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Software as a Service Business Plan That Works

04.03.2013
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Listen closely, boys and girls, because today, you’re going to see a software as a service business plan that works. We’re not going to talk about theory, we’re not going to talk about options or possibilities, we’re just going to go through one basic and simple plan that works.

I will take you through this plan one step at a time, and in each step I will explain the obstacles at hand, how they are solved and why things need to be done this way. This plan works for beginners and old hands at SaaS, but note it will be a simple and affordable plan to implement, so fortune 500 companies may want to just go back to reading the New Yorker, and sit this one out. Oh, and maybe explain their cartoons to me while they’re at it.

So, without further ado, I proudly present the easiest software as a service business plan in the history of the universe.

First thing to keep in mind is that we plan to grow. We plan on not being a startup forever, and eventually becoming like those new Yorker-reading fat cats we summarily dismissed a moment ago. But, we’re not that big yet, so let’s plan around not having a lot of resources, but using resources later when we do have them. How do we do this?

We start out humble, like we should. Our first offering should be available absolutely free, even fully-featured. You can either have a limited duration of free access under a “beta” label, or you can just launch the first version for free. Don’t add features to this access level in the future unless it’s crucial problem solving, though. Now, how do we generate revenue with this? We use ads.

We start out with heavy but not obnoxious ad-peppering, and we make sure the software does a lot of fast and efficient navigation or refreshing. This will generate lots of ad views, more as your initial customer base grows. These add up, and with minimal overhead at this point, you’re doing well.

Now, we’ve established ourselves, and we have a user base of at least seven hundred people now, so here’s what we do next. We offer to let people buy out of ads for a small yearly or six month basis. Charge what you’d lose in ad revenue from them, or the best estimate, plus a little bit extra – don’t be greedy though.

Now, we wait for the user base to reach two thousand people, and then we introduce new features in a subscription plan. We do not take the old one down, but we stop offering the ad buyout at this point, though offering those who bought out of ads regularly a discount for a time on the subscription. This will be easy navigation, and with free users accustomed to the buy out option should they want it, they can come to terms with a feature-rich paid version.

Now, we stay at this plan long-term, and what do we do for those free users that are using ancient software now? Why, every three official version updates, move the standing feature set down to the free. Don’t remove ads from the free version, and keep it just a few versions out of date, promoting conversion.

Now, you may be asking me how this software as a service business plan deals with preventing high churn rates and all of that fun stuff, but guess what? That’s not about your business plan, that’s about marketing and customer relations and that’s not what this was all about, now was it?

Published at DZone with permission of Omri Erel, author and DZone MVB. (source)

(Note: Opinions expressed in this article and its replies are the opinions of their respective authors and not those of DZone, Inc.)