Starting up a SaaS business today has become common practice in the IT world. As software keeps evolving, developers become more and more skilled, demand for new and advanced technology is constantly rising and new SaaS products come to life almost every day. Therefore, it goes without saying that the SaaS market is overcrowded with suppliers desperately seeking to outperform each other and gain market shares. In the 21st century, creating a successful and profitable SaaS business is a major challenge that entrepreneurs and businesspeople take on continuously.
Developing and offering software as a service originates back to the 1960s, where developers started forming the first ideas of cloud computing. Yet, the SaaS business did not experience major growth until the end of the 1990s, which makes it a quite young and rapid-growing business. With thousands of SaaS companies spread throughout the world today, competition in the SaaS market is stronger than ever. Customers often include a great amount of Millennials, whose demands and expectations are higher than those of the older generation. If your product isn’t up-to-date and doesn’t fit their needs, another product most likely will.
It’s a hard knock life for a SaaS
But why is it so difficult to compete in the SaaS market?
First, many suppliers means that there are many products that function just like yours. Being first mover or gaining monopoly on a product in the SaaS market is difficult, as almost every idea has been realized in some way leading to strong competition.
Second, you must always keep up with development and ensure that your product is not outdated. Technological advancement is an integrated part of the 21st century, which requires SaaS businesses to constantly think out of the box and keep up with competitors and new entrants.
Third, in an industry with high expectations and demands, it can be challenging to find the right customer fit. How to differentiate yourself from others and at the same time meeting the demands of your target group can lead you into wild guessing and fumbling in the dark, if you do not research and test your product continuously both before and after launching it.
Another important issue for a SaaS startup is funding. Nearly half of all SaaS startups are funded, which shows that most businesses believe funding plays an essential role in gaining a market advantage. Depending on your product and idea, funding can turn into a multi-million dollar feature that can provide you with what you need to take your SaaS to the next level. Sounds promising? Indeed. Yet, funding can also become an obstacle to being true to your original ideas and business model. Therefore, some businesses choose not to look for investors, as they wish to do things their own way:
“We want to be our own bosses and create our product the way we feel is right in line with our vision, ideas and goals. With funding, you are never your own boss, as the ones funding your product want a say in what they’re investing their money. Maybe they’ll want to follow a slightly different path than you and develop your product into something that’s against the foundation of your whole business.”
Mathias Aggerbo, co-founder of Smartplan (employee scheduling software).
Customer fit – tick tock!
Despite meeting the challenges that all other SaaS startups meet, the founders behind Smartplan fight for their product and the right market fit without the money from investors. With a crowded SaaS market, Smartplan has many competitors including many big players, who are funded with several millions. But what do you do when you’re a small, bootstrapped business fighting for your place in the SaaS market full of challenges? You use the resources at your disposal, you focus and you keep working – on your product, your new ideas and your customer relations. You continue testing your product and engaging with as many customers as possible. Accepting that the creation of a small business takes one customer at a time is key to keep it going. At the same time, you need to realize that your best chance at getting noticed is through happy customers, which largely depends on customer fit:
“The biggest challenge for the small SaaS startup is finding the right customer fit before you run out of money.”
Mathias Aggerbo, co-founder of Smartplan
In the end, only you know what’s right for your customers, because you’ve talked to and connected with them. Try not to focus too much on your competitors and spend your time finding that fit that brings you closer to your customers. Don’t give up because the challenges of starting up a SaaS business are many and big – the opportunities are just as many if you have just the right product.
by Maiken Bech Christensen