5 Threats Facing SaaS Companies

June 12, 2014By
Startup Marketing

Oh dang! We’ve been hacked!

Every business faces threats.

It’s one of the frustrating things about being an entrepreneur.

There is no doubt that if you start a business that you’ll run into at least mini-issues that will cause you stress. There’s no way to prepare for every potential threat.

But that’s not an excuse to not prepare as much as you can. I remember reading in Great By Choice that successful entrepreneurs were optimistic about the future of their businesses, but that they were also paranoid about all kinds of things that could happen.

So we’re going to prepare you at least a little bit.

Here are 5 threats facing your SaaS company.

1. Having One Big Client

I’ve seen it happen to multiple companies including the occasional SaaS company.

When you’re starting out your first customers are obviously going to make up a large portion of your business. If you lose one it will hurt, but you’re still in startup mode so you can usually recover.

However, if you’re cruising along and one or two clients make up more than 30% of your entire business then you’re at risk. If that client were to ever leave then you’ll have a huge hole to fill.

Take Action: The way to avoid this is to limit the levels you have with your SaaS. When every client is the same you won’t hurt as much if one leaves. And individual clients won’t be able to make extra demands on your efforts and time.

2. Hacking

It seems like there is a new hacking news article out there every week. Even if you’re partnered with big companies for your technology you can still be at risk for all kinds of issues.

Take Action: Form a support group of developers where you can stay on top of the latest trends in hacking. For SaaS companies, it’s important to protect your client data. You might not be able to stop everything, but if you’re working with a network that keeps themselves plugged into the online world you’ll usually stave off most potential threats.

3. Federal Compliance

A big one for growing companies is federal compliance. It can vary depending on the industry you’re in, but if you deal with financial information or things in other regulated industries then there is usually a pile of red tape to sift through.

Take Action: Talk to your lawyer or a lawyer that works in your industry. See if there are any regulations you have to follow. It’s worth the effort up front to figure out the compliance requirements in your industry ahead of time because you could have to pay fines later and hire a lawyer to help you figure things out then.

4. Loss Of Data

It does happen and it happens to nearly 100% of businesses that do business online. Data can disappear for all kinds of reasons and it’s a huge hassle and can be very bad if your customers depend on your software working right every morning when they wake up.

Take Action: Setup a backup program right now for all the data for your software. Amazon has a good program, but there are many others. It’s worth whatever the fee is to automate the backup of all files. This way if a server goes down or if you’re hacked you can get back up relatively quickly.

5. Being Copied By Big Companies

Big companies are always looking at small startups to see if they can take an idea and create their own. They’ll usually make whatever you’re offering a commodity so they can get market share. They can do this if they have a different way of monetizing than you.

Google does this all the time with different companies including software companies. They buy companies, but sometimes they’ll develop a copy of something if they feel they can do better.

Take Action: Look at your software product and ask yourself if Google or another big player could swoop in and make the same thing with relative ease. If there is a threat, make it part of your ongoing plan to always find ways to make your software innovative and different (and hard to copy).

Conclusion

There are always going to be threats. There are probably many more that you can think of when it comes to your SaaS company. That’s no reason to give up. It’s just the way life is, but it’s also not a reason to plan for as many threats as possible. Some of the most successful entrepreneurs have been paranoid about threats.

Hopefully these have given you the urge to take action.