SaaS companies undergo a dynamic learning process. Though every SaaS founder is in the game to solve certain problems, they might make some mistakes along the way. Some make the best products, and others may face unprecedented losses with uncertain issues. This disruptive technology is great when you break in and get the code. However, it is tough to make the cut, and hence many SaaS startups fail due to bad strategy, planning, and miscommunication.
Knowing what these issues or mistakes are can help you take precautions and be prepared to face them, or best case, avoid them. Here are the ten biggest SaaS mistakes and how you can avoid them as a SaaS startup founder.
10 Biggest SaaS Mistakes (and How to Avoid Them)
Lack of understanding of the SaaS Model
The SaaS model of business is not that simple. It involves the responsibility for the database, servers, software, and plans that help the product. The product is a cloud-based software that one can choose to use on any device with an internet connection. The SaaS product architecture allows users to choose a blend of plans that works for them. Revenue is earned on a monthly or yearly basis through recurring payments. The way to keep doing business in SaaS is through customer success and customer retention.
Bad Market Research
Market research is necessary before starting any business. If a SaaS company jumps into the industry without performing prior research, it might not succeed. To avoid this, you need to know the software trend, various features, type of customers involved, pricing points, specific interests, and other trends. You also need to check market competition cause if it is overcrowded, you will end up burning a lot of resources and cash. You need to identify actual pain points and solve the problems of customers.
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Contract framing mistakes
Contract lengths are everything. In many cases, you might have to deal with contract terms that may not be in your favor. A SaaS company must scrutinize renewal clauses, payment terms, and price points to consider long-term outcomes. Review your contract for long-term success and pricing on a favorable level. You must also be able to prevent future pricing issues and look for better contract setups.
Unaware of audience requirements
Many SaaS companies do not know their own audience requirements. Try to understand what the audience wants and their pain points and offer a better solution. Track and map a list of potential customers, find out the market size, customer profiles, ideal customer behavior, market segmentation, niche, and potential substitutes. Understand customer needs and speak to them to customize a strategy best suited for them. Offer upgrades and be competitive to create a strategy that works for customers.
Not tracking Metrics
Not knowing your numbers is a major problem. A lot of SaaS businesses do not track their numbers right. They just track the monthly recurring revenue and assume everything is fine. But the devil is in the details. Core metrics like Lifetime value, customer acquisition cost, conversion rates, customer satisfaction scores, and more need to be tracked. Tracking metrics can be done with customer success software to employ the best practices and policies.
Lack of clarity on the value proposition
Many SaaS companies have no true differentiation in terms of value. They lack of clarity when it comes to the value proposition. You need to make it easier for customers to understand what makes you different from competitors. Ensure that your users know the solution and its value addition. A clear value proposition helps customers know how they will be benefited from the product services. Ensure the unique value proposition is clear compared to others.
Bad onboarding process
An ineffective customer onboarding process is bad news for a company, irrespective of the product. If the onboarding process is not of value to customers, they will churn faster. It is necessary to make sure the customer onboarding process is simple. SaaS businesses can do that with helpful videos, newsletters, written guides, tutorials, and more. Having a clear customer onboarding process involves the following elements-
- Setting up a simple sing up process
- Designing an onboarding process
- Having an email as part of the welcome process
- Product walkthrough
- In-app messaging settings
- Resolution of tickets process
It is vital for SaaS companies to analyze campaigns and form patterns. SaaS companies need to nurture customers keeping products, people, and brands in mind. Companies need to support and address issues with customers. Nurturing customers will enhance their understanding of the product. The best way to do that is by giving your customers a sneak peek into the product and noticing them use it. Place conversion triggers and notice inactive leads. Find out their issues and help them overcome them.
Neglecting Customer Feedback
One big mistake SaaS companies make is not taking customer feedback seriously. Customer feedback improves services and products, shows that you value customer opinion, improves retention, and enhances customer satisfaction. If your SaaS product is not reaching customer expectations, you can take their feedback into account. Your goal is to help customers achieve their goals, and hence knowing their feedback is vital to success. Avoiding this means taking feedback regularly and seriously. The primary keys to doing that are asking for feedback on a monthly/quarterly basis, frequently communicating with customers, and creating a customer-centric company. Using multiple channels for communication and monitoring them will create space for feedback requests.
Not looking at expansion revenue
You need to know how product success converts into company growth in every SaaS business. Usually, SaaS companies of a similar category are connected through various groups and communities. You can ask your existing customers to refer others by sharing their feedback. A SaaS company needs to employ customer success software to create a flurry of expansion revenue like upsells and renewals. Other ways to encourage customers to refer others include offering coupon codes, discounts, and promotions. You can even use an affiliate program to pitch to new customers and make the process easier.
Bottom Line
Starting a SaaS company is great but making it work with fruition for success is a task. You need the right set of knowledge resources, technology, tools, and more to let that happen. The key is to keep testing and implementing procedures to find out what works and why. There is no guarantee you will create the best product the first time itself. Take feedback seriously, listen to others, adapt to the changing times, and be accountable to users and the product.
Shivani is a talented CS manager with the skillsets to elicit, scope and manage end-to-end B2B SaaS project delivery. She has a keen interest in depicting her learnings in customer success by writing resourceful blogs and articles.
Published April 05, 2022, Updated March 02, 2023
