SaaS business plan for starting your own company

Are you thinking about starting a business that will have an enormous scope in the near future? Well, you must opt for a SaaS business then. SaaS stands for software as a service and includes providing software such as CAD or content management with their key or license on a subscription basis to many customers, even at the same time, and hosting and upgrading them while sitting on your location.
These days several startups and businesses require different software to make their tasks easier. But not all of them want to buy them. So, they prefer to contact SaaS businesses and pay on a monthly or weekly basis to use their software services instead of spending a heavy amount in making a purchase.
If you have made up your mind to start this business but have no idea about how to start or how to write a business plan SaaS, you can take help from here. This sample SaaS business plan provides all the crucial details while relating them to a SaaS business startup, Techware, based in Houston.

Executive Summary

2.1 The Business

Techware will be a registered and licensed SaaS business responsible for hosting software services throughout Houston and nearby cities. Techware will be offering management, accounting, and engineering software on affordable subscription fee. Moreover, it’ll be responsible for updating and monitoring the provided software from time to time.

2.2 Management

Tom Will, the owner, has decided to manage his business by himself. Knowing the importance of good management structure in business, he decided to include that in his business plan for SaaS startup. Tom will hire experienced software engineers, IT experts, computer experts, account managers, sales executive, and other personnel to run his business.
Later in this sample SaaS business plan package, we will be listing company’s employees along with their job description and average salaries.

2.3 Customers

Before making a business plan for SaaS company, it’s essential to know your customers. Having a clear idea about your target groups helps you in devising SaaS business continuity plan template, which can help in specifying ways to deal with possible losses/threats by approaching another group of customers if one fails to satisfy your sales.
After analyzing the market, Techware identified that every group which will be associated with any small or large business, company or institute will be its target customers.

2.4 Business Target

Our main business targets are to add two new software services every 3 months, expanding our business network and increasing our sales by 20% every 6 months.

SaaS Business Plan - 3 Years Profit Forecast

SaaS Business Plan Sample 1
Bank/SBA Business Plan
Document for raising debt funding from financial institutions to meet the expectations of the banks, SBA, and government agencies.

Company Summary

3.1 Company Owner

Tom Will, owner of Techware is a software engineer who did an MBA from London Business School after his graduation. Tom has worked in Symantec for two years as a product manager. But he resigned as he wanted to start his own business. No doubt, he possesses all the qualities that enable one of starting their own business such as talent, knowledge, management skills, experience and wealth.

3.2 Why the SaaS Business is being started

In this age, no business and company can survive without the usage of the latest software. But not every startup can afford to buy them. So here comes the scope of SaaS companies who buy expensive software and host their services on any location specified by the customers on a subscription basis.
So, Tom who always wanted to start his own business couldn’t have come up with a better idea than initiating a SaaS business. As it offers him the platform to blend his software knowledge with his management skills to generate huge gains.

3.3 How the SaaS Business will be started

The only way to avoid confusion at every decision making stage is to formulate a proper saas business plan. Your business plan for saas company must cover the details of your investments, advertisement costs, strategy to reach your customers, management structure and financial plan.
Recognizing the importance, Tom created a thorough software as a service business plan. According to which, the company’s office will be based in Houston, but its services will be offered in nearby cities too.
The office will be decked by first-class equipment and the latest networking system. Initially, the company will be providing services for some major software such as office software, payroll processing, customer relationship management, and collaboration, etc. Moreover, it will hire highly experienced personnel to ensure the perfect running of the business and skilled web developers to ensure a strong web presence.

SaaS Business Plan - Startup Cost

The detailed startup requirements are given below:

Start-up Expenses
Legal $135 000
Consultants $0
Insurance $75 000
Rent $70 000
Research and Development $65 500
Expensed Equipment $80 500
Signs $3 500
TOTAL START-UP EXPENSES $429 500
Start-up Assets $453 000
Cash Required $546 000
Start-up Inventory $45 000
Other Current Assets $643 000
Long-term Assets $520 000
TOTAL ASSETS $2 207 000
Total Requirements $2 636 500
START-UP FUNDING
Start-up Expenses to Fund $429 500
Start-up Assets to Fund $2 207 000
TOTAL FUNDING REQUIRED $2 636 500
Assets
Non-cash Assets from Start-up $973 000
Cash Requirements from Start-up $546 000
Additional Cash Raised $40 000
Cash Balance on Starting Date $44 250
TOTAL ASSETS $1 603 250
Liabilities and Capital
Liabilities $36 000
Current Borrowing $0
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $48 500
Other Current Liabilities (interest-free) $0
TOTAL LIABILITIES $84 500
Capital
Planned Investment $2 636 500
Investor 1 $0
Investor 2 $0
Other $0
Additional Investment Requirement $0
TOTAL PLANNED INVESTMENT $2 636 500
Loss at Start-up (Start-up Expenses) ($1 117 750)
TOTAL CAPITAL $1 518 750
TOTAL CAPITAL AND LIABILITIES $1 603 250
Total Funding $2 636 500

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Services for Customers

Deciding your services is a step that must be taken before crafting a marketing plan for your saas business. Your investments, purchases, hired staff and many more things will just be dependent on your services, so you must state them clearly in your saas startup business plan.

Note

Choosing your services at the initial stage will also help you in devising saas lean business plan and finding ways to minimize wastage of resources.

Services which will be provided by Techware are given in this standard business plan saas company.

  • Providing Management Software: We’ll be offering software services for management software like accounting, invoicing, enterprise resource planning, content management, office software, human resource management, payroll processing, customer relationship management, and collaboration.
  • Providing Engineering Software: Software that are used in engineering institutes and companies will also be offered by us such as Adobe Font Folio, AutoCAD, Visual Studio Ultimate with MSDN, VxWorks, etc.
  • Providing Construction Software: We’ll provide services for following expensive software used by construction companies such as Oracle Primavera P6, Esticom, Buildertrend, FINALCAD, etc.
  • Graphic Designing Software: We’ll offer services in graphic designing software such as Adobe Illustrator CC, Adobe InDesign CC, CorelDraw Graphics Suite, Corel PaintShop Pro, etc
  • Training Sessions: Our software engineers will also give training sessions on the latest software at our customer’s location.

Marketing Analysis of SaaS Business

If you want to opt for a SaaS startup, you must first search out whether the market you’re choosing has the potential to bear your startup or not. It’s better to research to know if there are already-established such businesses because it’ll be difficult for you to strive then.

Strategic/Operational Business Plan

5.1 Market Trends

In this current age, usage of software in various sectors has increased which has helped in increasing productivity and keeping pace with the fast-going world. Almost all companies and businesses require some sort of software. But usually, enterprises don’t prefer to purchase them for a lifetime and opt for seeking the services of SaaS companies instead.
So you don’t have to bother at all about the scope or trend of SaaS business, you’ll just need to have a look at your budget. If it is not too large then you can start with just one type of software such as business software.

5.2 Marketing Segmentation

Before you think about how to find clients, you must be clear upon who will be your clients. To understand their demands and meet their expectations, it’s essential to do a thorough marketing segmentation in your saas business plan template.

SaaS Business Plan - Marketing Sermentation

The detailed marketing segmentation done for Techware is given in this part of startup saas actual business plan.

5.2.1 Companies: Our first target will be the companies that will be needing our services to have the latest payroll, coordination, and management systems. Besides the general software, they are also expected to use our services for software which will be specific to their works.

5.2.2 Startups: Our second target will be the startups who just can’t afford to make huge investments on the software especially when they have a better option to get them hosted by SaaS companies.

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5.2.3 Institutes: Our last category will be institutions such as those who carry out research work on some engineering-related projects. They will surely be needing diverse software, some for a smaller span of time and some for a larger, thus, will obviously prefer to use our services.

The detailed market analysis of our potential customers is given in the following table:

Market Analysis
Potential Customers Growth Year 1 Year 2 Year 3 Year 4 Year 5 CAGR
Companies 46% 44 500 46 250 48 000 49 750 51 500 10%
Startups 26% 15 350 17 400 19 450 21 500 24 000 10%
Institutes 28% 17 430 18 250 19 070 19 890 20 300 10%
Total 100% 77 280 81 900 86 520 91 140 95 800 10%

5.3 Business Target

Setting SMART: specific, measurable, attainable, realistic and time-bound goals for your startup is necessary to keep up the spirit of working hard and harder.

Our business targets are as follows:

  • To achieve a net profit margin of $15k per month by the end of the first year
  • To increase our services by adding new software in our package after every 3 months
  • To increase our overall sales by 20% every 6 months
  • To attain an average rating of 4.5/5 by the end of the first year

5.4 Product Pricing

To maintain the quality of our services Techware found it essential to not compromise on the money. So, our prices will be in the same range as that of our competitors.

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SaaS Marketing Strategy

Before writing a saas business plan, you must research what your competitors are doing. This will help you in coming up with diverse and better services.
If you are looking for saas business plan example to get an idea about what strategy can make you more preferable than your customers, you can take help from this saas business plan template free of cost.

6.1 Competitive Analysis

Our biggest competitive advantage lies in our wide range of services and the skills of our employees. Secondly, we are highly customer service oriented. Besides providing them with just our software services, we’ll offer training sessions by our software engineers, so that they can learn about working on it. We’ll be providing our services in various regions so we expect to attract more customers to our site. Lastly, we’ll be extremely careful about protecting our customer’s data.

6.2 Sales Strategy

We’ll advertise us by the following methods:

  • By ensuring a strong web presence
  • By providing a 5% discount on our services for the first two months
  • By personally sending our representative to our target customers
  • By providing a 2-day free training session to help those persons who don’t have hands-on on the latest software

6.3 Sales Monthly

Our monthly sales are forecasted as follows:

SaaS Business Plan - Sales Monthly

6.4 Sales Yearly

Our yearly sales are forecasted as follows:

SaaS Business Plan - Sales Yearly

6.5 Sales Forecast

Our forecasted sales are given below.

SaaS Business Plan - Unit Sales

Sales Forecast
Unit Sales Year 1 Year 2 Year 3
Providing Management Software 1 200 1 600 1 900
Providing Engineering Software 760 890 1 200
Providing Construction & Designing Software 1 350 1 650 1 870
Training Sessions 230 300 450
TOTAL UNIT SALES 3 540 4 440 5 420
Unit Prices Year 1 Year 2 Year 3
Providing Management Software $160,00 $180,00 $200,00
Providing Engineering Software $200,00 $210,00 $220,00
Providing Construction & Designing Software $350,00 $420,00 $540,00
Training Sessions $140,00 $220,00 $260,00
Sales
Providing Management Software $192 000 $288 000 $380 000
Providing Engineering Software $152 000 $186 900 $264 000
Providing Construction & Designing Software $472 500 $693 000 $1 009 800
Training Sessions $32 200 $66 000 $117 000
TOTAL SALES $848 700 $1 233 900 $1 770 800
Direct Unit Costs Year 1 Year 2 Year 3
Providing Management Software $67,00 $81,00 $94,00
Providing Engineering Software $72,00 $76,00 $100,00
Providing Construction & Designing Software $69,00 $89,00 $99,00
Training Sessions $105,00 $165,00 $195,00
Direct Cost of Sales
Providing Management Software $80 400 $129 600 $178 600
Providing Engineering Software $54 720 $67 640 $120 000
Providing Construction & Designing Software $93 150 $146 850 $185 130
Training Sessions $24 150 $49 500 $87 750
Subtotal Direct Cost of Sales $252 420 $393 590 $571 480

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Personnel plan

It’s not just the role of management which must be played efficiently. No business can survive until devoted and talented employees invest their tireless efforts in it. So, it is necessary to hire suitable persons for your business. In this saas business plan sample we’re listing personnel plan of Techware to help those who have no idea about how to writing a saas business plan.

7.1 Company Staff

Tom will be the manager himself and will hire the following persons:

  • 2 Network and Information Security Managers to ensure network security
  • 1 HR Manager to coordinate staff
  • 2 Software Engineers to maintain and upgrade software
  • 4 IT experts to host software services
  • 2 Technical Assistants to maintain equipment
  • 2 Accountants to maintain financial and other records
  • 4 Sales Executives to market and reach target groups
  • 1 Web Developer to manage company’s sites
  • 2 Customer Representatives to interact with customers off/online
  • 1 Cleaner to ensure a healthy environment
  • 2 General Assistants to carry out day-to-day tasks

7.2 Average Salary of Employees

The following table shows the forecasted data about the salaries of the employees for the next three years.

 Personnel Plan
Year 1 Year 2 Year 3
Network & Info. Security Manager $60 000 $66 000 $72 600
HR Manager $35 000 $38 500 $42 350
Software Engineers $35 000 $38 500 $42 350
IT Experts $70 000 $77 000 $84 700
Technical Assistants $18 000 $19 800 $21 780
Accountants $15 000 $16 500 $18 150
Sales Executives $48 000 $52 800 $58 080
Web Developer $12 000 $13 200 $14 520
Customer Representatives $28 000 $30 800 $33 880
Cleaner $10 000 $11 000 $12 100
General Assistants $28 000 $30 800 $33 880
Total Salaries $359 000 $394 900 $434 390

Financial Plan

Since a SaaS business requires a large investment for purchasing licenses of costly software thus it’s necessary to get its business plan written by a financial expert. The financial expert must be adept at playing with figures and stats and finding ways to cater possible capital losses.
As for Tom, he wanted a business plan saas that could enable him of making a heavy investment every 3 months to increase his services as well as generating profits after spending money on all possible expenses like salaries and system maintenance. So he sought help from a financial consultant. Thus the financial plan which is provided below is the result of combined efforts of Tom and his hired financial consultant.

8.1 Important Assumptions

 General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 9,60% 10,10% 10,60%
Long-term Interest Rate 9,80% 10,20% 11,10%
Tax Rate 27,10% 28,20% 29,60%
Other 0 0 0

8.2 Brake-even Analysis

SaaS Business Plan - Break-even Analysis

 Brake-Even Analysis
Monthly Units Break-even 6370
Monthly Revenue Break-even $144 542
Assumptions:
Average Per-Unit Revenue $222,87
Average Per-Unit Variable Cost $0,76
Estimated Monthly Fixed Cost $200 146

8.3 Projected Profit and Loss

 Pro Forma Profit And Loss
Year 1 Year 2 Year 3
Sales $848 700 $1 233 900 $1 770 800
Direct Cost of Sales $252 420 $393 590 $571 480
Other $0 $0 $0
TOTAL COST OF SALES $252 420 $393 590 $571 480
Gross Proft $596 280 $840 310 $1 199 320
Gross Margin % 70,26% 68,10% 67,73%
Expenses
Payroll $359 000 $394 900 $434 390
Sales and Marketing and Other Expenses $1 730 $1 850 $1 990
Depreciation $2 190 $2 190 $2 190
Leased Equipment $0 $0 $0
Utilities $3 600 $3 950 $4 200
Insurance $2 200 $2 200 $2 200
Rent $6 750 $6 900 $7 100
Payroll Taxes $36 540 $42 350 $43 252
Other $0 $0 $0
Total Operating Expenses $412 010 $454 340 $495 322
Profit Before Interest and Taxes $184 270 $385 970 $703 998
EBITDA $184 270 $385 970 $703 998
Interest Expense $0 $0 $0
Taxes Incurred $36 854 $77 194 $140 800
Net Profit $147 416 $308 776 $563 198
Net Profit/Sales 17,37% 25,02% 31,80%

8.3.1 Profit Monthly

SaaS Business Plan - Profit Monthly

8.3.2 Profit Yearly

SaaS Business Plan - Profit Yearly
8.3.3 Gross Margin Monthly

SaaS Business Plan - Gross Margin Monthly

8.3.4 Gross Margin Yearly

SaaS Business Plan - Gross Margin Yearly

8.4 Projected Cash Flow

SaaS Business Plan - Project Cash Flow

 Pro Forma Cash Flow
Cash Received Year 1 Year 2 Year 3
Cash from Operations
Cash Sales $38 000 $40 000 $42 000
Cash from Receivables $8 090 $8 650 $9 210
SUBTOTAL CASH FROM OPERATIONS $45 900 $51 000 $56 100
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
SUBTOTAL CASH RECEIVED $43 500 $44 000 $44 500
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $19 500 $20 900 $22 300
Bill Payments $15 900 $16 400 $16 900
SUBTOTAL SPENT ON OPERATIONS $34 000 $36 700 $39 400
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
SUBTOTAL CASH SPENT $42 000 $46 500 $51 000
Net Cash Flow $10 800 $11 800 $12 800
Cash Balance $19 000 $20 700 $22 400

8.5 Projected Balance Sheet

 Pro Forma Balance Sheet
Assets Year 1 Year 2 Year 3
Current Assets
Cash $182 100 $198 200 $214 300
Accounts Receivable $11 980 $13 970 $15 960
Inventory $2 460 $3 100 $3 740
Other Current Assets $900 $950 $1 000
TOTAL CURRENT ASSETS $199 450 $247 120 $294 790
Long-term Assets
Long-term Assets $9 800 $12 000 $14 200
Accumulated Depreciation $13 100 $14 230 $15 360
TOTAL LONG-TERM ASSETS $975 $990 $1 005
TOTAL ASSETS $200 000 $234 000 $268 000
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $9 230 $10 120 $11 010
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
SUBTOTAL CURRENT LIABILITIES $9 230 $10 120 $11 010
Long-term Liabilities $0 $0 $0
TOTAL LIABILITIES $9 230 $10 120 $11 010
Paid-in Capital $27 000 $27 000 $27 000
Retained Earnings $46 000 $65 000 $84 000
Earnings $99 000 $120 000 $141 000
TOTAL CAPITAL $201 000 $218 000 $235 000
TOTAL LIABILITIES AND CAPITAL $197 600 $218 000 $238 400
Net Worth $209 000 $210 000 $211 000

8.6 Business Ratios

 Ratio Analysis
Year 1 Year 2 Year 3 INDUSTRY PROFILE
Sales Growth 4,24% 5,22% 5,09% 4,00%
Percent of Total Assets
Accounts Receivable 5,47% 6,73% 6,56% 9,50%
Inventory 1,80% 2,22% 2,16% 9,50%
Other Current Assets 1,71% 2,10% 2,05% 25,40%
Total Current Assets 135,07% 166,13% 161,98% 50,50%
Long-term Assets -9,23% -11,36% -11,07% 50,20%
TOTAL ASSETS 97,50% 119,93% 116,93% 100,00%
Current Liabilities 4,56% 5,61% 5,47% 25,30%
Long-term Liabilities 0,00% 0,00% 0,00% 24,30%
Total Liabilities 4,56% 5,61% 5,47% 51,00%
NET WORTH 96,84% 119,11% 116,13% 49,60%
Percent of Sales
Sales 97,50% 119,93% 116,93% 100,00%
Gross Margin 91,83% 112,95% 110,12% 0,00%
Selling, General & Administrative Expenses 72,43% 89,09% 86,86% 85,40%
Advertising Expenses 2,01% 2,47% 2,41% 1,50%
Profit Before Interest and Taxes 25,81% 31,74% 30,95% 2,54%
Main Ratios
Current 25,2135 31,01 30,24 1,88
Quick 24,765 30,46 29,70 0,87
Total Debt to Total Assets 2,61% 3,21% 3,13% 87,50%
Pre-tax Return on Net Worth 65,16% 80,15% 78,14% 3,60%
Pre-tax Return on Assets 63,26% 77,81% 75,86% 9,70%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 18,72% 23,03% 22,45% N.A.
Return on Equity 46,60% 57,31% 55,88% N.A.
Activity Ratios
Accounts Receivable Turnover 4,45 5,47 5,33 N.A.
Collection Days 89,70 110,33 107,57 N.A.
Inventory Turnover 19,21 23,63 23,03 N.A.
Accounts Payable Turnover 13,82 16,99 16,57 N.A.
Payment Days 26,33 32,38 31,57 N.A.
Total Asset Turnover 1,79 2,21 2,15 N.A.
Debt Ratios
Debt to Net Worth 0 0 0 N.A.
Current Liab. to Liab. 0,98 1,20 1,17 N.A.
Liquidity Ratios
Net Working Capital $117 919 $145 041 $141 415 N.A.
Interest Coverage 0 0 0 N.A.
Additional Ratios
Assets to Sales 0,44 0,54 0,53 N.A.
Current Debt/Total Assets 4% 5% 5% N.A.
Acid Test 23,07 28,37 27,66 N.A.
Sales/Net Worth 1,64 2,01 1,96 N.A.
Dividend Payout 0 0 0 N.A.

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