Scale SaaS Startup – Problems and Solutions
Basically, SaaS startup scaling is the process of growing your startup to a small or medium business. Indeed, the business needs, requirements, and customer expectations are evolving as well.
You can think of scaling your SaaS solution if your business strategy succeeded, and you have enough resources and budget to expand the borders of your software product. It means that your company functions thanks to your revenues, not only due to investors, so the complete responsibility for scaling a SaaS app is up to you.
To define whether your company is ready to expand and develop, you need to analyze the growth plans and rates which your business has executed for the past 2 to 3 years to prove the stability of your work.
Along with business and revenue growth, SaaS startups need customer expansion. In simple words, if the number of your customers does not increase, the necessity for functionality updates will be absent that also block your business development.
Metrics to assess the readiness for SaaS scaling
To define the perfect moment for your SaaS product to scale, we recommend evaluating the key metrics of your solution and ensuring your business is ready to grow sustainably.
Customer churn shows the number of customers that have canceled the subscription and stopped using your SaaS product. This indicator is one of the pivotal things that influence your business growth. Basically, the revenue of your SaaS startup is based on the number of regular consumers.
So if the customer churn rate becomes too high, then it blocks your product scaling and overall business development. Each churned customer needs to be analyzed, by exploring the industry and specifics of the business, its founders and decision-makers, and a potential reason for canceling the subscription.
Further, this information has to be deeply analyzed by marketing and business development managers in order to adjust their strategies and plan the required changes in SaaS products.
Surely, the customer churn leads to
revenue churn as well. However, revenue churn has to be assessed separately, as not all customers generate the same amount of revenue.
The explanation is clear: SaaS software commonly offers several pricing packages like basic, advanced, and premium that cost differently, providing various options. So basic user losses can be not really significant for your revenues in comparison with premium accounts, for instance.
Customer Lifetime Value (CLV)
Customer lifetime value (CLV) is another vital indicator that shows the readiness of your SaaS startup to expand, especially if you partner with investors. This assessment shows the average amount of revenue generated by each of your clients. Generally, CLV specifies the value your business receives from each bought account. This number also depends on the duration of using your SaaS solution as well as the selected pricing plan.
Customer Acquisition Cost (CAC)
Customer acquisition cost (CAC) measures the efficacy of your business strategy, particularly sales and marketing. CAC shows how many expenses you spend to acquire new customers. These costs include the budget spent on marketing activities and payrolls for sales and marketing employees.
The CAC rate and revenue you get from these new consumers need to correlate to each other to remain your business in profit and enable its growth.
Customer Engagement Score
A customer engagement score is important in analyzing and evaluating the customer experience and their satisfaction with the services of your SaaS system. This indicator tracks how often they use the product, what options they prefer more, and what issues they face according to their request to the support team.
This will help to predict the potential churn and prevent it, as well as specify the needed fixes within the scaling process to decrease the customer churn rate in the future. To figure out the low indicators of customer engagement score, you need to analyze the customers that have been using your SaaS application for a long period and are satisfied with its functionality and your services overall, and then compare this data with other customers.
What does SaaS scaling include?
Before diving into scaling your SaaS product, make sure it is not too early for your startup. The number of your clients has to grow gradually and be stable, as it directly influences your business income and business growth.
If the number of regular clients doesn’t expand, then you need to specify what ongoing issues your SaaS product has which limit its scaling. Make sure the process of interaction with your SaaS flows smoothly, providing an easy billing process, app installation, and workable functions.
SaaS startups are recommended to follow a gradual development, with no premature and sharp decisions and actions. Of course, your willingness to spread your software solution to as many users as possible is clear, but before diving into it, make sure your SaaS solution is capable of providing enough resources and high-quality service to each of these clients.
The SaaS scaling needs to flow step-by-step as this is not a one-day process despite any of your efforts, wishes, and expectations. Based on our experience, the
SaaS startup scaling process can be divided into three stages:
- Resolving the urgent issues and system errors;
- Planning the further steps your inner team will take to enable the product scaling, as there are some parts of your solution that need to be upgraded first like billing processes, customer experience, etc. ;
- Future planning entails a long-term vision of your SaaS solution and its development.
Scale billing: automate the process
The subscription billing model is the common solution for SaaS-based software. Billing is the required part of the functionality of any SaaS application, as SaaS type of software entails using it for certain fees on a monthly or annual basis. This process has to be automated under scaling. Billing and accounting automation means:
Pricing plans– the SaaS app that has been on the market for a while commonly offers two or three different pricing plans that include various ranges of options the users will have access to; scaling the variety of billing plans is obvious from growing SaaS startup, but only under the condition your client base is steadily growing; Automated billing– this option aims to reduce the scope of work for your accountants, as the paid subscription will be prolonged automatically in case the user doesn’t cancel, there is no need to check the number of days each of the users has to leave in their pricing plans; A free trial period is a must– this option is rather common for SaaS solutions, however, it has to be also automated with the opportunity to cancel the subscription before the charge; Charge refund– your SaaS software has to entail the possible incidents where users can receive a charge refund or several months of free usage.
Scale CRM system: retain your customers
CRM software is used internally for managing customer information and interactions with the solution, as well as inner processes like sales, marketing, and so on. CRM scaling is an inevitable part of SaaS startup scaling, no matter whether you use the off-the-shelf customer relationship management system or a custom one.
Basically, here is the approximate range of features your CRM has to execute to enable business growth, providing customers with a great experience with your SaaS product:
Management of user information– the more information about potential clients you collect and analyze, the more of them you will be able to retain; customer information includes their persona, billing information, and any other data related to the interaction between your SaaS product and them; Customer support– the number of your regular consumer is expected to grow due to the scaling process, so you still need to provide all of them with high-quality solutions to their issues and concerns about your SaaS system Product usage guide– with the expansion of the options of your SaaS product, you need to educate your customers on how to use it properly; it shows you care for customers as well as the development of the solution.
Challenges in scaling SaaS startup
The messaging of your SaaS is not relevant to a buyer
Businesses implement various SaaS products to streamline their processes and resolve the certain issues that they struggle with every day. SaaS startups commonly adjust to these common issues as they have gone through the same situations or just explored the needs and requirements of their target audience deeply.
With the product scaling, the goals, and functionality of the SaaS are expected to change to become suitable for large companies as well. Thus, the SaaS solution may become irrelevant for a certain number of your regular customers.
Eventually, it can cause a higher customer churn rate than you expected, but this is also a great way to involve new and more profitable prospects to use your product. However, cooperation with larger businesses requires another approach to marketing and sales, making it different and a bit more complicated.
Feature demands are evolving
Surely, the SaaS startup scaling implies the business development and revenue growth, these two goals are among the primary in this process. However, the vital purpose you need to pursue is to know and follow the needs and demands of your consumers to avoid their loss.
If you neglect the needs of smaller businesses to meet the demands of enterprises that use your SaaS product, there is a huge probability of rapidly increasing customer churn with a higher CLV rate.
A vague vision of the product
As the product features and values are changing, it is pivotal to ensure your sales team is completely informed of these changes and has a clear vision of the SaaS solution they sell. Business development entails expanding your sales team members, the number of potential clients, the number of daily tasks for each department, and the company overall.
As a member of the C-suite, you will not be capable of checking each conversation with each customer. To avoid misunderstanding between your company and your clients, the sales team has to explore the UX design and features of the SaaS product to be able to precisely message its value to potential consumers.
Tips to enable SaaS startup scale up
Follow the most optimal business strategy
The majority of SaaS businesses follow the subscription-based model of cooperation with their clients. The SaaS product scaling enables the expansion of pricing plans for your regular and new consumers, which is commonly called the tiered pricing model.
Thus, the price of each plan depends on customer location, size of business, number of users, duration of the selected package (month or year), and so on. Some customers are capable of generating more revenues than others, and you need to specify them.
Improve your pricing
SaaS startup scaling extends not only different pricing plans but also the cost of each of them. The new higher pricing must be reasonable as a result of product improvement and development.
To define the suitable prices for your SaaS system, you can test your audience and define the most successful experiment. The prices need to be optimized due to the updated software and options each of the pricing plans offers.
Enter the international market
Scaling the market where your SaaS product is available to purchase is another vital point in SaaS startup scaling. When your software has received a stable customer turnover and consolidated in the local market, your company should think of entering the international market.
However, each different location entails different business needs, issues, and shopping behavior. Additionally, going international means implementing various payment gateways to make the billing easy despite the location.
Communicate with your audience to retain it
Communication and customer support remain essential, no matter how much your business has grown. It helps retain the customers by providing them with a seamless customer experience every time they use your SaaS product or get in touch with the support team.
Along with hiring enough employees for the support team, you have to provide consumers with a knowledge base that will tell them everything about your product, possible system errors and solutions, contacts of your support team, and so on. In addition, we recommend launching an AI-powered chatbot that will decrease the need for lots of support managers and provide customers with instant responses to the basic set of questions or requests.
How can we help?
For the last 10+ years, our team has gone through many-many software projects building custom solutions for businesses of different sizes and industries. We have succeeded in being able to find the suitable approach and methods for each of your clients, correlating to the ongoing needs and requirements of their companies.
We managed to expand our expertise in SaaS startups, providing companies with perfect formulas to enable sustainable business growth. Altamira offers the “Now, Soon, Later” approach to enable startup scaling.
The first stage entails supplying your inner team and project with the required engineers and other resources in urgent need. Eventually, it gives us enough time to thoroughly assess your software product, and define business goals and requirements in order to plan for the next months of our cooperation.
By selecting us as your software supplier, we guarantee:
- Providing you with a complete development team or required software developers;
- Development according to the proven methodologies suitable for scaling SaaS startups;
- Complete management of the development process, ensuring its productivity, security, and efficiency;
- Flexible terms and types of cooperation;
- Available of all required resources to ensure long-term cooperation strategy.
We aim to reach the initially set business goals and plans, providing high-quality software solution development that meets the demands and expectations of our clients as well as their consumers.