You’ve decided to open up a software company and your current venture needs more funding. If you’re in SaaS, you’re going to want an SaaS business model to show potential investors value in what you offer.
When taking into consideration the vastly different financing needs of Software as a Service (SaaS) companies compared to traditional commercial businesses, it follows that the SaaS business plan has similarly unique needs.
As capital investors ourselves, we have seen many hopeful business plants cross our desks. In the article below, we have compiled some of the key attributes we look for in a business plan to help get your software funded and out on the market.
Choosing the Right Format
Generally, there are two main types of business plans a company will use: traditional and lean plans. When you write a business plan, you should set out to include all of the most important information about your business or start up, how you are planning to scale, and most importantly information about the types of problems your product fixes.
These types of business plans are generally longer and require in-depth information about not only your product, but the target audience you are looking to serve. Generally, these include the following sections:
- Executive summary: this is where you get to talk about you, your company, and why it is valuable.
- Company Description: here, you build on your executive description by explaining more about the mission of your company and the problems your product is aiming to solve.
- Market Analysis: this is where you use data to explain the different sectors of your market and how your product appeals to them.
- Organization Structure: Here, you explain the legal organization of your company’s ownership. Depending on the size of your company and the number of your products, the complexity of this section varies.
- The Product: simple and straightforward– explain your product and why it’s amazing
- Marketing Plans: this is where you will assimilate all your market research from before and explain the best way to reach those individuals.
- Finances and Funding: Finally, you set out your financial needs to get your plan off the ground. This can include both shorter-term funding in addition to other needs that come with scaling your company.
Lean plans are best for companies and startups who are in earlier stages of development or who plan to change their product on a regular basis. For some SaaS startups, this plan often leaves more room to accommodate for different product lines, packages, and changes that will eventually happen over time.
- Explain Partnerships, Activites, and Resources: for many in the SaaS community, offering a product that serves many functions is an important aspect of your value. This is where you should explain the various offerings you can give to your clients, in addition to the kinds of working partnerships you will secure to get there.
- Product Value: Here, you explain not only why your product is awesome, but how it fares better than your immediate competition
- Outline your Audience: Through market research, you will show which groups of individuals will most likely benefit from using your product
- Outline your Cost Structure and Revenue Stream(s): For many SaaS companies, your cost structure and revenue streams are going to look different than companies selling a physical product. Here, you want to outline where, when, and how much funding you will need, in addition to the different ways in which you will bring revenue in (such as different tiered products, subscription duration, etc.)
Now that we know a little more about the different types of models you will use for your business plan, we will discuss in greater detail what information you will need most.
If you are looking for a business plan template, the internet has many options to offer. However, it’s good to remember that not every template will fit the needs of every business (or every investor, for that matter), so it’s always best to make sure you know not only what information you should include, but why it’s important to pitching your company.
Know your niche… know their pain points
One of the detrimental mistakes many SaaS start-ups make is that they develop a product before developing an audience. This is the business equivalent of trying to wear your pants as a sweater.
The reason is simple.
If you don’t offer a compelling solution to a problem your audience already has, there is no reason to buy your product.
Calculating CAC (It’s Different for SaaS)
What many entrepreneurs don’t realize about SaaS products is that they follow a different growth curve than many other types of product. This is largely because SaaS companies rely on recurring subscriptions rather than a one-time purchase.
In the beginning phases of an SaaS company, it takes a heavier financial push to see growth than other industries. You need to acquire leads that convert which will eat up a large part of your early revenue.
Making this initial investment however, is an important step. Making sure your leads are hot and your customers are likely to stick with you over the long haul are integral to building the bedrock of your financial stability.
As you acquire customers, they become the foundation of your recurring revenue. Over time, the initial cost of acquiring these customers begins to pay for themselves.
Define your pricing model
For the reasons mentioned above, having a pricing model that works for both your audience and your product is an essential component of your business plan.
Here, you will want to first decide and state what your product will actually cost and how those costs contribute to your overall revenue. This usually involved a tiered pricing model featuring a free (or low-cost) package, complimented by other “premium” plans which had more usable services.
Here is also a good point to outline your growth prospects and how you plan to achieve your goals. This not only shows business viability, but a way for you to show your are knowledgeable and well informed about the future prospects of your business.
Prove your Profitability
In addition to building a pricing model, show your long-term profitability. Most often, this includes different levels of products you would like to offer in the future, different business ideas that are related to your main product, even ways in which you could monetize your company going forward.
This step looks different depending on your industry and your overall goals for your company. The important aspect of this step is showing the ability to conceptualize your product over time and many iterations.
When You Need an Extra Financial Push
The internet is full of SaaS business plan examples. You could use one of those as a jumping off point for formatting and inspiration, but no template will replace a well thought out idea of your market, product, and company.
At RevTek, we take qualifying companies and help them reach their expansion goals by giving them the financial support where it’s most needed. With a full staff of experienced entrepreneurs, we can help businesses assess their strengths, weaknesses, and help them refine and achieve their goals.
To begin the conversation about how to take your business to the next level, contact us at (480) 332-0399 to schedule an appointment.