SaaS startups often assume that they are the exception to the rule. They are almost always assumed to be founded by a well-financed, large organization with deep pockets. However, this is not always the case. It’s easy to start a SaaS company with little capital and no customers. You need to learn how to set up your startup correctly so that you can continue to operate your business with minimal risk but without being beholden to any organization or individual that may or may not be interested in your services and product.
Here are some common mistakes I have seen SaaS startups make and how to identify them.
The most common mistake startups make is either a free plan or too cheap or too expensive plans.
In most cases you don’t need to offer a free plan. The free plan can only be justified in two cases.
- You are going to get to millions of customers soon and the usual conversion of 2-5% will keep you profitable like anything.
- Your free users help you in a direct way even though they are not paying you. For instance, you may have a free plan for certain group of users because you want to acquire the people these free users will expose your brand to.
There is no other reason to offer a free plan. If you are on the fence, just take it off for a month and then decide for yourself.
You should experiment with your pricing every few months until you are happy with what you have. If you don’t know if the pricing is right, then also experiment. Once you see a lot of rejections claiming that it is too expensive, then you will know that your prices are too much. Even then, it could be because you are attracting wrong kind of crowd.
Lack of Customer Support
Lack of customer support is common at SaaS startups. Bugs are not an uncommon occurrence; where there’s a will there’s a way. Other common activities of a startup that causes customer support to take longer to respond to are higher than usual loads, low customer retention or even just a lack of time. Start ups should give tools to their employees to work from home, in order to be able to manage their teams remotely.
You need to make sure that you are serving customers in their timezone. You also need to make sure that they know when you are not available. Invest in a good customer support platform that your support team likes to work with.
One good method is to look at your churn. If a lot of the new customers are canceling then you have an issue with onboarding. Put more customer success efforts into the process to convert them better.
Not enough incoming customers
If you don’t have enough incoming customers then you cannot survive. SEO is a big help for early stage startups. You can work on SEO even before you launch your product. There are other methods to get users to your startup. Paid advertising is there, but be careful with that because if you get people who are not a good fit, that money is going down the drain. Wrong customers will make you feel like your feature set is not complete and you will keep on building things you should not.
Following the traditional business metrics and KPIs is the greatest mistake among the SaaS community, and apparently the most occurring one. Here is a further read on the most important SaaS Sales & Marketing metrics VS. their traditional alternatives, explained most simply.