3 Tips for Growing A SaaS Startup

The world is rapidly transitioning from traditional on-location server and software installations to a cloud-based setup. There are many advantages of working in the cloud (referred to as Software-as-a-Service or SaaS) including cost savings, access to advanced technical skills, efficient scaling and more rigorous security.

The compelling benefits, however, don’t mean that customers will come running to a SaaS product immediately when it is launched. After all, there are likely products in the market that do what the startup does. Growing the customer and revenue base, therefore, takes well thought out planning and execution.

Applying the following tips can substantially increase the startup’s odds of success.

  • Charge Early

In their quest to disrupt existing players and draw customers to their product, startups are often hesitant to charge customers. They anticipate that this will help their product gain market traction and a sizeable customer base that could generate substantial revenue when they do start charging for the service in the future.

The truth, however, is that many SaaS startups are often uncertain about their product’s viability and are thus prepared to retain millions of free users in the hope that within this customer base, there’ll be some serious ones who will be happy to pay for additional features. It’s a flawed strategy.

Users want predictability. If the product is free at the start, make sure it’s free for users indefinitely and seek other avenues of revenue generation (such as in-app advertising). Changing from a free to a paid model months or years later may be perceived as misleading. Charging from the beginning tests its viability against real market conditions.

Also, because the company will have some money coming in from the beginning, they reduce their risks. If it doesn’t work, the company will fail early and focus their time and resources on something else as opposed to wasting years on a product that will never take off the ground in the way they envisioned.

  • Identify and Focus on Targeted Customers

A company has already spent plenty of time and money to get their SaaS product ready. It’s tempting to subsequently throw their money at all the forms of advertising and marketing that they can afford. This is one of the main reasons startups fail.

The startup must recognize that it’s extremely unlikely that the entire world needs their product. Rather, there’s a certain user demographic or organization type that it most appeals to. Marketing to an audience outside this niche will be a waste of precious resources which, as a startup, are greatly limited.

To get the best return on company advertising campaigns, establish the profile of the average consumer interested in their product. That means narrowing down to age range, gender, location, needs, interests, type of business or profession, and budget. Conduct structured market research, speak to consumers and attend industry events.

Use analytical tools such as Google Analytics to track user behavior in terms of what pages they visit on the site and which pages they linger on longest. The startup could also get valuable information by studying who their established competitors market to.

  • Make The Pricing Model Transparent and Scalable

Complicated pricing can repel even the most enthusiastic users of a product. Consumers like knowing what value they are getting from a specific product for the amount of money they pay so they can be able to compare with what is available from the competition. Few will have the time to spend hours reading through the numerous layers and options of a convoluted pricing model.

Ergo, make the pricing model clear from the get-go. Before announcing the pricing plans to the public, get someone else such as a friend or focus group to take a look and judge how coherent and simple it is. Clear pricing allows users to predict their costs and therefore accurately plan their budgets. The company can streamline pricing and subscription by using a Saas subscription management software.

Growing a startup is hard relentless work. The above tips will help a startup focus on the things that will be the biggest drivers of their success.

Melissa Thompson writes about a wide range of topics, revealing interesting things we didn't know before. She is a freelance USA Today producer, and a Technorati contributor.