How to Scale SaaS Product: Steps, Strategies, Pitfalls
Every business owner, at some point, decides to enter new markets, attract new customers and find new ways of development. Accordingly, any business model requires the timely adoption of new technologies and software, and this is especially true for SaaS products.
Scaling your SaaS business is a must if you plan to increase your profits and minimally develop your product. This procedure is necessary so that your company does not enter a stage of stagnation and doesn’t get stuck there.
The scaling process itself is not easy because there is no one-size-fits-all solution. This procedure requires time, proper preparation, patience, marketing efforts and resources.
It is crucial to prepare if you are running a SaaS startup. This industry is trendy and competitive, so it is essential to have a clear scaling strategy and understand all its strengths and weaknesses. So, how to do it properly?
In this article, we will try to understand how to scale a product and find a perfect time for it. We’ll analyze the types of scaling and find out how this process works, what to look for, and what can block the growth of your business.
How to Understand That Your SaaS is Ready to Scale?
According to the CBInsights research, about 42% of unsuccessful startups fail due to a lack of understanding of the market and its demand, and the main reason for failure for about 29% is funding and money issues. All this happens because business owners can’t assess their product properly and can’t find the right time for scaling.
Whatever it was, scaling is essential for any SaaS business. It is very important not to miss a good moment, but also not to hurry. There is no universal metric for determining the correct time, but several factors can be indicators of it.So, your SaaS product is ready for full scaling when:
- You clearly understand the benefits and goals of your product and have already surpassed them. Time to find a new purpose and achievement!
- Your business has a stable and strong financial income, including through regular sales.
- You are well aware of your customers' needs and have found every possible solution to meet them. So, it's time to expand your target audience and client base.
- You see certain obstacles that can be overcome by scaling. This may be the need to implement new solutions requiring a larger team and a larger customer flow or expanding the business to create the necessary workload on the team.
- A team is working on your product, ready to grow, scale, and develop.
Suppose you understand that now your business is in the most stable position and has reliable support in the form of human and financial resources, and the risk metrics are minimal. In that case, you can safely prepare for SaaS business scaling.
Two Types of SaaS Scaling
There are two main approaches to scaling SaaS projects. Each has its pitfalls and advantages, so let's talk about it in more detail.
Growth in itself is about improving key performance indicators: monthly regular income (MRR), customer lifetime value (CLTV), etc. Thus, the organic growth of SaaS is the improvement of such indicators without stimulating business processes from the outside and attracting investors.In other words, it’s the gradual and natural growth of a business at its own pace.This type of scaling involves using tools such as
- product transformation (improving functionality, adding new features);
- SaaS development services improvement;
- engineering solutions;
- marketing efforts, etc.
To scale a SaaS product, you can also use different strategies to attract new clients, improve relationships with old ones and increase customer and revenue churn rates.
Organic scaling methods allow you to interact more closely with your target audience and effectively identify client pain. With their help, you can improve the product and develop the business through stable iterations. Thus, the process is painless for the company and easy to control.
Organic Growth Advantages
There are some essential benefits of organic scaling:
- Restructuring is easier. Organic growth allows you to change the leadership or staff more smoothly and comfortably. All restructuring and integration processes are organic, so the company's internal culture doesn’t suffer, and new business management operations are easier to implement.
- More control over the process. Because scaling is iterative, company management has more time and resources to control assets and business processes.
- Quick adaptation. In this case, unlike non-organic growth, when scaling occurs through mergers or acquisitions, management clearly knows all its internal and external processes. This allows you to develop more flexible and efficient strategies and quickly adapt to rapid market changes.
In addition to all things mentioned above, organic growth is more stable and predictable, and this is the ultimate goal of any SaaS business. Gradual and lasting scaling attracts investors and potential buyers and opens new opportunities for active sales.
Organic Growth Disadvantages
Organic growth as a type of scaling products has its pitfalls. First, all companies depend on market competition in one way or another. If major competitors start mergers and acquisitions, it requires businesses to grow faster than the organic approach offers.
As a result, such players either leave the competition or are forced to look for non-organic ways to scale quickly. And this, in turn, often leads to failure because without preparing, it’s like jumping into the open sea.
It is also worth noting that organic growth is slower. In this way, businesses sacrifice speed for the sake of stability because the scaling process cannot exceed available assets, resources and staff. It can reduce your competitive advantage, as other companies in the industry will easily outperform you if the market has high mergers and acquisitions level.
In addition, everyone has their own limits. Without third-party infusions, a business can quickly run out of resources.
Inorganic or non-organic growth is a type of SaaS startup scaling when a company's business and assets increase due to a merger or acquisition of competitors. In this way, the company gets access to a new customer base, human resources, etc.
Inorganic scaling immediately increases both the company's profits and market share. At the same time, the issue of adopting new technologies and personal adaptation needs some time to be resolved. This strategy has its advantages but also requires business owners to be very careful and balanced.
Non-Organic Growth Advantages
This is the best scaling strategy for a product if you need to achieve a maximum growth rate. Merging with competitors can immediately double the list of customers and expand business opportunities. However, you should pay attention to other advantages:
- Immediate increase of experience and knowledge. When you merge or buy competitors, you combine your company's human capital with their resources. Thus, the ability of their key players and valuable specialists is at your service. You have more solid teams and experienced management to make effective strategic decisions.
- Immediate market share and sales increase. Non-organic scaling provides instant access to another company's previous sales, customer base and achievements. This way, you cover a larger market share.
- Serious competitive advantage. This benefit follows from the previous ones. The more pros in your team, the bigger your market share, the more companies count on you, and the further you are in the competition. This scaling creates a new reputation and provides a strategic advantage in overall coverage.
It is also worth noting that rapid scaling opens up new financial opportunities for businesses (creation of a new credit line, more accessible debt financing, etc.).
Non-Organic Growth Cons
The faster the growth, the more effort is needed to manage. Otherwise, the business may go in the wrong direction, there will be unbearable debt, and too rapid growth always entails many risks.
Managing integrated companies is quite tricky. Restructuring operations, sales work, and integration support require additional attention and scale resources for a saas company. In addition, financing the merger or acquisition of competitors has a rather high initial cost, and business development can lead to large debts.
So, What’s Better?
It all depends on the circumstances and characteristics of a particular business. In some cases, the boost from acquiring a competitor provides useful short-term gains and can sometimes help correct internal problems.
On the other hand, gradual organic growth allows the company to make a profit regardless of economic status. So the choice always depends on the specific circumstances and scaling goals.
SaaS Scaling Stages
There are four primary steps of scaling a SaaS business, and every stage has its value, pitfalls and obstacles. So let’s discuss them in more detail.
Design is not just about the appearance of your product. Professional development teams pay special attention to this stage because it provides convenience, intuitiveness and efficiency of the product. User experience research has long been integral to any software or application.So, the design stage has several components. There are:
- User experience research and in-depth analysis. Here, the team defines product strengths and weaknesses, creates a user roadmap, and analyzes the market, its needs and trends.
- Prototyping. After analyzing and studying user needs, designers create the optimal interface and prototype for testing and evaluating product updates.
- Prototype testing. For such purposes, a focus group is often invited to identify shortcomings and correct them in the early stages.
Each stage is critical because it allows you to get the best design for easy scaling. Without it, creating a smooth user flow and gaining a real competitive advantage is just impossible.
The product stage is no less critical. This is where you work with the app architecture, its functionality, tech stack, etc. It’s not enough to know the needs and pains of the target audience to scale. You should find a way to solve them.
Therefore, this step is needed to increase the product's capabilities and for its full upgrade. Due to this, after the active influx of new customers, the software will be ready to meet their needs and cope with a heavy workload.
Find out more about product development and scaling stages in our SaaS outsourcing guide.
You can't fully scale enterprise SaaS without any marketing effort. At the marketing stage, marketers work with comfortable customers adaptation to new product features, create a strategy to retain loyal users and expand the client base. This is quite a thorough process because it’s essential to show all the benefits of the new format and not lose the old network of customers.
So the primary goal of this stage is to maximize coverage, implement upgraded product soft but effective and promote its brand. Here, marketers work with website traffic, social media, etc., as well as track and analyze important metrics, namely:
- conversion rates and lead flow;
- cost per acquisition (CPA);
- growth rates;
- customer retention, lifetime value and churn rates;
- net promoter score (NPS);
- monthly recurring revenue.
Tracking and analysis of metrics are crucial in scaling SaaS products. Without this, it is impossible to plan, identify risks and assess the correct scaling trajectory.
Onboarding is another significant part of scaling. In any process, whether it is studying at school or the first days at a new job, smooth adaptation is an integral part of success. It's the same with scaling a SaaS business: the better you organize onboarding, the easier it will be to build relationships with your target audience and create a solid customer base.
This step is needed primarily to present the updated product to users, to tell them about its unique features and benefits. Here you have an excellent opportunity to explain to the audience how your business can solve its problems and why it is worth choosing you.
Of course, depending on project complexity and features, onboarding can be very different. However, in general, the whole process consists of several basic steps. These are an explanation on the website's homepage, gradual adaptation and gaining valuable/positive user experience.
The website's homepage should draw attention to what your product can give the user. This will be a hook for potential customers. It is also essential to generate simple and concise instructions for clients on how to take advantage of the product. Do not forget about the call to action – it helps guide the user forward.
Gradual and smooth adaptation significantly reduces user churn rate and improves the perception of the SaaS product. It’s also an essential element of customer support.
At this onboarding stage, you need to create a clear and logical sequence of actions for the user, which will lead him to the desired result and guide him in the right direction. This can include a tutorial, integration instructions, presentations, training videos, developer documentation, etc
.In addition to a clear plan of action, you should consider engaging adaptation features. These can be rewards, congratulations on passing each step, etc. Proper UX design will help make this process interactive and exciting.
Valuable/Positive User Experience
The ultimate goal of onboarding is to make the user aware of the actual value of your product and get used to it, and this is what makes the audience stay with you. So, don’t forget to remind your clients about the real benefits of your offer.
In addition, the user's awareness of the product's value is important for reputation. This way, customers will recommend you to their friends and acquaintances, leave positive feedback and remain loyal.
The Right Development Team Structure For A Successful SaaS Scaling
Successful scaling is not just about updating business processes and financial change. It also involves the correct transformation of the team.
Sometimes such changes can be quite difficult for staff, if something is done wrong, the scaling process can slow down dramatically. However, team transformation is a necessity.
Why Do You Need It?
First of all, it’s crucial to set new goals and choose a convenient business model before scaling. Accordingly, the old team may not meet these goals. So you have to review its composition and determine what changes it needs carefully.
Secondly, as the company's size increases, so does the workload. Your team needs more “fighters” to deal with it. You also have to consider the management organization and choose the right professionals.
In addition, great changes always come with new technologies. Very often small teams simply do not have specialists who would have enough experience in working with them. Therefore, sooner or later you will have to supplement the staff with professionals of narrow specialization and it’s better to do this before scaling.
How Does The Transformation Looks Like?
The process of transforming a team for SaaS scaling includes several important points:
- Review roles and areas of responsibility. Obviously, in order to scale, a team needs personnel changes so that everyone can fulfill a mission suitable for them and be in their place.
- Work on communication. The communication process is significant for successful scaling. All team members should be able to connect and receive answers to their questions promptly. Otherwise, the process will take too much time and effort. Therefore, it is necessary to clearly define communication channels and rules and eliminate unnecessary participants in the chain.
- Installation and configuration of tools. Everything is clear here: you must have all the necessary tools ready for the saas scale.
It is also essential to take care of the establishment of work processes. Don't choose between speed and quality. Otherwise, you won't get anything. It is important to prepare the team so that it does its job cleanly, clearly, and without losing deadlines.
Proper Development Team Structure
Of course, each company has its own development and growth characteristics, so the team structure in each case may differ.Nevertheless, in order to effectively scale up development team, it’s important to include the following specialists:
- Project Manager. This person is responsible for team and task management, reporting, performance control, etc. Basically, a good project manager provides a proper work environment and connects team members.
- Developers (back-end, front-end).
- Business Analyst. BA is your eyes, ears and sixth sense. This person analyzes the market and services, identifies risks, generates new ideas, business requirements and acceptance for developers and QAs, makes predictions, etc.
- Quality Assurance (QA). Engineers test the product to comply with BA requirements and look for bugs so developers can correct them in time.
- DevOps. DevOps engineer is responsible for monitoring and maintaining backlogs, managing and configuring the environment, configuring and controlling CI/CD processes, and ensuring development and delivery quality.
- Software Architect. It is a guru of databases and system architecture. Such a specialist works closely with DevOps to create the optimal environment and the right delivery process. Clean and solid architecture is very important for scaling, so you can't do it without a software architect.
- UI/UX Designer. This is a person who will work closely with a business analyst to conduct quality user experience research. The designer creates an intuitive and user-friendly interface, improves graphic elements and app structure, and creates prototypes. In other words, this person prepares the product for scaling in a way that is convenient and user-friendly.
The team structure may vary depending on the scale of growth, goals and development methodology.
What Should SaaS Scaling Decisions Be Based On?
Several fundamental groups of indicators can help to make an informed decision about scaling.
The first one is the market situation and the industry assessment. Such metrics include data analysis based on the overall market assessment, growth rates, competitors' business and traffic analysis, etc. This group also includes checking the popularity of search queries.
The second important group of indicators is everything related to user behavior analysis. These include the number of registrations, the number and type of subscriptions/plans purchased, features popularity and user activity, user churn (quantitative and speed), etc.
Another metric that influences the decision to scale your business is financial. It is crucial to assess their income and regularity adequately. Metrics are evaluated on a monthly basis, and it is also necessary to determine the cost on the same principle and calculate the relative increase.
And last but not least is the company's technical capabilities. Without evaluating such metrics, successful scaling is not possible because you have to calculate your strengths based on business productivity and security, employee skills, product scalability, and so on.
How Technical Debt Blocks SaaS Scaling
Technical debt is a phenomenon that all companies face. Often it rises in the stages of MVP and after, when the development was quite fast, the load on the team was constantly growing and unresolved problems have accumulated.Why is it necessary to reduce tech debt? Because it seriously blocks scaling and makes the process much more difficult. There are several reasons for this:
- You don’t have the resources for long-term processes, such as deployment automation or quality testing.
- Your product may not reach the required security level.
- All the usual procedures become much more expensive and take too much time.
- Architecture loses flexibility and hence the ability to scale.
Also, technical debt can negatively affect the data structure, negatively affecting productivity.
How to fix it?
It all depends on the type and cause of the debt. If it is an architecture issue, it is necessary to find experienced engineers who will be able to improve the situation. If the technical debt accumulates due to poor team organization, you can try to change the development methodology to Agile, Waterwall, etc. You can read more about this in our article on technical debt reduction.
In other words, the decision depends very much on the situation. But before scaling, you should definitely deal with this problem.
SaaS Scaling Example: From 0 to 200k MRR
Stripo MVP was launched in 2017 and at first, it was just a handy and simple embedded editor for an ESP. Over time, the influx of customers began to increase gradually, the product had a stable cash flow and a solid team. After in-depth analysis and market research, the founders realized that Stripo can be useful in many areas, from marketing and advertising to design.
It was the moment when the team assessed its strengths, compiled a list of additional features, and create a development strategy. The decision to scale was made based on market research, financial assessment and predictive analysis. It was an organic growth based on a high-quality product, completely ready for scaling.
In three years, the usual built-in builder has become a full-fledged email design platform. Today, Stripo is integrated with 70 ESPs, email clients and CRMs. It has over 600,000 users from 182 countries.So the founders chose the path of gradual organic growth to scale a SaaS business, which allows the company to create a solid basis for scaling and not depend on outside investment. Gradually
- the product received new features;
- the MRR grew (from 0 to 200000);
- the customer base grew due to the proper marketing efforts.
In order to save its leadership position in the market, the product needed constant improvement, so designers and developers are working on new features and new technologies implementation, and the team is regularly replenished with new specialists.
Also in the process of growth, special attention is paid to the issue of technical debt. The overriding task is not to accumulate it, but if it appears, the team immediately finds an opportunity to reduce the debt.
How Ardas Can Help You
Ardas is a high-level expert in SaaS scaling process and everything related to it. For many years we have been working on the development of our own products, as well as helping to scale companies of different sizes and from different industries. Our team is constantly working on the implementation of the latest technologies and finding new ways to improve clients' products.
Why should you work with us?
- We know everything about growth hacking as we had to find new solutions for our products like Stripo. Because we have tried several different strategies and approaches on our own products, we can help you find the best option individually.
- We have a solid team of specialists with extensive expertise and practical knowledge, so you can trust us to scale the business and not be afraid of negative consequences or failing.
- Our business analysts are always ready to analyze any business process and find approaches to optimize them. Scaling the SaaS business with Ardas is soft and secure, with no traumatic experience for the staff or the product itself.
Ardas team will be pleased to share its experience and best practices in SaaS scaling. So feel free to contact us in any convenient way. We’ll be happy to answer any questions and find the best option for your business.