SaaS App Development: A Step-By-Step Guide

We are Clockwise Software, and we have been building software products for 10 years.

Over the last few years, we have built over 25 SaaS applications, and six more are currently in different stages of active development. We have learned much from these projects, so we decided to create a custom SaaS development checklist to give our potential and existing clients an overview of the product creation process and realistic expectations regarding outcomes.

This guide is for you if you plan to create a SaaS application from scratch or migrate your existing app to the software as a service model.

Let’s get started with overviewing the process of creating a SaaS app.

How to build a SaaS application: Steps and costs

Whether you are building your first SaaS application or your tenth, you need to go through three main phases:

1. Product discovery — transform your idea into app requirements (clear instructions for the SaaS app development team)
2. SaaS MVP development — create the first solid version of your application to start testing your idea with real users
3. Iteration and scaling — invest in further SaaS platform development and work on acquiring market share

All three phases incorporate multiple processes. We describe them briefly in this section to give you an overview of their importance and the impact of each process on the end result.

You will also find the approximate time and cost of building a SaaS product based on data from SaaS projects we’ve built recently.

Product discovery

Only one out of 10 clients comes to us with clear software requirements.

But SaaS software developers can’t start coding until they have clearly defined requirements. And business analysts can’t form those requirements until they understand the environment in which the app will operate.

That’s why most of our projects start with a project discovery phase, during which we explore the app idea and the target market.

If you have only an idea for your future SaaS application, you have to either do the preparation by yourself or cooperate with a discovery team to create the following documentation:

• Market analysis and competitive analysis
  Thorough research helps you identify the market’s growth potential and emerging SaaS trends, as well as understand the competition and the potential market share you could capture.
• User personas and use case scenarios
  Understanding who will use your software as a service application and under what circumstances can help you better satisfy users’ needs.
• Software requirements specification
  An SRS defines the functional (app features) and non-functional (system operation) requirements for your cloud application.
• Work breakdown structure (WBS)
  A WBS is a table containing all the features you want to implement in your SaaS platform, along with time estimates for their implementation.
• Risk assessment and mitigation plan
  A risk assessment and mitigation plan includes predictions of what risks you might face when developing a SaaS application, along with ways to minimize them.
• Clickable prototype
  A clickable prototype is a visual representation of your application, allowing you to evaluate its convenience and experiment with different layouts.
• Proof of concept (PoC)
  A PoC allows you to test whether your idea can be implemented from a technical point of view.

For example, when building a route planning application for public transportation, we had to test several map providers. Our goal during the product discovery phase was to identify which third-party mapping services would support the proposed app functionality and provide the desired cost-effectiveness. Testing technical feasibility with a PoC helped us avoid many hours of rework during SaaS app development.

• Technology stack
  This is a list of the technologies and tools needed to build an app according to the software requirements specification.
• SaaS development cost estimate
  We can create a reliable cost estimate — a table with the projected budget for SaaS application development — based on previously formulated software requirements documentation.

We have mentioned only nine key deliverables of the discovery phase. In fact, there are over 30. However, you surely don’t need to create all of these documents for every project before the start of the actual SaaS application development process. The set of deliverables needed for your project depends on the application itself, its complexity, your understanding of the end product, the target market, and so on.

Sometimes, our clients come with ready documentation, such as a software requirements specification or a clickable prototype. In this case, we allocate a project manager and a software engineer to create only those documents that are critical for the start of SaaS platform development.

SaaS product discovery cost

The cost for the minimal set of discovery phase deliverables starts at $12,000, and their development takes around three weeks. Extensive discovery for a large project may cost more than twice as much (around $25,000) and take eight weeks to complete.

If you want to find out what deliverables these discovery packages include and how you can customize them based on your project specifics, download our white paper on product discovery:

Product discovery enables fast and cost-effective experiments and allows you to pivot until you find the right solution to fit market needs. Spending $12,000 before you start actual SaaS application development may save you from investing lots of money in a product with no market fit.

SaaS MVP development

Starting custom SaaS development with an MVP is a proven strategy to release a market-ready application while working in iterations. With the MVP model, you build core features first and introduce new functionality only after analyzing the market response. SaaS MVP development is a smart way to get the most out of your allocated budget.

A proper discovery phase makes MVP development predictable and almost risk-free. Your SaaS development team can clearly estimate timelines and costs and offer you ways to optimize both.

Building an MVP involves multiple professionals, including a UI/UX designer, software developers, a quality assurance engineer, and a project manager. They take part in the following steps of SaaS application development:

• Documentation creation
  Create code documentation, testing documentation, guides and manuals for end users, release notes, and maintenance guides.
• App UI/UX design
  Design intuitive and user-friendly interfaces, focusing on a seamless user experience. Create wireframes, mockups, and prototypes to visualize the user journey and refine the look and feel before SaaS application development begins.
• Development environment setup
  Configure the tools, libraries, and frameworks required for development. Establish version control systems, continuous integration pipelines, and development guidelines to ensure a smooth workflow.
• App infrastructure setup
  Design the app’s infrastructure, including servers, databases, and network configurations. Ensure scalability and reliability by choosing appropriate cloud services and setting up essential components like load balancers and data storage solutions.
• Backend development
  Develop the server-side logic, databases, APIs, and other core functionalities that power the application. Focus on creating a scalable, reliable, and secure back end. For these purposes, you can use Node.js, Laravel, or Ruby on Rails.
• Frontend development
  Build the client side of the application, ensuring a responsive and interactive user experience. For the front end, you can choose among popular JavaScript frameworks including React, Vue.js, and Angular.
• Integrations
  Connect your application with third-party services such as payment gateways, social media websites, analytics tools, and CRM systems. You can also reduce the time needed for SaaS application development by integrating ready functionality such as for chats and maps.
• Testing and debugging
  Conduct thorough testing to ensure the application’s design and functionality match the initial software requirements. Identify and fix bugs before users encounter them in the app.
• Deployment
  Once your team has built the needed functionality and it works as expected, your app is ready for testing in real-life conditions. Deploy the MVP to a live production environment, making it accessible to users.

If you want to understand all the processes behind creating a solid custom SaaS app, read our article about the SaaS product life cycle.

SaaS MVP development cost

In our recent experience, developing an MVP app for a SaaS project starts at $50,000. Depending on the type of app and the scope of work, the cost may even exceed $100,000.

In an ideal world, a minimum viable product should truly be minimal. It should be based on a single core feature that is projected to satisfy a particular market demand. However, sometimes SaaS founders can’t narrow down their assumptions to a single feature and decide to develop broader functionality and test it with real customers. Naturally, this impacts the development budget.

The final cost always depends on the number and complexity of the features the team has to prepare for the first release. The fact that most of our projects start with a discovery phase and include formulating the scope of work allows us to reliably predict the custom app development cost and time and rarely exceed estimates.

SaaS app iteration and scaling

Congratulations, your MVP is live! Are you dreaming of resting now? We are sorry to ruin your dreams, but …

Some founders think they are done with SaaS application development once their MVP is released. However, this is only where the real development starts.

During the discovery phase, we want to learn as much as possible about customers’ needs to build a perfect solution for them. This reduces the risk of missing the target, but all assumptions can still be validated only after the app is in the hands of real users.

Sometimes you find market fit with your first MVP version. Sometimes, the app needs slight polishing to achieve product–market fit. And in some cases, several pivots are required before you find the perfect match and are ready to scale your application to a full-featured product.

This is what your team will work on when scaling the app:

• Monitor SaaS app performance
  Continuously track key performance metrics such as response time, uptime, and resource utilization to ensure the app runs smoothly. Use performance monitoring tools to detect and address potential issues before they impact users.
• Monitor for updates in APIs and tools used in SaaS development
  Stay up to date with the latest releases and changes in third-party APIs and development tools. Regularly review and apply necessary updates to maintain compatibility and prevent vulnerabilities in your app.
• Work in sprints to implement improvements
  Adopt an Agile approach by organizing SaaS application development tasks into sprints, allowing for regular, iterative enhancements. This helps prioritize features, improve collaboration, and deliver updates incrementally.
• Infrastructure scaling
  Scale the underlying infrastructure to accommodate growing user demands by adding more servers, optimizing database performance, and implementing load balancing. Ensure the system remains reliable and performant as the user base expands.
• Maintenance
  Perform routine maintenance tasks such as updating dependencies, fixing bugs, and ensuring security patches are applied. Regular maintenance ensures the application remains stable, secure, and efficient over time.

You should use an Agile methodology to build SaaS applications due to its flexibility. Your product has to operate in a highly competitive environment, with dozens of SaaS startups entering the market or releasing new functionality each month. It is important for you and your team to react quickly to market changes. Working with an Agile methodology helps us to increase the chances that a client’s software as a service app will be successful.

The scaling phase of the development lifecycle ends only once you decide to shut down your SaaS business. As long as your product exists, your technical team should continuously work on it, releasing new functionality and adapting the app to changing market demands.

Team structure

Your SaaS software engineering team structure is not fixed and changes over time depending on the stage of development. It may include the following roles:

• UI/UX designer
• Solution architect
• Frontend and backend developers
• QA engineers
• Business analyst
• Project manager
• Product manager

Our business model allows us to add the required specialists to the project development team on demand and without delays.

As the speed of SaaS application development changes, we are ready to scale the team up or down. Such flexibility allows us to make the process transparent and predictable to business owners and to remain within the estimated budget and timelines.

Product manager’s role in scaling a SaaS app

The iteration and scaling phase requires the introduction of a new tech team member. The product manager takes over strategic tasks related to further SaaS application development, including:

• Overseeing user testing and analyzing feedback to inform iterative improvements
• Monitoring market trends and competitor offerings to keep the product competitive
• Prioritizing features based on user needs, business impact, and technical feasibility
• Translating high-level goals into actionable requirements for development teams
• Communicating with stakeholders and cross-functional teams to ensure alignment

By prioritizing the most impactful features and avoiding scope creep, product managers ensure that development efforts are focused on what truly matters. This prevents wasting resources on unnecessary features, which helps control costs and maximize the return on investment.

SaaS development cost

If you build a SaaS app internally, you have to account for recurring monthly costs (development team salaries, office operating costs, etc.) no matter the workload.

If you order SaaS software development services from a vendor, you only have to pay for work done based on the hourly rate. The budget required for SaaS application development will depend on your team composition and your preferred speed of scaling. In the initial stages, this budget may range between $20,000 and $60,000 per month. Our article on how to hire dedicated developers sheds light on the dedicated team model and the pricing behind it.

Note that some of these specialists can be involved on demand and won’t necessarily work full-time. This allows us to optimize the budget for full project development.

In our experience, SaaS companies that have gone through the MVP phase with an outsourcing team often decide to scale the app with the same team. Even though their budgets grow and they can afford to hire and run an internal team, they still prefer to work with a dedicated team remotely.

This was the case with one of our clients: Agilea Solutions, a company providing IT consulting services. Agilea decided to build a marketplace to match businesses with digitalization consultants. They chose to outsource MVP development to an external team, as their in-house developers were busy working on commercial projects. After the MVP release, they decided to proceed with a dedicated Clockwise Software team even though they have a large team of technical professionals in-house.

For more on this topic, read our article about the cost of custom software development and criteria we consider when estimating the development process.

SaaS development checklist: What’s next?

Still reading? This means you are serious about building a SaaS application and the second half of our article will be just as useful for you. In this section, we go into more detail about the following:

1. Migration from web application to SaaS — the shortest way to turn your existing app into a SaaS product
2. Single-tenant vs multi-tenant architecture — the technical choice that defines your scalability
3. What a SaaS features matrix is and how it may help you prioritize development of new features
4. How to build a SaaS product with AI functionality to stay competitive
5. SaaS development team — What models of cooperation are the most efficient?
6. Managing risks during SaaS application development

SaaS app development guide

The six topics we cover here are crucial to set up the development lifecycle, make the right decisions, and maximize the benefits of the SaaS business model.

Migrating existing applications to SaaS

In most cases, we get to build SaaS applications from scratch.

However, sometimes we receive requests to migrate an existing application to the SaaS model. If you want to migrate an existing app to the SaaS model, prepare for several or all of the following steps:

• Migrating to cloud hosting
  An application has to be hosted in the cloud to count as a SaaS app. If your app is hosted locally, you have to start with cloud migration.
• Making architectural adjustments
  Custom SaaS applications have specific architectural requirements to be robust and scalable. When migrating to SaaS, we select between a single-tenant and multi-tenant architecture (we discuss them in detail below) and decide between a monolithic and microservices architecture.
• Integrating with third-party apps
  To provide better services for users, third-party integrations are crucial for a web-based SaaS application.
• Implementing user management
  Your SaaS app has to include authentication and role-based access to handle different subscription plans and multiple client organizations.
• Implementing subscriptions
  Last but not least, you have to make it easy and convenient for users to to pay for subscriptions and access subscriber-only functionality.

One of our most successful SaaS migration projects was transferring a freelancer marketplace to a SaaS model.

Our client Whitelance ran a freelancer marketplace and noticed demand for such platforms in other regions. In response, they decided to rebuild their platform and provide a customized freelancer platform creation service.

They already had a running marketplace, and the biggest challenge of the SaaS app migration process was transferring to a multi-tenancy model. What is this, and why is it important? Let’s review.

Single-tenant and multi-tenant architectures

The concept of tenancy in software architectures is simple: A tenant is a user (or a group of users) of a SaaS app. For example, in Slack, your whole organization is a single tenant.

The choice of a single-tenant vs multi-tenant architecture defines whether tenants share the same databases, software instances, and computing resources.

In a multi-tenant architecture, the same database, computer resources, and application infrastructure can be shared among numerous tenants, but each tenant’s data is isolated and secured from other tenants. A multi-tenant architecture is scalable and easy to maintain. It’s the best choice for such solutions as customer relationship management software or cloud-based ERP systems, as they serve multiple businesses from shared infrastructure.

In a single-tenant architecture, each tenant has its dedicated software instance, including its own database, resources, and infrastructure. A single-tenant approach allows custom SaaS software developers to ensure that app users don’t share their resources with others. A single-tenant architecture offers such advantages as enhanced security and customization. This type of architectural model is the best choice for software that provides financial services demanding the highest level of security or for healthcare software, where providers can use single-tenant solutions for increased patient data privacy.

Most SaaS apps start with single tenancy, as this type of architecture is easier and cheaper to design. However, it has poor scalability and requires much attention from your tech team as the number of tenants grows.

A multi-tenant architecture, on the contrary, takes longer to design initially. But it pays off in the long run, as creating workspaces for new tenants is hassle-free.

Single-tenancy vs multi-tenancy: Which to choose?

You should decide between single-tenancy or multi-tenancy as early as possible, as this decision will impact the SaaS application development process and costs. We recommend the following:

1. If you want to validate your concept with an MVP, start with single-tenancy. Don’t invest much until you know your app has product–market fit. But try to migrate to multi-tenancy as soon as you have proof that your SaaS app is accepted by the market. The earlier you migrate, the less it will cost you.
2. If you know your app will have multiple tenants straight away, go for multi-tenancy.

Turning Whitelance into a SaaS product required a total architectural rewrite. Our experienced AWS architect, along with a team of backend engineers, thoroughly examined the app’s inner workings, clarifying the function of each component. They then restructured the app and redeveloped its parts from scratch to enable multi-tenancy.

Now, tenants can access a customized front end and individual databases while sharing the app’s back end.

What technologies did we use for this?

We’ve built another multi-tenancy app for our British client who was developing a route planning solution for a public transportation company and planned to eventually sell the software to transportation companies in cities across the UK. From day one, we knew there would be multiple tenants using the application. As the client had a clear vision of the app’s future, we could go with a multi-tenant architecture straight away and eliminate possible migrations in the future.

Features matrix and how it affects SaaS application development

After a SaaS app is launched, the founders often struggle with prioritizing features for the next development sprints. If this sounds familiar, we can offer a solution:

Feature Placement Matrix helps you classify your software features into one of four quadrants by comparing users’ perceived importance and willingness to pay for each feature.

For the SaaS development team, the matrix helps prioritize feature implementation based on the subscription plan structure. It ensures that core functionalities are developed first for the basic plan while additional high-value features can be added progressively for higher tiers. Working with this tool is the responsibility of a product manager.

To correctly place features in the matrix, you have to start by talking to potential or actual users:

1. Ask users to identify the most important and least important features from your list.
2. Ask users for the price they are ready to pay to access each feature.

In the end, the product manager can group features into the following categories:

We recommend that you evaluate your long list of features on a regular basis and identify the functionality you have to prioritize in your development process. This helps you increase the efficiency of your SaaS application development efforts and ensure high ROI.

Implementation of AI-based features in the SaaS application

Our experience shows that AI-based features are becoming increasingly popular, and most users expect AI functionality in software they pay for.

If this sounds like a huge piece of work for you, calm down. The development of modern pre-trained LLM frameworks, such as GPT and others, allows us to build AI-based features quickly and at relatively low cost. Generative AI can help to improve your SaaS app by:

• Personalizing content
• Automating manual tasks
• Generating content
• Providing 24/7 customer support
• Offering predictive analytics

Modern users want to delegate their tasks to smart software, and you have to cater to their needs if you want to capture a significant part of the market. This is something you have to keep in mind when working on your features matrix.

SaaS application development team

We have already discussed the desired team composition for SaaS development, but there is still one question to answer:

Where do you get the specialists to build your SaaS team?

In general, you have two options:

1. Hire in-house specialists for your own technical team
2. Outsource SaaS app development to a remote team

Hiring in-house may seem like a go-to option, but in the case of building a SaaS product from scratch, this model may cause some limitations, such as:

• High cost and duration of the hiring process
• Ongoing operating expenses
• High turnover risks and potential SaaS product development process disruption
• Skill set limitations

If time to market is your main concern, then hiring an in-house team may not be the best decision. Instead, consider partnering with an outsourcing company.

At Clockwise Software, for example, we offer three different cooperation models to satisfy the demands of different types of businesses:

1. SaaS product development — We take over the whole process, from creating an app from scratch to releasing it according to the requirements formulated in the discovery phase.
2. Managed team — We allocate a team to solve our client’s high-level business tasks and manage them to ensure high service efficiency.
3. Dedicated team — We build a project team based on the client’s staffing requirements. The SaaS application development process is managed on the client’s side.

Let’s compare different remote team cooperation models:

If you want to hire a dedicated team and manage them in-house, make sure you have the necessary tech leadership in your company. If your internal team lacks it, consider CTO as a service — an on-demand technical consulting service that helps you make important decisions that influence the SaaS application development process and outcomes.

How to choose a SaaS application development partner

If you feel like outsourcing is an option for you, evaluate potential vendors according to these important criteria:

• Industry expertise and technical proficiency
• Reputation and client references
• Project management approach and SDLC standards
• Pricing and value for the money

Also, read our article about how to find app partners where we advise on what steps to take before starting an app development partnership.

When outsourcing software development to Ukraine, you benefit from a lower web application development cost compared to other regions like Northern America and Europe. Also, you don’t have to deal with recruitment. All professionals who will join your SaaS application development team are pre-vetted.

These benefits allow you to release your SaaS application faster and with lower upfront investment.

Managing risks during SaaS product development

If you want to build a successful SaaS product, it’s vital to consider all the risks you may face. That is why risk management is an integral part of any software project.

But how can you organize this process?

A risk management process encompasses the following steps:

Step 1. Planning risk management. The first thing you need to do is discuss with everyone involved in the project (namely, team members and stakeholders) how you are going to deal with upcoming risks. At this stage, you need to create a SaaS application risk management plan and identify risk sources.

Step 2. Identifying and categorizing risks. This stage is probably the most important and effort-consuming. Risks are usually identified during requirements analysis and project kickoff meetings, and the ability to identify risks is dependent on the SaaS development team’s experience. In order to structure identified risks, you need to categorize them.

In project management, there are various risk categorizations. Based on our company’s broad experience, we can say that the most relevant risk categories in SaaS application development are technical and organizational risks.

Technical risks are associated with technologies, technical processes, UI/UX design elaboration, security systems, and third-party integrations. Organizational risks, in turn, depend on organizational factors related to SaaS application development: establishing requirements, constraints that hinder the development process, risks associated with dependance on third-party teams, and others.

Identified and categorized risks are entered in the risk register — a chart used to document, analyze, and prioritize risks. This allows for a structured and understandable approach to risk management.

Step 3. Analyzing risks. The main goal of risk analysis is to adequately assess each risk in order to develop a strategy for its mitigation. This involves estimating each risk’s severity, likelihood of occurrence, potential harm, and hours required for mitigation.

Step 4. Responding to risks. Once you have identified each risk and estimated its severity, you are ready to start working on mitigation. There are four ways to respond to risks: eliminate them, transfer them to another team, develop a mitigation plan, or accept them. Your response should depend on a risk’s specifics and level of severity.

Step 5. Monitoring risks. You can hardly identify all risks during the project planning stage. That’s why you need to constantly monitor both the status of current risks and the probability of new risks occurring during the whole SaaS web application development lifecycle.

The result of our work is a risk register like this:

Risk management is a complex process that requires a lot of attention. If you need detailed information about risks and how to manage them, check out our comprehensive article about risks in software development that contains insights from our own experience.

Summary

Hurrah! You’ve made it to the end.

After reading this article, you know more about SaaS development than the majority of founders who keep dreaming about their app. This means you should be confident in your next steps:

Steps to start a software as a service company:

1. Identify a problem you want to solve with your SaaS app.
2. Start a discovery phase to learn about the market you want to enter.
3. Formulate software and system requirements for your app.
4. Find a team to build your software as a service product.
5. Start to develop a SaaS application MVP to validate your idea with real users.
6. Create a scaling plan and keep building your application.

To do all of this, we recommend you partner with a software development company. Taking over the SaaS application development process, we free your time for strategic work on business development and marketing.

We know it’s important to use resources wisely to build a successful SaaS business.

Want to know how we can cooperate in SaaS app development? Let’s discuss your needs in detail. Contact us.