Every startup looks for ways to catapult a business to success. Here are ten tips for accelerating growth for SaaS (software as a service) companies.
1. Sell the problem, not the product
There are plenty of SAAS startups that do various things. Some succeed and others fall away because they can’t sell a solution. Focus on the problem.
Apple did this with the iPhone by focusing on the shortcomings of competitors and introducing the solution as something magical. Identifying pain points for customers and offering a solution will be what really makes you stand out amongst competitors. Not providing another product for something they don’t realize they even need.
2. Start charging early
SaaS startups are often hesitant about charging customers. They think that their product is not yet ready, that it’s necessary to get traction and focus on expanding their customer base rather than on growing revenue.
Deep inside, however, they often don’t just have enough faith in their product and are not sure if someone will buy it at all. They prefer keeping hundreds or thousands of free users attempting to win a few serious customers. Big numbers are comforting but the product remains an unverified idea.
Building a product should imply increasing revenue. So don’t hesitate too much—put it to the test by charging and see if it works in the real conditions. This is one way to minimize your risk too. Instead of waiting to launch until you’ve invested huge amounts of time and money, launch early. If you fail or discover that you need to pivot, you haven’t lost all your effort. This is a good way to validate that your idea has traction in the marketplace.
People truly value only what they pay for. And by paying, people demonstrate they recognize your value. By charging early, you will drive away freebie collectors but serious customers will stay with you.
3. Narrow down your customer acquisition efforts
Often, time, effort, and money don’t bring the desired results. In fact, this may be a targeting problem, not a product problem.
Not everyone on this planet needs your product—and that’s normal. So, trying to market to everyone and anyone is simply a waste of resources.
To achieve growth, you need to focus on a specific audience that is genuinely interested in your product value.
To identify your target market:
- Ask yourself questions about your typical user’s gender, age, geographic location, business nature, pain points, interests, budget, and so on.
- Research your competitors. Discover their keywords and ads for paid and organic search. You may use competitor analysis tools for this purpose, for example, SE Ranking.
- Determine who they are targeting and appeal to the same audience or concentrate on another group that your competition leaves out.
- Speak to people, attend your sector forums and events, and organize surveys and polls to narrow down your marketing focus.
- Use website analytics tools (Hotjar and Google Analytics, for example) to see what visitors view on your website, which pages visit, and what content they are interested in, which will help you to understand what they really care about.
All this will enable you to define your customer personas and focus on their specific needs.
4. Experiment with pricing
Your pricing should evolve as your company evolves; it is not a constant. You can test your copy around pricing; you may find that the price is right, but it’s not attached to the right value.
Only by charging money and split testing various pricing levels can you understand people’s perception of your product and their readiness to pay for it. Some great split testing tools include Optimizely and VWO.
Your optimal price is when you have:
- A relatively small percentage of people who complain that you are too expensive
- Another small percentage that doesn’t hesitate at all before paying
- The biggest category that says the product is quite expensive but they are ready to buy anyway because they see its value for their businesses.
In his book, “Selling the Invisible,” Harry Beckwith recommends raising prices until 15 percent to 20 percent of your qualified prospects resist this.
Generally, a higher price generates a perception of higher value. And people don’t price shop as much as you expect—they are well aware that something extremely cheap can’t be good and building good products inevitably involves costs.
Think of Apple products. They definitely don’t try to lower their prices. They use a WTP (willingness to pay) to form their pricing. This means they set prices according to the maximum that the majority of their target audience can pay, not the average and not the minimum. Of course, in this case, the product should really feel like a premium one.
5. Offer a transparent and easy-to-scale pricing model
Many SaaS businesses fail to acquire customers just because their pricing is too complicated.
Users simply don’t have the nerve to spend their time deciphering all options and layers in a messy presentation — so be clear. Ask your friends or a focus group to take a glance at your pricing page and evaluate its user-friendliness.
Also, it’s paramount to choose the right pricing model that enables businesses to predict costs and plan their budgets.
For example, some CRM companies adopt per usage model and charge based on the volume of their user’s customer base. This means that the more customers you acquire by using the software, the higher your bill is. But this is the goal of many businesses to have a lot of customers and gain more continually. Within this model, it’s difficult to foresee and plan costs.
Another example is per-user pricing which depends on the number of people using the software. This model is quite transparent and simple. The users on subscription enjoy an unlimited activity and the company can easily forecast costs.
Offering monthly, quarterly, and annual pricing can be beneficial. Your end goal to increase growth is to lock in customers for a longer period of time at the annual tier and phase out price-cutting promotions whenever possible.
Other SaaS pricing models include: per active user, flat rate, tiered pricing, per active user, per feature pricing, freemium, and so on. For more on this, check out The Ultimate Guide to Choosing a Pricing Strategy for Your SaaS Startup.
Additionally, pricing is one of the top website pages where visitors have questions. If you use a live chat, set up an automated proactive message offering help.
6. Listen to your paying customers
People may say all kinds of nice things about your product or service—that they like your product, that they’ll promise to buy it, and so on.
But listening to all voices is a risk. In particular, don’t base your business on free users’ feedback (if you have them) because it’s likely to lead you astray—you’ll be improving your product for the wrong audience.
Of course, provide the best support to all of your users but develop new features for those who take your product seriously and pay you—because they provide you with insights that truly matter. You needed this type of validation when starting your business, and now it’s about repeating that process consistently to maintain and grow a target market.
7. Make big customers comfortable with your pricing
If you want to gain high-profile customers, your product shouldn’t be embarrassingly cheap for them. Imagine an industry leader using a piece of software that costs five bucks!
Moreover, a low price creates an impression that your software is not fully reliable and your business may fold up at any moment.
Big players are careful in their choices: in addition to a great feature set, they expect impeccable service, accountability, security, maximum uptime, and so on — and are ready to pay for all that.
That’s why it’s advisable to add Enterprise pricing plans from the start. Even if your product is not yet ready for the Enterprise segment, you’ll be able to collect the requirements and expectations of the big buyers.
High-profile clients may also be looking for flexibility, think about providing custom pricing options to be able to satisfy their particular needs.
8. Exploit paid growth tactics
Some startups lose steam if they struggle to achieve quick growth — but sometimes their real problem is a lack of proper promotion.
Don’t fall under the illusion that word of mouth and organic growth is enough. Marketing plans and strategic sales initiatives are what make businesses actually grow.
It can seem like businesses everywhere are effortlessly scaling quickly to million (or billion) dollar revenue. Keep in mind that you’re looking at their growth from the outside — most likely, they’ve been on a strategic growth trajectory for years. In general, having a great product doesn’t mean marketing is redundant.
Paid digital marketing platforms are a good place to start. Use Google AdWords, Facebook Ads, and LinkedIn Ads, and run remarketing campaigns in Google and Facebook. People usually read reviews before purchasing anything so you can buy traffic on popular software review platforms like Capterra, GetApp, or G2Crowd. Also, consider using GDN — it has over 2 million sites and reaches over 90 percent of people on the internet.
You can read more about the various paid growth techniques here.
9. Partner with competitors
For early-stage SAAS startups, you may have plenty of smaller competitors and 1-2 larger established competitors.
Rather than fighting over an ever-shallowing pool of customers, it may be worth connecting with the competition to take on the big players. Sometimes combining forces can make for a larger impact and faster growth.
10. Create great content
One of the most effective ways to get noticed in a competitive space is by giving out valuable but free information.
Write about what you know, your solution, and the industry you’re looking to revolutionize. Presenting your audience with great content will help win their attention and respect.
Growing a strong SaaS startup requires faith in your product, great flexibility, and smart market positioning.
The above tips will help you win over the right type of clientele, boost their perception of the value of your product, collect relevant feedback for better strategic decisions, effectively manage your sales funnel, and establish yourself as a thriving business much faster.
Editors’ note: This article was originally written in 2018 and updated for 2020.
I am a passionate blogger, content marketer, and artist. Love sharing my experience and knowledge about customer success, ecommerce, content marketing, and startups. Feel free to contact me via email at email@example.com, or on LinkedIn.
How do I get my first 100 customers in SaaS? ›
- #1 Start with your network. ...
- #2 Establish your social media presence. ...
- #3 Gather Customer Data. ...
- #4 Use Affiliate Marketing. ...
- #5 Leverage your outreach efforts.
- Devise a UI/UX Strategy. ...
- Find What Makes You Unique. ...
- Plan a Long-Term Business Model. ...
- Focus on Value Instead of Cost in Competition.
The Rule of 40 is a principle that states a software company's combined revenue growth rate and profit margin should equal or exceed 40%. SaaS companies above 40% are generating profit at a rate that's sustainable, whereas companies below 40% may face cash flow or liquidity issues.What are the top 3 most important aspects of SaaS? ›
- - Multi-tenancy model.
- - Automated provisioning.
- - Single Sign On.
- - Subscription based billing.
- - High availability.
- - Elastic Infrastructure.
- - Data Security.
- - Application Security.
- CAC:LTV Ratio.
- Monthly unique visitors.
- Conversion rate.
- Lead velocity rate.
- Customer satisfaction score.
- Net Promoter Score.
- Response time.
- Resolution time.
Stated simply, the Rule of 50 is governed by the principle that if the percentage of annual revenue growth plus earnings before interest, taxes, depreciation and amortization (EBITDA) as a percentage of revenue are equal to 50 or greater, the company is performing at an elite level; if it falls below this metric, some ...What are the 5 key security elements of SaaS model? ›
- Access management. Access management is critical for every SaaS application due to the presence of sensitive data. ...
- Misconfigurations. ...
- Regulatory compliance. ...
- Storage. ...
- Retention. ...
- Disaster recovery. ...
- Privacy and data breaches.
- Send outreach emails.
- Send follow-up emails.
- Get on the phone with potential clients.
- Respond to inbound inquiries.
- Research local business meetups.
- Attend local meetups.
- Interact in social media groups.
- Send hand-written mail.
- Educate via Video. Video marketing isn't just a trending digital marketing strategy, it's a solid way to boost customer engagement. ...
- Gather (and Listen) to Feedback. ...
- Engage in Live Chat. ...
- Utilize Gamification. ...
- Re-engage via Web Push Notification.
- Clearly Define Your Ideal Customer. ...
- Set SMART Goals. ...
- Determine The Best Acquisition Channels For Your SaaS. ...
- Publish Relevant, Useful Content. ...
- Ask For Referrals. ...
- Tap Into Your Network. ...
- Build A Community Around Your Product. ...
- Invest Into Email Marketing.
What are the 4 growth strategies? ›
The four growth strategies
These are Product, Placement, Promotion and Price. Where the Four Ps focus on audiences, channels & pricing, the Ansoff Matrix is more effective for a broader view of markets and uses the older Four P framework within each of the 4 Ansoff quadrants.
- Market penetration. The aim of this strategy is to increase sales of existing products or services on existing markets, and thus to increase your market share. ...
- Market development. ...
- Product development. ...
Four generic business-level strategies emerge from these decisions: (1) broad cost leadership , (2) broad differentiation , (3) focused cost leadership , and (4) focused differentiation . In rare cases, firms are able to offer both low prices and unique features that customers find desirable.What is rule of 70 SaaS? ›
The rule of 70 is a calculation to determine how many years it'll take for your money or an investment to double given a specified rate of return. Investors can use this metric to evaluate various investments including mutual fund returns and the growth rate for a retirement portfolio.What is the magic number in SaaS? ›
The SaaS magic number is one of the best ways to calculate your sales efficiency. The formula to calculate the SaaS magic number is “(Current Quarter ARR – Prior Quarter ARR) / Prior Quarter Acquisition Spend.”What is a good monthly growth rate for SaaS? ›
According to a study by Bessemer Venture Partners, the average monthly growth rate for successful SaaS startups is 7-8%. This means that a company's revenue is increasing by 7-8% each month.What is good growth for SaaS? ›
SaaS company growth rate depends much on a company development stage. On average, the revenue increase falls into the 15% to 45% year-to-year growth range.What makes SaaS attractive investment? ›
Investors like SaaS companies because their subscription fees, which recur every month or year, make the revenues predictable. Well-run SaaS companies are also inherently scalable, as the cost of serving each customer goes down as SaaS companies grow.What are the 2 basic components of SaaS? ›
The essential SaaS components are: CRM system. Marketing automation.What are the 7 key performance indicators? ›
- Engagement. How happy and engaged is the employee? ...
- Energy. ...
- Influence. ...
- Quality. ...
- People skills. ...
- Technical ability. ...
What are the 5 key performance indicators? ›
- Revenue growth.
- Revenue per client.
- Profit margin.
- Client retention rate.
- Customer satisfaction.
The Rule of 40—the principle that a software company's combined growth rate and profit margin should exceed 40%—has gained momentum as a high-level gauge of performance for software businesses in recent years, especially in the realms of venture capital and growth equity.What is the SaaS rule of 78? ›
78 is the magic number when it comes to SaaS, to predicting the MRR (monthly recurring revenue) you need to keep hitting month-in-month-out to reach your ARR (annual recurring revenue) goal for the next year. Simply subtract your target ARR from your last year's ARR and divide by 78. It really is that simple.Is a 40% EBITDA good? ›
It takes into consideration growth and profit. In terms of interpreting the rule, 40% is the baseline figure where the company is deemed healthy and in good shape. If the percentage exceeds 40%, then the company is likely in a very favorable position for long-term growth and profitability.What is a good EBITDA for a SaaS company? ›
This number is a well-known figure in the SaaS Industry that assesses the health of your SaaS Business. The formula says that if you add together your revenue growth rate and EBITDA profit margin, and if their sum equals more than 40%, your company is healthy and doing well.What is the most important barrier to SaaS? ›
Lack of adoption strategy. A lack of a clear adoption strategy and budget is the single biggest reason that businesses fail to make the most out of SaaS, and ultimately lose money.What are the six pillars of security? ›
The article goes onto reference pseudonymisation, encryption, confidentiality, integrity, availability and resilience.What are the 3 pillars of security? ›
The Three Pillars of Security: People, Processes, and Technology.What are 4 ways to attract customers? ›
- Ask for referrals. ...
- Network. ...
- Offer discounts and incentives for new customers only. ...
- Re-contact old customers. ...
- Improve your website. ...
- Partner with complementary businesses. ...
- Promote your expertise. ...
- Use online reviews to your advantage.
- Offer quality products. Good quality is the most important reason cited by consumers for buying directly from farmers. ...
- Cultivate good people skills. ...
- Know your customers. ...
- Use attractive packaging. ...
- Let customers try samples. ...
- Be willing to change.
What words attract customers? ›
- Define clear expectations.
- Provide an “aha” experience.
- Contextualize your offering.
- Offer connected upsells.
- Create a communication schedule.
- Keep your product current.
- Go above and beyond.
- Consider a rewards program.
- Shorten your trial periods.
- Optimize your email campaigns.
- Upsell like a pro.
- Offer annual plans at a discount.
- Learn from failed conversions.
- Align around retention.
- Prioritize onboarding.
- Help customers succeed.
- Reduce involuntary churn.
- Deliver exceptional support.
- Optimize pricing.
- Offer seamless billing.
- Leverage metrics.
- Accessibility: Ability to run via an internet browser 24/7 from any device.
- Operational Management: No installation, equipment updates or traditional licensing management.
- Cost Effective: No upfront hardware costs and flexible payment methods such as pay-as-you-go models.
Customers want to see more features that meet their needs appearing on a regular basis. The more they have to leave your product to use other features that should be intuitive, the more likely they are to abandon your product for one that has those features built in or integrated with another tool that does.What are the top challenges facing a SaaS industry? ›
- Commoditization of SaaS. ...
- Market consolidation. ...
- Usage-based pricing and monetization reengineering. ...
- Hybrid work and dispersed team management. ...
- Service decentralization and unbundling. ...
- Privacy and compliance changes.
Acquiring new customers in existing markets.
- Creating new products and services.
- Developing new value-delivery approaches.
- Moving into new geographies.
- Creating a new industry structure.
- Opening up new competitive arenas.
Using these ideas, Rostow penned his classic Stages of Economic Growth in 1960, which presented five steps through which all countries must pass to become developed: 1) traditional society, 2) preconditions to take-off, 3) take-off, 4) drive to maturity and 5) age of high mass consumption.What are the 5 phases of growth? ›
- Phase 1: Growth Through Creativity.
- Phase 2: Growth Through Direction.
- Phase 3: Growth Through Delegation.
- Phase 4: Growth Through Coordination and Monitoring.
- Phase 5: Growth Through Collaboration.
- Phase 6: Growth Through Extra-Organizational Solutions.
What are the three pillars of growth? ›
Enterprises stepping into the self-serve space and launching their growth practice need to first build a strong foundation on three pillars: technical, organizational, and operational. Each of these pillars plays a specific role, and each can only drive desirable outcomes if the other two are in place.What are the 3 important focus areas to achieve profitable growth? ›
- 1) Introduce new products or services to the market. ...
- 2) Expand an existing market. ...
- 3) Increase share in a growing market. ...
- 4) Compete for share in a stable market. ...
- 5) Acquisitions.
This is the lowest risk and potentially easiest growth strategy. It involves growing the sales of your existing product in your existing market.
Each of the five P's represents a distinct approach to strategy. This includes Plan, Ploy, Pattern, Position and Perspective. These five elements enable a company to develop a more successful strategy.What are the 7 elements of strategy? ›
- Step 1: Environmental Scan. ...
- Step 2: Internal Analysis. ...
- Step 3: Strategic Direction. ...
- Step 4: Develop Goals and Objectives. ...
- Step 5: Define Metrics, Set Timelines, and Track Progress. ...
- Step 6: Write and Publish a Strategic Plan. ...
- Step 7: Plan for Implementation and the Future.
- Set Clear Goals and Define Key Variables. ...
- Determine Roles, Responsibilities, and Relationships. ...
- Delegate the Work. ...
- Execute the Plan, Monitor Progress and Performance, and Provide Continued Support. ...
- Take Corrective Action (Adjust or Revise, as Necessary)
So how do you actually get the first customers for your SaaS? You can begin by contacting people from your network: friends, acquaintances, current and former co-workers, and ask them for introductions. Let them know when the product is ready and offer to help them with a demo.How do you keep a SaaS customer happy? ›
- Define clear expectations.
- Provide an “aha” experience.
- Contextualize your offering.
- Offer connected upsells.
- Create a communication schedule.
- Keep your product current.
- Go above and beyond.
- Consider a rewards program.
- Make a list. ...
- Look for referrals. ...
- Work your network. ...
- Show it off. ...
- Attend industry events. ...
- Team up with other business owners. ...
- Build an online presence. ...
- Spread the word on social.
- Identify Qualified Prospects. ...
- Give Short and Value-Focused Demos. ...
- Optimize your Email Campaigns. ...
- Show Customer Pain Points. ...
- Keep your Trials Short. ...
- Reward your Existing Customers. ...
- Upsell and Cross-Sell your Existing Customers. ...
- Show Customer Success Stories.
What does rule of 40 mean? ›
The Rule of 40—the principle that a software company's combined growth rate and profit margin should exceed 40%—has gained momentum as a high-level gauge of performance for software businesses in recent years, especially in the realms of venture capital and growth equity.What is the rule of 40 formula? ›
The rule of 40 formula requires just two inputs, growth and profit margin. To calculate this metric, you simply add your growth in percentage terms plus your profit margin. For example, if your revenue growth is 15% and your profit margin is 20%, your rule of 40 number is 35% (15 + 20) which is below the 40% target.What is a good yoy for growth? ›
Growth rate benchmarks vary by company stage but on average, companies fall between 15% and 45% for year-over-year growth. Businesses with less than $2 million in annual revenue generally have much higher growth rates according to a Pacific Crest SaaS Survey.Is 3% a good growth rate? ›
Good economic growth can vary, but typically falls within two to four percent. This means that even if a company is only growing five percent a year, it could still have a good growth rate compared to other businesses.Is a 15% growth rate good? ›
In general, however, a healthy growth rate should be sustainable for the company. In most cases, an ideal growth rate will be around 15 and 25% annually.