Top SaaS Startup Lesson to Learn From Successful Entrepreneurs

Top SaaS Startup Lesson to Learn From Successful Entrepreneurs
Updated date:
Apr 01, 2022

Table of Contents

You may have noticed that SaaS has been at the top of the best business model lists for some years. That is why SaaS companies have reached the zenith of their success. Large corporations have embraced this concept, such as Google, Apple, IBM, Adobe, and small firms.

This article will talk about SaaS startup lessons from successful entrepreneurs.

What should I know about SaaS?

What should I know about SaaS?

Software as a service (SaaS) is a model of delivering software service through the internet. Instead of constantly installing and maintaining software, you use the internet to access it. This eliminates the need for complicated software and device maintenance.

Web-based software, on-demand software, and hosted software describe SaaS applications. The SaaS service provider is in charge of the application's security, availability, and performance.

According to a 99Firms study, the global Software-as-a-Service market will reach $157 billion in 2020, with over 80% of businesses now using at least one SaaS application.

Companies Running Purely on SaaS From 2018 to 2023

What is the SaaS Sales Cycle?

SaaS sales, like any other product, follow a predictable cycle:

The Sales cycles differ depending on these factors: price, clients, budget, and product complexity. A sales representative will go through the following stages:

Lead Generation

Lead Generation

The first stage is to generate leads. It's where you get people excited about your SaaS product and get them to pay attention to it. Content marketing, advertising, and email marketing are common lead generation strategies for SaaS startups.

Your sales professionals can engage with these leads using outbound sales strategies if you've effectively built a pool of prospective buyers. Cold calling, emailing, and social selling are classic prospecting methods.

Lead Qualification

Lead qualification is critical in any sales process. Sales professionals must qualify each lead to ensure that the company and contact fit the product. It's vital to qualify leads so that salespeople don't waste time talking to people who aren't likely to buy.

Lead Qualification Process

Demos

Facilitating a SaaS platform demo is also an essential aspect of the sales process. You can do this in person by showing a prospect through important product features on a video clip, or a SaaS platform trial. Offering free week-long trials isn't a possibility in most other businesses.

Thus, this stage in the SaaS sales cycle sets it apart from different sales cycles.

Closing the Deal

Closing the Deal

This is the point at which you agree on terms with the prospect, and they pay the first installment. They're now a registered user.

While every SaaS sales process follows these steps, the length of each is determined by two key factors: price and decision-makers. The longer the SaaS sales cycle, the higher the price tag.

Which are the Three Things that Influence Your SaaS Business Success?

Here are other factors that can influence the SaaS sales cycle:

1. New Markets: we expect that when you sell to new markets, the sales cycle will take longer because you're going to spend some time building a relationship and promoting your case with your new prospects.

This will prolong your sales cycle, but it is necessary to educate new markets before selling to them.

2. Enterprise Business: Enterprise-level companies have many stakeholders and complex decision-making units, and most often, legal and technical issues and concerns accompany their purchases.

3. Complex Software: The longer the sales cycle, the more complex your software is. When you deliver your demo, ensure that the technologically savvy prospects are present, as they may help sell your items to less tech-savvy stakeholders.

Examples of Successful SaaS Business

Software as a service (SaaS) enterprises can cover various topics. SaaS enterprises benefit other businesses by allowing them to run more efficiently. The Most notable are SaaS companies, include:

Salesforce

Salesforce

Salesforce came into effect in 1999 as a software company and was one of the earliest SaaS startups. They've helped many organizations to manage their sales staff to handle their leads and follow-ups.

The company has been an enormous success and serves as an example of what most SaaS entrepreneurs hope to accomplish with their solutions.

 Zendesk

Zendesk is a customer service ticketing system that allows small, medium, and even large organizations to govern their customer care better and, as a result, provide a better experience for their customers.

 Meet Edgar

Meet Edgar

Edgar is a social media automation SaaS tool that can help you save hundreds of hours. It automatically fills up a social queue and allows posts to be recycled.

Edgar has become a heavyweight in the social networking SaaS market and is worth observing and patterning other SaaS businesses after a while, being significantly smaller than SalesForce.com.

A guide to the Top SaaS Startup Lesson to Learn From Successful Entrepreneurs

1. To Show Product-Market Fit, Start Small: Cindy Mi, Founder and CEO at VIPKid

Cindy Mi, Founder and CEO at VIPKid

Identifying your problem will almost certainly result in discovering several potential solutions. However, while deciding which one your organization will give, start small. Keep your investment in check until you've shown that your target audience will buy your goods or service.

If you're like the VIPKid company — a Chinese online language-learning EdTech that has educated over 200,000 kids and is now valued at over $1.5 billion — you think you have to go all-in building a name for yourself.

However, when entrepreneur Cindy Mi originally released it, it was for a small group of four children.

To Show Product-Market Fit, Start Small: Cindy Mi, Founder and CEO at VIPKid

Mi could test several concepts and identify the most effective strategy for educating pupils by starting small. She didn't start looking for finance to scale her business until she'd established market need and the efficacy of her solution in addressing it.

Regardless of the type of problem, follow Mi's lead and start with a simple minimum viable product (MVP) test before entering a new industry.

 2. To Start a Firm, You Don't Need a Software Product: Jim Belosic, CEO of Short Stack

Jim Belosic, CEO of Short Stack

When we have an idea, we will first think about constructing a product. Most of us know that doing so is a mistake. We know we should speak with potential clients and determine their problems. But it's so tempting to jump right in and build that product.

Some entrepreneurs began by developing a services firm before moving on to a good business.

For example, Short Stack Labs' founder, Jim Belosic, started his company as a small agency. Still, as he understood more about his customers, he could grasp better their challenges and how his company could help them solve them.

To Start a Firm, You Don't Need a Software Product: Jim Belosic, CEO of Short Stack

Starting a software company felt logical, and his software company now earns close to $8 million in yearly revenue.

3. Create a Business Model Based on Client Happiness: Melinda Gonzalez, V.P of Customer Success at Pendo.io

Melinda Gonzalez, V.P of Customer Success at Pendo.io

According to Salesforce veteran Melinda Gonzalez in the recently released "The SaaS Startup Founder's Guide," customer happiness involves keeping the clients you already have.

Customers who are happy with your service will stay and refer to others, and it is much easier to earn cash from customers who are already willing to pay you than it is from new prospects who must be a win over. 

Customer Satisfaction Rating

4. Decide Who You'll Compete Against: Marc Benioff, Salesforce CEO

Marc Benioff, Salesforce CEO

The success of SaaS startup lies in knowing your competitors. Rather than establishing a hostile attitude toward emerging SaaS startups in the early 2000s, Salesforce leaned in. 

They made their platform more user-friendly for small businesses, which increased the value of their product by making it more widely used.

Also, they came up with the App exchange, allowing other firms to build products directly on top of SalesForce, expanding SalesForce's reach, loyalty, value, and revenue.

5. Ask for Feedback From Users Regularly: Jessica Pfeifer, Chief Customer Officer and Co-Founder of Wootric.

Jessica Pfeifer, Chief Customer Officer and Co-Founder of Wootric

It's vital to ask for user feedback consistently, timely, and thoroughly. 

Pfeifer served as Chief Customer Officer at Wootric in early 2021, after co-founding the enterprise feedback management platform with CEO Deepa Subramanian in 2013.

Customers may have a slight (or immense!) displeasure with you, but they may not reach out to tell you about it. Don't rely only on client dialogues. Being proactive here can help you avoid unnecessary turnover.

After their clients had finished the onboarding process, Pfeifer and her team started asking the customer effort score question.

Customer Feeback

They met the onboarding milestone when customer survey replies appeared in their Wootric dashboard. If you build up an effective customer feedback program, customers are significantly less likely to leave.

6. Make Simplicity of Usage a Top Priority: Marc Benioff, Salesforce CEO

Make Simplicity of Usage a Top Priority: Marc Benioff, Salesforce CEO

From its out-of-the-box subscription strategy to its Amazon-inspired website, Salesforce makes CRM software simple to use. Customers should navigate a SaaS startup's website, app, and other user platforms with ease.

Even better, organizations can usually monitor specific client interactions as they use these interfaces. When they identify trouble spots, organizations may use this real-time feedback to resolve them and continue to improve their product, learning from current users to make their software easier for new consumers.

7. Create Strategic Planning: Tobias Lütke, the co-founder of Shopify

Tobias Lütke, the co-founder of Shopify

Tobias Lütke, the co-founder of Shopify, underlines the importance of long-term planning to establish and maintain such a massive SaaS startup empire. To establish a viable strategy for SaaS enterprises, he suggests taking the following steps:

1. Choose a statistic to focus on according to your business's stage and goals 

2. Select a time that enables a tight feedback loop.

3. Keep updating your team on all the preparations

Shopify's top leaders use the following framework to clarify what's next in their initiatives to attain the intended CMRR:

1. The value proposition of your product, and what is the time to value?

2. What is the state of competitiveness in space?

3. What is the value of target customers, and what market is worth the property?

4. What is the most efficient strategy for you to assist your clients in winning?

5. Your aim with prioritization is always to be performing the work that optimizes consumer value created.

8. Make it Simple to Get the Greatest and Up-to-date Products: Bill Gates, Co-founder Microsoft

Customers had to renew specific items each time new versions came in for big players like Microsoft until a few years ago. The software company now lets individuals and organizations connect to and use its cloud-based programs through the internet for a monthly charge.

This cloud-based software distribution is a crucial driver of SaaS startup success. It eliminates the significant upfront expenditures on purchasing software or hardware once and owning it. Customers in the SaaS world always have real-time access to the most recent and most excellent versions.

SaaS software has many other potential benefits above traditional "buy and own" strategies. For example, they cut the time to set up and deploy services in half, and consumers may easily upgrade their services. This built-in flexibility aids in the scaling and growth of businesses.

A crucial point here for all businesses is that flexibility is essential for offering products and services. You must invest in the required resources and personnel to assist your clients in effortlessly upgrading their products and scaling their deployments conveniently for them.

Allow them to flourish rather than suffocate them with unnecessary constraints.

9. Adopt Pricing Strategies that are Different: Wilmot Redd Hastings Jr, Co-founder, and CEO of Netflix

Wilmot Redd Hastings Jr, Co-founder, and CEO of Netflix

According to the Global Index data collection, low-income countries have a severe disadvantage in financial services than developed regions.

Only about 2% of the population in these growth zones has a credit card, and 7% have had a debit card.

This is a hurdle that service providers must overcome to deliver offerings in these locations, especially since they are the most frequent forms of payment in Western countries.

Netflix has set an example for many SaaS businesses, particularly financial challenges. While it has failed to develop a strategy that works in regions with low credit card penetration, it has succeeded in other markets by offering various pricing points.

A monthly membership to streaming services costs $7.99 in the United States. In Japan, a basic Netflix package costs only 650 yen ($5.72), whereas the same plan costs $14.90 in Switzerland. Netflix is more widely embraced because it offers different prices based on the market.

SaaS companies might adopt this tiered pricing structure to expand into high-growth sectors.

10. Offer Freemium: Daniel Ek, Spotify CEO

Daniel Ek, Spotify CEO

From marketing, price, and product development standpoint, convincing consumers to sign up for your SaaS platform instead of your competitors is brutal. You must express what makes your product unique, price it competitively, and ensure that it includes all the features that your users desire.

Several businesses have given away their products — or at least a portion of them — for free to address these difficulties. It's called the freemium model, and it's trendy among SaaS businesses.

While there are some distinctions between a free trial and a freemium model, both follow the same fundamental principle: encourage people to use it for free before asking them to pay for it.

Spotify is killing it with its freemium to premium transition. Customers may sign up for a free-for-ever, ad-supported subscription in a matter of seconds. However, out of the 159 million users on the platform, 71 million have premium accounts.

That's a 45 percent conversion rate compared to the average of 1-5 percent for the rest of the industry. Dropbox, for example, is a very successful freemium user, with a conversion rate of around 2.2 percent. Spotify is unquestionably an aberration, but it shows what is possible.

You should not confuse Freemium with free trials, which allow customers to test out a company's whole product (or, in rare cases, a scaled-down version) for a limited time before deciding whether to buy it.

11. Make Integration With Other Tools a Top Priority: Nithya Rajaram, Founder & CEO SupportBee

Whether to get back to marketing or submit data points to the CTO, we all use different technologies for distinct functions: emails, Slack messages, updates on shared project management platforms, and calendar reminders.

As a SaaS provider, discover what additional tools your consumers use and incorporate them. 

SupportBee made it possible for clients to link with Basecamp, one of the most popular project management software solutions. It became more valuable to those who used it. Suddenly, these two necessities might communicate with one another.

You can integrate with other tools to test your feasibility in a new market, 

Finally, you can leverage integrations as a pricing approach. Premium connections, which allow your users to connect your software to huge market tools like Salesforce, may justify a charge that is well worth it to them.

12. Prioritize Repeat Customers to Increase Revenue: Bastian Lehmann, Founder & CEO at Postmates

Bastian Lehmann, Founder & CEO at Postmates

Selling to an existing customer is less costly than selling to a new one. Food delivery unicorns like Postmates is capitalizing on this phenomenon to the fullest, focusing their businesses on a customer base that is likely to use their services again and again:

This idea of repeat transactions is the foundation of food delivery businesses. This is one reason they've been so successful — and appealing to investors. Customers who return have a stable income base from which to expand."

How can your business sell to the same clients several times? Suppose your primary product or service doesn't have a mechanism to tap into the power of repeat consumers. In that case, it's time to consider a service extension or new solution that can generate consistent revenue.

The Final Note

Startup success doesn't happen quickly, and neither will your firm. If you stick with it and follow the advice above, you'll be able to tap into the wisdom of giants to position your company for long-term success.

Need help in improving customer experience through personalization?

At AI bees, we use AI to help SaaS companies meet consumers' level of personalization. Reach us today for more information. It is not a simple thing to start a SaaS company. It's challenging to start a business from the ground up. However, if you are a determined entrepreneur, these challenges will not deter you.

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