Is Your SaaS Company Facing These Challenges?

SaaS businesses have been growing for the last few years due to the increasing usage of cloud computing resources. Information Technology entrepreneurs are finding this model extremely appealing as a business idea. The success of many SaaS providers such as Slack or Dropbox has given rise to SaaS startups worldwide. However, like all businesses, this business type also faces some challenges that aren’t hard to resolve. The businesses that were using other models such as Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) are now moving towards Software as a Service (SaaS) models.

Here are the main challenges that all SaaS businesses are facing today. Although there are numerous ways to solve a given business problem, the first step is detecting potential issues and addressing them one by one.

Challenges for SaaS Businesses

Market and Audience Identification Failure

The major SaaS providers have an idea of who their audience and market are. But, when it comes to the SaaS model startups, they lack the required information. This means that without knowing the market, they aren’t able to solve customers’ problems. In fact, some experts believe that the recent SaaS startups are failing because rather than addressing the consumers’ demands, they are creating solutions for problems that don’t yet exist in the market.

Failure in Controlling Costs

The very first batch of customers might be the enthusiastic and interested group of people. However, not every customer will find the services of a SaaS provider unique or beneficial. Hence, acquiring them as business model subscriber becomes difficult. The startups fail to acknowledge metrics like LTV (lifetime value) and CAC (cost of acquiring customers). If a SaaS provider has a greater CAC than their LTV, it means that they are spending more than the revenues they are generating.

Customer Retention Failure

SaaS businesses usually struggle with higher customer retention issues. The main reason is that many startups fail to incorporate certain metrics in their business decision. A SaaS provider has to keep their customer turnover rate lower than their customer growth rate. If the former is higher than the latter, then the company is losing customers to competitors.

Feature Updates Failure

Most SaaS companies remain concerned about their core features and service to such an extent that they forget they have to streamline other components of their services. For example, mobile application hosting or development tool management services alone cannot keep the customers happy. How a SaaS company engages with its customers through the billing process, customer support, and on-boarding procedure is also important.

Conclusion

If you have a SaaS business model, you might be aware of the success of SaaS companies like Slack, Google Docs, Dropbox. However, you shouldn’t forget that adopting the SaaS model isn’t an easy task, let alone guaranteeing success in doing so. There are many challenges that you have to face, and competition stays at first. Therefore, the best approach is to address all the issues and find relevant solutions for all of them.