SaaS Business Plan
Over the past 20 years, we’ve helped over 10,000 entrepreneurs create successful SaaS (Software as a Service) business plans. This step-by-step guide will show you how to start and grow your SaaS business. You’ll learn how to make a plan that outlines your business goals and how to achieve them. Let’s get started on building your SaaS company today!
What is a SaaS Business Plan?
A business plan provides a snapshot of your SaaS business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your business plans.
Why You Need a Business Plan for a SaaS Company
If you’re looking to start an SaaS business, or grow your existing SaaS business, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your SaaS business in order to improve your chances of success. Your SaaS business plan is a living document that should be updated annually as your company grows and changes.
How to Write a Business Plan for a SaaS Company
Your business plan should include 10 sections as follows:
Executive Summary
Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of SaaS business you are operating and the status; for example, are you a startup, or do you have an SaaS business that you would like to grow?
Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the SaaS industry. Discuss the type of SaaS you are offering. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.
Company Analysis
In your company analysis, you will detail the type of SaaS you are offering.
For example, you might offer the following options:
- Horizontal SaaS – this business model allows big SaaS businesses to serve a varied customer base from a multitude of industries. Services can be expanded to incorporate a variety of software categories.
- Vertical SaaS – this business model includes solutions that are created for a specific customer type of industry. This software focuses solely on that industry’s needs.
In addition to explaining the type of SaaS you provide, the Company Analysis section of your business plan needs to provide background on the business.
Include answers to question such as:
- When and why did you start the business?
- What milestones have you achieved to date? Milestones could include usability goals you’ve reached, number of new subscriptions, etc.
- Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
Industry Analysis
In your industry analysis, you need to provide an overview of the SaaS industry. While this may seem unnecessary, it serves multiple purposes.
First, researching the SaaS industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your strategy particularly if your research identifies market trends.
The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that. 
The following questions should be answered in the industry analysis section of your SaaS business plan:
- How big is the SaaS industry (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential market for your SaaS service. You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.
Customer Analysis
The customer analysis section of your SaaS business plan must detail the customers you serve and/or expect to serve.
The following are examples of customer segments: businesses, households, government entities, etc.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of SaaS you offer. Clearly, households would want different products and services, and would respond to different marketing promotions than government entities.
Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve.
Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.
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Competitive Analysis
Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.
Direct competitors are other SaaS services.
Indirect competitors are other options customers may use that aren’t direct competitors. This includes customized software solutions and open source software. You need to mention such competition to show you understand that not everyone who needs software will subscribe with an SaaS company.
With regards to direct competition, you want to detail the other SaaS providers with which you compete. Most likely, your direct competitors will be SaaS providers offering similar solutions.
For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:
- What types of customers do they serve?
- What types of software do they offer?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide superior products?
- Will you provide services that your competitors don’t offer?
- Will you make it easier or faster for customers to use your products?
- Will you provide better customer service?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan.
Marketing Plan
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion.
For a SaaS business plan, your marketing plan should include the following:
Product: in the product section, you should reiterate the type of SaaS business that you documented in your Company Analysis. Then, detail the specific solutions you will be offering. For example, in addition to Customer Relationship Management solutions, will you also offer Email Marketing solutions? 
Price: Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the services you offer and their prices.
Place: Place refers to the location of your SaaS company. Document your location and mention how the location will impact your success. For example, is your SaaS production or support office located in the US or in India, etc. Discuss how your location might impact customer attraction or retention.
Promotions: the final part of your SaaS marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:
- Advertising in trade magazines
- Reaching out to associations that correspond with the industry or industries you are targeting
- Publishing articles or writing guest posts on relevant blogs
- Social media marketing
- Radio and/or TV advertising
Operations Plan
While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday short-term processes include all of the tasks involved in running your SaaS business, such as attracting customers, running the customer helpdesk, processing paperwork, etc.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect your 100th subscription, or when you hope to reach $X in sales. It could also be when you expect to hire your Xth programmer, or when you expect to launch a new solution.
Management Team
To demonstrate your SaaS business’ ability to succeed as a business, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.
Ideally you and/or your team members have direct experience in SaaS. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.
If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in software development or deployment, and/or successfully running small businesses.
Financial Plan
Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.
Income Statement
An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not. 
In developing your income statement, you need to devise assumptions. For example, will you have 10 enterprise subscribers or 500 individual subscribers? And will subscriptions grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.
Balance Sheets
Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $200,000 on building out your SaaS solution, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $200,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement
Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt. For example, let’s say a company approached you with a $100,000 customization contract, that would cost you $75,000 to fulfill. Well, in most cases, you would have to pay that $75,000 now for employee salaries, hosting, utilities, etc. But let’s say the company didn’t pay you for 180 days. During that 180 day period, you could run out of money.
In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing an SaaS business:
- Location build-out including design fees, construction, etc.
- Cost of equipment like computers, design and project management software, etc.
- Payroll or salaries paid to staff
- Business insurance
- Taxes and permits
- Legal expenses
Appendix
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office design blueprint or location lease.
Summary
Putting together a business plan for your SaaS company is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the SaaS industry, your competition and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful SaaS business.
Sources of Funding for SaaS Businesses
With regards to funding, the main sources of funding for an SaaS business are personal savings, credit cards, bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.
The second most common form of funding for an SaaS business is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan.
SaaS Business Plan FAQs
What Is the Easiest Way to Complete My SaaS Business Plan?
Growthink's Ultimate SaaS Business Plan Template allows you to quickly and easily complete your Saas Business Plan.
How Big is the SaaS Industry?
The Software as a Service (SaaS) industry in the United States is a significant and rapidly growing sector. As of 2023, the market value of the SaaS industry in the U.S. is approximately $108.4 billion. This industry is expected to continue its growth trajectory, with projections indicating that it could reach a market value of $225 billion by 2025, solidifying the U.S. as the world's largest SaaS market
The SaaS industry in the U.S. has seen remarkable growth over the past decade, driven by the increasing adoption of cloud-based solutions across various sectors. This growth is attributed to the flexibility, scalability, and cost-effectiveness that SaaS solutions offer businesses, ranging from small startups to large enterprises. The U.S. market, being a global leader in technology innovation, plays a pivotal role in the development and proliferation of SaaS products.
Key trends shaping the industry include the integration of artificial intelligence and machine learning, which are enhancing the capabilities and efficiency of SaaS applications. There's also a significant push towards vertical SaaS, providing tailored solutions for specific industries like healthcare, finance, or retail, which require specialized software.
The competitive landscape in the U.S. is robust, with both established players and emerging startups vying for market share. There's a continuous emphasis on innovation, customer experience, and service integration. Security and compliance, especially with regulations like GDPR and HIPAA, are also critical concerns for SaaS providers in the U.S., given the sensitivity of data handled by these applications.
The market is also witnessing a shift in revenue models, with many companies moving away from traditional subscription models to usage-based pricing to cater to a broader range of customers. This shift is a response to the growing demand for more flexible and customer-centric pricing structures.
In terms of challenges, the industry faces issues such as market saturation in some segments, rising customer acquisition costs, and the need for constant technological upgrades. Despite these challenges, the U.S. SaaS industry's outlook remains positive, with continued growth expected, driven by ongoing digital transformation in various sectors and the increasing reliance on cloud-based solutions.
Overall, the U.S. SaaS industry represents a dynamic and vital segment of the tech sector, characterized by rapid innovation, a strong focus on customer needs, and a significant impact on how businesses operate and grow in the digital age.
What is the Goal of a Business Plan's Executive Summary?
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of Saas business you are operating and the status; for example, are you a startup, do you have a Saas business that you would like to grow, or are you operating multiple Saas businesses.
Finish Your SaaS Business Plan in 1 Day!
Don’t you wish there was a faster, easier way to finish your SaaS business plan?
With Growthink’s Ultimate SaaS Business Plan Template you can finish your plan in just 8 hours or less!
Click here to finish your SaaS business plan today.
OR, Let Us Develop Your Plan For You
Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.
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