How Startups Can Leverage SaaS App Model to Build a Profitable Business?

SaaS or Software-as-a-Service is going to be the future of software development. Let’s have a look at how startups can leverage the SaaS app model to build a profitable business.

5 min read
Dec 27, 2021

Software-as-a-Service is gaining a lot of traction and momentum these days. Software such as Wix, Slack, MailChimp, Zoom, Dropbox, and others that we regularly use are all based on the SaaS app model.

A report by BetterCloud finds 70% of the business apps in use today are SaaS-based and by 2025, this figure will go up to 85%. After 2022, more than 86% of the companies will be purely functioning on SaaS. So, from these, we can get pretty much the idea that SaaS-based new startups and businesses will flourish going forward.

BetterCloud

(Source: BetterCloud)

However, extremely profitable SaaS niches are dominated by the biggest industry players, making it difficult for emerging startups to carve a space for their apps. This has led to the rise of the MicroSaaS model. Let’s first clearly understand what is SaaS and MicroSaaS.

What are SaaS and MicroSaaS Models?

Software-as-a-Service is a model where disparate services are delivered through the software. Companies can charge end-users by implementing a subscription model for their services. This subscription would last a certain period after which they’d have to renew to continue using their services.

MicroSaaS model is where a small software product is developed to support the functioning of the existing SaaS product. These can include add-ons, extensions, accessories, or tools for other SaaS platforms.

How Does MicroSaaS Work?

Let’s understand how MicroSaaS work with an example.

Throwing off the big players in the content management systems such as WordPress, Wix Joomla, etc. would need a miracle. They dominate the market with their world-class SaaS product.

However, this can’t limit innovators to put their guards down against these industry giants. With MicroSaaS, startups can leverage the SaaS model to create complementary apps, add-ons, plugins, etc. to build their own profitable business.

The great thing about the MicroSaaS model is it requires small upfront investment and may not require outside funding.

MicroSaaS products generally are location-independent and can generate high profits from across the world. Such high profits coupled with low overhead costs make SaaS, especially MicroSaaS a lucrative industry for startups to build a profitable business of their own.

AI-Optimized SaaS Solutions

Artificial intelligence has been a disruptive technology on its own. And now its entry into the SaaS arena is opening up the new horizons that were previously unknown and are offering promising outcomes.

AI is capable enough to augment human intelligence, automate redundant tasks, optimize business processes, and improve efficiency and productivity. Even though AI has an outsized potential, only a meager amount of this potential has been fully utilized. Startups who want to take the SaaS approach have the perfect opportunity to break the barrier.

AI is the most innovative technology that can revolutionize the SaaS industry and startups can leverage it to create a well-defined path to a profitable business.

Splitting/Unbundling SaaS Product

A traditional SaaS product that’s focused on offering every imaginable feature possibly can be considered as an overkill. What we mean by this is startups should focus on building a small set of specific functions packaged as an API instead of a full-fledged platform.

For small businesses, especially when starting up don’t necessarily need to offer feature-rich software that’s out of their budget and requirement. They can split different functions of a fully-fledged SaaS product into APIs that complement those. There are multiple startups that have adopted this startup SaaS app model to build their profitable business.

White Labeling Your SaaS Solution

White labeling is somewhat similar to dropshipping. This literally means offering SaaS software developed by others but with your company branding to other businesses/users. This is not a new trend and in fact, many emerging SaaS startups use white labeling to quickly enter the market.

Doing so will save them from building SaaS solutions from scratch without the mighty investment and offer their clients what they need while still keeping their brand identity. All that end-users want is a solution with the right features that meet their needs.

White labeling speeds up the time-to-market for SaaS startups while still being able to deliver better services. Additionally, white labeling enables you to have higher revenue per client and higher customer lifetime value ultimately making your startup an extremely profitable one.

Blockchain Integration With SaaS

Blockchain and SaaS are polar opposites but are arguably the most revolutionary technologies. Blockchain is considered the core technology behind cryptocurrencies such as bitcoin, Ethereum, Litecoins, etc.

However, it had never taken the center stage in the SaaS industry but it can deliver the transparency so much craved about in the SaaS industry. SaaS software thrives when exposed to transparent and trustworthy technologies such as blockchain.

Blockchain is a decentralized database that can bolster the transparency in SaaS products. It can help SaaS startups to come up with foolproof systems and eliminate the security challenges in traditional databases. The benefits of Blockchain in the SaaS are immense and can disrupt aspects such as online payments, auditing, tax collection & compliance, etc.

Currently, there are not many Blockchain-enabled SaaS software but it’ll undoubtedly take over and become a permanent fixture for the SaaS app model to build a profitable business.

Horizontal vs. Vertical SaaS

Traditional or Horizontal SaaS products are typically generic solutions that target a vast majority of clients in the field. A perfect example of a horizontal SaaS would be the CRM software offered by Salesforce.

Horizontal SaaS products have a bigger addressable market and also face multiple challenges. Vendors would have to come up with numerous campaigns to lure in new customers.

Vertical SaaS, on the other hand, are more specific solutions that fulfill particular needs or fit into a particular field and have a smaller addressable market.

Thanks to its notable benefits and ability to fulfill distinct needs of a specific industry, vertical SaaS software have a massive proclivity that uptick it for startups to build a profitable business out of it.

Final Words

A lot of things go into developing a profitable SaaS-based startup. Things like market research, knowing your target audience, and your SaaS product will fit into the customer needs will obviously affect the profitability of your SaaS app model.

However, the core idea behind how startups can build a SaaS product that meets user needs as well as adopted by other businesses can make a lot of difference on your business’s profitability. Also, the skills and effort put in by the team of developers matter to build user-friendly and highly responsive SaaS software products.

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