In the last decade, SaaS (Software as a Service) has become a very popular model for new software product development. According to Blissfully’s report, overall spend per company on SaaS has increased by 50% in 2020 as compared to 2018. The largest cost component of establishing a SaaS company is product development costs. This includes the design, development, launch, and enhancement of the SaaS application.
Often, SaaS company founders are not aware of steps, tools, and checkpoints they should follow while building their product. This can lead to overspending early on that may make it difficult to achieve profitability and help your business grow effectively.
How to optimize SaaS startup development costs
With proper awareness about the SaaS product development process, your costs can be managed better. In this blog, we are going to discuss some of the important practices to optimize product development and remove unnecessary startup expenses.
1. Create a detailed requirement document
Requirement analysis is one of the earliest and most important stages of software development. A requirement document defines the system’s purpose, functionality, interface, the scope of the product, and performance criteria. It not only helps you scope everything out but helps you to communicate your needs to your software development team.
A sound requirement analysis and scope definition tend to improve quality planning and thereby reducing the cost and duration of a project. Improper requirement analysis can leave entrepreneurs suffering longer project schedules, higher costs, and producing poorer quality products.
Most SaaS startups want to launch with more features because of the belief that it will help them increase the adoption. However, some features cost more to build and don’t guarantee a profitable outcome. It is important to identify and eliminate all unnecessary features during the requirement analysis. It helps refine your scope to better utilize resources that efficiently build useful functionalities.
This can be a daunting task, where you will have to involve your sales team and technical team to identify which features are most important and which aren’t necessary. The ones you identify as unimportant can be dropped from your list or rescheduled for a later development phase.
2. Follow lean product development strategy (MVP strategy)
Lean product development strategy or MVP (Minimum Viable Product) refers to creating a product with core features and offering it to a specific audience to get feedback. It is an ideal and highly recommended strategy to reduce costs and validate if there is demand for your product or service.
If you remember the launch of the Instagram app 10 years back, they launched only for iOS, there was no Android App. The first version of the Instagram App leveraged a simple Facebook login and only included the ability for users to post pictures, like, comment, share and follow the posts. They did not have all the bells and whistles such as reels, videos, eCommerce integrations, and explore functionality. They were able to take their market valuation to $1.0 billion just with the iOS MVP.
3. Do your design first
A major mistake many SaaS company founders make is not focusing enough time on the UI/UX of the product. The usability of your product can define your success. The UX design should be attractive, easy to use, and intuitive to navigate without affecting the performance.
Less money spent on design can push those expenses into the development phase, potentially lengthening development time and build costs. It may also increase the churn rate of your customers, who sign up only to realize the product is not what they’re expecting.
To save on design costs it’s important to efficiently do your wireframes and visual design first before you go into development. This helps you to see the user experience before you develop the product. If you develop with a half-baked design, you will end up spending more time and money while releasing a less-than-ideal experience.
4. Don’t hire full time, outsource your project
As a SaaS startup, you would be better off outsourcing components of your project compared to hiring full-time developers. If you hire full-time, you will have to spend a lot of money recruiting, onboarding, and managing the team. You will also have to build the infrastructure to house full-time employees. If you don’t have enough tasks assigned to them at the start, you may find yourself still paying but keeping valuable talent on the bench.
All of this adds to your costs. For the initial few years of your product development, it is better to outsource your project. Outsourcing to a company allows you to get access to various skill sets and a range of experiences. A diversified team can bring a lot of value in terms of skills, experience, and troubleshooting. Outsourcing also reduces the cost of infrastructure (i.e. office building, furniture, computers) as the vendor will take the responsibility of setting up a management structure for the team.
Another benefit of outsourcing is that it offers the flexibility of bringing in extra staff when it’s needed for the project and releasing them once the requirement is met. Additionally, if you find that you work well with some of these developers, you can potentially extend a hiring invite once your business is off the ground.
5. Proper communication and management
Effective communication with the development team is one of the most important components for successful, on-time, and cost-effective completion of your software product. Regular interactions with the product development team increase the scope clarity, minimizes the gaps, time delays, bugs—which in turn will keep your costs in control.
You should maintain a project management tool like Jira, Basecamp, Trello, Monday.com, or any other project management tool. Anything with all the deliverables, timeline, team members, documents available for the team. You should encourage all the team members to communicate any roadblocks or issues faced by them.
6. Use cloud backends like AWS or Azure
SaaS companies require servers and other networking infrastructure to run the applications. You can reduce your initial cost by using cloud infrastructure like AWS, Azure, Google Cloud since these platforms charge you only based upon the usage. Prior to the launch of these cloud platforms, software product companies had to invest a lot in setting up servers and maintaining them.
With cloud servers, the setup and maintenance costs become negligible and you generally pay based upon the usage. Make sure to a trusted and popular cloud backend server for your SaaS product to avoid any disruptions.
7. Hire a freelancer for User Acceptance Testing (UAT)
User Acceptability Testing (UAT) is needed once the product is undergone unit testing, integration testing, and system testing. Inefficient UAT results in poor product quality, increases user dissatisfaction, increases marketing expenses, and potential post-launch development expenses. Many startups don’t pay enough attention to UAT. Either they are not aware of the importance or they do not want to spend proper money on testing.
Doing a detailed UAT requires an expert tester to understand your application, create a test plan and perform the testing. You don’t want to hire a full-time tester for this role since you will need this person 40 hours a week, especially when you are in the MVP phase.
You also should not hire the tester from the same company who is building your product either. A tester from the same company may be biased in finding defects. If possible, hire a third-party tester. You can find experienced testers on websites like Upwork at $15-$20 per hour, who could do this job efficiently. Having an on-demand tester will keep your testing cost and application performance in check.
Software design is a process
Building software products is a process, if you follow the right process and tips, you can build better products at the right cost. Most of the time avoiding the steps or not following the expert’s advice will cost in the long run. SaaS startups should educate themselves about software product development since it is a big part of their investment and product is what drives the monetization. We hope these tips will help you to keep your product development cost in control.