WHY DO SAAS STARTUPS FAIL?
Have you ever been taken aback by the news of a recently established SaaS company folding up? And you’re probably wondering why those guys failed, especially considering the success stories and high yearly revenue stashed up by companies like SLACK, HUBSPOT, and others.
It has been reported that less than one-tenth of SaaS startups develop into profitable SaaS firms. Worrying?
Recently, the SaaS business has been on the emergence. This is mostly due to its reduced barrier to entry convenience and frugality. A lot of entrepreneurs are climbing on its boat.
Unfortunately, for some basic reasons, which will be clearly stated in this article, the majority of these startups don’t last more than 3 years.
If you are looking at starting up your own SaaS company or not, then this article is a must-read for you, to help avoid making these common mistakes as others.
Below are basic reasons why startup SaaS companies fail.
Reducing Cash Flow
One of the basic reasons why startup SaaS companies fail, is a reduction in cash flow. This often happens with having a wrong definition of the cash flow required for the startup to grow. These companies make the mistakes of;
underestimating their churn rate,
having no plan for additional funds for their products to improve,
overvaluing their prospective earnings,
making use of a wrong and narrow-range pricing structure,
spending unreasonably during periods of scaling up, and
no proper and careful plan for the volume of their cash flow.
Product Issues
Another key reason why SaaS startups fail is product issues. Some of these products turn out to be user-unfriendly in comparison to other rivals in that sector. Other product mistakes committed by failed SaaS startups include;
- Having a poorly designed product.
- Poorly tuned onboarding and aiding processes.
- Delayed fixing of a bug.
- Little or no client assistance.
- Indefinite billing.
- Losing constant touch with clients.
As such, it makes it easier for competitors to build on the strengths of these products, sniffing out the weaknesses and presenting them as better automatic solutions than your product.
Poor Management
Poor management has also been identified as one of the reasons why SaaS startups don’t succeed. These companies end up shutting down due to team challenges. There's no proper definition of the right direction the business should take by these teams. Some of the poor management mistakes include;
- The poor market study, consumer acquisition techniques, and expansion strategies execution.
- Ill timing of new employees recruitment.
- Imprecise leadership.
- No feeling of oneness.
Lack of Interest in Market
Most SaaS startups fail because of a lack of market need. This can either be a disinterest by customers in what the company is offering or bad timing of emergence.
Some of these companies do not build this certainty around their product, that customers need what they are offering. As such, as soon as the products hit the ground running, they fade off within a couple of years.
As earlier mentioned, bad timing can also induce a decline in market interest. Launching during a period that conflicts with the services of your product affects the growth of such a startup.
Conclusion
It is necessary to note that the reasons why SaaS startups fail as exposed in this article are not independent of each other. There are all intertwined. Hence, to have your SaaS startup succeed, you should endeavor to adopt a comprehensive approach to its emergence and scaling up.
