Insight: SaaS (32) In 2022, is it still a good time to start a SaaS company?
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The pricing strategy of SaaS was discussed in the previous article ‘Insight: (31) Common pricing strategies for SaaS’. Today, we’ll talk about whether 2022 is a good year to launch a SaaS business.
With globalization and the ubiquity of the Cloud, the entire SaaS market is fast growing. In the United States, the enterprise service market is enormous. No one can predict the size of the worldwide SaaS market in 2021 with certainty, but one thing is for sure: SaaS is evolving at a rapid pace. In the public market, there are an increasing number of IPOs, and a growing number of giants are acquiring SaaS startups. Everyone is familiar with the stories of Zoom, Slack, Zendesk, and Salesforce.
The SaaS industry’s strong success in the public market indicates that it has a huge upside, yet we discovered that many of the best SaaS companies were founded 8–10 years ago, for example. Slack had its first release in 2013, and Zoom had its first release in 2011. Is it currently a good time for entrepreneurs to start a SaaS business? It’s probable that the current period of prosperity has reached its apex, leaving no room for new entrepreneurs to enter the market.
The statistics from the stock exchange and huge corporations are all too macroscopic. As a startup, we should focus on more easily accessible data.
According to the Blissfully Report on 2020 Annual SaaS Trends:
Companies with 1–100 employees (VSB and SMB) spend an average of $200k per year on SaaS products, according to the research. Then figure it out depending on how much each of these companies has invested in various departments.
For instance, if the Marketing department accounts for 20% of the SaaS cost, the annual SaaS cost in the Marketing department of a company with 1–100 employees is $40k.
Then, based on the client level and product category, your SaaS product may roughly calculate the revenue that you can make. Modify your product prices based on this data; if the data is insignificant, you may have chosen an emerging market in need of education or just a market with little demand.
This figure indicates a purchase of SaaS in an established market. This is not a forecast of the future market. What makes new SaaS companies stay in the game?
Let’s have a look at the following data:
The turnover rate is a noteworthy piece of information found here. This indicates how many SaaS companies customers will continue to use in the second year, as well as how many SaaS goods will be abandoned or prohibited.
We can see that 29 percent of SaaS dropped in the second year in the mid-market segment (100–1000 employees). Simultaneously, 29% of SaaS was added in the second year. That is to say, regardless of how many established suppliers your SaaS product competes with, you can still enter a blue ocean market.
There will always be clients who will select your product over the old answer as long as you can employ new methods to solve old problems. This is where the new SaaS offering shines as a viable alternative.
Depending on whose side of the script you’re on, it also offers good and bad news.
The good news is that your product, no matter how simple or complex it is, has the potential to replace the initial competing products, and no single item can be monopolized for an extended period of time. This instills immense confidence in SaaS businesses. Here’s why SaaS has always been a good arena for entrepreneurs. They will be able to compete with the market leader regardless of who they are. In the SaaS market, the annual renewal is a new opportunity for anyone. The customer is a prospective target as long as a competitor loses this customer.
The bad news is that your product could be superseded at any time by a new solution. No matter how much glory you’ve previously earned or how many accomplishments you’ve had. In the face of rejuvenation, you always walk on the thin ice. At all times, you must preserve a sense of crisis. The SaaS industry’s annual renewal business model rewards you with a higher valuation, as well as ongoing renewal pressure and competition. To keep your clients from churning, you must constantly enhance your offering and understand what your competitors are doing. You must be determined to select between the two options: losing clients or getting them to purchase more.
Aside from the alternative, we’ve discovered that clients are often open to new SaaS categories. You’ve developed a new blue ocean market if your product can address new problems for customers or meet new wants. It is your responsibility to educate the market and help customers identify the problem and your solution. Don’t be fooled into believing that there will never be competition.
Although the global cloud market is still in its early stages, the leaders already have a competitive brand advantage. The cloud market itself has enormous potential, and I predict that AWS, Azure, and Google clouds will continue to dominate in the next ten years, capturing the vast majority of market share. SaaS, which is a scenario-based cloud market, is the cloud market that is most ideal for entrepreneurs.
As a result, the SaaS business remains a viable entry point for entrepreneurs. 2022 is still a good time to launch a SaaS business
Please send me an email (jasperhanlingyi@gmail.com) if you have any questions or suggestions.
The next article ‘Insight: SaaS (33) Quarter-life crisis of SaaS’ is published. Simply send me some claps and feedback if you enjoyed my article.
