Analysts predict that software as a service (SaaS) will grow at over 20 percent per year, reports Forrester. With this sizeable and steady growth trajectory, it would seem that a subscription-based business is a pretty foolproof way to go. But before hanging your hat on the success of the industry at large, it’s important to consider some of the most common pitfalls of this model.
But even though there are challenges with running a SaaS company, there’s no need to be dissuaded entirely. With a little forethought and thoughtful approaches to handling these issues as they arise, you can find success with a SaaS company of your own.
Here are three things you’ll likely run into as you launch your business, and how to overcome them.
Cracks within Your Sales Strategy
Most businesspeople are well aware of the idea that it costs more to gain a new customer than it does to keep an existing one. But if your only sales strategy is built around this principle, and geared toward keeping or upselling existing customers, you’re a victim of a common—and deadly—mistake in SaaS sales. Your salespeople should be focused on new customer acquisition, and that’s pretty much it.
In order for a subscription-based business to get support from investors and altogether thrive, you need to show rapid growth. In order to do so, customer counts are highly important. This does not mean ignoring current customers, though. The smartest strategy is shifting your internal team’s focuses so that your best salespeople are going after new customers and your customer service team is handling current customers. That’s truly a win-win.
Less than Optimal Allocation of Your Resources
So since a key way to make a SaaS company prosper is by regularly acquiring new customers and keeping existing customers happy, how do you accomplish this?
Many startup businesses in the SaaS field are lacking the personnel resources that effective direct sales require. A great deal of them also face a lack of marketing funds, which hinders their ability to compete with larger SaaS companies. Since you likely haven’t found a money tree hanging around, and can’t quite go running to your investors every time you’d like a little more cash in your account, how do you get around these obstacles? Well, it’s time to analyze the resources you do have.
If you’re struggling to make payroll each month, take a good, hard look at all the roles within your company. Do you have a full-time CFO? Maybe you can get by with just calling on a contract CFO service for the time being.
Are you missing someone with creative marketing ideas? When you make your next hire, look for someone with both marketing and account management experience so you can get both skillsets for the price of one.
If you’re strategic about it, your internal structure can almost always be better organized to allow for more love around your marketing and more salespeople to zero-in on direct selling.
Lack of an Ecosystem
Every type of SaaS business, from recurring billing to healthcare documentation, needs to think about creating a larger ecosystem.
When a SaaS company has its technology supplemented by resellers, channel partners, consultants, trainers and integrators, then it offers customers all the essential elements needed for them to thrive. After all, users and prospects will be thinking about security, integration with legacy solutions, support, data portability and whether or not the product will last for the long haul. An ecosystem may sound exhausting, but it doesn’t have to be. You can start small, just make sure you always keep the end in mind. Begin strategically with just enough prongs to make your ecosystem complete. For you, that could be one channel partner. Maybe next year, you’ll also need two trainers and one integrator.
No two ecosystems have to look alike. As long as you’re providing a comprehensive solution to customers that makes sense based on your value proposition, you’re making the right move.
Whatever stage your SaaS company is in, it’s important to be optimistic about the success you can have—as well as realistic about some of the accompanying challenges. If you spend some time reworking and refining your sales strategy, better allocating the resources you have at hand, and working toward a complete ecosystem, your business will have a real shot at being around for the long-term. And in a burgeoning market like SaaS, that’s a solid place to be.