Why SaaS is the best business model (3 Things You Need to Know)

Written By Mike Strives

Software-as-a-Service is arguably the best business model. In this post, I’ll talk about the 3 biggest benefits you’ll have when running a successful SaaS. From low support to a big fat check when you exit.

Let’s start with the first and most important one.

1. Recurring Revenue

This is, obviously, the most important one. With SaaS, you’ll receive recurring revenue, often referred to as MRR (Monthly Recurring Revenue) or ARR (Annual Recurring Revenue), and this is particularly valuable because it makes a lot of things about running and scaling a business easier.

Most importantly, you can make better decisions since you know how much money you earn and how much you spend. So, making investments to grow the business, is a no-brainer.

This makes things like hiring new staff, acquiring other products, or investing in marketing and sales-related campaigns, based on the data of your MRR and ARR charts, much easier.

This is a dashboard you can create with Baremetrics.

You can look at recurring revenue as your stream of data.

Based on your revenue stats, you can see how many people are onboarding, converting from trial to paid, churning (leaving your product), and you can even predict its growth over a period of 6 or 13 months. Especially when using a tool like Baremetrics.

2. Low support-load

There’s a reason why so many “solopreneurs” or one-man shows are able to create profitable SaaS products. It’s literally about building the software and to then get it into the market through marketing and sales, which you can often automate by using tools like Hypefury and Manychat, and the biggest downside of running any other business will not be a burden when running a SaaS: support.

Especially with new tools such as AI chatbots from Crisp, support-load is very minimum when running a SaaS.

That is, if you build it “self-served”.

Make sure to build a self-serving onboarding with a clear path to the users’ “aha moment” (the moment they see value in your product), communicate clearly with emails, build a knowledge base for people to find more information if needed, and ask proactively for feedback with a tool like Upvoty.

If you nail that, support will not be an issue.

3. A big fat exit!

And then, the best part. Besides making decent money through your monthly recurring revenue, as talked about in point 1 of this post, you can then sell your SaaS product for anywhere between 3 to 5 times its ARR.

A great example:

This guy called Bhanu sold his SaaS startup feature (dot so) for a whopping $250,000.

Now, a quarter million is a lot of money, for some even life-changing, but it’s not because of the money I’m sharing this story.

It’s because of its valution.

You see, he was “only” doing 6.5k in MRR:

So, all the time, he was making a decent amount of money every month.

And now, a lump sum of 250k.

A big fat check.

All he did was build something specific for a specific target audience.

Niching it down.

You can do it too.

I teach this in my free SaaS Masterclass.

What’s stopping you?

Maybe, in 6 months, I can write about you.

Mike Strives
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