How to Build a Software as a Service Product: A One-stop Guide for Startups and SMBs

Getting a SaaS product off the ground is no small feat, especially for startups and SMBs trying to make their mark. With Software as a Service (SaaS) model becoming a go-to solution for businesses striving for efficiency and growth, the stakes are high.

How to build a SaaS product that, beyond meeting your unique requirements, assists you to grow exponentially remains a formidable challenge for startups and small enterprises that operate with limited resources.

To succeed, you need to carry out a series of meaningful steps that will result in a winning SaaS product. Our useful guide will help achieve this purpose, as we take you through those essential steps for developing a SaaS product.

From identifying your target market, analyzing business requirements, building the development plan, choosing monetization model, building the architecture, developing an MVP and designing a user-friendly interface to developing features that solve your customers’ pain points, we’ll show you how to create a SaaS application that not only meets your business needs but also delights your customers.

So, if you’re a startup planning to build a SaaS product from scratch, below we offer those insights that you need to develop a SaaS application.

Analyzing the Steps involved in SaaS Product Development

There are two important questions that arise when it comes to SaaS product development. First, why should you develop a SaaS product? And second, how to develop it?

As we know, the need to build SaaS applications has become stronger than ever among businesses. If you are looking to build one to meet your business’s needs, then here is a comprehensive list of all steps that go into building a good SaaS product.

1. Identify the Target Market
2. Analyze Business Requirements
3. Build the Development Plan
4. Choose the Right Monetization Model
5. Build the Architecture and Craft the Product Design
6. Pick the Right Technical Stack
7. Build an MVP
8. Develop and the Product
9. Assure for Quality
10. Integrate with Third-Party Services
11. Maintain and Update the SaaS Product

1. Identify the Target Market

Without a clear understanding of who the product is for, even the most innovative software solutions fail to gain traction. Startups and SMBs operate with limited resources. As a result, they need to focus their efforts on the most promising customer segments. These are some steps that must be executed to systematically identify and understand their target market and spearhead product discovery to aid the subsequent stages:

• Start with Initial Market Research: Product managers should start by gathering broad data about potential markets. They should conduct online surveys, interviews with industry insiders, and analyze competitors. You don’t need expensive or complex tools. SurveyMonkey and Typeform are great tools for creating and distributing surveys, while Google Trends will help you understand what’s popular in your industry.
• Leverage Data Analytics: With initial data in hand, it’s important to dig deeper. Customer data platforms (CDPs) are important here as they will help aggregate and analyze user behavior and demographic information. You will get a deep understanding of the specific characteristics of potential users.
• Segment the Market: Once you’ve gathered and analyzed your data, divide the market into smaller, more targeted segments. Segmentation should focus on factors like industry type, company size, geographical location, or specific pain points that the SaaS product addresses.
• Develop Customer Personas: Create detailed customer personas by combining data from CRM systems, social media analytics, and direct feedback from potential users.

2. Analyze Business Requirements

Target market identification gives a startup or SMB an idea of what type of SaaS platform needs to be developed. Now, it moves to the development team, which analyzes their requirements. Here onwards things will be handed over to the SaaS development team. In case a business has an in-house team, it can hand it over the task to it or outsource SaaS platform development.

Anyway, requirements should be seen from two angles. First, the functional angle and second, the non-functional angle, which a software requirements specification (SRS) document will help capture. Start by creating a robust SRS document and then go for gathering both these requirements. Let’s see them.

• Functional Requirements: They specify the features and capabilities of the SaaS product, such as user authentication, data storage, or specific integrations. Business analysts document these requirements using use cases or user stories, which describe how users will interact with the system. Lucidchart or Microsoft Visio are common tools that are used to create flowcharts and diagrams that visually represent these interactions.
• Non-functional Requirements: These are technical specifications that cover dimensions like performance, security, and scalability. Developers use Apache JMeter or LoadRunner to simulate different loads on the system and define the performance requirements.

Once the requirements are gathered and documented, they need to be validated with the business team. The development team will create prototypes or mockups to allow stakeholders to visualize the product and provide feedback before the SaaS software development process begins.

3. Build the Development Plan

The development plan must align the goals of the SaaS project goals with the available resources. An experienced software development team will basically have a template with them for the plan. However, since each project comes with unique requirements, the plan must be framed accordingly.

In the plan, there is a project’s scope, which is documented in a project charter or a scope statement. It is a document that outlines the boundaries of the project, including what will and will not be included in the final product.

Next, the work must be organized into a work breakdown structure (WBS). Microsoft Project or Asana are some tools that help in this task of creating the WBS and assigning tasks to team members. Each task should have a clear set of deliverables, dependencies, and deadlines.

For each task, you need to allocate resources which makes resource allocation a key component of the development plan. It is here that you assign the right personnel, tools, and technologies to each task. Resource allocation should help in balancing workloads and managing team availability. The development plan also includes risk management, where you identify potential risks and develop mitigation strategies.

4. Choose the Right Monetization Model

Analysis of development costs offers a precursor to selecting the monetization model. Cost of building SaaS applications varies from project to project. Expected features, resource requirement, timeline are all It’s essential elements to consider.

Consider costs related to cloud infrastructure, customer support, marketing, and ongoing maintenance. Against these cost considerations, some of the affordable monetization models that the SaaS business model offers to startups and SMBs are:

• Subscription-Based Pricing: This is the most common model for SaaS products where customers are charged a recurring fee, typically monthly or annually. It offers predictable revenue streams and can be easily managed with tools like Stripe, Chargebee, or Zuora.
• Freemium Model: The freemium model provides a basic version of the product for free, with the option to upgrade to a paid plan for additional features. It is cost-effective for customer acquisition, as it allows users to experience the product before committing financially.
• Usage-Based Pricing: Also known as pay-as-you-go pricing, this model charges customers based on their actual usage of the service. It is always nice for smaller businesses to pay for what they make, making this model an attractive option as it aligns costs with customer value. Businesses can start with lower initial fees and scale as they grow.

You should always stick to proven strategies for managing subscriptions, as they will justify your offerings. After estimating the budget and selecting a monetization model, focus on creating financial projections. These projections will help in understanding the potential revenue, profit margins, and return on investment (ROI). Financial modeling tools like PlanGuru or Jirav are well-suited for small businesses, as they offer detailed forecasts that guide strategic decisions and help secure funding.

5. Build the Architecture and Craft the Product Design

Now we arrive at the technicalities of the project. We define the foundation of the product by building its architecture. The architecture consists of three layers: the presentation layer, the application layer, and the data layer.

In architecting, it is important to first consider all essential factors, which are:

• The architecture must be able to easily accommodate growth in users and data without requiring major changes.
• The system should be designed in a modular way to enable independent updates and improvements.
• Architecture should handle high traffic loads for fast response times.
• Data storage, retrieval, and processing, should aid in consistency and reliability so that the system continues to operate smoothly.

Keeping these factors in mind, the architecting process must be executed as:

• Start by developing a high-level architectural blueprint that outlines the overall structure of the SaaS product by defining the key layers—presentation, application, and data.
• For the presentation layer, build mockups and wireframes to define UI/UX design. For, application layer, go with microservices architecture to break down the application into smaller, independent services that can be developed, deployed, and scaled separately.
• Coming to the data layer, selecting cloud-based databases like Amazon RDS, Google Cloud SQL, or MongoDB Atlas. Additionally, the architecture should support data flow and real-time processing, where Apache Kafka or RabbitMQ will prove handy for event-driven designs.
• Finally, establish a design system by crafting a SaaS product design that requires a focus on both the technical and user experience aspects. Design systems, which include a collection of reusable components, guidelines, and best practices, are created to maintain consistency across the product.

These steps work as best practices for building SaaS architecture that have to be followed for the application to deliver sustainable results.

6. Pick the Right Technical Stack

We have talked about some tools in the earlier steps, which give an idea of which technology you should select for a particular activity. Discuss with the SaaS team about software licenses that would be required to be purchased and the associated cost and along with the technical tools directly dealing with the development process. Also consider secondary but important tools like project management software, version control tools, and design software. To simplify things, here is a standard tech stack that is recommended for SaaS application development:

7. Build an MVP

Start building a version of the SaaS product with the core features needed to meet the needs of the target audience. The minimum viable product (MVP) will allow for early testing and validation of the product concept before full-scale development.

The development team must know what are the core features, as were identified based on the business requirements and market analysis. These features are prioritized using methods like the MoSCoW method (Must have, Should have, Could have, Won’t have), which helps in determining what is essential for the MVP.

With all these preliminary steps executed, the development team begins MVP development using the selected technical stack. Once developed, the MVP is released to a small group of users who provide feedback on the product’s usability, performance, and functionality.

Typically, the development team will use UserTesting or Hotjar to collect user feedback and track user behavior. The feedback is used to refine the MVP and make necessary adjustments before the actual product is developed.

Also Read: What to avoid when hiring MVP developers

8. Develop and the Product

The full-scale development of the SaaS product begins after the MVP has been validated. This phase involves building out the remaining features, optimizing the product for performance and scalability, and preparing it for launch.

Given the numerous feedback loops in SaaS software development, agile is the best-suited method. As discussed in the Project Management Institute’s article, Agile and SAAS: Lessons for value realization,

“Agile is a natural fit for SaaS development because it lets teams deliver working software quickly and adapt on the fly. By breaking projects into two-week sprints, it allows businesses to see real progress early on, and they can tweak features and prioritize what really matters. The quick feedback loop not only speeds up development and deployment but also builds trust with stakeholders, who begin to see tangible results right from the start.”

If you are following Scrum, you will develop the product in sprints. Each sprint focuses on adding new features, improving existing ones, and fixing bugs. On the technical front, developers use version control systems like Git, along with platforms like GitHub or GitLab,

to manage the codebase and collaborate with team members.

Performance optimization is a key focus during the development phase. SaaS developers implement techniques like lazy loading, caching, and database indexing to improve the product’s speed and efficiency.

Since everything must happen in a secured environment and the application must be secured once it is launched, security is followed right from coding to protect code, data, and other application elements from vulnerabilities.

9. Assure for Quality

Quality assurance (QA) is an ongoing process that runs parallel to development. The goal of QA is to identify and fix any issues before the product is released to the market. It hinges on both manual and automated testing, each serving different purposes.

Manual testing is used for exploratory testing, usability testing, and testing of edge cases that might not be covered by automated tests. Testers use test management tools such as TestRail or Zephyr to document test cases, track test results, and report bugs.

Automated testing is employed for regression testing, performance testing, and load testing. These tests are written using testing frameworks like Selenium, Cypress, or Jest, and are integrated into the CI/CD pipeline. They run automatically with each code commit, so that new changes do not break existing functionality. For load testing, tools like Apache JMeter or Gatling are used to simulate different levels of user traffic and identify performance bottlenecks.

Code review is another important aspect of QA. SaaS app development team members review each other’s code before it is merged into the main branch.

10. Integrate with Third-Party Services

The SaaS product envisioning will have to collaborate with various external services to serve as a holistics SaaS solution. Integrating with third-party services adds functionality to the SaaS product without the need to build everything from scratch. Common integrations include payment gateways, email services, analytics platforms, and CRM systems.

The integration process starts with identifying the services that need to be integrated and obtaining the necessary API keys and credentials. API documentation provided by the third-party service guides the integration process.

The development team will next test the API integration using tools like Postman or Insomnia, ensuring that the SaaS product is able to communicate effectively with the third-party service. Error handling and retries are implemented to deal with potential issues like network failures or API rate limits.

Webhook integration is another method used to receive real-time updates from third-party services. These are configured to send data to the SaaS product whenever a specific event occurs, such as a payment being processed or a user signing up. The SaaS product then processes the data and performs the necessary actions.

11. Maintain and Update the SaaS Product

Once all the above steps are executed, the SaaS product is launched and made available to the intended users.

Finally, we arrive at an important step which is keeping the product ever functioning without any hassles. Maintaining and updating the SaaS product is an ongoing process that begins after its launch.

The maintenance team will delve on various monitoring tools like New Relic, Datadog, or Prometheus to track the product’s performance, uptime, and usage. These tools provide real-time alerts when issues are detected, and the team responds quickly to resolve the issue.

When bugs are reported by users through customer support channels or automatically detected through error monitoring tools, it is prioritized and assigned to a developer for fixing. On the other hand, patches are deployed using the CI/CD pipeline. Because of the automated nature of the process, the downtime and disruption to users are minimized.

In the update operations, developers add new features, improve existing ones, and adapt to changes in technology or market demands. Feature requests from users are collected and prioritized using product management tools. The maintenance team then rolls out the updates, following the same development and QA processes used during the initial product development.

What to avoid when building a SaaS Product?

While we saw what it takes to build a winning SaaS product, there are certain things that you should avoid and not commit the folly of ignoring them. These are:

• Overcomplicating the Product

Including too many features in the initial release can overwhelm users and make the product difficult to use. It’s important to prioritize core functionalities and focus on solving specific problems effectively. Likewise, a complex or unintuitive UI will lead to a poor user experience. Simplicity and ease of use should be at the forefront of SaaS design considerations so that users are easily able to navigate the product without frustration.

As the product evolves, it’s tempting to keep adding more features, but this can backfire if the initial design wasn’t built with scalability and user-friendliness in mind. Instead of stuffing every potential feature into the first version, it’s wise to revisit user feedback regularly and prioritize updates that align with what users actually need. The iterative process of refining the product ensures that each new addition enhances the user experience, rather than cluttering it.

• Not Keeping Scalability in Mind

Building a SaaS product on a weak infrastructure will create performance issues as the user base will grow. The scalability of SaaS products, therefore, should be considered right from the outset and should not be treated as a later activity. Allied to this, neglecting database optimization will result in slow response times and poor performance. It’s essential to design a database that can scale horizontally and handle large volumes of transactions efficiently.

When the user base starts growing, many startups realize their initial infrastructure can’t handle the increased load. Trying to patch up scalability issues after the fact is like building a house and then deciding to add more rooms without expanding the foundation. The solution isn’t to over-engineer the system from day one, but rather to design with flexibility in mind, allowing your platform to handle future growth without disruption. With the right foundational setup, scaling becomes a smoother and less stressful process.

• Lack of Focus on Performance Optimization

Skipping performance testing causes unexpected issues post-launch. It’s important to conduct thorough testing under various conditions to ensure the product performs well under load. Writing unoptimized code will make the application slow and thus inefficient.

When performance is compromised, even the best features become irrelevant. A slow-loading app or sluggish interactions quickly frustrate users, causing them to abandon the platform. Testing under real-world conditions—simulating various load scenarios—should be part of the development process. Addressing performance early on not only helps meet user expectations but also builds a solid reputation. A product that runs efficiently from the start is less likely to face serious backlash after launch.

• Overlooking User Feedback

Failing to conduct beta testing will offer you a product that doesn’t meet user expectations. Obtaining feedback alone won’t do, as not iterating based on user feedback will cause the product to become stagnant. Continuous improvement is the key to keeping users engaged and satisfied with the product. Engage early adopters and gather feedback to seek valuable insights for refining the product.

Listening to user feedback is just the beginning; the real value lies in how you act on it. If you’re not responding to feedback and making improvements, you risk users feeling ignored or misunderstood. Regularly updating the product based on user suggestions keeps the platform relevant and increases customer loyalty. By building a feedback loop, you make your users feel heard, and at the same time, the product evolves in a direction that truly addresses their needs.

Want to build a SaaS Application? Onboard Finoit’s experts

Startups and small enterprises see in a SaaS product growth and success. However, building a successful SaaS product takes time and dedication, and businesses must be willing to invest in the necessary resources, including time, money, and a skilled development team.

Whether you are building a new product or trying to end your dependence on traditional software, the benefits of a successful software as a service (SaaS) product are worth the effort.

A good product calls for a strategic approach, a deep understanding of the target audience, and a commitment to delivering an exceptional user experience.

In order to implement the steps we outlined here and to use them to build your SaaS product, you can connect with our experts. As an experienced custom software development services firm, we possess strong technical know-how of developing various types of SaaS products.

You can connect with our development experts and build a successful SaaS product that solves real problems and meets customer needs, thereby enhancing your brand image in the long run.

Related Posts

• 
  Signs Your B2B SaaS Product is Out of Product-market Fit: How to Regain Your Footing

  Landing on a solid SaaS product market fit is a dream come true for any…

• 
  How to Launch A SaaS Product Successfully?

  You had a groundbreaking idea that sparked the interest of investors. With their support, you…