4 important factors to watch that make a successful SaaS business

| Last Updated: May 26, 2017 |

Reading time: 3 minutes


Running a SaaS business means radically shifting from the standard practices of traditional software vending and adhering to new principles. Understanding your customers can mean the difference between being hugely successful or barely making it. What factors make for a successful SaaS company?

The cradle of SaaS success is understanding your market and monitoring the value you provide customers. Below are four things you should watch for to make your SaaS business successful.

Study the Sales Learning Curve

Study the Sales Learning Curve (SLC) and only invest behind success. Most software businesses fail because the founders invest too fast in their sales efforts before they have refined their sales model. Given the large upfront costs of acquiring customers, you will burn precious cash reserves and sink the ship if you ramp too quickly.

When you have a sizeable customer base, you can have dedicated teams for acquiring new customers and nurturing existing ones. Both teams are crucial for the health and growth of your business. To be profitable, you want to lower churn and continuing signing up new customers.

Savvy online marketing is a must

SaaS services are meant to be accessed via the Internet. Therefore, expect your customers to be online savvy. According to a report by PWC, 83 percent of US online consumers research products before buying. Numerous studies have also confirmed that buyers research online before they buy.

This being the case, you should be more aggressive with your online marketing efforts. Creating content that educates, entertains and inspires your target market helps to build trust and position your company as an industry leader. Hubspot is a great example of a SaaS business that aggressively markets its services through inbound marketing. When customers understand how they can benefit from your service and trust your brand, they will buy from you.

Software isn’t “service”, it’s “support”

The SaaS business model is different from traditional software vending and transition from the latter to the former can be challenging. One of the reasons why most SaaS businesses fail is failing to provide adequate customer support. Unlike traditional software where creating a great product will get your customers happy, SaaS comes with the challenge of offering constant support.

Multi-user groups may be using your platform and this means extended support hours, sales and call center technical staff, online chat and email support are all required. Users may want to use your application on different desktop and mobile devices, operating systems, and other potentially conflicting software. To be successful, build your business for end user support and inculcate a culture of customer service.

If you are operating a SaaS business, success can be determined by a number of things that are more about your support than your product.

Check the 6Cs of cloud finance

Your business should be guided by the 6Cs of cloud finance. These metrics indicate the health of the business, churn rate and revenues. The 6Cs are Customer Life Time Value (CLTV), Customer Acquisition Cost (CAC), Churn, CMRR Pipeline (CPipe), Cash Flow, and Committed Monthly Recurring Revenue (CMRR).

Some businesses watch vanity metrics and are surprised when their ships start to sink. An example of a vanity metric is free users who have no intention of purchasing your service.

The above are four things you should watch when running your SaaS business. Which one are you missing?

Author of the post

John Solomon

Marketing Leader / Sales Enabler. Head of India Operations for @Infrascale / @sosonlinebackup.

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