Blog/When is the right time for software development founders to build SaaS products?

You founded a software development company and it’s been going pretty good. Now you’re thinking about the next step – building SaaS products. You’re one of many, and it’s probably because you wish to scale your software company, increase cash-flow or simply prove to customers that you have insane dev skills. Or… you just need a new challenge, right?

Are you sure it’s the right time for this challenge? Are you sure you have all that you need to succeed? 

Product and service sales are different systems. One of the biggest myths that I hear all the time is that selling SaaS products is much easier than selling software dev services

Which is a pure lie, and not the only sales myth that software founders keep repeating. Selling SaaS products, you earn much less from individual customers. Overall you need much more of them to make a profit than when selling development. Do you know how to interest 10.000 people to get 700 of them to buy?

That’s just one of the small challenges you’re going to have to face if you want to succeed at building SaaS products. The perfect, profitable SaaS dream is achievable. Here’s what you need to achieve it:

TL;DR – what do you need to build SaaS products in a software dev company?

You need:

  1. Large development capacity and no outstanding priorities– don’t confuse it with a large number of developers! Make sure your team is working on a comfortable number of projects. You can only have one priority at a time. If your service business still needs improvement, your priority is to make it sustainable. Otherwise, nothing will get done well

  2. Brush up on business (SaaS marketing and sales) – it’s impossible to learn everything, but you need the basics. Start by reading “Crossing the Chasm” and you’ll already know more about selling software than most of your competitors. You can then move on to other books that interest you from this list on Quora

  3. Real problem that your SaaS can solve – you know where to start, have a good general idea and confirm the problem (you know there are plenty of people that experience it, otherwise your product won’t sell)

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1. Large development capacity and no outstanding priorities – plenty of devs that you can afford, who have time to work on your in-house project

If your development team can’t handle your current service clients, adding your SaaS project to their plates will be too much.

Hiring another software house for your SaaS products might be a way to walk around this problem. But that destroys the whole point of building SaaS products (especially if your main goal is proof of your dev skills, not just increasing cash flow).

You and your team need free time because SaaS products demand huge attention – especially in the first years of developing and selling them. You shouldn’t have other outstanding priorities, like building a solid sales system for dev services to make sure you don’t run out of money before your SaaS is up and running. 

SaaS development always takes more time that initially expected. Especially if you’re doing it well – which is asking potential customers for validation of your ideas at every step, and working on whichever seem to interest customers the most. You can read more about this in my article with Software Mill’s co-founder, Jan Zborowski.

2. Brush up on business (SaaS marketing and sales) – a bit of business savvy, learn the basics to know what you’re doing

Being in the software dev service market is a cool spot from a marketing point of view. You’re a dev and a lot of the time you talk to other devs or people that speak a very similar language (CTOs, startup founders, etc).

Rolling out SaaS products requires a bit more knowledge of how marketing and sales work. In the introduction, I said you need to know how to attract 10.000 to get 700 of them to buy. That’s not just my imagination – average saas web conversion rate is just 7%, compared to 10% in professional services (which software dev services are a part of).

Just focus on quality development and quick project delivery and you already have a stronger position than most software dev companies competing with you. Selling SaaS products can be easy too – but you need to learn business basics. Here’s a huge list of books (in a Quora answer) for you to start.

Learning everything about sales and marketing (targeting, copywriting, a lot of marketing channels that you could write separate, huge books about) or business, in general, is not even possible. Just learn enough to know what you’re doing.

3. Real problem that your SaaS can solve – many people experience it, you know how to confirm SaaS specs with potential clients

Because building a useless SaaS and learning that no-one wants to buy it really sucks. Anyone can think of a random problem and come up with a, hypothetically, good solution.

For lack of a better example – you build an app that cleans up data in spreadsheets, removes duplicates, makes sure data sets are relevant and up to date. But professionals that use spreadsheets a lot, also know how to use Excel to their advantage and do all that with functions. You’d be solving a problem that’s already been solved years ago.

Your SaaS product needs to solve a problem that’s existing in the minds of people right now. Your personal problem, your friend’s problem, your favourite, long-term service client’s problem:

  • problems that you can solve – you know where to start, have a good general idea

  • confirmed – you know it’s not just a unique problem that one person has, but more people experience it and would buy SaaS if it solved it well

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Software development services aren’t all – creating SaaS products can be a much more rewarding challenge

Building SaaS products are proof that your software dev team is da bomb. And that you run a solid company. It can increase your cash flow and scale your business to a point that you won’t need to provide software dev services to profit anymore.

The service model is great for establishing your market position, building an efficient software dev infrastructure and getting positive cash flow going. Building SaaS products is an awesome next step, as long as you do it at the right time.

It’s a great path to business growth but do one thing well first before you start another. Build a solid (sustainable, efficient, profitable) software dev service business before you start building SaaS products.