How to build a SaaS business model

If you found yourself here on this page, most likely either now or at some point in the past, you thought about creating your own SaaS company. Just like with any business in today’s realities, success mostly depends on how well you build and implement your business model.

With SaaS companies, it’s the same. If you want to know how to build a SaaS business model, you will definitely need to understand the intricacies of SaaS design and development, how to study your market, and choose the right technology for the development process, etc.

To provide a little guidance, we’ve created this article outlining the steps necessary for building and launching a new SaaS product.

For more information and inspiration, check out one of our recent publications on designing the best SaaS products.

Identifying your market

Once you embark on the journey of building your own Software-as-a-Service business, identifying your market is an essential step that requires meticulous planning and execution. It involves going through the process of analyzing your target audience, identifying the competition, and creating a comprehensive business plan that outlines your main strategies.

Research your target audience

Before you even begin building your SaaS business model, you have to know who your target audience is and what drives it in the first place. This knowledge alone can help you tailor your product and marketing efforts to meet the specific demands of your future customers.

Use data-gathering techniques like surveys, social media analysis, focus groups, or one-on-one interviews to gain insight into your audience’s pain points, needs, and desires. You should mainly focus on demographics, user behavior, and product selection preferences.

All you have to do afterward is to carefully analyze the data you’ve collected. Look for patterns and trends that can accurately depict how your potential customers think and feel.

Research competing businesses

Next thing you should focus on is getting acquainted with your competition. This step will help you understand the market better, if and how your product will fit in, etc. Competitive analysis will show you what products and services other businesses offer, pricing strategies, and marketing efforts.

It’s always easier to learn from other people’s mistakes. You can also learn from their successes. If a competitor’s product is doing great, study why that happened and what the company did to achieve it. Similarly winning strategy is understanding your competitors' strengths and weaknesses.

To research competing businesses, use various techniques such as studying their websites, analyzing their social media channels, and reading customer reviews. Also, knowing more about the prices of similar products can help you determine your product's optimal price point.

Create a business plan

The final part of the preparation process before actually developing your SaaS product is crafting a comprehensive business plan. It will provide some guarantees that your product is launched successfully and generates revenue. A well-written plan should include product features, a sales strategy, and an effective marketing plan to promote your product.

The sales strategy will clearly define the steps you will take to promote the product and drive customer acquisition, while the marketing plan will help ensure your product gains traction in the marketplace.

The former has to include a pricing structure and a sales funnel, while the latter should make you identify your product’s unique selling proposition (USP) and use it to create a compelling marketing message that resonates with the target audience.

Want your SaaS to attract, engage, and keep users?

Merge is here to help.

Learn more

Developing your SaaS product

Now that you have studied your market and you’re moving closer to developing your SaaS product, the next thing to do is to plan, design, and implement your solution. It’s a pretty complex yet rewarding process, and we want to delve deeper into topics like planning your solution, selecting the right technology, and designing your application and architecture.

Plan your solution

Here are some key steps to keep in mind when planning your SaaS solution:

• Define the problem your product will solve or a need it will satisfy. Previous target audience research will help you with that. Find gaps in the market and fill them.
• Create a clear value proposition that highlights the unique features and benefits.
• Determine the deployment model, the scalability options, and the data storage and backup strategies.

Choose the right technology

The next step is to determine the right architecture for your SaaS product. For that, you should decide on the technology stack that will be used to build the product and ensure that it can handle the expected traffic and usage. A few tips:

• Consider the scalability. Since most SaaS products are designed to be used by a large number of customers, the tech stack that you choose should be able to handle them all. The key here is to choose the one that can scale horizontally and vertically, is optimized for performance, and is flexible enough to support new features and functionalities as the product evolves.
• Pay attention to security. With the increasing number of cyber threats, select a technology stack with robust security features to protect the product and the user's data, such as secure communication protocols, data encryption, effective access control, and authentication mechanisms.
• The tech stack should also align with the skillset of your development team. Check if your developers have the required expertise to work with it.
• Consider the availability of resources supporting the development process, including libraries, frameworks, and other development tools.
• And last but not least - the cost. Choose a stack that offers a good balance between cost and functionality. While it may be tempting to opt for the most advanced and expensive technology, it is important to evaluate the cost-benefit of the technology in terms of the expected revenue of the SaaS solution.

Design your application and architecture

Finally, design your solution and build its architecture. First, define the architecture. You’ve already decided on the programming languages, frameworks, libraries, and databases your team will use.

Now, the architecture should be built to support all your product’s functionality, which means it should be modular and flexible, allowing you to reuse code, easily add or remove components and modules, and adapt to changing business needs.

Later, design a consistent and user-focused user interface and user experience (UI/UX) of your product that is intuitive and easy to navigate. Conduct user testing and iterate on the design to ensure that it meets the needs of the target audience and aligns with the product's goals.

Lastly, don’t forget to create a roadmap that outlines the development process and timelines for the SaaS solution. You can break down the project into specific milestones, set realistic deadlines, and then determine the required resources (a.k.a. your team members and funding) and allocate them accordingly.

Pricing and packages

The following step in building your SaaS business model is determining the optimal price range and packaging options. One excellent approach is to use a value-based pricing model. It involves assessing the value your product brings to the customer.

If you choose this approach, analyze the customer's willingness to pay, the cost of alternative solutions, and the value of your software in relation to the customer's business goals. Then price your product according to its perceived value rather than the cost of production.

Another consideration is the packaging of your software. Offering different packages or tiers will help you cater to different customer needs and budgets. Each package should offer a unique value proposition - higher tiers offering more features and benefits, encouraging customers to upgrade as their needs grow.

Remember - pricing and packaging should be flexible and adaptable. Your pricing and packaging should also change as your business and customer needs evolve. Occasionally offer promotional pricing, seasonal discounts, and limited-time offers as well.

Customer acquisition

Finally comes the time for the customer acquisition process. You now need to build an online presence that attracts, engages, and converts your customers into long-term clients. That can be achieved by creating a website that stands out, establishing a nice social media presence, and working on your SEO strategy.

Build a website

Build a website that centers around two key factors - user experience and your brand identity. It has to stand out in a sea of competitors as well. Otherwise, it’s just going to be another SaaS product in the market of similar SaaS products.

At Merge, we focus on usability, visual appeal, and functionality by:

• Simplifying navigation;
• Using clear and concise language;
• Creating visually appealing designs that are consistent with your brand;
• Ensuring that your website is fully responsive;
• Optimizing for all devices and screen sizes;
• Including features such as search functionality and easy-to-use forms.

Establish a social media presence

Creating an effective social media presence involves all the knowledge you’ve collected about your target audience. One key factor is choosing the right social media platforms for your business.

Use the research of the demographics and behaviors of your target audience and identify which platforms they are most active on. For example, if your target audience is primarily professionals, LinkedIn may be a more effective platform than Instagram. For a younger audience, you might want to use TikTock as well.

Once you have chosen the platform, try creating valuable and engaging content. For that, share blog posts, videos, infographics, and other content that provides value to your audience, and then track and analyze your social media metrics to measure your strategy’s effectiveness.

Develop and implement an SEO strategy

One last step, and you’re good to go. So, SEO, or search engine optimization, involves optimizing your website and content to rank higher in search engine results pages (SERPs). Use relevant keywords to increase visibility and get higher click-through rates and, in turn, more conversions and revenue.

First, conduct keyword research to identify the keywords and phrases that your target audience is searching for. Focus on the search volume, competition, and relevancy to your business.

Then do an on-page optimization of your website's content and structure to make it more search engine-friendly - manage your website's meta descriptions, title tags, header tags, and image alt text.

Off-page optimization is crucial too. Build high-quality backlinks to your website from other authoritative websites. By acquiring links from reputable sources, you can signal to search engines that your website is valuable and trustworthy.

Want your SaaS to attract, engage, and keep users?

Merge is here to help.

Learn more

Conclusion

Since most modern successful SaaS businesses are built on a foundation of in-depth market research and a thorough understanding of customer needs and preferences, you can only make your business more profitable by leveraging the proper techniques. One of these techniques is a thoughtful building of your SaaS business model.

All the elements of the SaaS business model building we’ve discussed today form the foundation of your product and play a crucial role in determining its success. Set on guiding you through each step of the process and offering insights into best practices and expert advice, our main goal was and still is to help you craft a robust and scalable SaaS product.

We believe you can do it in no time with the right mix of technical know-how and creativity. Join us on this exciting journey, and together with Merge, build a product that will disrupt the industry and leave a lasting impact on your customers.