How to Create MVP for SaaS Startup

The Software as a Service (SaaS) business model is no longer cutting-edge or experimental. Chances are high that you have SaaS apps like Zoom, Netflix, Slack, and Spotify installed on your phone. SaaS MVP development interests more entrepreneurs by the day, and for good reason. Among other things, it offers cost-effectiveness, scalability, and opportunities for monetization.

In 2023, organizations worldwide used 130 SaaS products on average, and the number continues to grow steadily. Increasing adoption of cloud services is the main driver of this growth. Based on analysis of several SaaS market reports and global surveys, Fortune Business Insights determined that by 2025, approximately 85% of organizations worldwide will use cloud-based applications, and 86% of US-based tech companies plan to increase investment in cloud technologies in the near future. In light of these statistics, now may be the right time to enter the SaaS market with your own product.

It’s no secret that startups often fail. Research by CB Insights based on analysis of 101 startup post-mortems found that 42% of startups failed because their product couldn’t find its audience, 29% ran out of cash, and 7% didn’t pivot quickly enough. Building a minimum viable product (MVP) can help you avoid three of the biggest risks and achieve success in SaaS product development.

What is a SaaS MVP?

A SaaS minimum viable product is an early, basic version of your SaaS application that has only core features that can be used by potential customers. The main goals behind MVP SaaS development are:

• testing the idea behind the startup without risking a lot of money
• collecting user feedback directly from the target audience
• attracting investors
• generating initial income to fund future development

Reasons to build a SaaS MVP

Why should you build an MVP for a SaaS product even if you are absolutely sure of your app’s success? Let’s take a look at the main benefits an MVP offers.

Idea validation

Launching a successful MVP for a SaaS startup is hard, which means you need to make sure your idea is as good as you think it is. The best way to validate your idea is testing it in a market environment with real users. This will help you make important decisions about your SaaS startup’s future. If your MVP launch is successful, you can move on to adding new features and polishing the user interface (UI). If it isn’t, you can regroup, make necessary changes, and start building a SaaS MVP again without spending three to six months and a ton of money on a less-than-perfect idea.

Early user feedback

Even if you think that you know your target audience and their needs, real-life scenarios can find a way to surprise you. With early user feedback, you and your development team can make necessary adjustments, add and remove features, and make a SaaS app more user-friendly. Nobody wants to spend a year building a SaaS product just to receive tons of negative feedback at launch and spend a couple months fine-tuning the application.

Cost-effectiveness

Developing a full-fledged SaaS application with numerous features, integrations, and a polished UI can cost you several hundred thousand dollars. Building an MVP for SaaS is a perfect option for projects with budgetary restraints. It allows you to launch a basic version of your app without exhausting resources. Not a lot of entrepreneurs are ready to spend hundreds of thousands on ideas that are not validated and tested on the target audience. You can develop a SaaS MVP for considerably less money and save your budget for further development based on user feedback and scaling needs. Plus, when you already have a target audience that is ready to pay for your SaaS product, investing more money is a safer bet.

Attracting investors

It can be difficult to compete with big established companies that can spend a couple million on their SaaS products. With a great idea, you can create an MVP for your SaaS startup for a reasonable amount of money. If the minimum viable product proves successful, it will be easier for you to find more funding. Investors are always looking for SaaS startups that have a proof of concept and potential for growth.

Starting SaaS product development with building an MVP is a great idea for many reasons. Now that you know key advantages of this approach, you may want to create a minimum viable product for your startup. Who doesn’t want to launch their app and test the core idea on a real target audience without spending all their budget? The big question is how to develop an MVP for a SaaS app. Let us take you through all key stages of this process.

SaaS MVP lifecycle

Building a SaaS MVP is faster and easier than developing a complex feature-rich product with all necessary third-party integrations, but it still requires a lot of planning, a clear understanding of core features, and the right technology stack. The SaaS MVP lifecycle includes many crucial stages and involves experts in many fields. To avoid setbacks and benefit from your MVP, follow these steps.

Discovery phase

To create an MVP for a SaaS startup, you need to have a comprehensive blueprint for your app, an understanding of the market, and a risk mitigation plan, among other things. A discovery phase is a great way to answer key questions, create documentation, and be as ready as possible for actual MVP development. If you have the necessary expertise within your team, that’s great. If not, consider partnering with a product development company that provides discovery phase services. At Clockwise Software, we have assisted dozens of companies during the discovery phase and are ready to share our insights. Let’s take a look at essential steps of the discovery phase.

• Identify the target audience. To be sure that your product will satisfy end-users and solve their problems, you need to learn as much as possible about the target audience. You can choose from dozens of techniques, including creating user personas, using interviews and surveys, working with focus groups, and conducting demographic research. This process requires a lot of resources and marketing expertise, but it will pay off big time. Only by conducting thorough research can you understand your potential users’ needs, pain points, likes, and dislikes.

• Conduct market research and competitor analysis. The SaaS market is growing quickly, so even if yesterday your idea was unique and you had a killer feature that no competitors offered, it’s still necessary to conduct thorough research to determine product–market fit. Understanding your niche, current and future SaaS trends, the market size, and its potential for growth will enable you to create a more realistic business plan. Information about competitors, both successful and failed, can provide invaluable insights that can be used later during development.

• Identify core features. Focus on core features needed to test your project’s viability. Categorize your desired SaaS app functionalities and define the most essential; everything else should be postponed. Keep all non-essential ideas in the backlog. You can always return to them later, after you’ve validated the product idea with your MVP. If you struggle with deciding on core features, think about how each feature affects the user experience and aligns with your overall business goals. This step can be difficult, but an expert discovery team can help you make an informed decision.

• Decide on technical aspects. During this stage, you and your team need to decide if your idea is technically feasible and make essential choices that will impact your product long after the MVP launch. Evaluate the feasibility of each feature and choose a tech stack that aligns with your project requirements. One of the key steps to developing a SaaS product is ensuring scalability. Thoroughly analyze all cloud service providers and outline the SaaS architecture for your app. To make an informed decision, read our SaaS architecture whitepaper. This step can be challenging without a CTO or at least an experienced full-stack developer by your side. Outsourcing the discovery phase to a SaaS product development company will allow you to lay a strong foundation for your MVP.

• Build a prototype. Before finalizing your decision-making process and documenting discovery phase deliverables, it’s important to validate your choices. Creating a prototype is the best way to do it. The prototype doesn’t have to be perfect and can differ from the final version of your SaaS product, but it still needs to be clickable and interactive, and it should present the majority of elements users will interact with. With a prototype, you can gather your first feedback from stakeholders or beta testers, which is crucial for refining your tech choices.

• Choose a pricing model. One of the most important steps during SaaS MVP development is deciding on a pricing strategy. There are several options you can choose from: freemium, flat-rate, user-based, usage-based, tiered, and variable pricing. This choice will not only impact your revenue down the road but also dictate what set of features your SaaS MVP should include to attract paying customers.

• Develop a product roadmap. Before your team actually starts building a SaaS MVP, they need to document all project requirements (including functional and non-functional requirements and design specifications), conduct a cloud assessment, and perform a security analysis. Additionally, you can create a roadmap for stakeholders with success criteria and short-term and long-term goals, along with a roadmap for customers to keep them engaged until the MVP launch.

• Create deliverables. At the end of the discovery phase, you will receive key deliverables. The exact list depends on the project’s requirements and details, but the most common deliverables are a product roadmap, development plan, feature breakdown, market research report, cost estimate, business plan, risk assessment and mitigation plan, and interactive prototype. With these, you can start developing your SaaS MVP with your own tech team, continue working with the company that assisted you with the discovery phase, or go to another SaaS development service provider.

  The discovery phase is a complex process that requires expertise in marketing, business analysis, software development, and other areas. Not many startups have professionals with all these skills on payroll. Creating a scalable cloud architecture or comparing SaaS vs PaaS vs IaaS without previous experience can be challenging. Finding a reliable tech partner to assist you with discovery for your SaaS MVP development is a good option. After the discovery phase, you can always continue working with this partner, choose another product development company, or develop a minimum viable product yourself with the help of numerous deliverables and a better understanding of the SaaS market.

Develop a SaaS MVP

After the discovery phase is over, you can start the development process itself. Remember that perfection is not your goal here. All stages of SaaS MVP development need to be quick and lead to putting your product on the market as soon as possible.

• Design the MVP. This step is not just about designing the app’s user interface and pages. It also includes architectural planning. You should choose the SaaS architectural model based on your MVP’s core features and tech requirements. We recommend a multi-tenant architecture, as it provides great scalability and customization. In terms of UI/UX design, ensure that it is simple, consistent, responsive, and accessible. Keep in mind that an MVP design is iterative, so be ready to quickly make adjustments based on user feedback.
• Build the MVP. This is the step when all your strategic planning finally transforms into your MVP. For backend development, we recommend Node.js as the most suitable technology for scalable SaaS solutions. For the front end, we recommend the Vue.js framework and React library. But the final decision depends on your project’s specifics and should be made after consulting with tech experts, either in-house or from the discovery team. For managing your project’s development team, we recommend choosing an Agile methodology over Waterfall or other alternatives.
• Implement security measures. During the whole SaaS MVP development process, it’s crucial to continuously implement security measures and minimize your application’s potential vulnerabilities. To ensure this, your team needs to use secure coding practices, authentication and authorization mechanisms, data encryption, and APIs protected against cyber threats. The cloud-based nature of SaaS applications often requires specific security considerations, such as firewalls, subnets, and the use of cloud service provider security tools. Also, don’t forget to ensure compliance with the GDPR, ISO/IEC 27001, SOC 2, HIPAA, and other regulations, laws, and standards depending on the market your service will operate in.
• Test the MVP. After your MVP is built and all security measures are implemented, it’s time for tests. You need to ensure that your product is not only functional but also user-friendly and ready for your first customers. The most widely used techniques during this step are individual unit testing, end-to-end testing, performance testing, usability testing, and security testing. Besides quality assurance (QA) engineers, ordinary users need to participate in this stage. Find several people that are part of your target audience and ask them to use your MVP. Also, test it yourself, as only you can decide if the MVP aligns with your vision. The QA team should continue to run thorough tests even after the MVP launch, especially after new iterations and the release of new features.
• Deploy your product. Effective SaaS application deployment requires thorough preparation, ongoing maintenance, and an understanding of cloud technologies. At this stage, your team needs to set up necessary infrastructure, configure the production environment, implement a CI/CD pipeline, and set up monitoring tools for ensuring the app’s smooth performance and gathering additional data. After that, you can finally make your SaaS MVP available for users.

Gather customer feedback

Post-launch is one of the most important startup phases, especially for an MVP. During this phase, you need to gather all possible feedback from users. Encourage them to share their opinions on social media and leave feedback within the app, and arrange customer surveys. Don’t hesitate to reach out to users that are part of your target audience before or after the MVP launch and ask them to participate in beta testing. Involving beta testers at this phase not only can help you with fine-tuning an app and finding bugs early. It can also help your startup generate interest and foster customer loyalty. Additionally, use testing tools and user analytics to gain insights about customer interactions with your SaaS MVP.

Analyze your data and iterate

After you gather the first feedback, start analyzing the data right away. This process should be оngoing, as it will be the main driving force behind polishing and improving your MVP. Based on data gathered from users, you can add or remove features, redesign elements of the app, change the pricing model, or fine-tune your marketing strategy.

Even if your first attempt at developing an MVP in SaaS industry fails to resonate with the target audience, don’t give up. Data you gathered during this stage will enable you to quickly create a new iteration with a greater chance of success. Or maybe you can even start from scratch and build a completely new minimum viable product with invaluable knowledge of market trends, user behavior, and technical aspects of SaaS MVP development.

Common challenges

If you decide to create an MVP for a SaaS startup, keep in mind that many things may go wrong. But with prior knowledge and necessary technical experience within your team, most issues are completely avoidable.

Poor feature prioritization

It can be difficult to decide on essential features for your SaaS MVP, especially without a thorough discovery phase. If you decide to incorporate too many features from the get-go, it may easily lead to a bloated budget and a longer than desired time to market. In the dynamic SaaS industry landscape, even the slightest delay can give your competitors a precious advantage and cost you the chance to become a front-runner. To avoid this, consult with a business analyst, in-house or external, and use feature prioritization frameworks.

Inefficient development methodology

The development methodology is one of the key aspects of any software project. When developing a SaaS MVP, developers often work on a tight budget. Bringing the product to market as soon as possible is the main goal, and choosing the right methodology becomes paramount. The most popular choice for SaaS MVP development is the Agile methodology. In some instances, IT professionals still prefer Waterfall over Agile, but for MVP development, an iterative approach is perfect.

Overcomplicated MVP

Of course, an MVP can’t be unrefined like a prototype for internal use. But don’t work too hard on a minimum viable product and overcomplicate it with features and design elements. Today, everyone wants to create an AI SaaS platform. But if AI technology is not essential for your core feature, postpone adding it until you have more user feedback and additional funding. Remember that your main goal is to test your idea’s viability, attract the first customers, and gain insights. The sooner you launch your MVP, the sooner you will benefit from it.

Scalability issues

Keep in mind that SaaS applications are cloud-based. Having too many users at once might lead to performance issues if your architecture and infrastructure aren’t scalable. You and your team need to think about scalability from the first day of the discovery phase. A single-tenant architecture can seem more suitable for an MVP when a fast launch is your priority. But in a couple of years, when your SaaS platform has thousands of users, you may face performance issues. Moving to a new software architecture is a long, expensive, and unpleasant process. Plus, you may lose users due to technical issues and downtime.

Not enough emphasis on security

It’s difficult to imagine a SaaS app that doesn’t collect any personal information about users. A single data leak can damage your startup no matter how successful it is. To avoid security breaches and all associated repercussions, you need to invest in cyber defense from the start. If you want to create an MVP for your SaaS startup, follow applicable data protection and security policies. Also, don’t forget to add robust security measures, such as encryption and multi-factor authentication.

Broken feedback loop

One of the main goals of SaaS MVP development is getting early user feedback. Failing to gather accurate feedback or ignoring it would be a big missed opportunity. Try to create a community of your first customers and communicate with them on social media, on forums, and via email surveys. Assess every piece of feedback you can gather, as it will provide you with valuable insights. Remember that the SaaS industry is constantly evolving, and new companies pop up every day. Startups that don’t know how to leverage user feedback are missing out on a significant competitive advantage and are destined to fail.

SaaS MVP development is a process with many intricacies and possible setbacks. To succeed, you need to have highly experienced software developers, marketing professionals, and business analysts on your team. Avoiding all challenges on your own or with a small team is almost impossible. To fully benefit from an MVP, consider partnering with a product development company that has experience in the SaaS industry.

How much does a SaaS MVP cost?

This is one of the most popular questions related to SaaS MVP development. To answer it precisely without knowing all requirements, features, and other details is impossible. You can create an MVP for a startup using low-code and no-code platforms. In this case, you can start with less than $10,000, but your MVP will suffer from a lack of customization options, documentation, and proper testing and quality assurance.

Custom SaaS MVP development may start at $100,000 and usually takes more than three months. The time frame is one of the most crucial factors that affects the development cost. Many startups are in a hurry to put their product on the market before competitors, but speeding up development will obviously cost extra, as a software development company will need to prioritize the project and allocate resources accordingly. You can take a look at an MVP estimate example for a better understanding of this topic.

If you’re not sure about your idea’s viability and don’t want to invest in SaaS MVP development right away, consider a discovery phase as an alternative. This service starts at $12,000 and usually takes two to three months. During the discovery phase, tech experts, business analysts, and other IT professionals will help you better understand your own expectations and requirements, create project documentation, conduct market and competitor research, and come up with a more accurate timeline and cost estimates for your SaaS MVP. Plus, don’t forget that you can receive a clickable, interactive prototype starting at $5,000. With a prototype, you can start beta testing with users or even try to attract additional investments for MVP development.

Conclusion

The Software as a Service market is constantly growing, and even established companies often consider SaaS migration to make their existing applications available via subscription to a broader audience and increase profits. Every year, several hundred SaaS startups are launched. The chances that your SaaS product idea is unique and that no one in the world is developing a similar solution are low. Putting an MVP on the market as soon as possible is the best option for gaining a competitive advantage.

Remember that your main goal is not to attract millions of users and become rich overnight. Developing an MVP for SaaS is your investment in long-term success. Any results you end up with and any feedback you collect are useful. Even if your idea doesn’t resonate with the target audience the first time, with the data you collect, you can regroup and deliver a new version or even a SaaS MVP that improves on its predecessor.

With a thorough discovery phase, a reliable tech partner, and an understanding of SaaS MVP development challenges and ways to overcome them, you can launch a product that finds its target audience and paves your way to success.