Blog5 Challenges for SaaS Businesses & How to Overcome Them
The potential in SaaS 

The Software as a Service (SaaS) market is expected to reach $200 billion by 2024. SaaS is a booming industry and has surpassed all other cloud services in revenue

In all sectors, there is the adoption of the SaaS model and needless to say it is an attractive service in a world characterised by remote working. It is, after all, a lucrative solution for a start-up founder or a business owner who doesn’t want to invest a huge sum of money in IT infrastructure. All they need to do is pay a subscription fee. 

As the uptake is high, so is the need for innovation in the SaaS industry. Many businesses have jumped on and faced the challenge of developing their SaaS solutions. However, an estimated 92% of SaaS companies fail within three years

Why do they fail, you ask? Well, there are several reasons, really! But in this blog, we focus on five of those and tell you about our tried and tested model to help you overcome the challenges. 

The 5 Challenges for SaaS Businesses

SaaS seems like a gold mine. If you have a business idea, it seems as if, success is destined. Not really!

Many SaaS businesses fail despite there being a market big enough and despite there being enough investment. Money isn’t always the problem, you see! 

Discussed below are some of the challenges that SaaS businesses face:

Lack of Understanding of the SaaS Model

The basic concept of a SaaS model is that software is hosted on a cloud infrastructure and businesses pay a subscription fee to get access. This cloud-based service involves a database, servers, software, and integrations that one can choose to use on any device with an internet connection.

A SaaS company is responsible for servers, databases and other software that ease access and use. As it allows users to choose a blend of plans that works for them, the SaaS business model is rather complex. Some of the complexities stem from:

  • The SaaS business and pricing model involves providing a subscription service. Revenue recognition and planning are therefore very important. 
  • Customer retention is very important in a SaaS business model because paying customers is the only thing that keeps the business going. Cultivating customer relationships and upselling are prerequisites.
  • SaaS platforms must provide smaller and more frequent service upgrades to keep the end users happy.
  • Ensuring security is a top priority in a SaaS model.

When people come into the industry with little or no knowledge of how SaaS works—from revenue recognition to customer retention to ensuring security and frequent upgrades, they might lose the uptake of their platform. 

If you are willing to have a startup or a business in the SaaS space, understand the magnitude of the world you are walking into. More often than not it feels that the money is being poured into the sand with no guarantee that people will turn up and subscribe to your product as soon as it hits the market. 

It is an expensive game so compromises on understanding the SaaS business model can be the difference between succeeding and failing miserably. 

Lack of Market Research

You can benefit from conducting SaaS market research regardless of whether your company is a start-up or a long-established SaaS business. 

There is a need for this primarily because of two reasons:

  • Technology moves fast and with that, there come changes in customer needs.
  • The SaaS industry is a competitive landscape.

Conducting market research helps you with the following:

  • To gather information about the target audience (those most likely to subscribe to your platform)
  • To segment the buyer personas (market segmentation)
  • To know about competition in the market

Depending on the budget, time, and other resources, you can either conduct primary market research or secondary market research. Interviews, focus groups, field research, surveys, and test monitoring are some of the tools for primary research that produce results specifically about your company. The secondary research tools include documents and reports that allow you to apply results from previously completed studies to your situation.

Failure to conduct market research can be detrimental to your business, so conduct market research to create a solution that sells by:

  • Identifying the pain points
  • Identifying the potential customers
  • Determining the potential market size
  • Analysing competitors and their services
  • Determining the end goal
  • Offering new features to stay competitive
Lack of Clarity in Value Proposition

Thanks to the remote working model, the SaaS industry is growing and doesn’t seem to be slowing down.

Because the market is so competitive, the success of your SaaS solution will depend on the clarity of your value proposition. That could be the only differentiator between you and many others who provide or seek to provide a similar solution.

Beware of confusing potential buyers with your value proposition as:

  • A wrong value proposition can deter potential customers
  • An unclear value proposition even if you have a great product stops a customer from preferring your product/service to your competitors’. 

In simple terms, your value proposition is a statement that explains features, uses, benefits, and differentiators while also considering customers’ needs, wants, and problems.

As it encompasses how customers will benefit from using the product and how it will solve their problems you need to have a strong understanding of the key features of your platform.

Think of it as an elevator pitch and keep it precise, direct and clear and follow these:

  • Be clear so that your customers know what the real value of your product is
  • Be specific and tell customers how your product is different from others in the market
  • Be focused and deliver what the customer wants
  • Be mindful of your niche because it can’t be for everyone
  • Be able to demonstrate domain expertise to create inbound leads

Customers are looking for something that meets their needs in the best possible way. A clear and distinctive value proposition will set you apart in the sea of sameness. 

Lack of Understanding of Customers’ Needs

As important as your product or service are the people you are selling to. 

The better you understand the needs of your target audience, the easier it will be to meet their needs and provide them true value.

Customer persona and acquisition strategy are a must. To understand their specific needs:

  • Segment your customers for effective targeting and personalisation
  • Identify their pain points and prioritise them
  • Align customers’ gains with your goals
  • Ensure that your product/services provide the benefits that customers want

  • Analyse your customer acquisition strategy and improve your product/service to cater to their changing needs

For your SaaS solution to succeed, you need to understand how your customers are and what their pain points are. Take time to learn about your product/service and its benefits to the end users. 

Neglecting Customer Feedback 

One mistake that SaaS businesses make is not taking customer feedback with the seriousness that it requires.

Customers use your product/ service and taking their feedback not only shows them how much you value their opinion but also helps you to improve your offering. A happy customer is a customer retained! 

Listen to your customers if you want to retain them, or else,

  • Old customers can’t be retained because they have moved to your competitors as their service/product was better in terms of benefits, experience or pricing.
  • Users will move to other platforms as your platform has a bad user experience—it is complex, intimidating, and time-consuming.
  • Customers will discontinue using your platform if there is a disconnect between your value proposition and what you delivered to the users.
  • Customers will have no reason to return to your platform if there are no regular upgrades or follow-ups. 

Using customer feedback is vital to success. 

The Solution

In an episode of the DevReady Podcast, we were joined by Stewart Marshall aka Mr. SaaS. As someone who has been in the industry for a while now, this is what he said about SaaSThe world’s changing and we are beginning to make the best of it.” 

Starting a SaaS business is one thing; having a successful one is a different ball game altogether. There is much potential in the SaaS industry and here’s Stewart’s guide to developing a business plan for any start-up itching to deliver a tech solution.

Articulate the problem

Having a good idea is a good thing. Having a good idea is, however, not an end in itself. 

Given the boom in the SaaS industry, many with those good ideas joined the bandwagon. There are days when it seems like someone is itching to create a SaaS solution for every problem. But this does not guarantee success.

Don’t do what many SaaS businesses do—don’t have a solution and then look for a problem. 

Start from the problem. Just don’t ask what your product/service does. Ask what pain points the product/service solves for the customers. 

People will pay for a SaaS solution only if it solves a practical problem. They also consider whether or not your SaaS solution is worth the cost, effort and time they would have to spend to use it. 

In simple terms, amplify the importance of the problem it solves and ensure that minimum cost, effort and time are used to make that possible. 

People will value your solution, only if their problem has been articulated and they want to solve it. Customers don’t care about your solution; they care about how it solves their problem. So, focus on articulating the problem.

Understand whose problem it is

Who wants this SaaS product? Are they willing to pay for it? These are the questions that need to be answered.

Unless there is a widespread set of customers that resonate with the product and are willing to pay for it, your SaaS solution is not worth the time, effort and cost that went into developing it.

Not just that it needs a substantial market; it also needs to do so in a way that is better than the alternatives. 

In short, ensure the following:

  • Have a broad group of target customers
  • Provide them with the product/service that solves their pain points
  • Promote how the solution you offer solves their problem
  • Tell them how it surpasses the alternatives
  • Let them know it is worth paying for
In conclusion

The SaaS industry is booming, and there’s room for many businesses to prosper. These are some of the challenges:

  1. Lack of Understanding of the SaaS Model
  2. Lack of Market Research
  3. Lack of Clarity in Value Proposition
  4. Lack of Understanding of Customers’ Needs
  5. Neglecting Customer Feedback

Mr. SaaS has these solutions:

  1. Articulate the problem
  2. Understand whose problem it is

Listen to the full episode here 👇

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