As businesses and consumers have developed an increasing awareness of the value of SaaS products, the landscape has gotten far more competitive. Startups are becoming exceedingly common, and the margin for error is much slimmer when trying to get one off the ground. It isn’t enough to have a good idea, and execute it well from a product development side. In today’s more impacted business climate, you have to avoid common SaaS mistakes that manifest in every step of the business lifecycle.
We at 7T have extensive experience assisting SaaS companies of all sizes in their growth journey at every step, from development to launch and beyond. In our experience as a consultant and a software company ourselves, we’ve seen just about every mistake a Saas company can make, and have a deep understanding of where startups most commonly slip up.
To share this knowledge with companies that may find it useful, we’ll cover the seven most common SaaS mistakes:
- Ignoring Market Research
- Underestimating Customer Acquisition Costs
- Overcomplicating the Product
- Weak Monetization Strategy
- Neglecting Customer Support and Client Onboarding
- Wasting Money and Not Conserving Cash
- Not Investing Enough in Marketing and Sales
We’ll then cover the solutions to each of them, and help lay out a strategy for avoiding these mistakes and setting your company up for success. We’ll also give you a quick table to briefly summarize everything we go over in the piece.
Mistake #1: Ignoring Market Research
Regardless of the industry you’re in, SaaS companies that ignore or neglect market research are going in blind. The sheer volume of new information and innovation that businesses and consumers are faced with means that markets are constantly shifting, and research is the only way to keep up. Launching without validating that there is a market need for your product and your method of delivery can lead to countless wasted resources.
Conduct market research like the following:
- Detailed market analyses
- Surveys
- Customer Interviews
These will ensure ample and up-to-date market data. It may seem like a superfluous expense at a time when development costs are as high as they’ll ever be, but there is a reason research and development are generally grouped together in the investment world: Quality development should always be led by good research.
Mistake #2: Underestimating Customer Acquisition Costs (CAC)
It can be tempting to believe that, once word about your SaaS product is out there, you’ll generate leads and be able to ramp down your marketing expenses– this is rarely the case. There is a lot more to customer acquisition than your launch marketing, and underestimating these costs can sink an entire project.
The key here is to continuously monitor your CAC, and compare it to your customer/client lifetime value (LTV). Additionally, it isn’t enough to understand whether you’re in the positive, you should always be using your market research outlined in step one to understand proper CAC:LTV benchmarks for your industry. Make sure to use these industry-specific benchmarks when evaluating any of these KPIs, so you have better context when auditing your company’s performance.
Mistake #3: Overcomplicating the Product
During the development process, it can be easy to assume that the more helpful features you add, the better. While this is well-intentioned, It often leads to a more confusing and complex user experience. When this happens, your software product is not only harder to use, but your budget ends up strained by features that weren’t necessary.
The key to avoiding this is creating a Minimum Viable Product (MVP), or a basic version of your product with all core functionality included with no frills. This can be used for demos to obtain funding and as an initial testing product so that you can obtain tangible feedback to determine whether your product needs new features. As features are added, you can continue testing and iterating based on feedback.
Another similar error is releasing a product that is not really ready for “prime-time” as it has significant bugs or issues that will disrupt the core brand promise of the product. This is usually due to an overcomplicated product feature set taking time and focus away from the main value proposition.
Mistake #4: Weak Monetization Strategy
Pricing strategy is complex, especially in a SaaS landscape with so many different pricing models. Choosing the wrong pricing model, or the wrong pricing within your model, can easily limit growth, probability, or both. There is a wide variety of SaaS pricing strategies, including:
| Tiered Pricing | One of the most common SaaS pricing models, tiered pricing involves offering multiple “tiers” of products with increasing functionality at different rates. |
| Per User Pricing | Another very common pricing model, per-user pricing involves a scaling rate based on the number of users. This is the most common model when you look purely at B2B SaaS surveys. |
| Per Active User Pricing | Enterprise-focused SaaS companies often use this twist on per-user pricing that only bills for active users, allowing large companies to sign up all of their employees to simplify operations but only be billed for those who actively operate the product. |
| Freemium Model | Freemium is a twist on tiered pricing, offering a free tier to capture users and get them familiar with the product. |
| Usage-Based Pricing | Billing is based on usage, with a transparent rate per unit of usage. |
| Flat Rate Pricing | One tier of product is offered at a single, flat rate for all customers/clients (More common in B2C applications). |
Testing pricing strategies and aligning them with customer value perception (a subjective evaluation by customers/testers of a product’s value) is key to finding the right strategy for your product. This, along with considering the number and nature of features included in your product, will help you choose a pricing strategy that works best for your business.
Mistake #5: Neglecting Customer Support and Client Onboarding
Unsatisfactory service and onboarding can increase churn and generate negative reviews and industry reputation. As we mentioned in the sections above, LTV is a key metric in determining the success of a SaaS project, and high churn is one of the easiest ways to reduce LTV. This is one of the most common SaaS mistakes for startups led by inexperienced CEOs.
Building a proactive customer success team and equipping them with the customer service management tools necessary to provide quality service throughout the customer lifecycle, like advanced AI tools, will reduce churn and increase the frequency of positive reviews. It will also make it easier to cross-sell and upsell customers if you offer a tiered product or multiple related ones.
Mistake #6: Wasting Money and Not Conserving Cash
Burning through your funds without clear ROI on all investments can sink your startup prematurely. SaaS leaders should prioritize spending on high-impact areas, shrewdly negotiate vendor contracts, control early employee salaries and manage their cash runway (the amount of time a company can operate before exhausting funds if there are no changes in revenue or expense) effectively. A trap that SaaS startups fall into is “death by swag”. Keep marketing costs targeted 90% at Client Acquisition and 10% or less Branding.
Cash is the startup’s “air”; without this, nothing else matters.
Mistake #7: Not Investing Enough in Marketing and Sales
As we’ve discussed above, the “if you build it, they will come” myth does not work in reality and leaves many SaaS companies without clients/customers. Companies should allocate equal or greater budgets for their marketing and sales apparatus as they do for product development. Below are some of the marketing channels we recommend for SaaS companies:
| Digital Advertising | Digital advertising includes Google Ads, social media ads, and any other digital ad space that companies can purchase. These provide lower Roi, but higher volume in the short-term, which is vital for a successful launch to quickly capture a portion of your market. |
| On-Site SEO | On-site SEO refers to creating a website that is optimized for search engines, ensuring all of your core landing and product pages are indexable by search engines and AI search LLMs and designed in a way that will allow them to rank highly in searches closely related to your product. |
| SEO Content Marketing | SEO content marketing is the creation of SEO-optimized blog and/or media content that will allow your product or website to rank highly for search terms that your target audience will be searching. This allows you to catch searchers that aren’t specifically looking up your name or software, but rather searching questions or terms that suggest that they could have a need for your software. This type of marketing provides exceptionally high ROI, but results take longer and are more of a “slow drip” than those from lower-ROI paid ads. |
These marketing channels will ensure that both short-term and long-term marketing goals are satisfied and will create a sustainable baseline of new customers.
Bottom Line
These SaaS mistakes are all extremely common, and each of them can sink a SaaS company all on its own. Unfortunately for many SaaS companies, they don’t often present alone, and it is vital to do your best to avoid all of them as your company moves through its lifecycle. Let’s go over all of them one more time:
| Mistake | Solution |
| #1: Ignoring Market Research | Perform market analyses, surveys, and customer interviews to ensure you have ample data from which to operate. |
| #2: Underestimating Customer Acquisition Costs (CAC) | Monitor key metrics like CAC:LTV ratio to ensure that your CAC isn’t getting out of balance with the revenue brought in by each customer. |
| #3: Overcomplicating the Product | Develop a Minimum Viable Product (MVP) to use for demos and tests to get feedback and iterate, only adding new functionality when it is necessary and welcomed by your ideal customer. |
| #4: Weak Monetization Strategy | Test multiple pricing strategies and align them with customer value perception of your product. |
| #5: Neglecting Customer Support and Client Onboarding | Build a proactive customer success team and leverage AI tools for efficiency. |
| #6: Wasting Money and Not Conserving Cash | Prioritize spending on high-impact areas, negotiate vendor contracts, and manage your cash runway effectively. |
| #7: Not Investing Enough in Marketing and Sales | Allocate equal or greater budget to marketing and sales as you do to product development. |
One of the best ways to avoid all of these mistakes is to work with an experienced development partner and growth consultant.
Avoid Common SaaS Mistakes with 7T
At 7T, we use a “Business First, Technology Follows” approach to create SaaS growth strategies and products for our clients across countless industries. Our custom-built platforms leverage machine learning and AI technology to deliver significant operational advantages with a robust ROI, and we have robust experience helping clients get them to market. Our team will audit your organization’s challenges, often showing up on-location to embed ourselves in your workflow to understand your needs from a first-person perspective. Then, we’ll architect a value-generating solution to transform your vital processes and meet your goals.
7T is based in Dallas, Houston, and Charlotte, NC, but our clientele spans the globe. If you’re ready to learn more about how to avoid common SaaS mistakes, contact 7T today.
