Building a SaaS: A Beginner's Guide (Includes Free Cheatsheet)

Did you know that the global SaaS market is projected to reach $307.3 billion by 2026? With businesses of all sizes increasingly relying on cloud-based solutions, there's never been a better time to dive into the world of SaaS. But what exactly is SaaS, and how can you get started? This beginner's guide will walk you through the essentials, from understanding the basics to launching your own successful SaaS product. Find the free cheatsheet at the end of this article.

What is a SaaS?

A SaaS (Software as a Service) is a software delivery model where applications are hosted by a service provider and made available to customers over the internet. Unlike traditional software, which requires installation on individual devices, SaaS applications can be accessed via web browsers, making them highly convenient and accessible from anywhere with an internet connection.

This model allows businesses and individuals to use sophisticated software solutions without the need for extensive IT infrastructure or maintenance, as updates, security, and technical support are managed by the provider. SaaS solutions are typically offered on a subscription basis, providing flexibility and scalability to meet the evolving needs of users. The subscription model offers founders the luxury of Recurring Revenue which is what makes this business model so lucrative.

How to start a SaaS company as a Beginner?

1. Identify a Problem to Solve

Start by identifying a common problem or pain point that businesses (preferred) or individuals face. Conduct market research to understand the needs of your target audience and find gaps in the market that your SaaS product can fill. Don’t overthink it. Simply write down 10 problems you’ve encountered in the domain you know best, then start validating them.

While brainstorming, it's preferable to focus on serving businesses rather than consumers. This is because solving a pain point for a business—especially one that saves time or money—allows you to charge a higher subscription fee. As consumers, we tend to think from a consumer perspective, so the first ideas that come to mind might be targeted toward individuals.

While there's nothing inherently wrong with targeting consumers (B2C), it's generally advised to target businesses (B2B). Consumers are often more cost-conscious, whereas businesses are willing to spend more to solve significant problems. This makes B2B SaaS models more lucrative and sustainable in the long run.

2. Validate Your Idea by Running a Smoke Test

Before investing time and resources, validate your idea. One common piece of advice in almost every startup book is to validate your idea before writing a single line of code. Personally, I use a smoke test to do this. Here’s how:

• Set Up a Landing Page: Get a domain and quickly create a landing page using Webflow. Design some graphics on Figma to make it look like the product exists. Include a sign-up button or another call-to-action (CTA).
• Collect Emails: When users click the CTA, ask for their email and inform them that the product is launching soon. You can offer them a discount or a pre-launch offer.
• Run Ads: Run a Google or Facebook ad with a small budget to drive traffic to your landing page. Track the clicks and sign-ups.
• Evaluate Conversions: A good rule of thumb is to aim for at least a 4% conversion rate (people leaving their email). If you achieve this, it’s worth investing more time and money into the idea.

If you don’t have an ad budget, reach out to people on LinkedIn or Twitter who are in your target space and get their feedback. Be cautious of polite affirmations—real validation comes from pre-sales, where users are willing to pay for the product. Avoid phrasing questions in a way that leads the respondent to a positive answer.

Remember, it's better to get a "no" early and scrap the idea than to spend months building a product only to find out that no one wants it, let alone will pay for it.

3. Define Your Value Proposition

Once you have decided on an idea clearly articulate the unique value your SaaS product offers. What sets it apart from existing solutions? How does it address the identified problem more effectively? It does not have to be a ground breaking idea, it can be a new twist to an existing product or a refresh to a clunky product

4. Plan Your Business Model

Decide on your pricing strategy and subscription plans. Consider different models like freemium, tiered pricing, or per-user pricing. Ensure your pricing aligns with the value you provide and is competitive in the market. For example, if you are building a tool that saves Software Engineers an hour on debugging or performing some task, you can estimate the cost savings for the company since engineers are expensive.

Here’s a breakdown:

• An average Software Development Engineer (SDE) costs $60 per hour.
• If a company has 50 engineers, saving one hour per engineer equates to $3,000 saved per day.
• This translates to $60,000 per month and $720,000 per year.

As a rule of thumb, you can charge about 33% of these savings as your subscription fee, allowing the company to retain the remaining two-thirds as cost savings.

5. Develop Your SaaS Product

This is a tricky one. If you're a seasoned Software Engineer, you might consider bootstrapping your project by investing your nights and weekends. If not, look for a technical co-founder or assemble a development team. Leverage existing skills to start building your product, focusing on creating a user-friendly and scalable application. Use agile development methodologies to iteratively improve your product based on user feedback. It is crucial to keep your early users on loop and build the product with them instead of for them.

6. Choose the Right Technology Stack

Select a technology stack that supports the scalability, security, and performance needs of your SaaS application. Common choices include cloud platforms like AWS, Azure, or Google Cloud, and development frameworks like React, Angular, or Vue.js. If you are bootstrapping, choose the tech stack you are most familiar with. Learning a new technology while building a SaaS is a bad idea.

7. Implement Robust Security Measures

Ensure your SaaS application complies with industry standards and regulations. Implement strong security measures to protect user data and build trust with your customers.

8. Develop a Go-to-Market Strategy

Plan how you will launch and promote your product. Utilize digital marketing channels, content marketing, and social media to reach your target audience. Consider offering free trials or demos to attract early adopters. This is one of the most important steps—you don't want to launch to crickets.

9. Provide Excellent Customer Support

Invest in customer support to help users get the most out of your product. Offer multiple support channels, including live chat, email, and a knowledge base. Customer satisfaction can drive word-of-mouth referrals and retain subscribers.

10. Measure and Iterate

Continuously collect data and feedback from your users. Use analytics to track key performance indicators (KPIs) and iterate on your product to improve user experience and add new features.

Conclusion

That’s all, folks! This is my first article and my personal take on how I’m building my second SaaS after reading numerous books, listening to hours of podcasts from successful founders, and watching tons of YC Startup School videos. If I’ve made any mistakes, please feel free to correct me. You can access the free cheatsheet here

I am Rads, I have over 8 years of experience developing software for Fortune 500 companies. I'm sharing insights on tech, startups, and digital marketing. Subscribe to my newsletter for free cheatsheets, Notion templates, and updates on my startup journey 🚀.