The Stunted Growth of 'Software As A Service' (SAAS)
We can say that a company's growth is stunted when it never makes it past the first stages of operations. This article is concerned with why SaaS StartUps fail. However, we must first take a look at what SaaS means.
Software As A Service (SAAS)
Software As A Service (or SAAS) is a way of delivering applications over the Internet as a service. An easy way to have a clear idea of the SaaS model is by thinking of a bank, which protects the privacy of each customer while providing service that is reliable and secure on a massive scale.
SaaS is being run like any other online venture and this results in not breaking even. Below are some of the major reasons why most SaaS businesses fail, and some mistakes they make.
Why Software As A Service StartUps fail
Some of the reasons include:
i. SaaS businesses fail often because they are not solving any existing problem. They lack a market, in the sense that they have nothing tangible to channel their services to. This problem can be avoided by adopting Lean Startup approaches and being Customer-Centric. Services should be solution oriented, and a market for it should be sought-after. This solution can be measured based on users feedback
ii. Another reason SaaS StartUps fail is as a result of the lack of a good business model. If the LifeTime Value (LTV) of the customer is not properly defined, then the Customer Acquisition Cost (CAC) may be higher than the LTV, which essentially means more money is being spent than revenues generated, and this is not good for any kind of business. To have a working business model, SaaS startups need to find ways to increase the LTV while keeping the CAC down.
iii. When the Churn rate (Customers' Turnover is higher than Customers' Growth, then a SaaS company will definitely fail. Churn can not totally be avoided as some factors responsible for it are beyond the control of businesses. One of these factors includes the priority of the customer changing. However, businesses have to be intentional about their good customer service and better alternatives. These can reduce the churn rate of customers.
iv. When customers find it difficult to start using SaaS products, this is a recipe for failure. Businesses should make it easy for customers to start using their product with as little friction as possible. In the same way, they should not make their services too expensive to access. Customers must be made happy by providing them quality product, fanatical support and minimizing friction to conversions.
It is paramount that SaaS companies project ahead and understand what it takes to keep the business running in the long run. This way, more systematic and well structured decisions and efforts will be made. For this to be achieved, there is a need to imbibe the life skills of consistency, diligence and discipline.