Between 2015 and 2021, the SaaS industry grew from $31.5 billion to over $140 billion. This makes it a highly profitable industry for new business owners.
SaaS is hosted on the internet using cloud infrastructure. It operates through a web browser and allows users to simply log in to access the software.
This article will cover the SaaS business model pricing, its characteristics, and the pros and cons of using such a system.
What is the SaaS business model?
Software-as-a-service allows companies and individuals to access a platform without spending a fortune. Businesses can use tools that streamline work processes without taking on financial risk.
Successful SaaS businesses create a service that other companies use in their daily operations. Many SaaS business models attract these clients by offering a part of their service for free, either during a time-related trial period or with the option to upgrade and unlock more features.
Examples of SaaS businesses that may ring a bell include Zoom, Slack, Grammarly, and Mailchimp.
Not all SaaS businesses operate within communications. Many creatives use platforms like Adobe Photoshop and its Creative Cloud. Those working within sales opt for customer relationship management platforms like Salesforce and Shopify to track and optimize conversions.
Businesses also turn to online bookkeepers such as QuickBooks and EveryDollar, so they don’t have to hire an accounting firm.
Herein lies the key to a SaaS business’s success: Offering a service that other business owners need to keep their doors open.
SaaS revenue streams
SaaS streams of revenue are based on the model of returning clients and paying a regular fee to make use of the business’s service.
These fees may include:
- Annual subscription fees
- Monthly recurring fees
- Higher-tier service fees
- Premium subscription fees
What to focus on when creating a SaaS business model
Here’s a SaaS business model template to focus on when creating a service.
Create a service for startups
As a business owner, you know how vital this phase is. The startup process is tedious and frustrating, from forming your idea and attracting potential investors to having a ready-to-go product.
Since this process is so challenging, many business owners quit. So if you can create a service that makes this process a little easier, you give yourself the best chance of success.
For example, Grammarly allows small business owners and new freelancers to create error-free writing without hours of proofreading. Mailchimp enables new businesses to start email marketing campaigns within minutes. Without these services, starting a business becomes much more challenging.
Emphasize growth
If you aren’t growing, you’re shrinking. So you must plan ahead, better your service, and keep up the demand for your product.
As more users wish to use your software, more time, money, and research is vital for delivering a high-quality and profitable service. So it’s essential to keep a close eye on SaaS growth.
Create the best service possible
Startup owners strive for the phase when they can stop worrying about finances and start churning a hefty profit. This is reachable through good management, financial backing, adapting to your client’s needs, and putting a product out in the world that makes you proud.
So when starting out, instead of worrying about turning a profit, try to create the best software possible, and money will follow.
The pros and cons of a SaaS business model
SaaS offers a variety of pros and cons. Here are some things to keep in mind.
Pros
- It brings in recurring revenue
- It’s easy to market
- Introducing updates is straightforward
- It’s flexible
- The business model of software-as-a-service is easy to roll out
- Customer feedback is instant, and you can make changes quickly
Cons
- It’s expensive
- Developing a high-quality product takes years
- The maintenance cost is relatively high
Get guidance from a company you can trust
Although it might be a daunting and costly process to get a successful SaaS business up and running, the return on investment and continuous revenue stream make it a worthwhile venture.
And you don’t have to figure it all out alone. VeryCreatives is a Digital Product Agency passionate about helping motivated business owners and startup managers make a success of their ventures.
We partner with innovators and startups to develop creative digital solutions to their business problems.
Contact us today, and we’ll help you deliver the best possible product.
