Top Ten Dos and Don'ts of SaaS

Build a successful software-as-a-service business

Copyright 2009 by Joel York at Chaotic Flow.

saas top ten dos and don'ts

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The Top Ten Dos of SaaS Success

SaaS Do #1 - Choose a Large Market

SaaS Do #2 - Create a Hub on the Web

SaaS Do #3 - Accelerate Organic Growth

SaaS Do #4 - Craft a Compelling Story

SaaS Do #5 - Build the Business into the Product

SaaS Do #6 - Reach across the Firewall

SaaS Do #7 - Monetize Creatively

SaaS Do #8 - Enable Mass Customization

SaaS Do #9 - Open Up to the Cloud

SaaS Do #10 - Leverage Your Community

The Top Ten Surefire Ways to Fail at SaaS

SaaS Don't #1 - Chase Elephants

SaaS Don't #2 - Waste Money Marketing Offline

SaaS Don't #3 - Launch without Online Trial

SaaS Don't #4 - Cover up Shortcomings with People

SaaS Don't #5 - Invest in Channel Partners too Early

SaaS Don't #6 - Bleed Cash Indefinitely

SaaS Don't #7 - Ignore the Long Tail

SaaS Don't #8 - Think You Can Control It

SaaS Don't #9 - Fail to be Creative

SaaS Don't #10 - Depend on Network Effects

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The Top Ten Dos and Don’ts of SaaS Business Success

The Dos: Ten Proven Strategies for Software-as-a-Service Businesses

SaaS Do #3 Accelerate Organic Growth

Succeeding in software-as-a-service requires a paradigm shift from push to pull revenue generation. Lower annual subscription revenue per customer and much lower cash up front create intense pressure to decrease average customer acquisition cost. This fact implies an unpleasant loss of control over the sales process and a commensurate need to focus more keenly on facilitating purchase over hard selling.

With the customer firmly in control, the role of sales and marketing switches from chemist to catalyst—from driving revenue to accelerating organic growth. Accelerating organic growth means stimulating demand and facilitating purchase by understanding and leveraging your prospect’s natural buying behavior. SaaS business managers should continually ask themselves the simple question: “How can I get more prospects to find my product, evaluate my product and buy my product over the Web even if no one shows up for work in the morning?”

The secret enabling organic growth is to eliminate purchase barriers and to respond on-demand with the information necessary to motivate the prospect to take the next step in the buying process. Being at the right place at the right time requires up-front investment in so-called free marketing tactics, e.g., SEO, public relations, blogging, social marketing, video, automated nurturing, newsletters, case studies, interactive demos, product trial, etc., so that content is ready and waiting to be served up when needed. In reality these activities are not free; they are simply free at the time of use, shifting the economics of revenue generation from direct, variable sales and marketing costs to indirect, fixed costs. In fact, this characteristic provides a convenient economic definition of organic growth:

growth = revenue generated with (near) zero marginal acquisition cost

No advertising, no outbound marketing campaigns, no sales calls, no technical inquiries, and no manual order processing. This financial viewpoint clearly highlights the primary benefit of accelerating organic growth: operating leverage. Increasing organic revenue decreases the average acquisition cost per deal and increases overall profitability. Moreover, accelerating organic growth and lowering marginal acquisition cost systematically expands your available market by allowing you to sell profitably on the outer reaches of the long tail.

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