Did you know that over 42% of failed startups had failed because their product couldn’t find an audience? True, you can’t predict whether your SaaS will find its niche until you test it on real customers. But that doesn’t mean you have to commit to full-scale development head-first and hope for the best.
Instead, build a SaaS MVP to give your clients a peek into your product with just enough investment of money, effort, and time.
Don’t just assume your clients will like your SaaS because you do. The market of cloud-based software is already saturated. The worth of SaaS solutions worldwide is predicted to reach $436.9 billion by 2025 from $272.4 billion in 2021. So, it’s getting harder than ever to find a loyal customer base.
At Acropolium, we see this tendency first-hand because we’ve developed our fair share of SaaS solutions. And now, we’re here to show you how to make an MVP for SaaS and generate user feedback as cost-efficiently as possible. We’ll also teach you to avoid the common SaaS MVP challenges, share tips on speeding up the development, and demonstrate how other companies started with an MVP.
But where are our manners? Of course, we should introduce SaaS MVP first.
What is a minimum viable product for SaaS?
A SaaS minimum viable product (MVP) is a simplified version of the product you should use to verify your concept and collect customer feedback. An MVP is far from the full version of your application or even a working prototype. It’s more of an investment in validated learning about your audience and its needs.
If that didn’t sound convincing, take a look at the other reasons why companies develop MVPs for their SaaS:
- Little effort. Your team only concentrates on the critical functionality of your SaaS. This, obviously, requires fewer resources than developing a fully functioning prototype or a complete product.
- Low-risk investment. You can gather feedback from testers, customers, and stakeholders much faster. This also puts less time and money at risk.
- Easier funding. You can use MVPs to demonstrate the strengths of your future SaaS to investors.
- More time to refine. Early adoption helps create a feedback loop with your users to get valuable information for future development.
All in all, a SaaS MVP helps you validate, promote, and refine the core of your app quickly, even if your budget is tiny. But that doesn’t mean MVP development is easy.
Read also: Guide to SaaS development outsourcing.
Common challenges of building a SaaS MVP
Many things can go wrong during MVP development, but fortunately, most of them are avoidable.
Here’s how you can deal with the most common problems of SaaS MVP development.
A broken feedback loop
You may rework your SaaS app from scratch or drastically change it based on the feedback. And it’s not uncommon to have several iterations of an MVP before starting full development. Still, some companies fail to gather accurate feedback from their audience.
The most effective way to collect data is to create a community for your early adopters. You can then communicate with them on forums, social media, email forms, surveys, and exploratory interviews. Make sure to incorporate both qualitative (user-friendliness) and quantitative (how difficult the task is to perform) feedback as you assess their experience.
Inefficient development methodology
Developing software without following a set methodology can affect productivity and drive costs up. But adopting iterative practices like Agile helps companies use their resources to the fullest.
According to the 2021 State of Agile report, two-thirds of Agile adopters reported a positive impact on management, visibility, and goal alignment during production. They also note that implementing Agile has improved their time-to-market (64% of respondents), team productivity and morale (60%), software quality (45%), and helped them reduce costs (23%).
Incorporating DevOps — practices focusing on automation and continuous feedback — also led to productivity improvements in many companies. Based on the 2021 State of DevOps Report, high-performing adopters have improved their code deployments by 973 times and reduced the change failure rate by three times. Plus, about 75% of practitioners state that DevOps is crucial for their organizations.
Not prioritizing security
Your SaaS application will likely collect personally identifiable information about your customers. This means that a single major data leak is enough to ruin your successful startup. That’s why you need to implement security solutions in the MVP stage to test external and internal risks.
During development, you should follow ISO/IEC 27001 security policies and frameworks to maintain protected data management systems. You also must incorporate effective mechanisms, such as multi-factor authentication, dynamic password change, encryption, and role-based access control. By the way, experienced companies can adopt the DevSecOps methodology to make cybersecurity an integral part of SaaS development.
Read also: Building SaaS for Healthcare market.
Having too many concurrent users in a cloud environment might create performance issues if your infrastructure isn’t scalable enough. You need to select the right SaaS architecture to ensure your app has enough resources to handle the demand.
Amazon Web Services and Microsoft Azure provide cost-effective infrastructures for SaaS apps. These platforms allow you to scale resources up as your MVP gets more features and your user base grows. Plus, they come with helpful tools for data analysis, monitoring, and load balancing.
Read also: Choosing the best cloud provider.
Unrealistic budget estimates
MVP development is more affordable than full product development, but it certainly isn’t cheap. However, many companies underestimate how much their project will take and go over budget even at this stage.
Our experience shows that it can take from $25,000 to $80,000 to create an MVP for a SaaS startup. And that’s if you have a team of skilled engineers, experienced managers, and an established workflow.
The development costs also depend on your team’s location. When choosing a remote team for outsourcing or outstaffing, study pricing, available talent, and skill rates.
For example, top outsourcing companies in the US and the UK charge $100-$150 per hour, while experienced providers in Ukraine will cost you $25-$50 hourly. On top of that, Ukraine outperforms North America and most European countries based on HackerRank and SkillValue rankings.
Read also: How to reduce software development costs.
How to build a SaaS MVP in 7 steps
An MVP helps you learn what your audience thinks of your SaaS early on, making it invaluable for smaller startups with limited resources. But a successful MVP requires thorough market research and planning. So, to make the process simpler and avoid bottlenecks, we divided it into the following steps.
1. Identify the target audience
Creating a solution for a problem that doesn’t exist is a fatal flaw of many SaaS startups. That’s why, before committing to development, you should create a detailed customer persona. To do this, try answering the following questions:
- Who is your customer?
- What are their desires and pains?
- Are their problems validated and significant enough?
- What devices do they use?
- What are current solutions on the market?
Gather as much information from people that fit your customer persona. If your idea for a project doesn’t have an audience, maybe it’s not the best idea. On the other hand, don’t spread yourself too thin if your audience has many pains. Instead, focus on one specific problem and decide on the best way to solve it.
2. Study the market and competitors
About 19% of unsuccessful startups didn’t pay enough attention to their competitors and didn’t realize they’d missed their window of opportunity. You need to thoroughly research the market and existing competition as you build a SaaS MVP. Think:
- What is the size of your market, and is there a demand for a new solution?
- Is your audience heavily concentrated in specific locations?
- What laws and regulations apply to your target locations and industry (GDPR, PCI DSS, APPI, PSD2, HIPAA, and others)?
- How do your competitors solve the same problem?
- How does your target audience perceive your competitors?
- How will your app stand out from the rest?
- What are your competitors’ revenue models and pricing strategies?
To understand what works and what doesn’t, study both successful and failed startups in your niche. You should also pay attention to your indirect competitors — SaaS products that tried to solve the problem differently. Use platforms like Crunchbase and Product Hunt to find both direct and indirect competitors.
3. Determine the core features
Many companies stuff their SaaS MVP with non-essential features or make them too complex. Don’t forget that it’s not an end-product or a prototype — focus on the bare minimum functionality needed to test your product’s viability.
You can use prioritization techniques to decide on the functionality to include. Write down features you think you need in an MVP. Then, create a table with two columns: for must-have initiatives and secondary initiatives.
Now, take each feature and filter it based on the following criteria:
- Can your SaaS product work without this feature?
- Does your target audience want it (as found during the research phase)?
- Does it solve a critical problem?
- Will it have a significant impact on your revenue?
- Is this feature a part of your product vision?
Put the features that meet these criteria in your list of must-have initiatives. Everything else should be postponed till future versions of the product.
For instance, an MVP for a healthcare SaaS platform might need document, client, and invoice management, as well as robust security to ensure regulatory compliance. However, you wouldn’t need time-tracking, customer relationship management, and marketing expansion extension from the get-go.
4. Choose a business model
About 17% of startups fail because they couldn’t find an appropriate business model to scale their business. That’s why you should determine your revenue model and pricing strategy early on.
Most SaaS companies stick to the subscription-based revenue model. Monthly recurring payments help convert more customers, as they incur less initial costs. At the same time, incremental income usually translates into a higher lifetime value for each user.
As for the pricing strategy for your SaaS, you can pick one of the following:
- Flat rate — a complete package of features for standard monthly payments
- Tiered pricing — different price points based on a number of criteria
- User-based pricing — charging based on the number of users the company adds to their account
- Usage-based pricing — the rate depends on the data and usage consumption metrics
- Variable pricing — individual payment model and feature packages for every client
- Freemium — free version of your SaaS with additional features available after a paid upgrade
According to the 2021 research by the Lahti University of Technology, 54% of SaaS companies use tiered pricing, and 27% develop their own hybrid strategy based on the tier-based model.
Account for the market demand and competitors when deciding on the prices. And don’t introduce your MVP at the lowest fee possible just to increase the price tag after full release. It’s better to make your business model close to the real one to learn how customers react.
Plus, free offerings are an excellent way to grow your product. But you should carefully consider what part of your SaaS features should be free. For example, the freemium model works as a lead-generator, but a paid model with a free trial generates twice the conversion rates from free to paid account.
5. Build a product roadmap
Before the start of the development, your engineers, architects, and designers should analyze and document all project requirements, including:
- Software specifications with functional and non-functional aspects of the MVP (technical stack, frameworks, APIs, and subsystems)
- Design specifications with key features, UI, application logic, and ways to implement requirements during the coding phase
- Cloud assessment to determine the optimal architecture and infrastructure for your app
- Security analysis to identify, evaluate, and prevent risks
- Post-deployment documentation to help the maintenance and support teams after the launch
Additionally, you can map out MVP development for executives, the marketing department, and customers. The key stakeholders should see the short-term and long-term goals, progress metrics, and success criteria. Your sales and marketing teams must have plans with prioritized channels. And an external roadmap helps to keep customers interested until the project’s launch.
6. Promote your product before launch
You won’t know if your MVP is up to the mark unless a sufficient number of people get to try it out. This is why you must showcase your product to customers, influences, and potential investors before the launch.
You can begin with a landing page or a video that illustrates audience problems and shows how you can solve them better than other companies. Make sure to communicate your idea accurately and as straightforwardly as possible.
Take a lesson from Dropbox — one of the largest file hosting services — that laid out its concept in a three-minute video. With little to no investment, the company validated its idea and skyrocketed the number of beta testers from 5,000 to 75,000.
7. Deploy the MVP to incorporate feedback
Post-launch is just as important for your MVP since it allows you to check your assumptions about the market and customers. You should create a tight feedback loop with your customers to learn:
- If your MVP generates enough demand to warrant full-scale development
- What customers like and dislike about your product
- If your business model fits your solution
- If the pricing strategy is appropriate compared to other products
During integration testing, your team should weed out bugs and errors. You also need to ensure your system handles a heavy load, system updates, and real user scenarios well.
Yes, it’s a lot of work. But don’t worry; if your MVP doesn’t resonate with your audience, you can start from scratch or apply your insight to the next iteration of the MVP. Then, once you perfect the core of your SaaS app, you can begin full-scale development.
Ways to speed up SaaS MVP development
While an MVP is small and can usually be delivered quickly, there are tricks to make SaaS
MVP development even faster:
Backend as a Service (BaaS) platforms allow automating backend processes so you can focus on frontend development. BaaS providers can integrate third-party services into your app via APIs or automate background processes like database and authentication management, system updates and notifications.
Low-code platforms are dedicated software development environments with graphical interfaces, reusable modules, ready-made code, and templates. You can use these tools to deploy your MVP with minimal coding, drastically speeding up the development. Over 84% of companies that use the low-code approach agree that it helped them improve their time-to-market, as shown in the 2019 Forrester survey.
Popular tech stack
The essential stack will mainly depend on the project’s complexity, but we prefer using the following programming languages and frameworks:
- Python, a dynamic programming language that works with many high-level frameworks
- Node.js runtime for concurrent web development and fast client-side rendering
- React Native framework for cross-platform development of mobile apps
Even if you decide to go with complex solutions, you should avoid short-term decisions that lead to long-term work. Do the bare minimum to validate your idea technically.
Read also: Most popular backend frameworks in 2022.
Open-source toolkits (like Bootstrap and GitLab) are the cheapest way to boost your development. Despite the risks of bugs and lack of documentation, these can save you lots of time at the early stages of the project. You can also save by using free databases like MySQL, seeing as your SaaS probably won’t have millions of users at launch.
Manually processed services
Manual-first MVP, also known as Concierge MVP, is a technique that mimics complicated backend processes with humans to save your money and time.
Let’s say you have an idea for a SaaS app that recommends movies based on behavioral patterns and past searches. You want to validate your idea without spending time or money developing machine-learning algorithms. The solution would be to write the recommendations manually to see if customers would want such a product in the first place.
Now that we’re done with the theory, let’s look at some real-life examples of successful businesses that created a SaaS MVP to validate their ideas.
3 examples of using a SaaS MVP right
Many successful SaaS solutions started as MVPs and gradually grew bigger based on testing, user feedback, and market research. Here are a few examples:
The founders of Airbnb — the largest online marketplace for lodging and vacation rentals — wanted to verify if there’s any demand for paid room rentals among non-commercial users.
So, they first built a simple website that targeted people at a particular tech conference. They found three people who agreed to rent their residence, which validated the initial idea. Afterward, they probed their MVP on a broader audience while keeping the features minimal, up until they saw a demand for their service.
The Spotify streaming platform was launched as an MVP aimed at influential Swedish music bloggers. The core functionality was great enough for early adopters to generate a positive buzz about the app. Then, as the feedback loop became tighter, developers enhanced their app with the features their audience wanted.
The world’s leading professional networking platform began as a shadow of its future self. The MVP for the LinkedIn web app had minimal functionality: the profile page, simplistic search engine, an invite feature, and a summary of the user’s network stats.
The early success and rising popularity attracted much-needed investments for the platform. Besides, the continuous user feedback helped developers add features we associate with LinkedIn today.
How we use MVPs during SaaS development
At Acropolium, we frequently use MVPs to validate complex and non-standard projects, especially for HoReCa, healthcare, and logistics businesses. Here’s how this approach helped us deliver high-quality SaaS applications for some of our clients.
Operational command software
Our team developed an operational command solution for social safety and citizen security services. We used AWS to create scalable and reliable infrastructure and an MVP for future software. Then, we incrementally integrated subsystems for information processing from IoT and communication devices.
The client got a secure and reliable SaaS platform capable of collecting, storing, and analyzing large data volumes for coordinating public order and law enforcement functions.
Read also: Building emergency operation center software development.
Computerized maintenance management system
We helped an enterprise medical vendor develop a CMMS to improve collaboration between healthcare vendors and IT staff for operational maintenance.
One of our goals was to ensure that the solution satisfied different target audiences. This prompted us to develop an MVP for web and mobile apps and test it with both user categories. The product we made significantly improved communication between clients and vendors, which helped the company attract 30% more customers.
Workflow automation platform
Our team helped an international transportation company go digital and ditch paper-based management.
We began by creating an app where users could enter data and generate standardized PDF documents. After testing the essential functionality on early adopters, we launched the app and added secondary features based on user feedback.
In the end, the SaaS platform automated most processes, reduced the personnel costs by 60%, and helped the client extend the coverage from one to eight countries.
Read also: Building a document management system SaaS.
A million-dollar idea can become a million-dollar failure if you rush development without validating your idea first. Building a SaaS MVP is the least risky way to learn if your product has a real audience and an effective business model.
Today’s media giants like Spotify, Airbnb, and many others started with an MVP. Their products were simple at first, but they allowed them to generate invaluable feedback to grow ideas into successful businesses.
Development can go off the rails even with an inexperienced team. But Acropolium’s vetted engineers and project managers can help you research, plan, and outline the core features of your product. Make sure to reach us if you’re interested in a future-proof SaaS MVP on a scalable architecture.