Every business needs a strategy that lays a strong foundation for success. For a Software as a Service (Saas) business, a solid business plan is critical for success. With a clear vision and clear objectives, business goals can be achieved faster and get desired results sooner.
50% of companies are not expected to survive more than five years (smallbiz).
However, companies with a complete and thorough business plan are 50% more likely to grow past the initial stages and grow into successful businesses (Onix).
Increase the odds of business survival by having a comprehensive business plan that will compete with the best out there.
Having an accurate understanding of the market, consumers, competitors, and cost for a startup is crucial to having a successful company that investors and lenders can see the value in what is being created and offered. With a good business plan, companies have a greater chance to secure a loan and acquire investment capital.
Without one, an investor or financial institution will not have the confidence to partner with the SaaS company.
Getting a Saas Business Plan into Focus
For a software as a service company, taking the time to brainstorm and flesh out the entire plan strategically will increase the visibility of potential strengths and weaknesses that need to be refined to achieve goals and increase the odds of success. More than just being marketable to investors, a company needs to have a clear vision and objectives for operations to move forward efficiently and effectively.
While all startups need a business plan, and most business plan components are universal across industries, a SaaS business plan must have a higher focus on customer acquisition and financial planning. A good SaaS business plan aims to demonstrate the company’s profitability, and a detailed document demonstrates that fully.
Key Focus for a SaaS Business Plan
There are unique factors a SaaS business plan should address. These will be key features that partners, investors, and lenders look for when deciding to become involved and invest in a SaaS company.
Strategy
Having a clear grasp of the business strategy will help push clarity to the forefront and keep the team on the same page.
- What services are offered?
- Are there free trials
- What about beta testers?
- Will there be free options and premium options?
- Will pricing tiers be offered?
- Are add-on services part of the strategy?
Brainstorming questions and answers related to the product, consumer, and marketing will help create and detail a strategy for getting the specific product to the optimal consumer in the most effective way.
Market Research
Knowing the customer, who they are, what they like, and what marketing will attract them is the key to success. Without a customer, there is nothing to sell. Knowing the customer and having a deep understanding of them will also help fine-tune the software as a service product and potentially develop more. Taking the time to evaluate the market and the customer will help a SaaS business develop the ideal product and help assess how to market that product to get in front of the customer.
It is also essential in market research to know the industry and the competitors. Identify the niche and analyze the competitors. Knowing who the competition is and what they offfer will help streamline the product being presented, and it will help in having a unique marketing strategy that no one is offering yet. This research will also help create accurate market projections and analyses.
Customer Acquisition Plan
Though the product may be exceptional, it is important to know how to get the product in front of the target audience that will generate sales. This takes market research and having a marketing plan thought through. A marketing plan is based on understanding potential consumers and knowing how to reach and engage them, ultimately converting them into paying clients.
A marketing plan will also detail what the best sales channels are. It will help define what type of promotions and advertisements are needed and what kind of professional networks and social media platforms should be utilized.
Customer Retention Plan
Making a sale from a customer is only a piece of the puzzle. Keeping those customers by earning their loyalty is crucial for the continued health of the company.
Without a customer, there is no company, at least not a successful one. The goal of customer retention is to be build relationships with current customers and maximize the revenue from each customer.
A customer base is the greatest asset to a company; they are the source of income. Have a plan of how to focus time and energy on improving customer satisfaction.
Cash Flow
All companies must have a solid financial plan, but for a SaaS company where customer acquisition is high, it is imperative to have enough cash to fund such a venture.
Financing requirements for a Software as a Service (SaaS) business are considerably different from a traditional company. Because of the subscription-based model, the revenue takes longer to match and outpace expenses, especially at the beginning. Having a plan for enough cash flow is imperative.
Lack of accuracy, overly optimistic financial forecasting, and not streamlining and optimizing expenses (Quaderno) in cash flow planning can break a company regardless of a fantastic product and the best-paid business plan. Knowing where and when the money is coming from, having appropriate funding, and keeping costs as low as possible is the lifeblood of an adequate cash flow for a SaaS company.
SaaS Business Plan Template
Traditional business plans are focused on in-depth information about the product and the consumer and tends to have any and all information relating to the business, and .
A lean business plan is ideal for SaaS startups is ideal because software service companies are usually in the early stages of development with potential changes to their product over time. A lean business plan accommodates the variety of offerings that a SaaS company thrives off of and leaves room for changes that will eventually happen. A lean business plan requires less time and detail though it must communicate the plans and future business accurately.
Regardless of the business plan template chosen, the goal is to be concise and critical about the business and its future projections. It is a document that will help align vision with action.
Here are important elements for a business plan:
- Executive Summary: give a brief overview of who the company is and why the company is valuable. The executive summary should summarize the overall business plan in one page. Readers should understand the mission, the problem, the product, and projections and why this company is the best solution.
An excellent executive summary can double as a stand-alone document sent to potential investors and partners. This one-page document should clearly and concisely communicate the who and the what of the SaaS business.
- Company Description: explain the goals and mission of the SaaS company. With a short overview, cast a description of who the team is and what the company will do. This is the place to make the company shine by highlighting its strengths and showcase why this team of experts is the team to take this problem and product head-on.
- The Target Market: detail who the customer is and how the company is going to reach them. Market research is key to identifying the ideal customer. Knowing the demographics, interests and main attributes of the target audience is crucial to success. Knowing how big the potential market is will also aid in correct projections. Show that the market has a proven audience.
It is also vital in market research to know the industry and the competitors. Identify the niche and analyze the competitors. This will help create accurate market analyses.
- The Problem: make the problem real. There needs to be a need for the product for there to be interest in the product. Every product should be a solution to a real-world problem or need, whether the customer even knows it yet. Real examples of current customers using the product is an excellent strategy for highlighting the problem and the solution. Highlight the pain of the problem the software service is seeking to solve.
Another strategy in showcasing the problem is to show how competitors are failing to solve the problem. If the product is new enough not to have many competing products, show how customers are currently solving the problem and how those methods are lacking.
- The Service as the Solution: let the product shine! Explain how the product is the solution to the problem. Show how the product is different and superior to competitor products. Describes the scope of the services that are being offered and how that solves the problem. Show how this software as a service provides the best understanding of the market’s needs, and the consumer wants.
Show how the service is the compelling solution to the problem.
- Acquisition Strategy: outline the plan to get paying customers. Included in this strategy should be the cost of acquiring these customers. For SaaS businesses, this is usually considerably higher than the average traditional business as the revenue from these customers is accounted for over the contract term rather than upfront.
(A clear understanding of SaaS accounting will help know when and how to track revenue accurately.)
- Retention Strategy: Keeping the customer is the main idea for a company. Included in this section could be plans for future products or upgrades that will keep customers engaged and come back for more of what the SaaS company offers. Consider what other competitors offer and how they keep their customers engaged.
- Structure of the Organization and Team: The company’s legal structure and the ownership structure is necessary to detail. Knowing who the team is and what roles are being filled will get everyone on the same page. Investors want to know about the company and the team with whom they are potentially investing and partnering. Outlining the management team members and why they are qualified will instill confidence as to why this team and company are qualified and competent to carry out the mission.
If there are gaps in the management team, honesty is the best policy. Even if the business plan is not meant for investors or financial lenders, it is an excellent strategic process to have completed so that the company is aware of potential gaps within its structure. It will also help create an organizational structure so that everyone on the team knows the chain of command and details of responsibilities and expectations of team members for team members.
- Financial Plan: while all companies need a financial plan, there are unique components for a software as a service company that utilizes a subscription-based model. This section of a SaaS business plan is the place to show that the company is well informed and knowledgeable about the current state of finances as well as the prospects and potential of the business.
- Subscription Plan: what is the pricing plan that is offered? What is the average subscription amount and any fees for the setup that may be charged? Detailing the financial side of the project, and all its varieties and components is important to gain an accurate economic forecast of the company. It is also important to know the different revenue streams that a company might be employing.
- Sales Forecast: how many customers are expected to sign up, and how many are expected to cancel? How much money is the customer expected to spend over the consumer’s lifetime? This can be a somewhat complex endeavor if users have the option of upgrades or downgrades or different contract lengths.
- Churn Rate: based on monthly numbers, it is important to know how many customers cancel the service. The churn rate is one of the more important numbers that indicate the health of the SaaS company. A high cancel rate does not bode well for the product being the solution to the problem that the product was meant to solve. Knowing the church rate will help a company create accurate financial projections and can indicate if the company should go back to the drawing board on product development or market research.
- Lifetime Value: how much money is a customer expected to spend on the product? Knowing the church rate, a company has a good idea of how long a customer is expected to utilize the service. Knowing this figure can help a company understand how much to spend on acquiring customers. The acquisition cost should always be lower than the lifetime value of the customer.
- Customer Acquisition Cost: a company needs to know how much to spend on getting a customer to invest in the product. For Saas businesses, the money required to startup is significantly higher due to how subscription-based models spread the finances out monthly. Though the customer’s lifetime value is higher than a traditional business, the money is spread throughout the year. A company needs to know how much money it needs to have to keep the company running while waiting for the earned revenue to catch up.
- Cash Flow: show where and how the SaaS company will obtain and manage the funds it needs to be a financially stable company. This can include short-term funding for the startup as well as longer-term investments that will be required to scale the company.
Turn Vision into Action
There are thousand and one Saas business plan templates on the internet that will make this process easier and more streamlined. A SaaS business plan does not need to be a 40-page brief. It can as simple as a few pages with concise streamlined objectives and goals and a well-researched budget and financial plan.
Nothing can replace a well-thought-out and detailed idea put on paper regardless of its technical structure. Taking the time to brainstorm will help set goals and project profitability more accurately, which will lead to higher chances of success. A solid business plan will help assess strengths and weaknesses. Ultimately the goal is to have a roadmap to achieve success.
Communicating the plan with appropriate business objectives with the team and with potential investors is the ultimate goal. It is worth investing time and energy to create the guide that will keep the business on the right path and make the company’s value visible to potential investors and financial lenders.
Reference:
- upmetrics.co/template/saas-business-plan-example
- revtekcapital.com/blog/saas-business-plan
- onix-systems.medium.com/how-to-write-a-business-plan-for-your-saas-company-e0c10c3148a3
- quaderno.io/blog/cash-flow-planning-saas-business
- smallbizgenius.net/by-the-numbers/small-business-statistics/