How to Start a SaaS Business
A Software as a Service business delivers software over the internet on a subscription basis. Customers pay monthly or annually instead of buying software outright. SaaS businesses benefit from recurring revenue, high margins, and scalability, but require significant upfront development investment.
How to get started
1. Identify a specific pain point that existing software does not solve well
2. Talk to 20-30 potential customers to validate the problem exists and people will pay to solve it
3. Build a minimal version that solves the core problem - nothing more
4. Get 5-10 paying customers before adding features
5. Track retention and churn from day one - these metrics determine if you have a real business
Key metrics to track
Monthly Recurring Revenue (MRR)
Churn Rate
Customer Acquisition Cost (CAC)
Lifetime Value (LTV)
Net Revenue Retention (NRR)
Common mistakes to avoid
- Building for 12 months before talking to customers
- Adding features instead of fixing retention
- Pricing too low because you are afraid to charge
- Targeting "everyone" instead of a specific niche
- Ignoring churn and focusing only on new signups
Startup costs
Expect to invest $5,000 to $50,000 to get started.
- Development (MVP): $5,000 - $30,000
- Hosting and infrastructure: $50 - $500/month
- Domain and branding: $200 - $2,000
- Marketing and ads: $500 - $5,000/month
- Legal (incorporation, terms): $500 - $3,000
Time to revenue: 3-6 months to first paying customer, 12-18 months to meaningful MRR
Funding options
Bootstrapping
Angel investors
Pre-seed/seed VC
Revenue-based financing
Frequently asked questions
Related business types
Related resources
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