If you’re going to do a SaaS start-up… you have to give it 24 months: The reality of building a successful software business

Key Considerations for SaaS Startups

Starting a SaaS company is an exciting prospect, but it’s not for the faint of heart. I’ve seen many ambitious professionals eager to strike out on their own, but there are crucial factors to weigh before taking the plunge.

Time Commitment

The first thing I always ask aspiring founders is if they’re ready for a 24-month journey to reach initial traction. This isn’t an arbitrary number – it’s based on the realities of building a SaaS business.

Here’s a typical timeline:

• 9-12 months: Developing the right product
• 6-12 months: Generating meaningful revenue

Don’t be fooled by stories of overnight success in the consumer app world. SaaS is a different beast entirely. Slack’s rapid growth to $12 million ARR in 2014 is often cited, but it’s crucial to remember that the company had been working on its product for a full year before that explosive period.

If you can’t fully commit to this 24-month timeline, it’s best to reconsider. Quitting too early is a common pitfall.

All-Consuming Focus

The second question I pose is about mental bandwidth. Can you devote 8,760 hours a year (that’s 24 hours a day, 365 days a year) to your startup? I don’t mean physically working around the clock, but rather being consumed by the challenge mentally.

As a founder, you’ll need to:

• Wear multiple hats (Sales, Customer Success, Marketing, Product)
• Handle customer drama
• Navigate the intense competition in the SaaS space

This level of commitment means your startup will be on your mind constantly, even during family time or leisure activities. It’s a gruelling pace that not everyone is cut out for.

Burning Bridges

The third and perhaps most critical factor is the ability to eliminate all other options. Successful SaaS founders don’t keep one foot in their old career or maintain a ‘Plan B’. They go all-in on their vision.

Common pitfalls include:

• Treating the startup as a ‘trial run’ with the safety net of returning to a corporate job
• Relying heavily on consulting work to stay afloat
• Raising a small amount of capital to ‘test the waters’

These hedging strategies almost always lead to failure. The most successful founders I’ve encountered have an unwavering belief in their vision and don’t even consider the possibility of failure.

Not Quite Ready?

If you’re not 100% certain you can meet these three criteria, don’t despair. Here are some steps to help you get there:

1. Conduct at least 20 in-depth customer interviews
2. Find a co-founder who shares your long-term vision (7-10 years) and can also commit fully for the initial 24+ months
3. Refine your idea and build your conviction

Remember, even the most successful founders often need support to fully realise their vision. A strong co-founder and thorough market research can be the missing pieces of the puzzle.

Real-World Example

Let’s look at Tiago Paiva, CEO of Talkdesk (now valued at over $3 billion). Their growth from $1 million to $15 million ARR in just 15 months is impressive, but it doesn’t tell the whole story. For the first two years, Talkdesk had zero revenue. Paiva even resorted to babysitting to make ends meet.

This level of perseverance and belief is what sets apart successful SaaS founders. It’s a stark reminder of the challenges you might face.

Common Questions About SaaS Start-ups

What’s a good growth pace for a new SaaS company?

In my experience, a healthy growth rate for a fledgling SaaS business varies. I’ve seen successful start-ups aim for 15-20% monthly growth in the early stages. It’s important to remember that this isn’t a hard and fast rule. Some companies might grow slower but still be on track for long-term success.

How long does it take to build a solid SaaS platform?

I reckon it takes at least 24 months to develop a successful SaaS platform. This timeframe allows for:

• Initial development
• Testing and refinement
• Building a customer base
• Adapting to market feedback

It’s a marathon, not a sprint!

Why is product-market fit crucial for new SaaS ventures?

I can’t stress enough how vital product-market fit is. It means:

1. Your product solves a real problem
2. Customers are willing to pay for it
3. There’s a large enough market to sustain growth

Without this fit, I’ve seen many start-ups struggle to gain traction.

What’s the role of MVP in launching a SaaS business?

An MVP (Minimum Viable Product) is brilliant for:

• Testing your core idea quickly
• Gathering early user feedback
• Minimising initial development costs

I always advise start-ups to launch an MVP before investing too heavily in a full-featured product.

How important is customer acquisition for SaaS start-up success?

It’s absolutely critical! A solid customer acquisition strategy should include:

• Clear understanding of target audience
• Multi-channel marketing approach
• Focus on customer retention and upselling

Without customers, even the best product won’t survive.

What should I consider about investments for my early-stage SaaS?

When it comes to investments, I always consider:

Starting a SaaS company can cost between £40,000 and £120,000 on average.

It’s crucial to plan your finances carefully.