5 Steps to Building a Successful SaaS Business: The Ultimate Guide

Did you know that over 90% of Startups fail?

Why is that, you wonder? Because building a successful business is difficult and requires not only a lot of effort from you, but also a clear strategy to follow. From validating your idea to building Personas, marketing strategies, customer journeys and Go-To-Market Strategies - there is a lot of work to be done to even have the chance of building a successful business.

But don’t be discouraged. The good news: In this ultimate guide, we will cover the 5 essential steps you need to be aware of when you build your SaaS business.

So let's dive right in.

When starting a business, it's crucial to find out if there's a demand for your product. It's disheartening to put effort and resources into creating a product you think will be popular, only to realize upon launch that it's not in demand. However, many overlook validating their idea because they're focused on other aspects of building a business or don't find it important.

Validation is the only way to ensure that your great idea can turn into a successful business. Failing to validate your idea means there is a strong likelihood that your business won't be in operation for long. Either there won't be enough demand for your solution, or the competition may already be fierce in your target market, making it tough for your business to draw enough customers to yield profit.

Remember: idea validation doesn’t guarantee that your business will be successful, but it gives you a chance to assess whether investing your time in a particular venture will be profitable. By doing so, you can ensure that your idea addresses an actual need in the market.

You should always validate your business idea as early as possible. By testing the idea's viability as early as possible and gathering feedback from potential customers, you can better understand the market and determine whether there is a real need for the product or service you plan to offer.

You can validate your idea through market research, customer interviews, or testing a minimum viable product (MVP) with a small group of target customers. By validating the idea early on, entrepreneurs can identify potential issues or areas for improvement before investing significant time and resources into the business.

Additionally, validating your idea can help you gain a better understanding of your target market and help you craft a more effective business plan.

Speaking with others is the initial step in validating your idea. If you don’t have a sizable group of active users, but an idea of the individuals or groups who would find your solution valuable, approach them and inquire about their needs and interests by asking them the following 9 questions:

• How are you currently … (fill in the problem you are trying to solve)
• What's the most annoying thing about the way you … (fill in the problem you are trying to solve)  
• Why didn't you already change it?
• How would it work in an ideal world for you?
• Because I am thinking about creating … (fill in your solution)
• Would that be valuable to you? Why? Why not?
• Are there any existing solutions you have tried for this problem?
• How would my solution fit into your current workflow or daily routine?
• Would you be interested in participating in a beta test or pilot program for my solution?

Once the potential customer has answered these questions, you have a good impression of whether your idea provides any value and how you might need to adapt it. Gathering this kind of feedback right in the beginning, before even investing more time and money in your idea, is the most crucial part when you build your Startup and the best insurance against failure.

I remember joining a Startup six years ago. Our team was committed to the concept we were developing, and we all believed it was worth pursuing. We didn't think it was necessary to validate the idea, and we kept investing time and resources into it. The worst part? Our solution failed due to a lack of customers.

Had we done our market research and validated the idea upfront, we’d have noticed that the product didn’t solve a real customer problem. This may have allowed us to pivot or scrap the idea without incurring big losses. The lesson learned is that no matter how much you believe in your idea, validate it.

The more information you have on your customers, the more refined your marketing efforts will be. When you build your business, Personas are one of the most important elements you need to have in place. Personas are used to customize your buyer’s experience with you, making them more likely to buy from your business.

Personas are fictional characters that represent the different user types that might use your solution. Even though they are fictional, they will help you understand your users' needs and help you craft a valuable solution that people love. But not only that. The more realistic your Personas are, the better you can understand their motivation and goals. And that is the most important part of it.

Remember: understanding your target audience is crucial for the success of your business. This knowledge will assist you in making informed decisions and developing solutions that really fulfill the needs of your users.

If you do not find enough customers, you can close your business and bury your dream of having a successful company. Therefore, Persona development is one of the crucial first steps for any SaaS business. You won't be able to position what you're selling without knowing who your target audience is.

How well do you know your ideal customers' backgrounds, goals, and challenges? How well do you understand their interests and needs? Do you know how old they are? How does a day in life look like for them?

Personas will help in targeted marketing efforts, reducing the need for costly broad-based advertising. Instead of catering to a general audience and providing a service for “everyone”, target specific groups of individuals. Only that will help you save money and time and will help you communicate effectively with your target audience.

It is important to understand your target audience. But often, this is easier said than done. To get a better understanding of your market and to better tailor your solution to your target group, answer these questions:  

• What keeps my customers up at night?
• What motivates my customers to solve their problem?
• What are my customers' pain points, and how can my solution solve them? • What are my customers' unmet needs that my product can fulfil?
• What's the desired future state for my customers?
• How does my solution fit into my customers' daily lives and routines?
• What are my customers' values and priorities?

Creating Personas is a crucial step in understanding your target audience, but it's important to avoid common pitfalls to ensure they are accurate. If you avoid the following 3 key mistakes, you are up to a good start.

The biggest mistake I often see when people create Personas is that they create them only once, at the start of their business or when launching a new product line, leaving them to gather dust. This is problematic because it assumes that the market and customer needs will remain the same, which is typically not the case.

For example, let's say you start your company with a pretty good impression of who your customers are. You are a couple of months into it, and you see initial success. However, the market shifts after a while, and you notice that your customer base is dwindling. If you haven't updated your Personas in the meantime, you may not be able to identify the reasons for this change and take appropriate action to address it.

Now that you are feeling stressed and unsure of why people are dropping off, and your success and forecasts are diminishing, what can you do? The best thing is to go back to your Personas and re-evaluate who your target audience is. Are you still targeting the right market? What value can you provide to customers? What vision do they have, and what do they want?

By returning to your Personas, you may find that people have new demands and that you can help them become successful by making a slight change to your service. With these newly gathered insights, you can update your initial Personas and develop your service in a way your target audience will love. This way, you will be able to attract new customers and even win back those who have left your service.

In short: Keep in mind that once you've created a Persona, it's essential to regularly update and refine it based on new insights. Continuously align your offerings and services with your Personas to ensure they remain relevant. By iterating and improving your Personas, you'll be able to avoid creating products or features that don't align with your target audience's needs.

The second common mistake when creating Personas is asking irrelevant questions. Personas are fictional representations of users who may use your service or product. To truly understand your users, it's vital to ask relevant questions.

When using a Persona template, many people focus on demographics, interests, and skills, but these pieces of information may not be meaningful. What matters is how you can provide value to your target audience, regardless of their hobbies, location, or personality type.

Now here is the deal. It's not enough to focus on demographics, interests, and skills. If you want to understand your customers, delve into their dreams and frustrations. What are their pain points, what's the desired future state for my customers, what's their motivation? Understanding your customers at that level will help you create a marketing strategy that will reach the right audience and convert them into customers.

A service for everyone is a service for no one. So, stop worrying about pleasing everybody and start focusing.  

It may seem beneficial to create multiple Personas for a business or marketing strategy, but having too many can create confusion and make it difficult to target and satisfy any of them. In addition, having numerous Personas can make it challenging to tailor your messaging to each individual Persona, which can affect the chances of converting them into customers negatively.  

Worse yet, an excessive number of Personas may result in an unclear customer journey because different Personas may have different needs, wants, and expectations. This can lead to a fragmented experience for the customer, as they may feel like they are being marketed to inconsistently.  

From my experience, I recommend not having more than 3 Personas since it would dilute your marketing message otherwise.

The customer journey is a key component of any business. Customers have different needs and preferences, and their behavior can change throughout their journey. Companies have to understand these dynamics and create a smooth customer experience, from initial contact to post-purchase usage.

A customer journey - also known as a user journey or customer map - is the process a customer goes through when interacting with a company, including the different phases which are Awareness, Consideration, Conversion, Retention, and Advocacy.  It's a way to understand and map out the experiences and touch points a customer has with a business.

Customer touch points can be any point of interaction where users engage with your brand, for example, your website, social media ads, content marketing, flyers, or TV ads.

Customer journeys are important because they help businesses understand customers' interactions and experiences with their brand. It's essential to understand that the customer's decision-making process is not a straightforward one. The customer may not purchase immediately after their initial contact with your brand. In fact, it may take several interactions and even multiple touch points before they make a decision.

For example, users may not immediately download your app when you launch it in the app store. Simply put, by understanding the customer's decision-making process, businesses can effectively influence their purchasing decisions and drive conversions.

Here is a pro-tip: The initial point of contact with potential customers typically occurs long before they actually commit to using your service. This can happen through various means, such as visiting your website, seeing ads on social media, or encountering your brand through other marketing channels.

The specific touch points will vary depending on the type of solution you offer, and it can take some time for customers to go through the process of becoming aware of your solution. Building trust and credibility with potential customers through these early touch points will greatly influence their decision to move forward with your service.

There is no such thing as starting too early; you can only start too late. Therefore, you should already design the customer journey once you have created your Personas and validated your idea. Personas represent hypothetical types of users who may use your service or your product. Even though they are fictional, Personas are the first step to building a successful product. They will help you comprehend your users' motivation, needs, and goals and, therefore, help you craft a compelling solution that people love.

Customer journeys help you better understand how potential users are currently coping with the issue you are trying to solve and how your solution improves their lives. Therefore, you can very well combine your customer journeys with your Personas.

This will help you determine whether your idea will be valuable to your potential customers. Always make sure you validate your idea upfront before getting into coding and developing your product.

So far, you've designed a customer journey and taken a huge step towards creating a successful solution. You must avoid these common mistakes or pitfalls to ensure the customer journey does the job.

Creating a customer journey without understanding the customer's goal is the most common mistake. Before creating a customer journey, developing Personas, validating your idea, and understanding what your customers are trying to achieve is essential.

Understanding how success looks to your customers and knowing their goal is crucial in creating an effective customer journey. Without a clear understanding of the customer's goal, creating a solution that meets their needs and leads them to the desired outcome is impossible.

Another mistake that companies often make is creating a customer journey that is too long and complicated. The key to success is making the customer's experience as seamless as possible. When the journey becomes too convoluted, customers may become frustrated and ultimately give up on the process altogether.

This is known as "churn" and will significantly impact your business' bottom line. Always consider ways to shorten the customer journey and help customers achieve their goals more quickly. Each additional step in the process will decrease the conversion rate, so it's essential to minimize the number of steps as much as possible.

You should start with your first customer journey once your Personas are ready, and you have validated your idea. To have data from research, interviews, or market analysis is great, but not a must for your first customer journey. Therefore, you should never wait for these insights before creating a journey map because you will lose much time.

Keep in mind that the first customer journey does not have to be perfect. I therefore recommend doing the first draft and adding data and additional information step by step.

Since you should never wait for specific data or insights to draft your first customer journey, most of the time, your first version will be based on your experience, common knowledge, or assumptions. There is nothing wrong with that because, during customer mapping, you will encounter many questions that you need to answer, which will help you think from a user’s perspective.

Assumptions are good for a start, but bad if you leave it at that. It is necessary to validate those assumptions and find out where you were wrong and how you can improve the customer experience.

Another common mistake is to create your user journey from a company’s perspective rather than from the customer’s perspective. To grow and be successful, every company has its goals, KPIs (key performance indicators), and metrics they track.

Therefore, it is only logical for many firms to think about what they want the customers to do. The problem is that you cannot force potential customers to go through a specific user journey. Therefore, you should instead focus on the customers’ obstacles and concerns and align your customer journey to solve those issues.

In the early days of Amazon, Jeff Bezos always stressed that their motto was “customers first.” By putting the customer first and aligning the total product experience with the customer’s needs and goals, Amazon could achieve levels of success unimaginable ten years ago. In addition, by putting customers first, you can create a valuable solution and find fans and evangelists around your product that will, later on, recommend your service to other people.

Use this customer journey template to start.

Your solution solves a customer problem, and you’ve done your competitor analysis. Great. What’s next? I mean, how you’re going to bring your service or your product to market? The answer is with a Go-To-Market Strategy (GTM).

A GTM strategy describes your plan of bringing your product or service to market. It is a plan of action that shows all steps needed to reach customers and achieve a competitive advantage. A GTM strategy can be helpful in a variety of use cases. For example, when you want to enter the market with your new product, enter a new market with your existing product, or test new products in different markets to discover growth potential.

But what strategy brings you the best odds of having success? For example, should you use Product-Led Growth, Marketing-Led Growth, Sales-Led Growth, Community-Led Growth, or even a hybrid model? In short, picking the right Go-To-Market Strategy is essential to make your SaaS journey successful.

A GTM strategy forces you to think through all your business components – for example, your target audience, your messaging, and the marketing channels you will use. Instead of waking up one day and finding yourself in a position where nobody wants to buy your product, a GTM strategy gives you a chance to rethink and iterate until you know you are heading in the right direction.

When you work with a team or stakeholders, a GTM strategy helps you build a roadmap that everyone can rely on. Additionally, a well-developed GTM strategy helps you to identify the most effective channels for reaching customers, the messaging and positioning that will resonate with them, and the resources that will be required to execute the plan.

How you approach your Go-To-Market Strategy depends on your key driver for growth. In simple terms, there are different options: growth that is product-led, community-led, marketing-led, sales-led, or based on a hybrid model.

In product-led growth, the goal is to let people experience the product themselves and help them become successful. Product-Led Growth starts with a free trial version, true to the motto "try before you buy".

Community-led growth uses a community as the critical driver for acquisition, retention, and expansion.

In sales-led growth, the product is a key part of any sales conversation, and the sales team takes charge of growing the consumer base and company revenue.

Marketing-led growth relies on marketing to acquire new customers. For example, through content marketing via blogs on your website, social media marketing, or ads. The goal is to hook the customers early on and have them remember your solution.

You are heading for a risky business if you do not validate your idea through product-market fit. It is better to find out early if your solution will not bring value to customers.

Especially if your product is new to the market, without a role model or competitor who has already validated the idea, validating your idea is essential. You need product-market fit to prove that your product solves a specific user pain, that people value your solution, and that they are ready to pay for it.

The best indicator for product-market fit is when people regularly use your service and even better – recommend it to their friends and family. Getting this kind of evidence that shows that your solution provides value is the most crucial part when you build your business and the best insurance against a disaster.

Another important part of every excellent Go-To-Market Strategy is the market definition. The market definition helps you find out if there is even demand for your product, what competitors are already out there, and what strategies have worked before. To get a better understanding of your target market, answer the following questions:  

• In what market do you want to sell your service/product?  
• What is the addressable market size?  
• Why this market?  
• How much are people willing to pay for your service in this market?  
• What are the specifics of this market?  
• What has worked before, what has not?  
• Why did it not work before?  
• Who are my most significant competitors in this specific market?  
• How am I going to differentiate myself from my competitors?  
• Who are the decision-makers in this specific market?

A service for everyone is a service for no one, and just trying to get as many customers as possible – no matter if they fit your target audience or not – is a safe road to failure. So, stop worrying about pleasing everybody and start focusing. Every Go-To-Market Strategy contains the definition of your target audience, the Personas. We already covered the importance of having clear and up-to-date Personas earlier.  

Remember: It is not about finding as many customers as possible, but about finding the right ones. It takes two steps to find the right customers - figuring out who they are and where they are. Skip these steps, and you will develop a service nobody uses.

Distribution refers to your marketing plan, which we will cover in the next chapter. One of the biggest challenges for every company is to get new customers. Therefore, you need to have a clear marketing strategy in place. There are 19 marketing channels you can use. However, not all of them will bring you the results you are looking for.

With the bullseye framework, you can identify which marketing channel might work for you. We will cover marketing channels more in the next chapter and if you want to learn even more about marketing channels, check out this article, but in short:

Brainstorm ideas for the different marketing channels, quickly test each idea and focus on the channels with the best results.

Your messaging takes a key role in standing out from the crowd and attracting new customers. To find a fitting messaging that resonates with your potential customers, you need to have a clear understanding of your Personas. A good rule of thumb for your messaging is to always emphasize the benefits instead just the features.

People are looking for results, for transformation, they want to be successful. So always ask yourself how your solution can help customers become successful, what dreams your solution fulfills, and what kind of transformation you provide. Write this in your messaging.  

Keep in mind that the first version of your messaging does not have to be perfect. Develop the first version of your messaging, test it with potential customers, iterate, and understand which version resonates with your audience.

How much you should charge for your product again depends on the target audience and the Personas you have. Should you be cheaper than your competition? Should you go higher than your competition? Are people even willing to pay premium prices for that product? The problem with pricing is that people might not buy it if you demand a premium price. However, if your price is too low, you run out of business.

So, the goal is to find the sweet spot to make enough money but not leave people behind. Discussing the ins and outs of pricing would go beyond the scope, but keep this in mind:

Most of the time, your price should reflect the value and the position you want to take in the market and not simply the manufacturing costs, plus your markup.

This Go-To-Market worksheet will help you.

The last step in building a successful business is to implement a marketing plan, which helps to ensure that your business idea is effectively communicated to your target audience and that your solution reaches the right people at the right time. Plus, a marketing plan can help you define key metrics and measure the success of your efforts, allowing you to make changes and fine-tune your strategy.

Many SaaS Startups experience failure because of a shortage of new customers. The Bullseye Framework - created by Gabriel Weinberg - helps you find out which marketing channels will bring the most traction for your business. It's a four-step process:

The goal of brainstorming in this framework is to come up with marketing ideas for each traction channel. It’s important that you don’t ignore any channel in this step. The goal is to have at least one concept for each channel considered.

The ranking step helps you organize the brainstorming process, and allows for a more critical evaluation of the potential marketing channels. This step is also crucial as it helps a company use its resources efficiently and prevent wasting time and money on channels that are unlikely to yield substantial results.

The testing step is when you take the ideas identified in the prioritizing step and put them into action. The goal is to find out which ideas and the respective marketing channels from your high-priority list are most efficient in bringing traction to your company.

The focus step aims to maximize the potential of the selected marketing channel by continuously experimenting to uncover the best ways to optimize growth.

Using the Bullseye Framework can help your company identify the most effective marketing channels and avoid wasting resources by finding the channels with the lowest customer acquisition cost (CAC) and the highest return.

A traction channel refers to a marketing channel that helps businesses gain new customers. It shows that the tactics being used are effective and yield positive results. A common mistake SaaS companies and Startups make is not understanding which marketing channels are most effective for their business. Gabriel Weinberg has identified 19 different traction channels.

These growth channels have proven successful in the past, but they may not all be suitable for every business. So, you must find the one that brings the most traction for your company. You must test it.  

1. Content Marketing
2. SEO
3. Viral marketing
4. Email marketing
5. Targeting blogs
6. Public relations
7. Unconventional PR
8. Search engine marketing
9. Social & display ads
10. Sales
11. Business development
12. Affiliate programs
13. Offline advertising
14. Existing platforms
15. Speaking engagements
16. Events
17. Community building
18. Trade shows
19. Engineering as marketing

To determine the best marketing channel for your company, consider the cost of acquiring new customers and the potential return on investment. This can be accomplished by using the Bullseye Framework, which involves brainstorming possible marketing channels and conducting quick tests to validate which channels may be most successful.

Keep in mind - you cannot tell which channel performs best without testing first. It is therefore important to always keep a testing mindset and to be open to make mistakes. Test at a high tempo, fail fast and iterate.  

However, before jumping from marketing channel to marketing channel, use the bullseye framework and answer these questions upfront for each respective traction channel:  
‍
• How much is the customer acquisition cost per channel?
• How many customers can we reach through this channel?
• Are we targeting the right customers in this channel?
• What is the ROI for each channel?
• What is the customer retention rate for each channel?

Having a thorough understanding of the 19 traction channels and the Bullseye Marketing Framework, let's move on to creating effective experiments to maximize the potential of a chosen channel. These experiments are crucial for growth and help you find out which marketing channel can have the most significant impact.

Before conducting any experiments, consider the objectives you wish to accomplish and the significance of achieving them for yourself or the organization. A realistic goal could be: We aim to get 100 subscribers for our newsletter, as we saw that 20% of our newsletter readers convert into paying clients.

Plan your hypothesis with "If, Then, Because". For example: If we publish ads on Social Media, we expect 100 newsletter readers in one week, because potential customers told us they would love to get more information about our service.

Your action steps need to be clear, concise and doable for you and your team.

Do not make your experiments everlasting. It is important to fail fast. Get your insights, improve and run the next experiment.

Once you have experiments for potential channels ready to run, pick the ones with the best ROI and the biggest impact. Use an impact/practicability chart or – to make it even more meaningful – rank experiments based on the following criteria:  

• Cost: How much do you have to spend to run the experiment?
• Targeting: How easy is it to reach the desired target group?  
• Control: How much control do you have over the experiment? (Can you adjust if it is not going well?)
• Input time: How much time will it take to launch the experiment?
• Output time: How long does it take to get your experiment's results once it is live?
• Scale: How large an audience can you reach with the experiment?  

Note that it is not about knowing the different criteria-values exactly, but to use them as a reference point. For example, it is difficult to find the exact cost of a Facebook ad, since there are more factors involved than just the costs of the ad itself (time to research best practices, time to build the ad etc.). Use the values as a reference point to compare them to the other experiments instead. Once you have found your top three ideas to test, define how you can measure success and what metrics are most important to you.

For example, if you want people to download your newsletter via the website, and you try social ads, click-through-rate, bounce rate, dwell-time and conversion rate are meaningful.

Building a successful business is no simple task and requires not only a lot of effort from you, but also a clear strategy you can follow. Before writing the first line of code, you always need to validate your idea. Finding out if there is even demand for your product or service is a must and will protect you from a Startup nightmare.

Use Personas and customer journeys to better understand your target audience and to get a feeling for what people truly want to achieve. Choose the right go-to-market strategy for your product and test if it brings you the necessary results. Keep in mind that a go-to-market strategy is not a 10-year plan you commit to, but rather works as a guidance where your focus could be.

And last, focus on the marketing channels that bring you the expected traction. For this, use the bullseye framework. Remember: Since you cannot tell which marketing channel works in the beginning, have a testing mindset. Be open to make mistakes, test, iterate and improve.