How to Start a SaaS Business in the USA

The software industry is always changing. In recent years, one of the most significant changes has been the advent of the Software as a Service model, or SaaS. Simply put, this model allows consumers to subscribe to Internet-based programs, accessible through a browser or app, eliminating the need for cumbersome hardware management.

If you have an Internet-based software solution you’d like to sell, the SaaS model may be a good fit. Naturally, there’s more to it than just product ideation. Several other steps are required if you want to succeed in the SaaS field.

Ensure You Have a Good Product

First and foremost, you’ll want to verify that the program you’re offering meets a real need in the marketplace. Take stock of this by asking:

• What problem am I solving?
• Is this a widespread problem?
• Among which users or organizations is this problem most acute?
• Is this a problem that I can relate to?

These are the kinds of questions that might be most helpful to you as you seek confirmation that your SaaS idea has legs.

Create a Lean Plan

At some point, you may decide you need a fully fleshed-out, 40-page business plan. But at the outset, it may be more helpful to distill your vision into a simple one-pager.

Some things your lean business plan might include:

• A brief “elevator pitch,” helping you articulate your business to someone who’s not in the SaaS industry.
• A one- or two-sentence value proposition (e.g., the service you offer, the problem you solve, and/or the factors distinguishing you from your competition).
• A description of your target market, or market segments.
• A list of sales channels you’ll use to bring in more users.
• A basic business model, denoting your main revenue streams and most prominent expenses.

This lean business plan should direct your next steps as you develop a successful SaaS company.

Validate Your SaaS Idea

The next step is to conduct some research, gaining more data to confirm that your business idea is a good one. Some ways to do this:

• Conduct informal research, talking to friends or colleagues about the problem you’re trying to solve and the solution you plan to offer.
• Conduct a competitive analysis. (Remember, having a few competitors in your field is actually a promising sign! It means the problem you’re trying to solve is a real one.)
• Use the information you gather to create a minimum viable product (MVP), a bare-bones SaaS offering that you can expand on later.

Register Your Business as an LLC

You’ll need to decide what legal structure makes the most sense for your business. While there are a number of options, and no one-size-fits-all solution, a majority of SaaS companies benefit from the LLC model.

An LLC, or Limited Liability Company, establishes your business as a distinct legal entity, allowing you to separate business assets/liabilities from personal ones. This offers you personal wealth protection, along with tax flexibility.

So how do you register your SaaS company as an LLC? The requirements vary from state to state, so registering an LLC in New York may be a little different from registering one in Texas or in Wyoming.

With that said, the basic protocol usually looks something like this:

• You’ll first want to ensure you have a business name that isn’t in use by another LLC in the same state.
• Choose someone to be your Registered Agent, receiving legal documents on your company’s behalf.
• Create a charter for your LLC, called the Operating Agreement. Outline basic managerial structures.
• File Articles of Organization with your star, paying the LLC registration fee. (This may be anywhere from $20 to $300.)

These basic steps will officially create your SaaS LLC.

Set Up Your Banking & Finances

There are a couple of things you’ll need to do before your business starts paying vendors, administering payroll, or accepting payments from your customers.

First, set up a business bank account. Assuming you’re using the LLC structure, it’s important to create a business account that’s not connected to your personal checking or savings accounts.

You’ll also want to claim an Employer Identification Number, or EIN, from the IRS. You will need this before you can pay taxes or administer payroll, so it may not be necessary from Day One, but will be needed eventually. Keep in mind that, for US residents, claiming an EIN is free.

Create a Good Website

To ensure a strong reputation for your SaaS company, you’ll need to demonstrate technological aptitude. There’s no better place to start than with a good website. Ensure that your site:

• Has an easy-to-remember domain name.
• Loads quickly across all browser and device types.
• Is optimized for mobile users.
• Has a clear CTA structure, guiding consumers through their journey.
• Offers a simple navigation structure.
• Provides a frictionless user experience, including plenty of ways for customers to contact you.

Choose the Best Channels for Marketing and Customer Acquisition

New businesses can’t afford to be active on every single digital channel. However, you can certainly select a few customer acquisition channels that align with your target audience. Some channels that may be worthwhile for SaaS companies include:

• Social media, especially LinkedIn (assuming you’re B2B)
• Email marketing
• Content marketing
• Free product demos and webinars
• An ongoing investment in SaaS SEO

Be sure you choose your customer outreach channels based on the information you’ve already outlined in your lean business plan. Also keep that brand new website as the centerpiece of your efforts.

Establish a Firm Foundation for SaaS Success

The bottom line: SaaS companies bring unique value to the marketplace. Establish the success of your SaaS business by following the steps we’ve outlined here.