Five Reasons Why a Strong SaaS Business Plan is so Critical to SaaS Startup Success

A strong SaaS business plan is one critical component of a successful SaaS startup. Any software business needs a strategy and a solid software business plan. ... but this is especially true for software as a service companies. 

Read this article to find out why, or check out our SaaS Business Plan Template Package here. Writing abusiness plan, and then tracking performance against it, is an important part of running any business effectively. Without a business plan, how will you know whether you achieved your goals, whether you are meeting customer needs as well as you possibly can, and whether you are taking full advantage of your unique value proposition?

A business plan may also be a requirement for investors and funding organizations.

However, there are a number of characteristics of SaaS startups that make it especially critical for them to have a solid SaaS business plan. In no particular order, those are:

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1. SaaS involves standardized solution selling... successful standardization requires up-front planning

Selling SaaS = selling a service, or a solution to a customer's problem, while at the same time not being able to customize it to each customer individually since that would be cost-prohibitive.

Successfully selling a solution involves really understanding your customer in great detail, understanding their needs and problems, and crafting a compelling solution. Many traditional software companies rely on customization during the sales process to create that compelling solution. With SaaS, that research and understanding has to be done up-front (and then iterated) to be able to create a standard solution or set of solutions that will appeal to a wide enough customer base to support a successful business.

You also have a very short selling opportunity once the prospective customer lands on your site. If your messages are not crisp and targeted, they will move on.

2. SaaS often requires more up-front capital

SaaS business models tend to be front-loaded on costs, which means they often have a heavier reliance on up-front investment with delayed payout. A higher level of investment is going to mean increased due diligence on the part of investors, and increased scrutiny of the SaaS business plan.

3. The SaaS business model is newer and less proven

Companies have been selling software licenses, some more successfully than others, for decades. This is less true of the SaaS business model, especially if you sell to business customers. Since the business model is relatively new, your plan is likely to require some ongoing analysis and adjustment as the market matures.

4. Keeping customer acquisition costs low is key

One of the key SaaS metrics is low customer acquisition costs, as compared to customer lifetime value. With a SaaS business, over-investing in lead generation or focusing on the wrong leads can lead to unsustainable marketing and sales costs. Keeping those costs down requires planning and strategy to make sure the company is investing in the right places to drive sustainable customer revenue.

5. SaaS business plan metrics are more complex

With a SaaS business, it is not sufficient to simply forecast and track quarterly bookings, as is common with licensed software companies. There is additional complexity to the key SaaS metrics of business health, and an ongoing plan is needed to forecast and track them reliably.

So, if you are launching a SaaS startup, having a well-thought-out business plan is going to be crucial to the success of that business.

We provide a business plan template, together with tools to forecast and track the SaaS financial metrics, in our SaaS Business Plan Package which can be downloaded here.

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