Did you know that having a business plan creates a 30% greater chance of growth?
A strong business plan is the foundation of success for businesses. But if you have a SaaS, a business plan is even more crucial to attract potential investors that you’ll need for growth.
Here at FounderPath, we know the importance of a robust business plan for SaaS companies. Keep reading below to find out why a business plan is crucial, what you need to consider and how to put one together.
What is a SaaS business plan?
A business plan gives an overview of your business. It covers where your business is currently, where it’s projected to go and how you’re going to get there. A business plan details your business strategy, marketing plans, customer acquisition tactics and more.
If you’re venturing into SaaS, your business plan needs to be specific to the industry you are tackling and it must cover the sections featured in this article. SaaS is continuously online, which may affect how you plan your business. You need to consider how the online landscape changes in a way that other businesses don’t.
Why a SaaS business plan is important
There are plenty of reasons why a business plan is crucial for your business and potential investors down the line.. Let’s take a look at some of them now.
A business plan stops you from floundering and keeps you focused and on track. It helps you make confident decisions in line with your goals, identify any potential weaknesses and have a strong reference when you talk to potential stakeholders. A good SaaS business plan will provide:
- A roadmap for the success of your business, including your financial and marketing processes
- Evaluation of your company’s status and growth over a specific timeframe
- Details on what customer problem you’re trying to solve
- Solutions to SaaS specific problems, such as scaling growth, data capacity, storage and customer support
SaaS investors or quick cash lenders, like FounderPath, need to know what they’re putting their money behind and when they’ll see a sizable return. A business plan shows them that their money is in safe hands. It does this by:
- Explaining why your SaaS business will succeed
- Highlighting your businesses’ advantages over your competitors
- Giving an overview of your financial plans and records
- Demonstrating how you’ll attract new customers with your marketing strategies
Some things to consider in your SaaS business plan
You need to know who your target audience is in order to reach them properly. Your product is trying to solve a problem that your target audience has. Without understanding what their problem is, you won’t be 100% sure that your company can aid them.
To understand how your product stands out, look at where your competitors are failing. What are their customers saying about them? Look at websites like Capterra to find your competitor’s weak points and how you can do it better.
Your USP and positioning
With 73% of organizations using SaaS products, you need to know what gives your product the edge over its competitors. This is how you’ll position yourself in the market.
For example, there are plenty of video editing platforms out there, but VEED’s focus on ease of use and simplicity helped them target users who were looking for a simpler alternative to the overly complex video editing platforms such as Adobe Premiere Pro. This eventually led to a $35 million investment from Sequoia.
Acquisition and retention
The success of a SaaS business largely depends on how well you can scale your customer acquisition and retention process.
Assessing product-market fit
You need to provide a way to indicate that you will be actively assessing your product-market fit, or, in other words, the viability of your platform to exist and grow as a business.
This includes measuring key metrics that show a clear indication of your trajectory, finding ways to collect user feedback, and developing a roadmap based on what your (potential) users want.
The financial side
With most startups, you’ll need a sizable chunk of change to start you off. You need to consider whether you’re going to try and attract investors or use a short-term lender like FounderPath. FounderPath looks at your current business performance, scores it and lends you money with terms related to this performance. It’s a great option for those looking for a quick cash injection.
In your plan, you’ll need to break down how much you’re projected to make and how you’re going to reach that goal, so investors have no doubts about backing your project.
How to write your SaaS business plan
The executive summary shouldn’t be longer than 2 pages. Keep it concise and to the point by answering the following questions.
- What problem do you aim to solve?
- How are you going to do that?
- Who makes up your team?
- Do you have any current interests?
- What are you asking for? Is it investments, a government grant, or something else?
Why did you start your business? Some of the best businesses are solving problems customers didn’t even know they had. Here, you need to cover 2-3 main problems your ideal customer is facing and why it’s a major problem for them.
For example, in AirBnb’s pitch deck, the problem it was trying to solve is clear: to provide a more affordable and authentic alternative to booking hotels.
This section should focus on the benefits for the customers. Continuing the Airbnb example, their users would no longer have to pay ridiculous hotel prices or settle for somewhere that wasn’t up to standard. And homeowners or those with an extra room could make extra money on the side.
Cancel out the pain points listed in your “problem” section and really highlight those customer benefits.
Here, you need to state how big the market you can address and how fast the market is growing. It’s important to cite facts and figures, so investors can clearly see a revenue projection over time.
This section is where you define your market and how it’s made up. Do 2 or 3 large companies dominate nearly 85% of the market? If so, how are you going to position yourself to take over?
Try creating a product comparison table to show what you do differently. Clearly highlight the differences and similarities based on features and show how you solve a problem the others don’t. You can even demonstrate problems your competitors are causing for customers and how you’ll solve them. Here is an example from Cheddar on enterprise-targeted marketing automation SaaS platforms:
What will your business model look like? There are three main business models for SaaS companies that you can follow.
- Subscriptions. With this model, companies charge their users a regular monthly or annual fee to use their service. Companies like Canva, Spotify or Grammarly use this model. Each month or year, you’ll have guaranteed income from recurring customers and the chance to grow with new ones.
- Ads and featured listings. Online marketplaces like Etsy, eBay and Amazon use this model. Think about the last time you scrolled through social media or searched for a particular product online. Chances are you’ll have seen a paid ad placement for one of these sites featuring something you’re looking for.
- Commission model. This is when the SaaS company splits its revenue with its partners. For example, Uber offers a 75% cut to its drivers while the company keeps 25%. If a company’s users are doing well, so will they. And it gives users incentives to use the platforms as they’ll be getting a cut of the profits.
How are you going to get your customers to notice you? When devising the marketing strategy, do keep in mind to include:
- Your distribution channels. SEO, email, social media, cold emailing, etc.
- How you will get your first clients. Examples include offering your product for free to get user feedback, trial and demos, etc.
- The timeline. How long would you need to get things running?
- Budget. How much would you need to execute your strategy?
- Your key performance indicators. Focus on essential ones, such as recurring revenue, churn and retention rate, month-on-month growth.
- Marketing tools you’ll use (optional). Obvious ones include Stripe, Mailchimp, etc.
Measuring your marketing strategy and its effectiveness is crucial to the success of your business. With Founderpath’s customer metrics tool, you’ll be able to calculate whether your strategies are pulling in new customers.You can even see how much you’re spending in order to acquire new customers.
This section explains where you’re going and how your product is going to evolve. Investors are interested in your product’s future, and more importantly, whether or not it has one. How are you going to stay relevant to customers? How will you adapt to changes in the market?
You can be as detailed and forward-thinking as you like in this section.
Some common figures you can include in this section are:
- Monthly recurring revenue
- Churn rate
- Average customer value
- Customer lifetime value
- Customer acquisition costs
Your financial plan is one of your most crucial sections and should include a lot of detail. Include here what type of funding you’re looking for.
FouderPath raised over $145 million for SaaS companies to use to grow their businesses in 2022. Borrowers retain 100% of their company and can track everything through their FounderPath dashboard.
A SaaS business plan is crucial for your development as a company. It keeps you on track and focused and drives out wasteful activities.
There are several things to consider in your business plan, including marketing strategies, research and a financial plan.
For more help with finances, consider a SaaS-specified lender, like FounderPath. Contact them today to find out how they can help your business grow.