Online businesses have become quite lucrative recently. Entrepreneurs, especially the home-grown ones and cottage industries are hopping onto the bandwagon of online companies. The reason for the growing popularity of online businesses is that they do not require much investment and turn out to be profitable and time-savers.
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SaaS Business Model Explained
SaaS or Software-as-a-service business model has become a catalyst for online businesses. Based on this model, entrepreneurs do not need to invest in software. Instead, they can buy a license for the software. SaaS requires renewing the subscription on a regular basis. Everything else is taken care of by the people owning the software.
SaaS companies create the product. They offer it to subscribers for a fee. The subscribers do not need to buy the software. SaaS companies offer paid access to customers, taking care of developing the software and maintaining it. Customers can either opt for weekly, monthly, or quarterly subscriptions.
When a company sells software to a customer, then it receives a lump sum amount for the same. However, when a company rents out the software in the format of SaaS, then it receives some amount as rent every time the subscription is renewed. There are different types of SaaS viz. CRM i.e. Customer Resource Management systems, Lead Management Software, Accounting Software, Web Hosting, and Data Management.
This type of model is very beneficial for the customers. They do not have to invest in the software by paying a hefty amount. Software is a costly application and many start-ups do not have that kind of backup. With SaaS, customers do not have to shell out space for software on their computers. SaaS allows customers to access complex functions from a dedicated device.
Advantages of SaaS
The predictable revenue stream of SaaS has made entrepreneurs prefer it over other revenue models. There are other advantages that have made entrepreneurs opt to build a SaaS start-up.
Scalability
SaaS business models have a very potential when it comes to scalability. SaaS offers its customers extend the features that they use frequently. There is even a possibility to eliminate all those features that are not in use. SaaS models are popular as they can be customized by users based on their requirements. Owing to its flexibility in usage, the SaaS business model has become quite popular.
In comparison to SaaS software, on-premise software is a little inconvenient. Due to this, small enterprises and start-ups were not able to invest in them. With its adaptability and flexibility, SaaS offers users tons of benefits. The cloud-based nature of SaaS makes it easy for users to modify and deploy within a short span of time.
The SaaS business model can be easily scaled to acquire big-ticket clients. Plans can be changed easily and conveniently. End-users can choose the plan based on their requirements. Customers who prefer premium services can opt for expensive plans. As the product portfolio is extendable, SaaS business models make it easy to find the target market and acquire customer acquisition.
There are different SaaS models that can be adopted for growth. SaaS start-ups can either opt for vertical growth by offering their products to bigger or smaller clients. Alternatively, start-ups can grow horizontally by focusing on one industry. The SaaS business model has made it possible to scale business to the global market as well.
Low Investment Cost
SaaS business model can be started easily and without much investment. Compared to other business models, SaaS start-ups are hassle-free and profitable. There is no requirement for inventory with SaaS start-ups. A SaaS business can be set up with just a laptop and an internet connection, even at home or in the basement. With remote working a possibility, SaaS team members can be present in different parts of the world.
The SaaS business model helps entrepreneurs save money on different types of utilities. The products need not require manufacturing or any kind of packaging. There are no shipping costs involved as well. The entire business happens through the internet. The downtime involved in SaaS is much lower than that of on-premise software. SaaS software can be provided to clients without any delay. SaaS startups help eliminate a host of expenses that are generally incurred in other types of business models. The SaaS product range can be developed independently with the right knowledge and resources.
Performance Measurement
With the SaaS business model, entrepreneurs can measure the impact and performance of the business, swiftly. The major part of business takes place online. The product is bought through the medium of the internet and is even deployed in the same manner. This makes it easy for entrepreneurs to tap the information regarding usage and the users in a convenient manner.
The income model of SaaS is predictable. As SaaS comes with the benefit of recurring income, entrepreneurs can analyze the data that is available. This helps them take decisions regarding scalability, marketing, and other things. SaaS start-ups can predict the performance and decide on whether the business needs to be continued or not, well in advance.
SaaS businesses track the customers, their reviews, and feedback to understand the performance of their products. This helps them make changes to the product offerings and features. The growth and expansion of SaaS start-ups are completely dependent on the feedback offered by the customers.
When customer feedback is taken seriously, it becomes easy for businesses to acquire new customers, retain them and maintain them. Data analysis is as much important as it is to gather it. This helps a SaaS start-up to reach great heights in a short span of time.
Recurring Revenue
SaaS entrepreneurs have to focus on the costs they will incur as compared to the revenue they will generate from the business. This helps them decide the profitability of the same. The benefit of the SaaS business model is that it operates on the subscription method. SaaS can be enjoyed by end-users by paying a small fee either weekly, monthly, quarterly or annually. With this model, entrepreneurs enjoy a regular income all year.
With SaaS, entrepreneurs are assured of a steady flow of income. This helps them cut down on regular expenses. The future is secured with this model of income. It helps businesses plan the future and scale the business accordingly. Right decisions at the right time help shoot up the valuation of the start-up.
The final words
This is the right time to build a SaaS business anywhere in the world. The competition has just started and the field is too big for everyone to play in it. With the promise of high profits, entrepreneurs need to take a chance and plunge into the world of SaaS.
