SaaS Startup Business Plan: How To Structure Your New Business
With your SaaS startup you have a few different options for the structure of the business.
You might think you can setup a business plan for the company right in your head. And many people do just figure things out as they go, but a written plan or at least something a little more formal can help. And it can actually make you more aware of what your vision is for the company.
What follows is an example of how we feel you should lay out your SaaS business plan including the structure of your business.
Step 1: Ownership
If you’re the only owner of your SaaS business then you’re in good shape. You’ll own 100% of the company and have control over the decisions and profit.
Many businesses start out as one-person operations where one person created the software and developed it from there while retaining complete ownership.
However, other businesses have multiple owners. This can work too, but usually requires more structure and formal agreements.
First, determine the percent of ownership for each owner.
Second, determine what will happen if someone wants to or needs to leave.
This can lead to difficult conversations, but it’s better to have an agreement up front so you don’t run into issues later.
Step 2: Customers
You might have your product already built or at least in the early stages of production. It’s a given that you have some kind of product, but before you get too far into the product you want to focus on your customer.
Every business has a very specific customer. If you think everyone needs or wants your product you’re going to struggle with marketing and sales and even with product development.
Create a description of your target customer. You can identify that person today and make slight changes as you learn more about your product and who actually wants to give you money for it.
Having a customer profile will make it much easier to provide the product they need to make their lives better.
Step 3: Profit
Without profit there is no business. It’s that simple.
Run the numbers on your planned product. Look at comparable products to see what the prices are that customers pay. Use those prices to start and see if it’s worthwhile with the costs you’re putting into building the product.
With SaaS, there can be a lot of effort spent up front, but the costs can lower over time and you can make more profit. But you have to understand early on if the outlook is positive.
Nearly every product will have a comparable, but if you struggle to find one then you’ll have to guess, which can be okay. But as you start selling the product you can tweak your price. It can be a good thing if you’re getting lots of customers, but it could also be a sign that your price is too low. Pay attention to how your customers interact with your product and make small tweaks over time if you feel it’s necessary.
Find a metric that allows you to scale profit. It might be the number of customers you have. It might be the number of seats or machines your software is on. Find the metric and use it to guide the decisions you make in building and selling your product.
Step 4: Requirements
As you build your product you’ll probably be able to do much of it yourself early on. As you grow bigger, however, you’ll have additional requirements. There is only so much work one person can do whether it’s sales, development or whatever else goes into your business.
Know what your requirements will be early on in the process. With GBW, I knew that at some point I would need to hire writers. So I figured out how to get writers to come to GBW. I also needed to figure out the sales process and other tasks within the business.
Your business will have requirements. List them out as tasks that need to be done and determine if you can automate it somehow or if you’ll need someone to do it.
Look at it from where you are today and also from where you want to be in the future.
Step 5: Priority List
I’m a huge fan of the Priority List. I used one when helping the designer work on the latest GBW website redesign. The list included the things that were most important for GBW.
High on the list were great posts, great writers and great customers. From there you can add things like great social media marketing, email marketing and things like that. Cover everything that goes into your business.
No business can do every single task possible. You’ll have to make decisions and a priority list makes it easier to make those decisions. Without a list you’ll struggle with choices and you might just push things off.
With the list you can look at things like your workday and determine if a task you’re doing is not really what you should be spending your time on.
Step 6: Constraints
I’m learning to love constraints. They’re really hard for startup businesses, but they really do help in the long run.
At GBW, I put constraints on the type of clients we bring on board. The truth is that we’re not the best blogging service for all businesses. We’ve identified who our best customers are and we look to partner with them. If someone comes along that doesn’t fit the profile we tell them that we’re not a good fit.
It saves us the time and struggle of doing something we might not be good at or working with a customer that doesn’t mesh well with us. But it also saves the customer time and frustration too.
Constraints can cover more than just customers too. You could limit the number of emails you send each day. If you’re the owner and you’re getting too many emails you’ll be forced to hire someone to help out with a specific segment of messages.
I need to work on that constraint by the way.
Step 7: Marketing
Getting new customers is the lifeblood of a growing business. If you’re not getting new customers you’re not going to grow and in the early stages it can mean that you won’t survive long enough to see success.
To get new customers you need marketing.
At GBW, we focus on building content and specifically we build content with our blog. We find questions our target customers are asking and try to provide the best answers. This seems to work well for attracting organic search and social media traffic, which leads to inquiries and new customers.
We also do a few PR-type things like guest articles, podcast interviews and other things for exposure.
Those are things I recommend for your business, but you can also look at advertising. There can be opportunities depending on your industry.
One thing to remember is that not every business needs tons of online traffic or tons of inquiries to succeed. If you charge $xx for your software, but charge that per month you know how much your customers will be giving you. Use that number to justify the cost you need to get traffic. If one blog post can generate 500 page views over 12 months and bring you in even one customer that might be enough to justify the effort of writing the post and marketing it.
The same goes for advertising or whatever else you can do for marketing.
One final note for SaaS startups is integration. This is huge for software companies. If you can make a complementary software better by integrating yours then they’ll often sell your service for you because it’s good for their customers. This turns their customers into your customers and you can grow without doing much marketing at all.
Step 8: Vision
I feel that every business needs a vision in order to have success. I’m not talking about your vision to sell your company for $1 billion dollars. That’s pretty vague. That could be your end game, but once you have a vision like that or of something else you need to work your way back to figure out your path for getting there.
If you want to sell for a billion dollars then figure out who would give you that money. Look into why someone would give you that money. Work your way back to develop the steps required to achieve your vision.
And share your vision with partners, employees and even customers. When they know where you’re going they’ll have a better idea of what they should be doing so they can help you get there.
By going through the steps above you’ll create a nice business plan for your SaaS startup. Each of the items is important for developing a business from an idea or a starting point. At the very least it gets you thinking about the key components of what your company is and what you want it to be in the future and what you have to do to take it there.