Securing investment, finding the right team, nailing the tech, getting users – the list of SaaS startup sales challenges just goes on. If you’re the founder of a SaaS startup we salute you – it’s a tough job!
Getting users is the key to MRR but there are a number of factors that can influence a user’s decision to sign up, pay and continue to use your product.
At Strafe Creative we specialise in conversion-led design. Over the last 10+ years, we’ve worked hard to identify the exact formula that helps SaaS startups (and scale-ups) like yourself convert more users, increase their MRR and grow the business – all through great UX design.
Recently, we talked about eight reasons why your SaaS signups are low and gave tips on how to improve your website or landing page. However, in this post, we’ll be talking about bigger-picture SaaS sales challenges you might be familiar with.
So here goes, 8 SaaS sales challenges (and how to fix them)…
1. Your initial costs are really high
There are a few cost issues we hear about from SaaS leaders. Firstly, getting ideas together for a SaaS startup can be very exciting. The downside of having loads of ideas is that your project can creep. And with project creep comes additional spending on development.
Secondly, many people are so keen to produce a ‘finished’ product that they end up spending too much on the development, without getting real user input and feedback.
What to do: to tackle both of these cost challenges we recommend you keep it simple at the start. Give your tech one job – a tool to tackle one problem at a time.
Create an MVP and then start testing with your target audience. This way you don’t spend money on design and development when you don’t even know if it’s required.
This leads me nicely to…
2. You don’t have a niche
Without a niche, you’re essentially targeting no one. Whilst the possibility of millions of users sounds exciting and revenue filled, you cannot fix everyone’s pain points and problems.
It’s impossible to communicate why your SaaS solution is the best for them when ‘them’ is everyone.
What to do: there’s only one solution here and that’s to choose a niche.
In doing so you can be specific about messaging, marketing tactics and channels and even pricing. Then once successful in a specific niche you can branch out to new ones, later down the line.
3. You lack clear differentiation
The SaaS industry is set to be worth around $208 billion in 2023 and it shows no sign of slowing down. If you want to get yourself a piece of that billion-dollar pie then you’ve got to stand out from your competition.
What to do: ensure your business has a unique selling point. If it doesn’t then this is a great opportunity to niche down and find USPs that really suit that specific market.
On your website, list your features and benefits in visual and easy-to-understand ways. Address your audience’s pain points with clear messaging explaining why your solution is different from others, and how YOU, and only you can help them.
4. You’re lacking brand awareness
Being the ‘best-kept secret’ in the world of SaaS is not going to help you grow your MRR. It’s impossible to grow your business if no one knows about it, so improving brand awareness is vital.
What to do: investing in marketing is key. Whether that’s a financial investment to get your product in front of the right people or a time investment – learning how to do it yourself.
No matter which way you invest, ensure the goal is awareness, closely followed by conversion. Without awareness, you’ll never convert.
5. Your cost per acquisition (CPA) is too high
It’s a fact, you won’t make enough money if it costs you more to get a customer than what the customer pays you. Spending large amounts of cash on paid media can significantly affect your cost per acquisition, especially if you’re not targeting the right users.
What to do: consider alternatives for marketing and brand awareness. Email marketing is an effective way to build and engage an audience and when done well, offers a much lower CPA.
Share value with your ideal audience through content marketing and blogs to help build trust and demonstrate your knowledge. Collaborate with organisations that have a similar ideal audience but offer a different product or service, to reach new, relevant audiences.
6. You’re struggling to upsell
Hurrah, with users signed up, the world of SaaS starts to feel much more exciting. The next challenge, getting them to convert to the paid version and beyond…
What to do: in order to upsell to the paid version of your software, you must balance your pricing tiers. If you’re offering too much good stuff in the free version, users have no reason to upgrade.
The same goes for pricing tiers, it’s important to ensure the value of moving up a tier is really clear and worthwhile. For example, this could be extra features, more logins and user access or additional analytics and data.
Another key consideration is your niche or target audience. If your software isn’t adding value to their day-to-day, then they’re less likely to upgrade to a higher-priced version.
Hubspot* is a great example. We use some of the lower-tier functionality, however, it has a number of higher-tier options with a lot of extras that suit larger companies.
We don’t need all the extra features they offer at the highest pricing. However, if they were targeting design agencies specifically, the features may be more suited and valuable to us, in which case we would be more likely to pay the extra.
7. Your churn rate is high
Retaining users month-to-month is imperative for any SaaS startup. A lower churn rate means people are staying and seeing value in your SaaS. A higher churn rate is a sign that users aren’t seeing the value in your product.
What to do: this issue can serve as a great reminder to review two things – Your target audience – are you focused on one specific problem that they have and then using your tech to solve it? Are you targeting the right audience? If the wrong kind of users are signing up they’re more likely to leave if and when the tool doesn’t meet their needs.
Your messaging – is it clear in your marketing what your product does? If it’s even slightly misleading, user expectations won’t be met and this will ultimately lead to churn.
8. You need more referrals
Getting referrals and recommendations through word of mouth is the best and cheapest way to do marketing. This is a fantastic way to grow your user base with people who have heard from friends, colleagues and loved ones that your product is GREAT. But you need more of them
What to do: think strategically about how you can reward your loyal users who are referring time and time again. Perhaps it’s a discounted upgrade to the next tier, or the opportunity to help beta test the next MVP – whatever you choose, make it engaging and worthwhile.
As it was growing Dropbox offered free accounts, however, anyone who referred friends received additional GBs of storage for free.
Build this process into your user flow and promote heavily via marketing and communications.
Conclusion: Overcome SaaS sales challenges by focusing on one thing at a time
This list can feel overwhelming, especially if you’re just starting out or struggling to work out the issue. Our advice is to review the ideas and prioritise. Then test one thing at a time and see if it makes a difference. Alternatively, we offer a one-off UX audit which will identify any issues and prioritise them accordingly – so you can make the changes (or we can?).
Learn more about the UX audit or get in touch using the Project Planner below.
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