The Ultimate Guide to SaaS Product Development Process
If we tell you that 80% of businesses use at least one SaaS application, you’re bound to think — that’s an amazing opportunity for me! And you won’t be wrong — SaaS market and revenue keep growing at a pace that often surpasses initial optimistic projections.
However, the SaaS industry also has its dark side — unless you keep up with its stellar benchmarks, the competition will beat you. To be precise, software development companies with an annual growth rate of 20% have only an 8% chance of surviving. This means that the process of SaaS product development has to be done right from the get-go.
In the industry as fast and volatile as SaaS, the organizational side of product development can be a serious challenge even for seasoned managers and developers. There are many variables in play, and there is a need for a balanced approach to every milestone — in this article, we’ll try to wrap them into one handy guide for SaaS product development.
Here are 8 steps to start your SaaS Product Development process
We’re not going to lie — developing a great SaaS product requires an equilibrium of good ideas, hard work, practical approach paired with visionary thinking, great organization, and a little bit of luck. Think about SaaS product development as a jazz performance — you know the melody that is the foundation of your music score — the rules that apply to any emerging business. The rest is an improvisation based on this theme — and if you want it to be good, your team has to be well trained and in tune. They have to be able to do their best on their own and at the same time adjust to other teammates’ needs, roles, and responsibilities. So let’s see how to get there.
Step 1: Double-check your idea
Before you start developing another SaaS — try to answer a few questions honestly. First and most important — does the world really need my product? While your mom and friends may think that your idea is fantastic, would a random person in the street agree? Would your target customer agree? Instead of thinking what you are building think of who you are building this for? And before starting to build the solution, reach out to some prospective customers and ask them about their hardships, use them as your R&D throughout the entire process. There is a great guide written by Dmitry Dragilev building relationships with prospective customers (as well as how to do it) and using these ongoing conversations as R&D feedback when you build your SaaS tool. So, discuss to the smallest detail with the CEO or the existing team:
- What problem is your software solving
- Who’s your core target audience
- What makes you different from your competitors
- The main differentiating features of your product
This should allow you to detect any weaknesses and inconsistencies in your idea and vision in the early stages of product development. Market research is a great way to test your idea and gather valuable insights into customers’ unanswered needs.
Step 2: Discuss the basic SaaS requirements
All the good SaaS products have a few things in common, so the foundation of building a viable product is having a clear plan for security and privacy, customization and integration options, as well as scalability.
In the old days of software development, security was often seen as a final touch and afterthought, rather than a foundational feature of a high-quality product. Nowadays, consumers expect safety and protection of their data, and the existing and upcoming legal regulation make top-notch security standards an absolute must. Based on your customers’ and clients’ needs, discuss the ways in which your software may have to be adjusted to their specific requirements or integrated with complementary existing tools. Finally, you have to prepare your software product to respond to the needs of an increasing number of users.
Step 3: Define your minimum viable product
Minimum viable product refers to the basic core features that create immediate value for your user with minimal costs on your end. Feature prioritization is a crucial component as well shedding light on what features your product team will prioritize in the mvp. Basically, the minimum viable product is what your early adopters will get and test.
One way to get closer to the outline of your minimum viable product is to define:
- User persona(s)
- Action(s) they need to take to solve their problem using your software
- Solution(s) to the problem
This will provide you with a guideline on which features you need to include in your MVP.
Step 4: Pricing model and strategy
Pricing model and strategy can easily make or break your software product. No matter how good it is, if the pricing model is not adjusted to your target user’s needs, habits and financial conditions, you will fail to acquire customers and grow.
The most common pricing models in SaaS include:
- Usage-based pricing — allows users to pay based on the amount of usage
- Freemium — offers a free version with limited features and encourages upgrade to paid plans with extra features.
- Flat rate — offers an entire product or bundle of features under one price, usually paid on a monthly or yearly basis
- Pricing per active user — offers an entire product or bundle of features charged per user
- Pricing per feature — offers different sets for features for different prices
While the pricing model should be something that is planned on a long-term basis, in the short-term, the right pricing strategy will enable you to settle comfortably into your market. There are several common pricing strategies with SaaS products such as:
- Market penetration — attracting customers with an initial low price
- Promotional pricing — skimming price from higher to lower, as the product gains credibility and exclusivity
- Premium pricing — common pricing strategy for exclusive niche brands
- Free trial
The right pricing model and strategy depend on your product, long term plans, target audience, and plenty of factors.
Step 5: Technical specifications
Now’s the time to determine how your software will be built. At this point, you’ll need consultations with the professionals, who will define which programming language, platforms, software, and tools are required to build your SaaS product. This decision should be made both with MVP and long term plans in mind.
Step 6: Assemble a development team
The person who’s going to take the lead in your development team largely depends on the type of software you’re building. Since choosing the right development team is a multi-step process in its own right, we’ll run a more detailed checklist in the following section.
Step 7: Determine your budget
With all of the previous steps you’ve taken, by this point, you’ll have a clear idea of how much SaaS product development will cost you. Don’t forget to take into account the time needed to build the product and start selling it. It can take between up to 10 months to build a SaaS product, but most SaaS MVPs take about 6 months to build.
Plan the budget sources and budget allocation carefully, and don’t forget to factor in possible setbacks and challenges that may burden your finances additionally.
Step 8: Organize the workflow
Since the process of building SaaS products requires a lot of flexibility, fine-tuning and constant communication, it is incredibly important to find the right tools that will keep your workflow on the same page at all times. While there are plenty of tools that deal with various aspects of workflow separately, it is highly recommended to use a more powerful tool that successfully delivers all of these functionalities in one package.
Nifty is a great choice for product managers who want to keep tabs on the entire project workflow in one place. Its features include:
- Collaboration
- Planning
- Task delineation
- Progress tracking
- File management
- Organizational oversight
This software also offers special solutions for client management, marketing and communication, as well as agile development, so you can easily scale organization with Nifty across the entire company. But before you onboard them — lets see how a solid product development team looks like.
How to Assemble your Dream SaaS Product Development Team
Your product development team structure is another thing that depends on the nature of your software, service, and target customers. In general, the team should be lead by a product development manager who works closely with the CEO.
A product manager doesn’t have to be a developer or marketer, but it is extremely important that this person is familiar with the specifics of each role in the team. Great organizational and social skills are an absolute must. Now, depending on the size of your company and software, some or of all of these sectors will have their role in product development. These sectors can be a team or a single person.
Structuring Your Product and Development Team in Nifty
Startups or Smaller Teams
If you’re just starting out or are a fairly lean team to begin with, stressing an agile layout that fuses design and product tasks with engineering tasks may have its benefits, such as keeping your tasks readily accessible and actionable.
Single Portfolio Model
Giving your most of (or your entire) team access to a single Product and Development portfolio will allow you to encapsulate operations in a single space. You may find value in dividing the portfolio into projects that cover a considerable breadth of your product’s breadth, examples being “Web App, Mobile, Website”.
In contrast to a larger team that might break out projects into portfolios based on a specific role — such as engineers — this model is small, tight, and incredibly actionable.
Sprint Management
Since your product and development teams are in shared projects, your weekly or bi-weekly sprints will have a blend of design and development tasks within them. You’ll outline your sprints as Milestones and tie tasks to them.
You can segment a “To Do” by role type and assign team members of those roles to the list to automate assignments. This workflow is a great use case for our Swimlane view as you’ll easily be able to see the backlog of tasks by role, and can shift tasks across sprints with ease if you need to rearrange priorities.
The benefit of this lean, compressed workflows is the speed at which tasks can be completed due to focused, simultaneous input from both product and engineering. The downside to this model is that it can become cramped and difficult to expand as your company grows, in which case you may shift to one of the below models.
Larger Team Structures
As your organization grows, your operations will scale in accordance to your needs. Below are a couple ways that you might structure larger teams in Nifty.
Department-Based Portfolios
Development, Design, Marketing, and so on use their own siloed portfolios to focus on the segment of the company in which they are specialized. The Product team can use the “Move” feature to ship a task from their project to a project in the Development portfolio to continue the task’s journey into development.
Team-Based Portfolio
Organizations who wish to keep product and engineering closer together will often cluster teams into Portfolios. Examples of this might be your Mobile team, or a team built around a specific feature of your product.
To know what works best for your organization, let’s take a look at the types of members you’ll need to succeed.
1. Product
This sector will consist of a product development manager and a team of developers, UX designers, QA testers and DevOps engineers. While the software is in the development and design phase, the product manager takes care that everything runs smoothly, addresses any concerns that arise, and communicates with the CEO and other sectors, if needed. Once developers and designers are done, QA (quality assurance) testers take center stage. Testing can be done separately or during the building process. The final stage is the deployment of the software to the cloud.
2. Business development
This sector should make sure the entire company has everything they need to do their job. The business development team communicates with partners that provide your company with the platforms and tools that make software development, management, and growth possible.
3. Marketing
The marketing sector in SaaS usually deals with content marketing, SEO, social media marketing, and advertising. Their job is to reach out to the target audience, generate, nurture, and convert leads.
4. Sales
If you thought that the product team is the superstar of SaaS development, think again. Most product managers will agree that the sales team is the lungs of any SaaS start-up. In the SaaS industry, some of the common roles in the Sales team include (but are not limited to) Sales Engineers, Customer Success Managers, and Sales Development Reps.
Customer Success Managers can be found in SaaS companies of all sizes, and their focus is on making sure your customers are making the best of your product. They act both as customer support and sales managers, as they address issues with the software, help with the onboarding process, and track key product development metrics that are reported to the product development team.
Sales Engineers and Sales Developments Reps are usually employed in larger B2B SaaS companies. They organize demos, meetings and close larger deals with clients and partners.
5. Finance and administration
Finally, finance and administration work behind the scenes to make sure everything is running smoothly. It is advised to hire professionals to oversee the company’s finances and accounting, especially in the early stages of product development.
Once you assemble your product development team and start working towards your goals, the final step is defining the right metrics and benchmarks to measure your success.
What are key SaaS metrics you should be tracking?
With all the metrics you can track using tools like Google Analytics, Databox, or Hotjar, it is not always easy to decide which ones are meaningful for your business goals. Most SaaS businesses focus on the following metrics:
- Monthly or annual recurring revenue
- Cost of acquiring a customer (CAC) — the amount you spend on marketing and sales to acquire a new customer
- Customer lifetime value (LTV) — the cumulative revenue generated by a customer over the lifetime of their subscription. This metric is usually analyzed in combination with CAC, with a fairly universal rule that LTV should be at least 3X larger than the CAC
- Net Promoter Score (NPS) — the value customers gain from your product. You want this score to be above 50.
- Customer Churn — the percentage of customers unsubscribing on a monthly basis against your overall customer count. Ideally, it should be kept between 3% and 5%, although the average SaaS companies’ churn is around 10%. Also, this metric is arguably less valuable compared to measuring the retention rate.
Some marketers and product managers, on the other hand, believe that dealing with too many of these metrics is akin to not seeing the forest for the trees. For these managers, one metric is usually enough depending on the nature of your SaaS product.
With this metric analysis, it is important to differentiate between low-touch SaaS and high-touch SaaS. Low-touch product is a software that allows subscriptions via website, emails, and free trials, with minimum interaction with the sales team. On average, these subscriptions’ prices are $10 for B2C software and between $20 and $500 for the B2B industry. For these SaaS products, the most important metric is monthly recurring revenue.
On the other hand, high-touch products require heavy involvement of the sales team in customer acquisition, onboarding, and account maintenance. Most of these SaaS are B2B products with an average contract value of between $6,000 and $15,000. Their priority metric is annually recurring revenue.
Long story short, most of your calculations should come down to tracking revenue. You can calculate your monthly or annual revenue by dividing your acquisition, conversion rate, and lifetime value with your churn.
This way, you’ll be tracking individual metrics but won’t get stuck on them — instead, you’ll easily assemble the little pieces to get the big picture.
Final thoughts
No matter how skilled or experienced you are, SaaS product development may feel like a project you’re doing for the first time. We did our best to give you clear, simple, and informative guidelines — but don’t forget that this process will ultimately require a lot of creativity and improvisation to succeed. Be open to new ideas, team collaboration and challenges and use them to fuel your SaaS product’s growth!
Ready to build your SaaS Product? Get started with Nifty to manage the end-to-end process for building your SaaS. 🚀
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