How to Create a SaaS Application [Complete Guide]

You’ve probably already read umpteen blogs and books on how to build a SaaS application. Or maybe you’ve gone further and made some trial runs to validate your SaaS startup idea with real customers. Now you need to find a development team to convert your idea into a saleable product. 

This guide is for those who are going to move from theory to practice. Follow us and peek into the development kitchen to get a better understanding of how SaaS application development works!

Why Create a SaaS in 2024?

SaaS is a popular way to use software by subscription, rather than on-premise software by license. Companies incorporate SaaS applications in their daily routine, using them for such things as time tracing, conferencing, customer relationship management, inventory management, and accounting. The SaaS market is expanding exponentially and it looks like this growth will continue.

So, what are the reasons to create a SaaS right now?

• Massive SaaS adoption.  The forecast from Gartner Inc. indicated that the worldwide end-user spending on public cloud services was expected to skyrocket by 20.7% in 2023, reaching a total of $591.8 billion. This is a significant increase from the $490.3 billion estimated in 2022. The growth rate for 2023 was projected to be higher than the anticipated 18.8% growth rate for 2022. These staggering numbers are a testament to the increased demand for cloud services worldwide, and experts predict that this trend will continue in the coming years.
• Covid-effect. The worldwide pandemic forced businesses to work remotely. Nearly 64% of companies have increased their use of cloud service platforms since 2019. At least half of these organizations are going to continue using the SaaS in post-pandemic times.
• Stable revenue. The value of software as a service market is anticipated to increase from $131 billion in 2021 to $716 billion by 2028. The SaaS business model promises its owners regular revenue generation from subscriptions and upgrades. 
• Customers love SaaS. Cloud systems are more convinient and affordable than software that needs installation. The main reasons companies go for SaaS solutions are agility and scalability (70%), ease of disaster recovery (38%), and flexibility (37%).
• Endless opportunities for startups. In spite of the fact that the market seems overcrowded with cloud solutions, there are still gaps with unmet needs both in the mass-market and narrow niches.
• Growth of SaaS acquisitions. SaaS startups are attractive to IT giants that are hunting for innovative startups to bolt on to their infrastructure and enhance their services. Here are some examples of cloud acquisitions:

- ShowingTime, an online scheduling platform used to show homes was acquired by Zillow Group for $500 million ZoomInfo acquired Chorus.ai, a conversational sales intelligence tool, for $575 million.

- Dropbox acquired Docsend (a document-sharing solution) for $165 million. 

- Mastercard spent $850-million on Ekata, a dynamic identity verification solution.

Sounds good? Let’s take a look at the nuts and bolts of SaaS development.

How Does SaaS Differ from Other Types of Software?

SaaS applications are unlike on-premise apps. First of all, SaaS is dedicated to being used by many disconnected organizations and users. Users access SaaS via the Internet on-demand and usually pay for the service as they go.

A core principle of SaaS structure is that all data is securely stored in the cloud. Each user can access only their personal data and no one else can access it without authorization. Let’s review some of the peculiarities implied by Software as a Service development:

To understand the SaaS structure, let’s introduce such notions as single and multi-tenancy which make the basic concept of SaaS.

• Single- or Multi-Tenancy architecture

Single-tenancy architecture means separate instances and databases are created for different organizations (tenants). That approach has transformed into multi-tenant architecture which is cheaper and easier to develop and maintain. 

Multi-tenant SaaS architecture implies a common code-based application where the instances are shared among more than one tenant. The major benefit of multi-tenancy is drastic cost reduction as all expenses and fees are shared.

Case study: Human Resource Management System SaaS for Home Healthcare Company 

At Greenice, we received a request to build software for a company that recruited and managed caregivers and nurses. Applicants needed to use the system to register, provide their resumes, complete training, pass assessments, upload documents, and set their schedule preferences. At the same time, the HR managers needed to examine the applicant's information, schedule interviews, and hire candidates.

Initially, the company wanted to create a system exclusively for their own needs. During the process of development, our clients researched the market and found out that there are similar businesses that could use similar software. They wanted to capitalize on this opportunity and introduce a new revenue stream.  

To re-organize the HRMS into SaaS, we created the ‘Organization’ tier that could distinguish different tenants (organizations) and would allow them to use the same software independently. The databases are stored in the same servers but are isolated from each other so each organization can only work with its own data. The feature set is the same for each organization but can differ according to the subscription. At the same time, the Admins of each Organization can customize their content as they need.

• Added Value through the API

When you build a SaaS application, you enter into a competitive landscape with other vendors and you need to stand out from the competition. Integrations with third-party solutions are a key element in this contest. Not all SaaS vendors provide necessary integrations because they cannot guarantee data security and system integrity.

If your SaaS provides API integration it will definitely be a competitive advantage for you.

Integrations allow users to enable the smooth completion of many routine tasks. For example, a CRM that is integrated with a marketing tool or email service is much more valuable than a stand-alone option. Payment Methods Usually, SaaS apps are sold by subscription, so you will need to have payment methods integrated into your platform. The system should allow autopay, or send notifications when expiration is near. Now let’s move on to the challenges you’ll face when starting a SaaS project.

Challenges of SaaS Development

Prior to answering the question of how to build a SaaS product, we should mention the challenges you may face during the development process.

• Increased Security and Confidentiality of User Data

Most SaaS systems are used to store confidential information about their customers, business processes, and finances. Thus, security is one of the biggest concerns of SaaS users. Building your SaaS with the help of contemporary cloud solutions like AWS is an excellent way to increase data security and confidentiality. The confidential data for each tenant is isolated; it can be accessed only with each client’s unique identifier. The data of different organizations do not mix.

• Scalability

SaaS applications usually provide different scalability options depending on the subscription plan. Your subscribers should be able to choose a plan according to the number of users, features, and other parameters. At the same time, the SaaS app should be scalable if more users must be served. There is where a cloud environment like AWS can help allowing quick modification of server capacity, either up or down, depending on necessity. The advantage of a cloud environment for a SaaS owner is that you pay as you go for the services that you need. Feature Accessibility SaaS architecture demands different feature packages for specific subscriptions. Thus, each SaaS solution should have a flexible architecture. Features that are not listed in the certain package should be deactivated for users automatically depending on their subscription plan.

• System Updates

SaaS solutions should deliver system updates in a timely manner — this prevents security breaches and incompatibility issues. At the same time, updating should not disrupt ongoing operations and data collection.

Let’s take a look at Photoshop. Previously, this software was distributed through installation CDs and was quite expensive. Users had to buy a new disk with each new version, and do a manual installation.

The subscription model offered less expensive, automated, online updates. SaaS development is a non-stop process; technologies evolve super fast, and your updates must be delivered as soon as they are ready.

How to Develop a SaaS Application Step-by-Step?

Creating a SaaS app can be thought of as a trip from point A to point B, and then to C, D, and so on. Just as a journey begins with a destination, each SaaS application begins with an idea. Then what? Many projects remain on the drawing board because their owners do not know how to nurse the idea from start to finish. Starting a SaaS company, use our detailed guide to help you quickly move to the launch stage! Here are the steps to take:

1. Research the market and analyze the competition

Market research is an essential pre-development stage for any project. Before jumping in, you should collect as much information as possible about your competitors and their products, identify the needs of your target audience, and find the untapped niches and unique features that will allow you to stand out.

2. Define the value proposition

To find the answer to the question: ‘Why should customers buy our product?’ look at your idea from different angles:

• Product Name
• Target Audience
• Customer Challenge
• Product Features
• Benefits for Users
• Advantages over competitors’ products.

The value proposition should be concise to give the customer an instant understanding of what your product is about. 

You can make more than one value proposition and test them in different marketing campaigns to gather feedback. Then, choose the final version that will be offered on your website.

3. Choose your revenue model

Before you start development, you need to decide how you are going to monetize your product. You can choose one or a combination of the following revenue models:

• Freemium. To attract subscribers, especially at the start, provide basic functionality for free. At the same time, you can push the users to buy the unrestricted version of your product. Usually, paid subscriptions allow you to switch off advertisements, increase the number of users, or get access to advanced customization and important features.
• Subscription plans. Instead of selling your application at one price, give your customers several options to choose from depending on the features or number of users they need. It’s always a good idea to provide a trial period to let the users play around with your system and understand its value before they pay.
• Pay-as-you-go. SaaS startups that use this model should be able to measure the resource usage to charge users only for what they need. For example, using AWS infrastructure, you can pay for necessary storage space and buy more or less as you scale up or down.
• Paid advertisements. If you are determined to provide your SaaS for free or at a low price, consider generating revenue from paid advertising and sponsored listings.

4. Collect and prioritize the requirements

To create complete and accurate requirements, try writing User Stories. You need to put yourself in your customers’ shoes and imagine all possible scenarios of how you would want to use this software.

Write as many user stories as possible, and don’t forget negative cases. For example, how should the system react if the user did not fill out all the required fields?

For effective user stories, you could use the conventional template proposed by Mike Cohn, one of the inventors of the Scrum software development methodology. Here it is:

As a <type of user>, I want <some goal> so that <some reason>.

For example, “As an Admin, I want to edit user details, so that I could help users fill in their Profiles.”

Surely, some user stories will need to be split into smaller stories to fit into a single iteration. Having user stories will allow you to come up with a list of desired features.

A list of features will help you communicate your ideas to developers and designers. Don’t force them to read your mind (*groan*) and guesstimate how you want the system to behave in this or that way.

For a startup, it is important to test its product on the market as soon as possible and quickly make changes to adapt to audience needs. After collecting all the requirements in one document, you need to prioritize them, highlighting the core features the application cannot live without.

You can use the Eisenhower Matrix for prioritization:

To identify which features are the most important, start from the epicenter of your solution and ask yourself if your app fulfills its main purpose. Features the app cannot live without should be done first. Here is a very good metaphor from Basecamp’s 'Rework' book:

'If you're opening a hot dog stand, you could worry about the condiments, the cart, the name, the decoration. But the first thing you should worry about is the hot dog. The hot dogs are the epicenter. Everything else is secondary.'― Jason Fried, Rework.

If your solution does not solve the main challenge for your audience, it’s useless. The market is overwhelmed with possible — and impossible — applications designed to make our life easier. This means that you will have to be unique in order to stand out. That’s why we suggest that you follow the suggestion in the book 'Getting Real:'

'Do less than your competitors to beat them. Solve the simple problems and leave the hairy, difficult, nasty problems to everyone else.' — 'Getting Real' by Basecamp (by the way, if you have not read this great book, we highly recommend it).

Prioritizing is important, so don’t panic and try to do everything all at once. Take a deep breath, and get rid of all these 'nice to haves,' before implementing all the 'musts.' Start with your MVP and make it lovable (here should be fireworks and hearts) before you start cramming in secondary features and decorations.

5. Hire a SaaS development team

Already on the step of requirement collection, you may find that you need the help of an expert. So even before your requirements are gathered, you can start searching for a development team. To get a rough estimate, simply send the request to a SaaS application development company describing your idea and core functionality.

For example, at Greenice, we help our clients who are researching the market and collecting requirements. Our experienced analysts will help you formulate your idea, analyze the competitive landscape, and create software requirements specifications (SRS) that turn your idea into a smashing success.

Besides a business analyst, you will also need other specialists:

• A team leader who will analyze your list of features and choose the most suitable technology stack and project architecture.
• A Project manager who coordinates the work of all the team members.
• UI/UX designer for creating a beautiful and usable user interface.
• Front- and backend developers who build the SaaS product.
• QA engineers will test the system in the pre-launch stage to make sure that it satisfies the requirements and has no bugs.

The number of team members depends on the number of tasks and their complexity. For example, you may come to us with a ready design, or you can use a cost-saving design template. Some projects need only backend or only front-end developers. Of course, there are many options and we handle each case individually.

6. Make wireframes

As a rule, written requirements are supported by schemes and wireframes (schematic design of the future UI).

Wireframing allows you to define the layout of the UI elements of an app on the screen before creating a detailed design. With wireframes, it is much easier to make changes without difficult and costly manipulation. You can juggle the UI elements, their sizes, and placement, searching for a better layout. Wireframes can be either drawn by hand or created with special apps. Wireframes can also be used to build a prototype in preliminary usability tests or demonstrations to stakeholders. You can create them by yourself with the help of online tools like Wireframe.cc or you can order them from a UX/UI specialist.

7. Create a design

When the wireframes are ready, you may proceed to the design step.

Why does design go before development?

When you are building a house, what would you dо first? Create a design, or start construction? Design, of course.  

Thus, you need someone to create a SaaS design! 

Finding a good designer can be difficult. You could search creative communities and workplaces like Dribbble, Behance, or Upwork. Or you could hire a web development agency. (like us, for example). 

Another important point to consider is a mobile-first design. Now that most people use their mobiles for literally everything, they expect that your app will also work on their device as smoothly as on the desktop. Mobile screens are small, so you should prioritize the most important features and get rid of all unnecessary details. This will give you a chance to look at your features from a mobile-focused angle.

But if you are in startup mode, do not spend a lot of time on your wireframes and design. Get moving! In the first stages, it is much more important to prove the viability of your idea than to polish every little detail. You will be able to correct the design in the later iterations. 

8. Start the development process

Once you have a clear picture of what you want to build and know how it should look and function, it is time for the rubber to meet the road. How’s it going to work? The process usually consists of stages:

1. Pre-development stage. We analyze your requirements to estimate time and budget and choose the best technology stack and architecture. Our Project Manager creates a project plan where she/he highlights the milestones and timeframes and splits requirements into smaller tasks. All tasks are prioritized from the technical point of view (some tasks can be done in parallel while others must follow one another) and assigned to the team members.
2. Coding. All development progress is tracked and reported to Team Leads and a Project Manager.
3. Testing. Before pushing the SaaS application to the market, we need to thoroughly test it to make sure it works correctly. The project is usually divided into milestones. Demo meetings show the Product Owner what has been done. If our client is happy, we continue. If modifications are necessary, we fix the code early to avoid undue complications in the future.

9. Launch and test “in the wild”

After your SaaS has successfully passed in-house QA testing, it's time for a reality check — test it in the wild. Testing in the wild is essential because you simply cannot anticipate every real-life condition and foresee all possible user scenarios. By launching your SaaS to the market, you convert your first users into testers — which is both a benefit and a risk.

On the one hand, you receive immediate feedback on what should be changed and you can quickly update your app.

On the other hand, you risk everything if users reject your solution out of hand. This can damage your brand reputation and it will take time to recover. But, as one Japanese proverb says: “Fall seven times and get up eight.”

10. Improve and maintain

After you have launched your SaaS and received feedback from the real users, you may want to add new features or make enhancements. This is called the iterative or repetitive process — when you change things and launch a new version. However, don’t go crazy and add too many features. Keep in mind that “less is more.”

How Much Does It Cost to Create a SaaS App?

The cost of building SaaS applications depends on factors such as the complexity of features, integrations, and scalability. Starting with an MVP, you can minimize risks and initial expenses.

The cost of an MVP can range from $15,000 to $35,000. If you need more sophisticated features and integrations with third-party applications, be ready for the price to increase to $35,000 to $100,000.

But each project is priced individually based on your needs, and we are always looking for ways to minimize costs.

How to Apply This to Your Business

We have come to our final page, but we hope that we can join you on your journey!

The character of SaaS development depends on the team. It is important to develop a trusting relationship with the SaaS development company from the very beginning. Here a Project Manager who balances between business and technical parts can help. A good Project Manager will handle the development progress, letting you focus on strategic aspects.

Do not hesitate to ask questions and seek clarification from the technical team. And remember that the more concise your requirements are at the beginning, the more accurate our estimate of SaaS development costs will be. This will allow you to avoid major changes and unforeseen complications at the end.

The Greenice team has been helping entrepreneurs develop SaaS applications since 2007. We have vast expertise in creating custom applications for different industries and purposes. Complex integrations and unique workflows are our bread and butter. Don’t hesitate to contact us.