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How to Build Software as a Service? A Comprehensive Guide for 2024

Max Babych

Max Babych

CEO

16 min

If you’ve been thinking about building a SaaS application, we have good news for you!

First, now is the perfect time to start.

The global SaaS market is booming, and by the end of 2024, it will be worth an estimated $307 billion.

Many businesses are adopting SaaS solutions. Especially small and medium-sized enterprises (SMEs). Mostly because they are affordable and can easily grow with the business.

Second, this guide contains everything you need to know about building a SaaS product.

We will cover the following aspects:

  • SaaS business model definition
  • why you should build a SaaS application
  • what are the types of SaaS applications
  • a step-by-step on building a SaaS application
  • SaaS development team composition
  • what are the pitfalls of SaaS product development
  • how much it cost to build a SaaS product in 2024
  • how to start actually building your first (or next one) SaaS application.

Ready to dig in? Let’s go!

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What is a SaaS Product?

Simply put, a SaaS (Software as a Service) product is a type of software that is accessed and delivered through the internet.

Instead of buying and installing software on your computer, you subscribe to a service and use the software through your web browser or a dedicated app.

This means you can use it from any place with a solid internet connection. Also, there is no need to worry about maintenance or updates – the service provider handles all of that.

  • Available online, so you can use it from any device with internet access.
  • You usually pay a monthly or annual fee to use the software.
  • The provider manages updates, security, and infrastructure.

Examples of SaaS Products

Google Workspace (formerly G Suite)

Includes Gmail, Google Drive, Google Docs, and other productivity tools that you access through your browser.

Salesforce

CRM is a platform for managing sales, customer service, and marketing, known as customer relationship management.

Slack

A communication tool for teams that offers messaging, file sharing, and integrations with other services.

Dropbox

A cloud storage service where you can save, share, and access your files from anywhere.

Zoom

A video conferencing tool used for virtual meetings, webinars, and online collaboration.

We bet you have already been using some, if not all, of these SaaS tools in your working routine.

These products provide a convenient, cost-effective, and flexible way to utilize software, making them a popular choice for both businesses and individuals.

Don’t feel like building your own SaaS application yet? Then, check out these 10 compelling reasons to do so.

10 Reasons to Build a SaaS Solution

Developing a SaaS tool can offer numerous benefits for both developers and users.

Here are a few reasons why SaaS application development is a great business endeavour choice.

Recurring Revenue Model

SaaS apps typically operate on a monthly or annual subscription model.

This creates a steady and predictable revenue stream, making your financial forecasting more reliable.

Consistent revenue helps you maintain cash flow and supports ongoing business operations and growth.

Moreover, subscriptions encourage ongoing relationships with customers.

This ongoing value delivery leads to high customer retention rates.

It is important to provide regular updates and maintain high service quality in order to keep customers engaged and prevent them from switching to competitors.

Efficient Scalability

Traditional apps require configuration and adequate system resources to run.

If workloads increase, additional storage, network, and computing capacities are needed. SaaS apps, on the other hand, are less resource-intensive and require no setup.

SaaS solutions leverage cloud computing. This allows providers to easily scale resources up or down based on user demand.

Cloud infrastructure means you only pay for the resources you use, avoiding the need for significant upfront investment in hardware.

Global Reach

You can access SaaS platforms anywhere you have an internet connection using any device—a computer, tablet, or smartphone.

This flexibility supports the work-from-home model and allows users to access the software beyond just their office desktops.

In fact, 67% of businesses have increased their use of SaaS platforms to support remote work.

 percentage of workloads businesses run in the cloud in 2022

Lower Entry Barriers

Users avoid large initial investments in software licenses and hardware. It makes SaaS solutions more accessible to small and medium-sized businesses.

Flexible pricing models, such as pay-per-use or tiered subscriptions, allow users to start small and scale as needed.

Faster Adoption

Offering free trials or freemium versions reduces the risk for potential customers, encouraging them to try your software.

Easy setup and  user-friendly interfaces facilitate quick adoption and integration into existing workflows.

Continuous Updates and Improvements

According to a recent Databox study, businesses using SaaS see a 30% increase in user satisfaction due to regular and seamless updates.

This is because, with SaaS solutions, users get the latest features and security patches automatically without installing updates themselves.

Seamless updates reduce downtime and keep operations running smoothly.

By continuously deploying updates, you can quickly incorporate user feedback and adapt the product to meet customer needs.

This results in a better user experience and higher satisfaction rates.

How to Build a SaaS Application

Enhanced Security and Maintenance

SaaS solutions enhance security through centralized management, allowing consistent application of security measures and reducing vulnerabilities.

Automated backups protect data and ensure it can be quickly restored if lost or corrupted, minimizing downtime and maintaining business continuity.

According to a report by Gartner, 70% of organizations rely on SaaS solutions for improved security and reduced risk of data breaches.

Additionally, a study by IDC found that companies using automated backups in SaaS platforms experience 50% fewer data loss incidents than those using traditional software.

Compliance

SaaS application development providers can ensure the software is compliant with all the necessary regulations, like HIPAA or GDPR, on behalf of their users.

Comprehensive logging and monitoring facilitate compliance and provide transparency.

Reduced IT Overheads

Users don’t need to maintain their own servers or IT infrastructure to utilize SaaS products. This reduces operational expenses.

SaaS providers handle all technical aspects of IT outsourcing providers, freeing up users to focus on their core business activities.

Data Analytics and Insights

SaaS products allow you to track how users engage with your service. This way, you get helpful insughts into usage patterns and preferences.

With this data in hand, you can better decide on feature development and improvements.

Innovation and Flexibility

The SaaS model lets you quickly develop and deploy new features, responding to market demands and user feedback.

You can test new ideas and concepts with a limited user base before rolling them out widely.

Develop solutions tailored to specific industries or business needs, offering greater value to users.

In conclusion, SaaS application development offers numerous benefits, from predictable revenue and scalability to enhanced security and innovation.

These advantages make SaaS an attractive model for businesses looking to develop and deliver software solutions in this competitive market.

Types of SaaS Applications

SaaS applications can be broadly categorized into two main types: Vertical SaaS and Horizontal SaaS.

Each type serves different market needs and offers distinct advantages.

Vertical SaaS Applications

Vertical SaaS applications are specialized software solutions designed to meet the specific needs of a particular industry or niche.

They are tailored to address the unique challenges and requirements of that industry.

Vertical SaaS Apps Examples

Healthcare: Electronic Health Record (EHR) systems like Epic and Cerner.

These SaaS applications cater specifically to the healthcare industry, providing tools for patient records, scheduling, billing, and compliance.

Real Estate: Platforms like Zillow and CoStar offer tools for property management, real estate listings, and market analysis.

Legal: Software like Clio and MyCase provide case management, billing, and document management tailored for law firms.

Manufacturing: Solutions like Plex and IQMS offer manufacturing execution systems (MES), inventory management, and supply chain management specific to the manufacturing industry.

Advantages of Vertical SaaS Apps

Features and functionalities are designed specifically for the industry’s unique needs.

Providers often have deep knowledge and expertise in the industry they serve. It translates into better support and innovation.

Vertical SaaS applications often include built-in compliance with industry regulations and standards.

Challenges

The market is limited to a specific industry, which can restrict growth potential.

Developing specialized features for a niche market can be more expensive and time-consuming.

Horizontal SaaS Applications

Horizontal SaaS applications are generalized software solutions designed to serve a wide range of industries and business functions.

Unlike vertical SaaS platforms, horizontal ones offer broad functionalities that can be applied across various sectors.

Examples of Horizontal SaaS Solutions

Customer Relationship Management Software (CRM): Salesforce and HubSpot, which provide tools for sales, marketing, and customer service applicable to any industry.

Enterprise Resource Planning Software (ERP): Solutions like NetSuite and SAP, which offer comprehensive business management tools for finance, HR, supply chain, and more.

Human Resources (HR): Platforms like Workday and BambooHR provide HR   management payroll, and recruitment solutions for businesses of all sizes and industries.

Project Management: Tools like Asana, Trello, and Monday help teams manage projects, tasks, and workflows across different sectors.

Advantages

The broad applicability of horizontal SaaS solutions allows providers to target a larger and more diverse customer base.

Serving multiple industries can lead to cost efficiencies in development, marketing, and support.

Horizontal SaaS applications often offer extensive customization options to meet the specific needs of different users.

Challenges

The broad focus may result in features that are less specialized, potentially lacking the depth needed for specific industry requirements.

The wide applicability of horizontal SaaS solutions attracts numerous competitors, making it challenging to stand out in the market.

Types of SaaS apps

Choosing Between Vertical and Horizontal SaaS Application Development

If you are still hesitant about what type of SaaS platform you should build, here are a few factors to consider.

FactorConsideration
Target MarketIdentify whether your target market requires specialized features or if a broader, more flexible solution would be sufficient.
ExpertiseConsider your team’s industry knowledge and ability to address specific needs versus providing a generalized solution.
Growth PotentialAssess the market size and growth opportunities for both vertical and horizontal approaches.
Resource AvailabilityEvaluate the resources needed for development, marketing, and support for each type of SaaS application.

Both vertical and horizontal SaaS applications offer unique benefits and challenges.

The choice between them depends on your business goals, target market, and expertise.

Vertical SaaS provides tailored solutions for specific industries, while horizontal SaaS offers broad functionalities applicable across multiple sectors.

Looking for profitable business ideas to start your SaaS adventure?

Here are 25 SaaS startup ideas to launch in 2024

How to Build a SaaS Product: Step-by-Step Guide 

Now, let’s discover a step-by-step process of SaaS software development.

Since SaaS app development is one of our key services, we know how to build SaaS products that stand out.

Let us guide you through our SaaS development process.

1. Discovery & Market Research

The main goal of this initial software development stage is to understand the market, identify user needs, and define the product vision.

At this point, we analyze the market to identify trends, opportunities, and gaps.

We also look at competitors to understand what they offer and where they fall short.

If possible, our team also conducts interviews with potential users to gather insights into their pain points and needs.

Based on the market research data, we and our client define a value proposition. Together, we clearly articulate what makes the SaaS product unique and why users would choose it over others.

2. Choose a Tech Stack and Monetization Model

This stage aims to select the right technologies and define how our client will generate revenue.

Tech Stack Selection

  • Front-End: Choose technologies for the user interface, such as React, Angular, or Vue.js.
  • Back-End: Select server-side technologies like Node.js, Python, Ruby on Rails, or Java.
  • Database: Decide between SQL (e.g., PostgreSQL, MySQL) and NoSQL (e.g., MongoDB) databases based on data requirements.
  • Cloud Provider: Choose a cloud service (e.g., AWS, Azure, Google Cloud) for hosting and scalability.

Once the tech stack is selected, we move on to the pricing model.

Monetization Model

  • Subscription-Based
    Monthly or annual subscription fees. Statista reports show that most SaaS companies adopt a subscription model. They highlight its popularity and effectiveness in the market.
  • Freemium
    Basic features are free, with advanced features behind a paywall.
  • Usage-Based
    Charges for services with mixed demand based on usage levels.
  • Tiered Pricing
    Different pricing tiers are based on feature sets and usage limits.

3. Product Roadmap & Business Plan

At this stage, it is time to outline the development phases and create a strategic plan for the business.

To create a product roadmap, we break down the development process into phases. It is important to prioritize features based on user needs and business goals.

As we develop a business plan, we cover the following aspects:

  • Target audience, market size, and competition.
  • Sales and marketing strategy – how to attract and retain customers.
  • Revenue forecasts, expenses, and profitability timelines.
Product Roadmap Example

4. MVP Development

Then, we build a Minimum Viable Product (MVP) to validate the client’s idea with minimal resources.

First, we identify the core features necessary to solve the primary user problem.

Then, we develop these features quickly and efficiently.

Finally, the client releases the MVP to a limited audience, and we gather feedback to understand what works and what needs improvement.

5. QA & Testing

This step is crucial to ensure the product is reliable and secure and provides a great user experience.

Our QA specialists conduct thorough manual testing for usability, functionality, and security.

Then, we release the product to a group of beta testers to identify any last-minute issues and gather real-world usage feedback.

6. Launch, Review Feedback, Iterate

Now it’s time to officially release the product, collect user feedback, and continuously improve.

We deploy the product to production and announce the release through marketing channels.

Then, our team monitors user feedback through reviews, support tickets, and direct communication.

We use the feedback to prioritize and implement improvements and new features.

It is important to regularly update the product to enhance user satisfaction and stay ahead of the competition.

Overall, SaaS product development involves a series of well-defined steps, from initial research to ongoing iteration after launch.

By following this structured process, we ensure our SaaS solution helps clients to stand out in the market and meets the needs of their target audience.

Development Process To Build A SaaS Application

What Are The Key SaaS Metrics to Track?

Once your application is in the wild, you need to monitor its performance and the overall success of your SaaS project.

Here are the most important SaaS metrics to track:

 

SaaS MetricExplanation Example
Monthly Recurring Revenue (MRR)Measures the total revenue generated from subscriptions each month.If you have 100 customers, each paying $50 per month, your MRR is $5,000.
Customer Churn RateThe percentage of customers who cancel their subscriptions over a given period.If you start the month with 100 customers and 5 cancels by the end, your churn rate is 5%.

Use our churn rate calculator to see how it works.

Customer Acquisition Cost (CAC)The average cost to acquire a new customer.If you spend $1,000 on marketing and gain 10 new customers, your CAC is $100 per customer.

Calculate CAC with our online calculator.

Customer Lifetime Value (CLTV)The total revenue you can expect from a customer over their entire relationship with your company.If a customer pays $50 per month and typically stays for 20 months, the CLTV is $1,000.

Use our  CLTV estimation tool.

Average Revenue Per User (ARPU)Measures the average revenue generated per user.If your MRR is $5,000 and you have 100 customers, your ARPU is $50.
Net Promoter Score (NPS)This metric gauges customer satisfaction and loyalty by asking customers how likely they are to recommend your product to others.It’s scored on a scale from 0 to 10, with higher scores indicating higher satisfaction.

Use our NPS Calculator.

Customer Retention RateMeasures the percentage of customers who continue to use your product over a certain period.If you start the month with 100 customers and 90 are still using your product at the end, your retention rate is 90%.
Lead-to-Customer Conversion RateThe percentage of leads that become paying customers.If you receive 100 leads and 10 of them convert to customers, your conversion rate is 10%.

Tracking these metrics helps you understand your business’s health, make data-driven decisions, and identify areas for improvement. This way, you can ensure the growth and success of your SaaS software.

5 Challenges in SaaS Application Development

Developing a SaaS application comes with several challenges that need careful consideration to ensure a successful product.

Here are five key challenges of SaaS software development you might face:

Scalability and Performance

One major challenge in SaaS software development is ensuring the application can handle increasing numbers of users and large volumes of data. And all that without slowing down or crashing.

Here is what we mean by that.

For example, you can build project management software like Trello.

As more users join and create tasks, the app needs to maintain fast response times and smooth operation.

Ensuring your infrastructure can scale up (add more resources) and scale out (distribute load across multiple servers) is crucial to maintaining performance as demand grows.

Security and Data Protection

Protecting user data from unauthorized access and breaches is another critical challenge.

SaaS applications often handle sensitive information. It can be personal details or financial data.

For instance, a  healthcare SaaS platform storing patient records must comply with strict regulations like HIPAA and implement robust security measures.

These include encryption and regular security audits to safeguard data against hackers and breaches.

Integration with Other Systems

Another challenge we would like to point out is integration.

SaaS applications often need to work seamlessly with other software and systems that users already use. This integration can be complex.

For example, a CRM tool like Salesforce might need to connect with email services, social media platforms, and other business software.

Ensuring smooth data flow and compatibility between different systems can be challenging and requires well-designed APIs and integration capabilities.

User Experience and Accessibility

Providing a user-friendly interface and ensuring the application is accessible to all users, including those with disabilities, is another challenge.

The application should be intuitive and easy to navigate.

If you develop an online collaboration tool like Slack, it should offer a clean, intuitive interface that users can quickly learn.

Additionally, it should be accessible to people with visual or motor impairments, adhering to accessibility standards like WCAG (Web Content Accessibility Guidelines).

Continuous Delivery and Maintenance

SaaS applications require regular updates and maintenance to fix bugs, improve performance, and add new features.

This continuous delivery model can be challenging.

For instance, if you have a cloud-based accounting software like QuickBooks, you need to frequently release updates without disrupting service for your users.

This requires a robust CI/CD (Continuous Integration/Continuous Deployment) pipeline and thorough testing to ensure each update is smooth and does not introduce new issues.

Summing up, building a SaaS application involves addressing challenges related to scalability, security, integration, user experience, and continuous updates.

Overcoming these challenges requires careful planning, robust technology solutions, and ongoing commitment to quality and user satisfaction.

SaaS Development Team

Creating a SaaS application requires a team of skilled professionals. Each of them should bring their expertise to different parts of the project.

Here’s a simple breakdown of the key roles in a SaaS app development team.

RoleResponsibilities
Product ManagerOversees the project, ensuring it aligns with the business goals and meets user needs.

They coordinate between different teams and manage the product roadmap. For example, they decide which features to prioritize and when to release updates.

Project ManagerEnsures that your project stays on track, within budget, and on time. 

They manage schedules, resources, and communication among team members.

For instance, project managers organize team meetings, track progress, and address any issues that arise during development.

Front-End DeveloperFocuses on the user interface (UI) and user experience (UX).

They build the parts of the app that users interact with using technologies like HTML, CSS, and JavaScript frameworks (e.g., React or Angular).

Front-end developers create the layout, buttons, and forms that users see on their screens.

Back-End DeveloperHandles the server-side logic, databases, and application programming interfaces (APIs).

They ensure the app processes data correctly and communicates smoothly with the front-end.

Backend developers set up the database where user information is stored and create the APIs that fetch and update this data.

UI/UX DesignerFocuses on the look and feel of the app.

They create wireframes, mockups, and prototypes to ensure the app is visually appealing and easy to use.

QA EngineerTests the app to identify bugs and ensure it works correctly across different devices and browsers.

They perform manual and automated testing to catch issues before the app is released.

For example, they check if the login function works smoothly and if the app performs well under heavy load.

DevOps EngineerDevOps engineer manages the infrastructure and deployment processes.

They ensure the app runs smoothly on the servers and handle tasks like setting up continuous integration/continuous deployment (CI/CD) pipelines.

For instance, they automate the deployment process so new updates are rolled out efficiently without downtime.

Having the right mix of these roles ensures that the SaaS app development process is smooth and efficient. 

It results in a high-quality product that meets user needs and business objectives.

Saas Development Team Structure

Average SaaS Platform Development Costs in 2024

So, how much does it cost to build a SaaS app in 2024?

Let’s dive in.

The average cost of developing a SaaS application can vary widely depending on several factors. The first of them is the size of the app.

Small SaaS Application

For a basic SaaS app with minimal features, the development cost can range from $35,000 to $60,000.

These apps typically serve small businesses or startups and include essential features like user authentication, basic data storage, and a simple user interface.

Medium SaaS Application

For a more complex application with additional features such as integrations with other services, advanced user roles, and better scalability, costs can range from $60,000 to $150,000.

These applications are suited for growing businesses that need more functionality and robustness.

Large SaaS Application

For a highly complex and feature-rich SaaS app designed for enterprise use, development costs can exceed $150,000 and may go up to $500,00 or more.

These applications include advanced features like machine learning, real-time data processing, extensive integrations, high scalability, and stringent security measures.

Here are other factors that can affect SaaS development costs:

  • Feature set – more features and complexity increase costs.
  • Design – custom and highly polished designs require more investment.
  • Integrations – connecting with other software and services can add to the cost.
  • Security – enhanced security measures and compliance with regulations can be costly.
  • Development team – costs depend on whether you use an in-house team, freelancers, or a development agency, and their geographical location.

In summary, the cost of developing a SaaS application in 2024 ranges from $350,000 for a simple app to over $500,000 for a highly complex, enterprise-level solution.

Want to check out the full breakdown of each factor?

Then read our article on SaaS Development Costs

How to Make a SaaS Product: Key Takeaways

We hope this guide helps you understand how to build a SaaS product efficiently and cost-effectively.

Here’s a summary of the key points:

The SaaS model offers many advantages over traditional software, including recurring income, low initial costs, scalability, global reach, automatic updates, and robust security.

To build a strong SaaS product, you need to follow these crucial steps:

  • Validate your idea to ensure it fits the market.
  • Select and prioritize must-have features for development.
  • Choose the right monetization model to balance value and compensation.
  • Create a technology stack that ensures scalability and security.
  • Develop a roadmap to guide your product development.

If you’re looking for an experienced SaaS development team to turn your ideas into a successful product, SpdLoad can help.

We have a track record of building multiple cloud solutions across various industries. Our team has been developing SaaS apps for over 10 years now. 

With this experience, expertise, and goal-oriented approach – we are your reliable SaaS development partner.

You can count on us in every step of your product development journey – from the product discovery phase and MVP development to support and maintenance. 

If you have any questions about SaaS development or custom software engineering,  contact us, and we will schedule a brief intro call to answer all your questions.

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FAQ

Have a question? Look here

What Are the Key Steps in Developing a SaaS Platform?
Developing a SaaS platform involves several key steps. First, conduct discovery and research to understand the market and your target audience's needs. Next, create a detailed plan that includes a product roadmap and business strategy. Then, choose the right technology stack for your front-end, back-end, and database. Develop a Minimum Viable Product (MVP) with essential features and ensure it works well through thorough testing. Finally, launch your product, gather user feedback, and continuously improve it.
How Do I Choose the Right Technology Stack for My SaaS Product?
Choosing the right technology stack depends on your project requirements, scalability needs, development speed, budget, and team expertise. Consider what features and functionalities your product needs and ensure the chosen technologies can grow with your user base. Factor in the cost of development and maintenance, and use technologies that your development team is familiar with. Common choices for the front-end include React, Angular, or Vue.js, and for the back-end, Node.js, Python, or Ruby on Rails are popular options.
What Strategies Should I Follow for Effective SaaS Product Management?
Effective SaaS product management involves understanding your users' needs, setting clear goals, and prioritizing features that deliver the most value. Maintain regular communication with your development team and stakeholders, and use agile methodologies to allow for flexibility and rapid iteration. Continuously gather and analyze user feedback to make informed decisions and ensure your product remains relevant and competitive.
How Can I Secure My SaaS Application Against Cyber Threats?
Securing your SaaS application involves implementing robust security measures, such as encrypting data, using secure authentication methods, and regularly updating your software to patch vulnerabilities. Regularly test for penetration and security to find and fix potential weaknesses. Educate your team on cybersecurity best practices and make sure your app is compliant with relevant industry standards and regulations to protect user data.
How Do I Measure the Success of My SaaS Product Post-Launch?
Measure the success of your SaaS product after launch by tracking key metrics like user acquisition, retention rates, churn rates, and customer satisfaction. Monitor usage patterns to understand user interactions and identify improvement areas. Revenue growth and profitability are also crucial indicators. Review these metrics regularly to make informed decisions and adjust your strategies to meet your business goals.

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