10 Challenges Faced By Growing SaaS Companies in 2022
November 3, 2022
SaaS is an exploding industry, which has grown by approximately 500% in the past 7 years, and it is currently worth over $170 billion. According to surveys , most companies count on SaaS products for one reason or another.
So it might seem like a good idea to hop into the stream that already flows steady and well, but things tend to be always tricky for the newbies...
Don't panic; I'm not here to say you're doomed to fail and lose everything, just to warn you of potential problems and make the growth process as smooth as possible for you.
After all, every founder has gone through these paths; one of the best things you can do while starting your own business is to learn from the stories of your predecessors.
Here are the top 10 challenges faced by growing SaaS companies:
Identifying the ideal customer profile
Deciding on the pricing strategy: Freemium Vs. Free trial
▶️Relatively new SaaS start-ups and/or small-medium scale SaaS companies that are in the early growing stages face more problems compared to their tech giant rivals.
▶️Lack of resources and experience in the industry are the 2 major factors underlying the most common challenges.
▶️ Also, even if they know the market, most founders struggle with the business part of the job (sales/marketing strategies, etc.).
▶️Building a strong team with different talents will allow you to overcome growth challenges as smoothly as possible.
▶️Entrepreneurship is hard and stressful, do not burden yourself by comparing your own story with the success stories of already grown companies.
Let's talk in detail 👇
Identifying the Ideal Customer Profile
''I have an idea!'' you said and started working on it: you shared your thoughts with a bunch of people -friends, family, possible teammates- , elaborated on the plan, spent hours, days, even years for your dream to come true. At the right time, you were able to get funds and start your own business; congratulations!
Once you've launched the product, it's time to work on the customer portfolio.
''There is no absolutely possible way of founding a successful company without correctly identifying customer profile.''
You may say anyone who's willing to pay is perfectly okay for us, and it might work for quite some time too. But most probably, you're gonna end up spending too much money on ineffectual marketing campaigns and higher customer churn rates.
But if you know who needs your product(s)/services(s) and why so, you can find and keep your customers much more easily.
In order to identify your potential customers, you need to know both the market's needs and your product's strengths. At first, you can reach out to your customers and ask for their opinion to see your place in the industry. Then, once your customers accumulate, you can finally start to analyze and segment them, which will give insightful data to your sales and marketing teams to develop better campaigns and close more deals.
So, keep your customer records 😉
Deciding on the pricing strategy: Freemium Vs. Free trial
We're in the world of product-led growth . More and more companies offer free trials and/or arrange online demo meetings where they basically take a quick product tour and show certain features.
''Products sell themselves'' many say nowadays, but how? With freemium or free trial?
According to reports, customers started to abstain more from paying for SaaS products, especially with the freemium boom in the market.
Why overspend for a product/service if another company offers a similar one for free, they say.
At this point, you need to work through the market and your customer list. Can they really get a similar service for free? Can they work efficiently without your product? How valuable is your product/service to them? How many of your rivals offer free trial/freemium? Is it easy and/or common to switch from one product to another in the area you serve?
Both strategies work well for various companies, but you need to decide which one is more suitable for you.
You might not want to risk your budget and go with a short free trial offer, which is fine. Or, you might prioritize reaching out to larger audiences and advertise with a freemium offer, which is also fine.
Ensuring financial stability
The road is long and sometimes bumpy. SaaS companies, just like others, face growth challenges, some of which might shake up the budget.
You will have higher churn rates some months, you'll make mistakes while planning your budget, or even when you've calculated everything right, you'll try a new marketing strategy or maybe get into a new market and have surprise expenses.
No problem, these things happen; every company faces problems with cash flow from time to time.
But at those times, you need to calculate your steps accordingly and look for ways to save money.
Try to cut on office supplies, negotiate for better deals and discounts, get energy-efficient equipment, and save the world AND your budget!
As a start-up, every penny you save will keep you above water.
Market penetration -Too many competitors!
Knowledge management platforms, cloud-based services, software tools... No matter which service you're planning to provide, you'll have tons of rivals.
It's true that some of your competitors have more budget, they use aggressive marketing strategies, they can give special discounts and lower offers, and you cannot beat them now.
But you already don't have to.
Don't overwhelm yourselves with the giants of your industry at the beginning of your journey.
You might say, okay, but their success stories look impossible for me to achieve too!
As Osman Koç says, ''Entrepreneurship is all about marketing. Take lessons from others' stories but don't focus on them too much and get sad; go on your way and do as you would do.''
Lack of expertise in the sector
There are so many difficulties waiting for you in the business environment, from sales challenges to security risks, compliance issues, and tax liability.
You'll learn how to deal with them slowly, either by making mistakes or working with professionals.
What I'm saying is that the entrepreneurship part is already stressful and full of paperwork -most of which is not necessarily relevant to the industry if you don't know the industry (don't know your competitors, can't fully understand the expectations of the customers, don't know the past of the industry and/or can't imagine the future of it) and falter in the product part too, it will become even more unbearable for you.
When you start an enterprise, start from the area you're familiar with; the more experience you have in the industry or, the more knowledge you have about it, the more comfortable you will be in the business and marketing parts.
Talent acquisition and team building
Building a strong and coherent team is one of the major challenges start-ups face in their early stages. Although it might seem like an easy -or relatively insignificant- task, hiring ''the right one'' for each and every position is crucial for several reasons.
1- As a growing company, you probably don't have enough budget to hire many people. So team members will have more responsibility and workload in the beginning.
2- Again, for the same reason, you cannot take big risky actions; you have to be careful with your expenditure, which means each team member should be extra mindful of expenses and avoid as much expense as possible when taking the necessary steps of their position.
3- It is easier to overcome growth challenges for a company that has achieved financial stability and established itself in the market. But for small to medium businesses, they can be incredibly painful. So you need mentally strong and agile teammates as it's a long path.
For the very same reasons, people might be reluctant to work with small start-ups/growing companies, but don't give up; there are hundreds of thousands of people out there. You already need those willing to take risks and step up your game with you.
Effective marketing = networking.
Of course, meeting people and building a strong network takes time, but if you don't start now, how are you planning to have it at the end, right?
While grappling with other issues, founders and CEOs tend to leave customer relations to sales reps and forget to get in touch with them in person. Well, I'm not saying you're supposed to talk to each and every one of your customers, but at least you can send personalised e-mails to your power users. They're the ones that report the bugs, write detailed comments and talk about your product everywhere. Appreciating their loyalty would bring only more points to your scoreboard!
As well as interacting and building strong relationships with customers, you should get acquainted with the important names in the sector. That might be other founders/CEOs, marketing/sales/product managers, and/or popular journalists/blog writers in your area.
Don't see everyone as customers; you can learn tips&tricks from people in your industry or casually share your experiences with them too!
There are tons of details about marketing, and that can be tiring sometimes, I accept. But it's also the backbone of your success, which means you cannot take half measures.
Let's give a few examples of the most common marketing mistakes that B2B SaaS companies make:
➡️Not investing in content marketing.
➡️ Investing in content marketing, but then neglecting SEO.
➡️ Investing in content marketing, also focusing on SEO, but this time, creating unoriginal/dull content.
➡️ No utilizing social media.
➡️ Not utilizing marketing automation tools.
Going global and stepping into new markets
Yes, it's hard to understand the needs of different customer types and get a proper place in a market you're already familiar with, but it becomes even harder when cultural factors enter the equation.
And most of the time, there's a language barrier too.
So marketing and sales teams must be extra careful while conducting a business in a different market.
The challenges of entering into a new market don't end with culture-related issues; you suddenly turn back to your founding stages. You need to learn the tax regulations, maybe hire a local team, get to know target customers and analyse them, create marketing strategies accordingly, and spend a lot of money...
But you have successfully completed these steps before; you can do it again! It just takes a lot of patience, effort, and a little time.
Tech problems are one of the most common and biggest challenges that growing SaaS companies face.
As companies do not have the necessary infrastructure or do not have a crowded team that can take quick action in case of bugs and errors in their early phases, they may experience disruptions in the service they provide and lose some of their customers in the process.
Also, some (potential) customers might have security concerns; you must ensure the necessary measures are taken regarding customer privacy.
So, the journey is long and full of ups & downs 🔺🔻
You might face only a few or maybe all of them. Though every company and founder has a unique story, they go through similar paths.
''Beginnings are hard. There's a playbook you can learn from other founders, you don't have to learn everything from scratch.''