What Characterizes an Ideal SaaS Company?

May 26, 2015

For the last 6 years I’ve been involved with Software-as-a-service (SaaS) startups. Marketing for SaaS companies is unique and challenging as ROI is usually a question of future series of transactions (recurring ones), and certain levels of churn. It doesn’t matter if you consider to start your own SaaS company or to join one, what are the questions that will help you determine whether you are doing the right move?


1. Does your company build a product that is core to the business operation?


If your product is essential to a business operations (that could also apply to marketing and sales operations) you are in the right direction. It makes your product a “must have” rather than a “nice to have” one. A few examples include: Salesforce – Customers relationship management (CRM) core to the sales team which cannot function without it, Zendesk – Support system and ticketing system, Marketo – Automated email campaign management.


2. Is your product unique / cheaper / better ?


Each of the above typecasts has its own benefits and disadvantages. However if your product is none of the above, you’ve got to do better homework. There are a few additional benefits that your company can gain in cases where the network effect drives more value (either to the customer, or to the company in terms of data).


3. Is your product scalable?


In it comes to software any additional piece costs are close to zero, ask Bill Gates. However, in Microsoft’s days of glory generating the initial piece cost a fortune. However, in today’s world, the flow of information and the cheap access to cloud-based infrastructures dramatically reduces the initial costs to get started with the development. If your software is too complicated to develop or requires an ad-hoc code per customer – you might be in trouble as a potential profitable SaaS company.


4. Is there a market leader?


Having a dominant market leader would obviously make it harder for you to obtain a series share of the market. On the other hand, if you will manage to follow the above this could become an advantage as you won’t have to educate the market, as market education is one of the top costly tasks. If there’s a market leader you should run a “Blue Ocean” analysis and create your own market segment. Hey, just please don’t complain to me about your marketing budget.


5. Are you a SaaS Marketing expert?


As mentioned in the opening of this post, SaaS Marketing is unique not only in its inherent demand to run low budget marketing activities and drive significant growth, but also because the way that the ROI you should attribute to any marketing activities and every marketing spend is hard to calculate and at the beginning very fragile as not all of your hypotheses were proven to be right yet. Scalability should also be considered when you build your marketing channels, so on every $ 1 spend in marketing you can predict the X factor in your sales.


 


Building a great SaaS company is challenging, yet a possible task and eventually could be highly rewarding. Ask the founders of those a 1 billion dollar SaaS companies..


Have additional characteristics for an ideal SaaS company? Please share them in the comments below.

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