If we tell you that 80% of businesses use at least one SaaS application, you will think that’s a fantastic opportunity! And you won’t be wrong; the SaaS market and revenues keep growing at a pace that often surpasses initial optimistic projections.
But, before you create that SaaS product development roadmap in your canvas…
Remember, the SaaS industry also has its dark side. Unless you keep up with its stellar benchmarks, the odds are that competition will beat you. Software development companies with an annual growth rate of 20% have only an 8% chance of surviving, which means that the SaaS product development process has to be done right from the get-go.
In an industry as fast and volatile as SaaS, the organizational side of product development can be a serious challenge, even for seasoned managers and developers. There are many variables in play, and there is a need for a balanced approach to every milestone.
In this article, we’ll try to wrap them into one handy guide to help you choose the proper SaaS product development process.
Here are 8 steps to start your SaaS Product Development process
SaaS product development requires an equilibrium of good ideas, hard work, a practical approach paired with visionary thinking, excellent organization, and a little luck. Think about SaaS product development as a jazz performance — you know the melody that is the foundation of your music score — the rules that apply to any emerging business. The rest is an improvisation based on this theme. If you want it to be good, your team has to be well-trained and in tune. They have to be able to do their best on their own and, at the same time, adjust to other teammates’ needs, roles, and responsibilities. So let’s see how to get there.
Step 1: Double-check your idea
Before developing another SaaS — try to answer a few questions honestly. First and most important — does the world need my product? While your mom and friends may think that your idea is fantastic, would a random person in the street agree? Would your target customer agree? Instead of thinking about what you are building, think of who you are building this for.
And before starting to build the solution, reach out to some prospective customers and ask them about their hardships, and use them as your R&D throughout the entire process. You can use survey tools like Qualaroo and Proprof’s Survey Maker to gather feedback from your potential customers and gain actionable insights.
A good strategy for data collection would be to generate QR codes for your survey, so that it reaches multiple prospects and you collect maximum insights.
Dmitry Dragilev writes a great guide on building relationships with prospective customers (as well as how to do it) and using these ongoing conversations as R&D feedback when you build your SaaS tool. So, discuss the smallest detail with the CEO or the existing team:
- What problem is your software solving
- Who’s your core target audience
- What makes you different from your competitors
- The main differentiating features of your product
This should allow you to detect any weaknesses and inconsistencies in your idea and vision in the early stages of product development. Market research is a great way to test your hypothesis and gather valuable insights into customers’ unanswered needs.
Editorial note: Before you start hiring professionals, it is always beneficial to skim a certified management accountant salary guide to estimate your new monthly expenses
Step 2: Discuss the basic SaaS requirements
All the good SaaS products have a few things in common, so the foundation of building a viable product is having a clear plan for application security audit, privacy protection, customization, and integration options, as well as scalability.
In the old days of software development, security was often seen as a final touch and afterthought rather than a foundational feature of a high-quality product. Nowadays, consumers expect the safety and protection of their data, and the existing and upcoming legal regulation make top-notch security standards an absolute must. Based on your customers’ and clients’ needs, discuss how your software may have to be adjusted to their specific requirements or integrated with existing complementary tools. Finally, you have to prepare your software product to respond to the needs of an increasing number of users.
Step 3: Define your minimum viable product
Minimum viable product refers to the essential core features that create immediate value for your user with minimal costs on your end. Feature prioritization is also crucial, shedding light on what features your product team will prioritize in the MVP. The minimum viable product is what your early adopters will get and test.
One way to get closer to the outline of your minimum viable product is to define the following:
- User persona(s)
- Action(s) they need to take to solve their problem using your software
- Solution(s) to the problem
This will provide a guideline for features you need to include in your MVP.
Step 4: Pricing model and strategy
Pricing models and strategies can easily make or break your software product. No matter how good it is, if the pricing model is not adjusted to your target user’s needs, habits, and financial conditions, you will fail to acquire customers and grow.
The most common pricing models in SaaS include the following:
- Usage-based pricing: allows users to pay based on the amount of usage
- Freemium: offers a free version with limited features and encourages upgrade to paid plans with extra features.
- Flat rate: provides an entire product or bundle of features under one price, usually paid on a monthly or yearly basis
- Pricing per active user: offers a whole product or bundle of features charged per user
- Pricing per feature: offers different sets of features for different prices
While the pricing model should be planned on a long-term basis, in the short term, the right pricing strategy will enable you to settle comfortably into your market. There are several common pricing strategies with SaaS products, such as:
- Market penetration — attracting customers with an initial low price
- Promotional pricing — skimming price from higher to lower as the product gains credibility and exclusivity
- Premium pricing — common pricing strategy for exclusive niche brands
- Free trial
The suitable pricing model and strategy depend on your product, long-term plans, target audience, and many factors. In addition to pricing plans and various B2B marketing strategies, it’s equally important to pay attention and have the right go-to-market strategy, SEO Strategy, social media strategy, and paid acquisition strategy in place.
Step 5: Technical specifications
Now’s the time to determine how your software will be built. At this point, you’ll need consultations with the professionals, who will define which programming language, platforms, software, and tools are required to build your SaaS product. This decision should be made both with MVP and long-term plans in mind.
Step 6: Assemble a development team
The person who will lead your development team largely depends on the type of software you’re building. Since choosing the right development team is a multi-step process in its own right, we’ll run a more detailed checklist in the following section.
Step 7: Determine your budget
With all of the previous steps you’ve taken, by this point, you’ll have a clear idea of how much SaaS product development will cost you. Consider the time needed to build the product and start selling it. It can take up to 10 months to build a SaaS product, but most SaaS MVPs take about 6 months to build.
Plan the budget sources and budget allocation carefully, and remember to factor in possible setbacks and challenges that may burden your finances additionally. If that happens, you will need to look for new sources of money right in the middle of your project, which can cause unwanted delays.
Step 8: Organize the workflow
Since the SaaS product development process requires a lot of flexibility, fine-tuning and constant communication, it is essential to find the right tools to keep your workflow on the same page. While plenty of tools deal with various aspects of workflow separately, it is highly recommended to use a more powerful tool that successfully delivers all of these functionalities in one package.
Nifty is a great choice for product managers who want to keep tabs on the entire project workflow in one place. Its features include:
- Planning & prioritization
- Task delineation
- Progress tracking
- Organizational oversight
Nifty software offers pre-built solutions for product development, client management, marketing, and communication and SaaS product management in agile sprints, so you can quickly scale your product development efforts across the entire team.
Redefine your product development process. Sign up and try Nifty for free!
But before you onboard your entire team — let’s learn what a solid product development team looks like.
How to Assemble your Dream SaaS Product Development Team
Your product development team structure also depends on the nature of your software, service, and target customers. Generally, the team should be led by a product development manager who works closely with the CEO.
A product manager doesn’t have to be a developer or marketer, but this person must be familiar with the specifics of each role in the team. Excellent organizational and social skills are an absolute must. Now, depending on the size of your company and software, some or all of these sectors will have their role in product development. These sectors can be a team or a single person.
Structuring Your SAAS Product and Development Team in Nifty
Startups or Smaller Teams
If you’re starting or are a reasonably lean team, stressing an agile layout that fuses design and product tasks with engineering tasks may have benefits, such as keeping your tasks readily accessible and actionable.
Single Portfolio Model
Giving most of (or your entire) team access to a single Product and Development portfolio will allow you to encapsulate operations in a single space. You may find value in dividing the portfolio into projects that cover a considerable breadth of your product’s scope, examples being “Web App, Mobile, Website.”
In contrast to a larger team that might break out projects into portfolios based on a specific role — such as engineers — this model is small, tight, and incredibly actionable.
Since your product and development teams are in shared projects, your weekly or bi-weekly sprints will blend design and development tasks. You’ll outline your sprints as Milestones and tie tasks to them.
You can segment a “To Do” by role type and assign team members of those roles to the list to automate assignments. This workflow is a great use case for our Swimlane view, as you’ll quickly see the backlog of tasks by role and can easily shift tasks across sprints if you need to rearrange priorities.
The benefit of this lean, compressed workflow is the speed at which tasks can be completed due to focused, simultaneous input from both product and engineering. The downside to this model is that it can become cramped and difficult to expand as your company grows, in which case you may shift to one of the below models.
Larger Team Structures
As your organization grows, your operations will scale according to your needs. Below are a few ways to structure larger teams in Nifty.
Development, Design, Marketing, and so on use their own siloed portfolios to focus on the segment of the company in which they are specialized. The Product team can use the “Move” feature to ship a task from their project to a project in the Development portfolio to continue the task’s journey into development.
Organizations wishing to keep the product and engineering closer together often cluster teams into Portfolios. Examples of this might be your Mobile team or a team built around a specific feature of your product.
To know what works best for your organization, let’s look at the types of members you’ll need to succeed.
This sector will consist of a product development manager, a team of developers, UX designers, QA testers, and DevOps engineers. While the software is in the development and design phase, the product manager ensures that everything runs smoothly, addresses any concerns that arise, and communicates with the CEO and other sectors, if needed.
Once developers and designers are done, QA (quality assurance) testers take center stage. Software testing services can be done separately or during the building process. The final step is the deployment of the software to the cloud.
2. Business development
This sector should ensure the entire company has everything it needs to do its job. The business development team communicates with partners that provide your company with the platforms and tools that make software development, management, and growth possible.
The marketing sector in SaaS usually deals with content marketing, SEO, social media marketing, and advertising. Their job is to reach out to the target audience, generate leads, nurture them, and then convert leads when the time comes.
If you think that the product team is the superstar of SaaS development, think again. Most product managers will agree that the sales team is the lungs of any SaaS start-up. In the SaaS industry, some of the typical roles in the Sales team include (but are not limited to) Sales Engineers, Customer Success Managers, and Sales Development Reps.
Customer Success Managers can be found in SaaS companies of all sizes, focusing on ensuring your customers are making the best of your product. They act as customer support and sales managers, as they address issues with the software, help with the user onboarding process, and track key product development metrics reported to the product development team.
Sales Engineers and Sales Developments Reps are usually employed in larger B2B SaaS companies. They organize demos and meetings and close larger deals with clients and partners.
5. Finance and Administration
Finally, finance and administration work behind the scenes to ensure everything is running smoothly. It is advised to hire professionals to oversee the company’s finances and accounting, especially in the early stages of product development.
Once you assemble your product development team and start working towards your goals, the final step is defining the right metrics and benchmarks to measure your success.
What are the key SaaS metrics you should be tracking?
With all the metrics you can track using tools like Google Analytics, Databox, or Hotjar, it can be challenging to decide which ones are important for your business goals. Most SaaS businesses focus on the following metrics:
- Monthly or annual recurring revenue
- Cost of acquiring a customer (CAC) — the amount you spend on marketing and sales to acquire a new customer
- Customer lifetime value (LTV) — the cumulative revenue generated by a customer over the lifetime of their subscription. This metric is usually analyzed in combination with CAC, with a fairly universal rule that LTV should be at least 3X larger than the CAC.
- Net Promoter Score (NPS) — the value customers gain from your product. You want this score to be above 50.
- Customer Churn — the percentage of customers unsubscribing on a monthly basis against your overall customer count. Ideally, it should be kept between 3% and 5%, although the average SaaS companies’ churn is around 10%. Also, this metric is arguably less valuable than measuring the retention rate.
On the other hand, some marketers and product managers believe that dealing with too many of these metrics is akin to not seeing the forest for the trees. For these managers, one metric is usually enough depending on the nature of your SaaS product.
With this metric analysis, it is essential to differentiate between low-touch and high-touch SaaS. Low-touch product is software that allows subscriptions via websites, emails, and free trials, with minimum interaction with the sales team. These subscriptions’ average prices are $10 for B2C software and between $20 and $500 for the B2B industry. For these SaaS products, the most critical metric is monthly recurring revenue.
On the other hand, high-touch products require the heavy involvement of the sales team in customer acquisition, onboarding, and account maintenance. Most of these SaaS are B2B products with an average contract value of between $6,000 and $15,000. Their priority metric is annually recurring revenue.
Most of your calculations should come down to tracking revenue. You can calculate your monthly or annual revenue by dividing your acquisition, conversion rate, and lifetime value by churn.
This way, you’ll be tracking individual metrics but won’t get stuck on them — instead, you’ll easily assemble the little pieces to get the big picture.
No matter how skilled or experienced you are, SaaS product development may feel like a project you’re doing for the first time. We did our best to give you precise, simple, and informative guidelines — but don’t forget that this process will ultimately require much creativity and improvisation to succeed. Be open to new ideas, team collaboration, and challenges, and use them to fuel your SaaS product’s growth!