10 Tips for Building a Successful Software Business

In today’s world of information technology, everyone is seeking new ways to use technology for their benefit and to make a positive contribution towards life. Businesses nowadays look for opportunities through which they can add digital and technological aspects to their businesses to automate its processes.

There are even other entrepreneurs who intend on knowing the technicalities of this world, especially about cloud-based software business, before entirely entering this industry seeking to set up a software business that turns out to be successful. Because of the awareness and the acceptance of the cloud-based services, SaaS, software-as-a-service industry has also started to grow continually.

Not only are the giant developers investing time and money on this but everyone who knows about its potential is looking for things that would be of more interest to the people and would give them as its owners a chance to outperform.

To create a successful software business that offers what is the need of the time to the audience, following are the most important and common tips that would indirectly help you attract more traffic to your software leading to a greater income ratio, which is all correlative to the software quality.

Tip # 1: Follow the keep it simple rule

Coming up with the design of software that is too difficult to understand and to be navigated by users is most probably to be skipped by them. These users wouldn’t show interest in learning something that doesn’t look to be user-friendly.

Therefore, it is recommended to always design your software intelligently and put some time and effort into it so that even the toughest actions look to be simpler than ever. Keeping this as your key point will help you attract users.

Tip # 2: Offer several packages according to user needs

The entry point to your SaaS offering should always be free to attract the audience. Moving onwards you should segregate your software into different low-end and high-end features rather than stuffing everything together.

You should also offer limited usage volume and functionality at the entry point and for a continuation of use offer two to three paid packages that are custom made and fits a particular segment. These segments might be differentiated on the basis of usability, willingness to pay and return on investment.

Tip # 3: Analyze and control your software before making it official

One way you could have a better understanding and usability of your software is by making it available to pilot users to check for any issue that might arise during this test run. As more issues are handled and taken care of during this time, the lower number of problems you would face.

This would not only help you in gathering invaluable information about your software and your customer’s needs and behavior but will also help reveal what functions in the software are popular than others.

After analysis, it is necessary you have control over the packages that your software is offering and continuously monitor each package’s performance and keep making regular changes in it for its improvement.

Tip # 4: Provide space for plug-ins

One of the main feature or quality of successful software is that it provides flexibility and accessibility to its users to add-on more functions that suit their needs. Some software businesses also have developers working for them to develop new plug-ins or offer a plug-in marketplace that allows its users to access third-party plug-ins.

This aura of cultivating an ecosystem where interoperability is given value and importance increases the value of the product, and introduces alternate sources of making revenues, striking a deal, or availing an opportunity.

Tip # 5: Provide professional services

Providing professional services is necessary as it comprises of 10 to 20 percent of new ACV and 20 percent of the gross margin. Calculating a total of these would reveal how they add up to be a gross margin that is greater than 70 percent which shows that it is essential for maintaining good valuation multiples.

Tip # 6: Stay focused on customer’s success

Where attracting new customers is important for the growth of your software, the main goal however of almost every SaaS company is to grow its recurring revenues from its existing customer base. From the new Annual Contract Value (ACV), up-sells can constitute to around 10 to 25 percent. Mostly the goal of the company is to maintain monthly churn rate – gross less than 1 percent and net to be negative.

In order to achieve these particular goals, a customer’s success team should be in place that keeps monitoring the usage level on the basis of which they can gather feedback by circulation of satisfaction surveys. The team that is put in place, for this reason, should be well-trained and capable of selling.

Tip # 7: Keep a check on your dashboard

Your dashboard is like your monthly report card that reveals your performance. This performance is measured on the basis of KPIs called Key Performance Indicators that comprises different rations that can be measured. These include the monthly recurring revenues (MRR), customer acquisition cost ratio, ACV/ MRR pipeline, cash flow, churn rate, customer lifetime value, and average ACV/ MRR per salesperson.

Tip # 8: Align incentives

Align your incentives on the basis of how and what kind of customer is tackled by the salesperson, type of booking and contract terms that are handled and further on. On the other hand, customer success managers should also be compensated on the basis of efficiently controlling the churn rate.

Tip # 9: Invest in growth

If you have the means to invest then do so for the purpose of growth. With gross margins over 70 percent for a SaaS company, its valuation is dependent on annual revenue growth rate. So if you are growing then make sure you keep investing to make it a working process.

Tip # 10: Plan a profitability path

Although most of the SaaS companies invest to fuel growth, one important tip for successful software business is to define a profitability path that ensures that the business model is fundamentally sound and allows maintaining at or above average growth rates.


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