These days businesses are replying on cloud-based services, which is one of the primary reasons that contribute to the growth of software-as-a-service industry. Software is necessary in every field today. Because of this reason by the end of 2015, more than 80 per cent of companies will be using SaaS services.
We can see that software is becoming a need of the hour and starting a software development company can be a great plan for the future. If you have this extravagant dream, there are some essential tips to help build a successful software business. Using these tips, start-ups and businesses are going to benefit significantly.
Trying to Keep Things Simple
Most of the products provided by SaaS are known to be self-served, which means that they are self-explanatory, highly intuitive, clean, and simple. Marketing and sales collateral will require highlighting use flows, value, and return on investment, not technology and features.
When it is about the entry point of software-as-a-service, it is mostly free, but it is limited when with respect to time, functionality, and usage volume. Therefore, it is better to provide at least two or more options that can cater to the needs of different customer segments who have different budget, ROl, and usability.
Time to Define, Quantify, Evaluate, Advance, and Control
The users of a software development company will be sharing invaluable information about the products they are using, including their behavior and needs. Data will reveal the functionalities will are being used as well as popular. It could be very useful in defining the packages. With the help of the data, it is crucial to define tests and make changes that will help in improving the products.
Nurturing an Ecosystem
The most successful products are known to be wrapped in flexible and open APIs that will enable easy integration using third-party software. The better ones are known for accumulating a whole host of developers and offering plugin marketplace for enabling the promotion and development of third-party plugins. Interoperability is known to enhance the value of the product and can also introduce an ancillary revenue source from resale opportunities, equipment manufacturer deals, referrals.
Offering the Necessary Amount of ProfessionalServices
Professional services are known for being double-edged words. On one side, they can significantly help in increasing the stickiness and revenue for reducing churn rates. On the other side, they will also be increasing deployment time as well as cost of sales with reduced margin.
Professional services are known for making up for about 10 to 20 percent of the new ACV or annual contract value, and the gross margin can be around 20 percent. These proportions are known for adding up for blended gross margin that is more than 70 percent, which is known for to be a crucial threshold that helps to maintain good valuation multiples.
Being Dedicated to the Success of Your Customers
When you take up new customers, as a software development firm you must be able to defend as well as grow the recurring revenue of the customers that you already have. Normally, the goal is going to be up-sells for constituting between 10 – 25 percent of the ACV newly booked, and for maintaining gross monthly churn rate that is below 1 percent (without considering up-sells), and a negative net monthly churn rate (where he up-sells is more than gross churn).
For achieving such a goal, customer success team will have to continuously monitor the usage levels of the customers, send satisfaction surveys and product updates to them, and invite them for being present on the customer-advisory board sessions. The customer-success team must be trained as well as capable of handling sales.
Showing a Path Towards Profitability
Most of the software development companies are considered to not be profitable because they end up investing their resources in fuel growth. For successful companies, it is extremely important to have a path to profitability because it helps in proving that the business model is ultimately sound, and the plan is to be profitable in the upcoming one or two years, and it can be achieved while having average growth rates. An excellent way of demonstrating it would be by hitting profitability in a few years before going ahead and investing more capital again in higher growth.
It is crucial to have these tips in mind when you want to set up your own SaaS company. they will definitely lead you to the path of success.