Starting a SaaS or Micro-SaaS Business
Starting a SaaS or micro-SaaS business can be profitable, but first, you need to come up with the right idea. So, how are you going to do that? In this step-by-step guide, we will walk you through the process of finding and validating potential SaaS ideas. We'll also show you how to determine whether to promote an idea or not.
Let's get started!
The Complete Guide to Generating and Validating SaaS Ideas
What is SaaS?
SaaS stands for Software as a Service. In layman's terms, this means creating and selling a software application that customers can access and use over the Internet.
Popular examples of SaaS businesses include Slack, Dropbox, and Salesforce.
SaaS enterprises have several key characteristics to consider when generating ideas:
- Typically, they are based on a subscription, meaning customers make a monthly or annual payment to use the software.
- Usually, they are cloud-based, meaning they can be accessed from anywhere with an internet connection.
- Often, they have a freemium model, meaning they offer a basic version of the software for free, and then sell customers a premium version with more features.
- This combination of regular revenue, scalability, and demand creation based on freemium services makes the SaaS model popular among entrepreneurs.
The Process of Generating and Validating SaaS Ideas
Creating a business is hard work, and the risk of spending years on something that doesn't work can be daunting. The key to preventing this disaster? Solving problems that people are motivated to solve in their lives – enough to pay for the solution!
There are many different ways to generate SaaS ideas. In a moment, we'll dive deeper into these strategies. But regardless of which idea generation methods we use, we'll follow the same process from brainstorming to prototyping:
- Make a list of potential customer segments or target markets for your SaaS business.
- For each target market, list potential problems or issues they may face that your software could help with.
- Once you have a list of potential problems, try to come up with ideas for software solutions that could solve these problems.
- As ideas emerge, start evaluating them. Is this idea feasible for you? Is the market big enough for it? Is it a problem that people are willing to pay to solve?
There are several advantages to using this framework:
- You'll know your market and target customer, which simplifies everything from user research to marketing.
- You'll know the problem you're solving (and that it's a legitimate problem people face and are willing to pay to solve).
- You'll confirm that there is a demand in the market.
- You'll confirm your ability to deliver the outcome.
This ensures that your ideas are focused on the problem and that you've done basic comprehensive validation of their market potential before spending time on a more formal validation process.
We may change the inputs to get different outcomes, but this is the foundation we'll return to for creating and validating SaaS ideas. Let's take a closer look at each step.
1. Define Your Target Market
The first step is to identify who your potential customers might be. SaaS enterprises typically serve one or more of the following broad segments:
- Small businesses: enterprises with fewer than 100 employees.
- Corporate enterprises: enterprises with more than 100 employees.
- Startups: New businesses looking for rapid growth.
- Consumers: Individual users looking for a solution to a problem.
These are the broadest categories you typically work with in SaaS, but you can get much more specific depending on the niche, income range (or revenue), and other demographic data, interests, etc.
Once you've identified several customer segments, start brainstorming the problems they may face.
2. Brainstorm and List Potential Problems
For each target market, list potential problems or issues they may face that your software could help with. During brainstorming, consider the following:
- What are the common pains and frustrations experienced by your target market?
- What are their everyday tasks?
- What are their long-term goals?
- What processes or tasks do they find laborious or tedious?
Here's a cheat sheet to start brainstorming based on high-level market segments.
Some common problems faced by small businesses include:
- Inventory management
- Accounting and bookkeeping
- Customer Relationship Management (CRM)
- Human Resources (HR)
- Marketing
Common issues faced by enterprises include:
- Data management and storage
- Security
- Compliance
- Integrations
- Workflow efficiency
Problems faced by startups include:
- Rapid growth and scaling
- Hiring and onboarding
- Funding
- Customer acquisition
And finally, some common consumer problems include:
- Productivity
- Health and Fitness
- Organization and time management
Now that you have a list of potential problems, it's time to think about software solutions that could solve these problems.
3. Generate Solution Ideas
When generating ideas, keep in mind that the best SaaS solutions are typically those that are:
- Simple: they solve the problem in a straightforward way, without any frills.
- Scalable: they can be easily scaled up or down to meet the needs of different customers.
- Flexible: they can be customized to meet the specific needs of different customers.
If you need more ideas, here are some resources to help you get started:
- The Lean Product Playbook: This book is all about using Lean Startup ideas to quickly and effectively validate your business ideas and quickly find product-market fit using minimum viable products and rapid customer feedback.
- The Lean Startup: This book by Eric Ries is a foundational piece that will give you an understanding of the broader lean startup framework.
- Subreddits r/SaaS and r/SideProject: this subreddit is full of entrepreneurs looking for ideas for their next SaaS business.
- GummySearch: Speaking of Reddit, this tool helps you analyze the Reddit audience for insights. Find out what problems your customers face and how they want them solved.
- IndieHackers: this site is a gold mine for case studies of successful SaaS entrepreneurs (and a great community of developers too).
Once you've compiled a list of potential ideas, it's time to start evaluating them.
4. Evaluate Your Ideas
When you think about which trends to capitalize on, it's important to consider whether there's a big enough market for your idea.
This intermediate step between idea generation and idea validation is crucial. Validation requires short, but noticeable, time commitments, so you'll never be able to validate every idea you come up with.
It helps you narrow down your list of ideas to a possible winner without relying too heavily on pure intuition. You don't want to prematurely dismiss a far-sighted idea, but you also don't want to get stuck in it.
The idea is to quickly filter out a shortlist for a more formal validation process.
When evaluating your ideas, there are several key factors you should keep in mind:
- Is this idea feasible for you?
- Is the market big enough for this?
- Is this a problem that people are willing to pay to solve?
One useful data-driven decision-making method on the fly is to use Google's Keyword Planner or your preferred keyword research tool. see how many people are searching for keywords related to your idea.
This allows you to see how many people are looking for solutions in that area in a quick and rough, but data-driven, way. If not enough people are searching for these keywords, your idea probably doesn't have a big enough market.
The advantage of using this indicator is that you start with an idea that has been evaluated for demand and for which you know a viable organic search strategy is available.
5. Inputs for SaaS Idea Generation
When it comes to generating ideas for SaaS products, there are several methods you can use. You might solve a problem of your own, ask your potential customers, or conduct market research. It's helpful to think of these brainstorming lenses in terms of the perspective they emphasize.
👉Human-Centric Methods focus on the problems people face and try to fill the gap with an innovative solution. These approaches involve a lot of talking and networking.
👉Look for problems in your life or work that could be solved with a software application.
👉Talk to people you know and ask if they have ever encountered any unpleasant situations or problems that a software application could help with.
👉Speak with people in sales or customer service roles. Ask them about the problems their customers face that could be aided by an application.
👉Market-Oriented Methods assess the market as it currently stands, whatever that market might be.
👉Market research: Who are the recognized players? Who are the disruptors? How much money is being made in the industry today, and are there tangible factors indicating continued or renewed growth in the next few years?
👉How many opportunities remain in this industry at its current stage of maturity, assuming other factors stay constant?
👉If other factors are indeed disrupting this market (like a change in technology), what might they be? And can you benefit from this prediction?
👉Identify trends in the technology industry and think about how you could create a SaaS business to capitalize on them. Keep up with news about companies that have been funded or acquired.
👉Business-Oriented Methods look at how each business that makes up the 'competition' operates. The idea is to find a sufficiently substantial way to fix the shortcomings to give you an economic rationale.
👉Look for SaaS companies that are struggling, and try to understand why. Is it a lack of demand or a poor product experience that you can improve?
👉This can also give you some insight into what isn't working in the industry and help you avoid repeating the same mistakes.
👉Look for SaaS companies that have exceeded growth or funding expectations. Can you replicate their disruptive approach in your niche or in a way that leverages your strengths?
Each of these methods can be a great way to generate ideas for SaaS products that could be successful.
Solve Your Own Problem
What pains and frustrations do you experience?
Also, review the SaaS products you currently use and see if any areas could be improved.
What features are you missing?
Basecamp is an excellent example of a company that solved its own problem. They created a project management tool because they were unsatisfied with existing market options.
Ask Your Customers
Another approach is to talk to people you know and ask about their experiences. This can be a great way to generate ideas because you're getting first-hand information about the problems people face.
Talk to other business owners and ask them about their challenges. Also, look at the SaaS products they currently use and see if any areas could be improved.
Zapier is a great example of a company that asked their customers for ideas. They created a tool that allows people to automate tasks because they were constantly asked for recommendations on how to best do this.
Conduct Market Research
Look at growing or declining areas in the market to help identify potential areas to focus on when developing SaaS ideas.
View industry reports, read articles, and talk to industry representatives to get a better understanding of what's happening.
Slack is a great example of a company that saw opportunities in the market and created a product to capitalize on them. They noticed people were using messaging apps for work and saw an opportunity to create a tool specifically for business.
Research Trends in the Tech Industry
Identify trends in the tech industry and think about how you could create a SaaS business to benefit from them. This can be a great way to generate ideas because you can see what's popular and identify market gaps.
After identifying several trends you think have potential, it's time to think about how you could create a SaaS business to capitalize on them.
Validating Your Ideas
To help you evaluate your ideas, here's a simple framework you can use, based on the Lean Startup methodology, which is designed to quickly and effectively test your business ideas.
🎯First, confirm that there is a real problem to solve and existing market demand. You can do this by conducting market research and talking to potential customers.
🧠Next, confirm your ability to implement the idea. Here, you'll need to conduct a feasibility study to see if it's possible to create a solution that meets your customers' needs.
✅Then, validate that your solution solves the problem. You can do this by conducting user research and talking to potential customers. Ask about:
- Common pains and frustrations your target market experiences.
- Their daily tasks.
- Their long-term goals.
- Tasks or processes they find laborious or tedious.
Then, ensure people are willing to pay for your solution. You can do this by conducting customer surveys and talking to potential customers. You'll want to find out:
- How much are they currently spending to solve this problem?
- How much would they be willing to pay for a solution?
After ensuring there is a market for your idea, the next step is to validate your business model, go-to-market strategy, and growth strategy. This can be done in several ways:
◾Create a landing page: This is a great way to quickly and effectively test your idea. You can create a simple landing page with an email sign-up form. Then, you can drive traffic to your landing page using paid advertising or social media.
◾Launch a minimum viable product: This is a great way to test your idea with potential customers. You can launch a simple version of your product and see how people react. If people want to use your product, you have a viable business model.
◾Create a sales presentation: This is a great way to test your idea with potential customers. You can create a simple presentation and use it to pitch your product to potential customers. If people are interested in your product, you have a viable go-to-market strategy.
◾Launch an MVP or beta version: This is a great way to test your idea with potential customers. You can launch a beta version of your product and see how people react. If people want to use your product, you have a viable go-to-market strategy.
◾Conduct customer interviews: This is a great way to test your idea with potential customers. You can conduct interviews with customers and see how people react. If people are interested in your product, you have a viable growth strategy.
◾Run a paid advertising campaign: This is a great way to validate your idea with potential customers. You can run a paid advertising campaign and see how people react. If people are interested in your product, you have a viable growth strategy.
◾After going through this process, you should have a good idea of whether your SaaS idea is viable. If you can validate both demand and feasibility, then you have a good chance of success. However, if you can only confirm one or the other, reconsider your idea.
And a final note: it's important to test your ideas as quickly and efficiently as possible. The goal is not to spend months or years developing a product that no one wants. The goal is to quickly test your ideas so you can either move on to the next idea or continue developing the idea.
Conclusion
The tech industry is constantly evolving, and it can be challenging to keep up with the latest trends. However, if you're interested in starting a SaaS business, it's important to conduct research and validate your idea before investing too much time or money into it.
In this article, we've outlined a few tips on how to come up with ideas for a SaaS business and how to test them. By conducting a little research, you can start a successful SaaS business.
Many Thanks For Reading!