Offer some features at no cost then combine this with additional or premium features at a price. This model is often used as part of the tiered model.
Step 6. Develop your MVP
A Minimum Viable Product (MVP) is the most basic, essential version of your product that will allow you to test your assumptions and get feedback from target users.
Keep in mind that your MVP doesn't have to be perfect—in fact, it shouldn't be, since you'll be using it to gather feedback and make changes.
Focus on building the simplest version of your product that still meets the needs of your target audience. You can always improve and add features later on.
Step 7. Validate your MVP
The next step is to validate your MVP with user testing. This is where you expose the product to your target users, get feedback about the feasibility of your SaaS product idea and the level of satisfaction they derive from it.
You can use this feedback to determine whether you should continue developing your product or pivot in a new direction.
It's important to remember that user feedback is not gospel—you still need to make decisions based on your own analysis and judgment. However, it's a valuable resource that should not be ignored.
Step 8: Develop
This is where the real work lies. Now that you have tested your MVP and assuming the reception is excellent at the MVP validation stage, it’s time to get down to work and develop the product. You can iterate the MVP if the reception was not good. Simply repeat the steps until you get an MVP that gives you confidence that the market is ready for your product. But for the purposes of this guide, we'll assume that the feedback is excellent:)
Here are the two items you must get right when preparing to develop the full SaaS product;
1. A great team
There are two main options to consider when determining how to build a team for your SaaS product. In-house teams are best for long-term projects, but outsourcing the project can have many advantages.
For starters, outsourcing reduces training and set-up time, while in-house development teams can develop early-stage concepts and refine them at a lower cost.
It is a bit easier to work with an in-house development team to jumpstart the process until you reach product-market fit.
Outsourcing is best when you are sure of what you want to get done, within what timeline and at what cost.
A glance at the basic team composition you will need:
- Software Developers: This the core team that will build the product ground up. Take some good time to discuss the product in entirety and ensure the big picture is clear to your developers. You can use your in-house team or outsource the work to a software development company.
- User Experience Designers: Unfortunately many ignore user experience but please note that this is a key component of the SaaS product development process. User experience can and often does make the difference between success and failure. Recruit a competent UX team.
- Sales & Marketing: However great your product is going to become, you will still have to invest in marketing and sales. It therefore makes a big difference to incorporate sales and marketing experts from the beginning. Their input will be valuable and timely.
Further reading: In-house vs. Outsourcing Software Development
2. Features & functionalities
Take time to outline the key features and functionalities that will define your product. This is ideally the product. It's the quality of features that define the quality of your product. Make use of the market surveys you already conducted in step one, as well as the feedback you collected at the MVP validation stage.
Again, focus on creating features that solve the problem you identified in your target market.
The 8 steps constitute the essential process of SaaS product development. But getting the final product out and right goes far beyond steps.
Let’s now shift attention to the important ingredients that you will need as well. We are talking cost, time, metrics, types of SaaS, challenges, etc.
How much does it cost to develop a SaaS product?
Depending on the features and functionality you want in your product, the total cost of development can run you anywhere from $35,000 to $80,000 or more. Some SaaS products can consume up to 1 million and over, especially if the product is commissioned by a big company with the intention of rolling out a massive product.
But it's important to remember that the cost of software development is only one part of the equation. There are other costs to consider, such as marketing, customer support plus ongoing maintenance and development.
How to estimate the total cost of developing your SaaS product?
One of the most important steps in estimating the cost of your SaaS application is to have a realistic idea of what you're trying to build. It's crucial to be as accurate as possible. You don't want to underestimate and end up overspending.
Consider the features and functionality you want your app to have. Other factors that can affect cost include the platform you choose, the size and complexity of your project, and the level of support and maintenance you require.
In order to get a realistic estimate, it's important to consider working with a SaaS costing expert. They will help you scope out your project and determine which features are most important. They can also give you an estimate of how long the project will take to complete, which will help you budget accordingly.
Summary of SaaS development costs
Here is a rough breakdown of the common SaaS development costs.
$100-$8000 depending on your product
Development (features and functionalities)
Design (UX and UI)
Maintenance and tracking tools
Approximate Total Cost
$35,000 — $80,000
SaaS Developers fees per region
If you are planning to outsource your SaaS development, here is a breakdown of the approximate developer fees across different regions.
|Region||Approximate developer fees per hour|
North America (US/Canada)
Asia (e.g India)
Please use these costs as a guide only and not the reality for what you intend to build. Matter of factly, the costs can go lower or higher. It all boils down to what you want to achieve.
Common types of SaaS applications
Here are the most common types of SaaS from which you can choose to build:
- Enterprise Resource Planning (ERP): ERP applications are used to manage and automate key business processes, such as accounting, HR, and logistics.
- Customer Relationship Management (CRM): CRM applications help businesses manage customer interactions and sales data.
- Enterprise Content Management (ECM): ECM applications help businesses store, manage, and share digital content.
Thousands of businesses are always looking for these SaaS products to help them manage their operations. Indeed, statistics show that 80% of businesses already use a minimum of one SaaS product.
SaaS metrics worth monitoring
When you’re first starting out, it can be tough to figure out which metrics you should track in order to gauge the success of your product. After all, there are a lot of potential metrics to choose from!
To make things a little bit easier for you, we’ve put together a list of the 7 key metrics you ought to track in order to make informed decisions about your SaaS product.
But first, what is a SaaS metric?
Definition of SaaS metrics
SaaS metrics can be defined as a set of items that reflect the performance of a SaaS product.
Why are SaaS metrics important?
SaaS metrics are important because they give you a snapshot of how your product is performing in the market. They can tell you how many customers you have, how much revenue you're generating, what your churn rate is, and so on.
Tracking these metrics over time can help you identify trends and problems early on, so you can take corrective action. Many of these metrics can be tracked using readily available tools.
The key metrics you ought to monitor in your SaaS product
While there is no golden standard for what metrics to track, these seven metrics are a good place to start.
- Monthly Active Users (MAUs): The total number of unique users that engage with your product from month to month.
- Churn Rate: The number of users/customers who end their subscriptions per month.
- Customer Lifetime Value (LTV): The total revenue that a single customer brings during the entire time they use your software.
- Customer Acquisition Cost (CAC): The total cost you incur to earn each new customer.
- Gross Margin: The total revenue that remains after you deduct all the costs associated with running and maintaining the product.
- Net Promoter Score (NPS): A measure of the satisfaction levels among your customers, determined by finding out the likelihood of your current customers recommending your product to others. .
- Monthly Recurring Revenue (MRR): The amount of revenue you can confidently expect to earn at the end of each month.
Overall, tracking your SaaS metrics is essential to the success of your business.
What are the common technical specifications of a SaaS product?
Here are the top seven technical specifications of a SaaS product that you need to take into account;
- Security: How secure is the product? Will customer data be safe?
- Scalability: Can the product grow with the needs of your target market? The product must be able to handle a large number of requests without causing any system-wide issues.
- Usability: Your product should be easy to use, with a simple and intuitive interface.
- Compatibility: Will the product integrate and work seamlessly with the current systems of your target customers?
- Reliability: How reliable is the product? Will customers count on it to accomplish their tasks?
- Capacity: How much data can your product store and manage?
- Flexibility: The architecture of the product should be able to support future changes and enhancements.
How long does it take to develop a SaaS product?
How long should you realistically expect it to take to develop a SaaS product? The answer is—it depends. If you have a well-defined idea and a team of developers who are familiar with your technology stack, it's reasonable to expect the development process to take around six months.
If you're starting from scratch, or you don't have a lot of technical experience, it's going to take longer. Give yourself a year to be safe. In fact the conventional wisdom is that it takes a SaaS company anywhere from 12 to 18 months to develop and launch a new product.
But remember, these timelines are just estimates. The most important thing is to start planning early and stay organized so you can hit your target release date.
There's a lot of variation in product development timelines, and the exact duration it will take you will be influenced by a number of factors, including:
- How well do you know your audience and what they want?
- How much will you be starting from scratch – versus leveraging an existing platform or code base?
- Are you developing in-house or leveraging an outsourced team?
- How complex is your product?
- Your timeline and deadlines also play a role.
Tips for speeding up the development process
There are a few things you can do to speed up the SaaS product development process:
- Plan: Make a solid plan and a well-defined scope by following the 8 steps. This will help you avoid unnecessary delays and make sure everyone is on the same page.
- Train: Make sure all your team members are adequately trained and up to speed on the project. Use effective communication tools like Slack or Asana so everyone can stay in sync.
- Get help: Don't be afraid to call in help when you need it—outsourcing certain if not all tasks can be a great way to get things done faster.
Common Challenges of SaaS Development
- Payment Integration: Your developers might encounter challenges integrating third party payment systems to your SaaS product. Sometimes they might need to keep switching between processors to find the right match or one that is easy to integrate.
- Legal Restrictions: Requirements such as GDPR are now becoming a big item that companies and developers must grapple with. You will need to incorporate the standards into your product to avoid setbacks when the product is already in the market.
- Sustaining Zero Down Time: Downtimes whether scheduled or unexpected are huge challenges in SaaS and you must address them if you want to develop a competitive product.
- Cyber Threats: While SaaS products are famed for being secure, the threat of cyber attacks is real. You will have to implement verifiable measures that guarantee users of their personal data security.
What is the Future of SaaS
SaaS is projected to take over as the future of software. The market continues to grow rapidly, so is the number of options. As more and more businesses adopt SaaS applications, providers will continue to innovate in order to stay ahead of the curve.
In short, the future is bright and anyone looking for an evergreen tech niche should definitely consider SaaS.
SaaS has quickly become the go-to business model. The benefits are clear – lower costs, faster time to market, good profits, and a lower risk for the customer. It can be a long and challenging process, but it's worth it in the end.
It's helpful to master and follow the development steps to avoid making mistakes. By being mindful of the steps and all the other factors outlined here, you can develop a super SaaS product and avoid any costly surprises down the road.
SaaS Development FAQ
How can I convert my app to SaaS model?
Use a migration expert to help you make the necessary adjustments and migrate your app to SaaS. Be sure to inform your users in advance of the plans to migrate and what this means for them.
How can you reduce the total cost of developing a SaaS application?
One way is to outsource the work to a SaaS software development company. This can significantly reduce the cost of development. By outsourcing the development process, you can also save on infrastructure and administrative costs.