You have an idea and you have your market research complete. How do you get from that idea to a valuable product that is optimized for the modern world? Choosing to create a Software as a Service (SaaS) business is your best option if you want to run an efficient, scalable company and produce products that customers love.
“It’s amazing to consider that no matter what size customer we were pitching, or where in the world we were selling, a singular idea drove all our accomplishments: we never sold features. We sold the model and we sold the customer’s success.”
~ Mark Benioff, Co-founder – Salesforce
Let’s take a look at what you need to know to build a SaaS Framework for your next
SaaS Framework Basics
SaaS companies offer software to customers that is accessed at any time, anywhere in exchange for a monthly or annual subscription. Companies like Salesforce, Twilio, and Dropbox are examples of SaaS companies that use a SaaS Framework to run their business.
Typically, a SaaS company offers their product to customers via a web interface that can be accessed on desktop and mobile devices. SaaS companies sell to businesses, consumers, and sometimes both at the same time. SaaS products take care of the backend headaches of servers and security, while also providing integrations with many of the current products customers use and keep the product updated and evolving with customer needs.
Basically, a SaaS company grows with its customers and continues to evolve to meet their needs. We will explain in further detail why you should build a SaaS product and the SaaS frameworks you can use to serve your SaaS customers.
Why should you build a SaaS Product
A SaaS product offers the founder to get feedback in the form of customer data points and then incorporate that feedback into updates to the product at a never before seen blazing pace. The following are more reasons to build a SaaS product:
- Go-market-strategies (GTM): SaaS products are created at reduced costs due to cloud infrastructure economies of scale, which means products can be offered at low or no costs to get initial market share and then improved and upsold to increase the Customer Lifetime Value.
- Scale: The use of cloud infrastructure and SaaS specific software tools can propel your business into a market quickly. SaaS companies thrive on feedback and iteration, making them perfect vehicles for scalable solutions in a short time period.
- Investors: SaaS Frameworks and the products produced are synonymous with “unicorn” and “10x your investment” in venture capital circles. If you are looking to raise large amounts of capital, having a SaaS product offering is critical.
Components of a SaaS framework
A SaaS frameworks is designed to maximize the benefits of operating a SaaS businesses. Frameworks are built on the assumptions that you want to get in front of customers often, you are seeking shorter sales-cycles, and your mantra is “iterate, iterate, iterate!” This is a shift from a traditional business model of build, build, release, market, get customer feedback. In fact, you have to flip that completely and get customer feedback, market while you build, build and release a beta, feedback, then build a version one. Feedback and releasing earlier than feels comfortable is key.
Every SaaS business and market is different, but when assessing a framework, the following core tenants of SaaS frameworks should be present in any framework you consider.
1. Scalability
In the world of yester-year, or sometimes the present for some software tools, you had to buy physical servers and CDs with product codes to use software, like Microsoft Office or Server Software. Installations required careful rollout by IT organizations and the software provider would have to charge for assistance to recoup costs for hiring technical experts to assist with implementation. Then a major update might require all this to happen again.
Enter SaaS. Friction is systematically eliminated where possible and the cost of deploying software and updates is a fraction of what it used to be thanks to cloud infrastructure like Amazon Web Services (AWS), Google Cloud, and Microsoft Azure. These services replaced the need for SaaS companies to hire experts in serve maintenance or custom deployments to a customer’s server environment. Now, you can do all of this using web technologies assisted by the cloud infrastructure; cheap and easy!
Due to the cloud revolution, SaaS frameworks incorporate scaling quickly into implementation. The cloud also provides additional benefits SaaS frameworks incorporate.
2. Multi-tenant
The cloud offers cheap and easy to scale solutions for SaaS companies, but SaaS frameworks also include multi-tenant server setups as a way to preserve SaaS product stability, even in times of rapid growth or unexpected outages.
Multitenancy is a software architecture where a single software instance can serve multiple, distinct user groups. SaaS products and services are examples of multitenant architecture. Imagine an apartment building. Each tenant has their own key and is able to come and go as they please. There are shared resources like the elevator, but each tenant is not able to see what is in their neighbor’s apartment unless invited in.
The ability to scale and multi-tenant go hand-in-hand. Multi-tenant provides redundancy because you can have software instances on servers in different geographies in case one region goes down, critical if your Service Level Agreement (SLA) has language around downtime and uptime.
SaaS Frameworks incorporate this into the strategy required to execute a SaaS business.
3. Dynamic pricing: pay for what you need
Pricing can match the value a SaaS product provides to a specific customer. One customer may be operating a multi-million dollar enterprise while another has a small operation barely in the black. If you offer value to both, A SaaS product can adjust pricing to charge more to the enterprise that might be gaining more value and less to the small operation who gets value but not as much.
How pricing is determined is unique to each SaaS company, but things like seat licenses, metered billing, and price based on customer revenue are all fair game. This also allows SaaS companies to offer usage based free tiers, like you can send X amount of messages for free and then you need to upgrade.
Building engagement with free and flexible pricing can attract larger market share faster and build a solid customer base. SaaS frameworks use the early customer engagement as a superpower to disrupt entrenched companies and stay ahead of other disruptors once a SaaS company is established.
Flexibility like this provides benefits elsewhere too!
4. Flexibility & accessibility
SaaS frameworks provide guidance on how SaaS companies can remain flexible by fitting into the customer’s solution stack. Through application programming interfaces (APIs), most SaaS programs can interact with what customers use daily and get them to value quickly.
SaaS frameworks also provide greater accessibility by meeting customers where they are on their mobile, IoT, and desktop devices. As work becomes a blend of remote and in-office, bring your own devices (BYOD) has become the norm for many companies. This can be a nightmare for IT teams to manage with traditional software, but SaaS has the advantage of device agnosticism. An internet connection is all that is needed to log into most SaaS products.
5. Data & security
SaaS frameworks rely on the cheap and secure storage of data. Cloud environments have teams of people ensuring they are secure around the clock. On-premise solutions are at higher risk of hacking because they often have less staff to maintain the security updates.
Additionally, many SaaS companies that handle sensitive data seek Service Organization Control (SOC) 2 compliance. SOC 2 requires extensive security measures on employee devices, data storage, and data transmission. Many SaaS companies that use cloud infrastructure are SOC 2 certified each year and are subject to annual security audits.
Next we will take a look at the common SaaS frameworks you should consider.
SaaS Frameworks
A SaaS framework provides a strategy for growing your SaaS business. They are many frameworks and it is important to remember each one can be useful if it fits with your SaaS business strategy.
Build-Measure-Learn
The build-measure-learn loop comes from Eric Ries’ popular book The Lean Startup. The philosophy behind this SaaS framework revolves around the feedback loop and making changes, or iterating, as new data reveals itself each cycle.
Each iteration reveals what works and what doesn’t. You learn and improve each cycle. The faster you run through these cycles, the faster your product becomes valuable enough to find product-market fit and take significant market share.
Uniqueness vs. Value SaaS
The Unique Value Proposition (UVP) is a key component in growing your SaaS business. A low UVP means your product will never have a chance to provide enough value or gain visibility in the market. High value but low uniqueness means you will have to fight to get customer attention which increases your Customer Acquisition Costs (CAC). If your product has high uniqueness but low value it will be more of a novelty and limit growth.
The key is to create a UVP through a thorough understanding of what a market needs and a way of doing it that no one has done before.
Features vs. Benefits
Your customers expect your SaaS business to benefit them in some way. Those benefits largely come from features in software. However, many customers are not interested in every feature or how the SaaS product works. They care about the benefits.
For SaaS sales and marketing teams, it is critical that the benefits customers will receive is the core of customer communications.
The features are the how, but you need to focus on the why.
Jobs to be Done
Similar to features vs. benefits, Jobs to be Done (JTBD) focuses on what the customer needs, not the specific features of your SaaS product. An often used example is that a customer seeks a quarter-inch hole in a wall, not necessarily a quarter-inch drill.
Don’t fall in love with the solution. Maybe there is a hammer device that provides many quarter inch holes at once and that is actually what the customer wants. You have to understand what job the customer is looking to hire your product for.
Thinking in terms of what job your SaaS product is hired for and the jobs it might be replacing will give you a focal point for your feedback cycle discussed earlier as part of Build-Measure-Learn.
Four steps of the customer development process
Another SaaS Framework focused on the customer is the four steps of the customer development process. These steps were created by Steve Blank as part of his Stanford Curriculum. The steps are:
- Customer Discovery: Find out who the customers for your product are and whether the problem you believe you are solving is important to them.
- Customer Validation: Build a repeatable sales roadmap that is field-tested by successfully selling the product to early customers.
- Customer Creation: Create end-user demand and drive that demand into the sales channel.
- Company Building: This is a transition from learning / discovery into formal departments with each department focused on mission driven activities utilizing the learnings from the previous steps.
Retention Curve
Customer Retention Rate (CRR) is the percentage of customers who continue paying the company after their first purchase. This is critical for showing traction in the marketplace and an indicator if you found product-market fit.
The CRR curve has active users as a percentage of your overall total users set to the y-axis, and the x-axis is the length in time in months for a monthly recurring revenue based SaaS company or annually for an annual revenue based SaaS company.
The retention curve will dip and should flatten over time. The goal is to have it flatten at a higher active user rate and keep it there.
Whole Product Definition
The Whole Product Definition is an effort to simplify the process of product-market fit. According to this SaaS framework, there are three solutions you can develop:
- A generic solution, which solves a problem but nothing more.
- An expected solution, which eases customer workflow.
- The whole product, which makes the whole process more intuitive.
The more intuitive a product, the easier it is to sell and scale.
Moving forward
These principles and frameworks are a guide for your SaaS business. Every company and market has unique challenges. The important thing is to experiment with the frameworks and see what works best for you.