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.

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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
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Bank/SBA Business Plan
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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.[/important]
    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.

    Operational and Strategic Planning

    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 CustomersGrowthYear 1Year 2Year 3Year 4Year 5CAGR
    Companies46%44 50046 25048 00049 75051 50010%
    Startups26%15 35017 40019 45021 50024 00010%
    Institutes28%17 43018 25019 07019 89020 30010%
    Total100%77 28081 90086 52091 14095 80010%

    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 SalesYear 1Year 2Year 3
    Providing Management Software1 2001 6001 900
    Providing Engineering Software7608901 200
    Providing Construction & Designing Software1 3501 6501 870
    Training Sessions230300450
    TOTAL UNIT SALES3 5404 4405 420
    Unit PricesYear 1Year 2Year 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 CostsYear 1Year 2Year 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 1Year 2Year 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 1Year 2Year 3
      Plan Month123
      Current Interest Rate9,60%10,10%10,60%
      Long-term Interest Rate9,80%10,20%11,10%
      Tax Rate27,10%28,20%29,60%
      Other000

      8.2 Brake-even Analysis

      SaaS Business Plan - Break-even Analysis
       Brake-Even Analysis 
      Monthly Units Break-even6370
      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 1Year 2Year 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/Sales17,37%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 ReceivedYear 1Year 2Year 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
      ExpendituresYear 1Year 2Year 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   
      AssetsYear 1Year 2Year 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 CapitalYear 1Year 2Year 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 1Year 2Year 3INDUSTRY PROFILE
      Sales Growth4,24%5,22%5,09%4,00%
      Percent of Total Assets    
      Accounts Receivable5,47%6,73%6,56%9,50%
      Inventory1,80%2,22%2,16%9,50%
      Other Current Assets1,71%2,10%2,05%25,40%
      Total Current Assets135,07%166,13%161,98%50,50%
      Long-term Assets-9,23%-11,36%-11,07%50,20%
      TOTAL ASSETS97,50%119,93%116,93%100,00%
      Current Liabilities4,56%5,61%5,47%25,30%
      Long-term Liabilities0,00%0,00%0,00%24,30%
      Total Liabilities4,56%5,61%5,47%51,00%
      NET WORTH96,84%119,11%116,13%49,60%
      Percent of Sales    
      Sales97,50%119,93%116,93%100,00%
      Gross Margin91,83%112,95%110,12%0,00%
      Selling, General & Administrative Expenses72,43%89,09%86,86%85,40%
      Advertising Expenses2,01%2,47%2,41%1,50%
      Profit Before Interest and Taxes25,81%31,74%30,95%2,54%
      Main Ratios    
      Current25,213531,0130,241,88
      Quick24,76530,4629,700,87
      Total Debt to Total Assets2,61%3,21%3,13%87,50%
      Pre-tax Return on Net Worth65,16%80,15%78,14%3,60%
      Pre-tax Return on Assets63,26%77,81%75,86%9,70%
      Additional RatiosYear 1Year 2Year 3 
      Net Profit Margin18,72%23,03%22,45%N.A.
      Return on Equity46,60%57,31%55,88%N.A.
      Activity Ratios    
      Accounts Receivable Turnover4,455,475,33N.A.
      Collection Days89,70110,33107,57N.A.
      Inventory Turnover19,2123,6323,03N.A.
      Accounts Payable Turnover13,8216,9916,57N.A.
      Payment Days26,3332,3831,57N.A.
      Total Asset Turnover1,792,212,15N.A.
      Debt Ratios    
      Debt to Net Worth000N.A.
      Current Liab. to Liab.0,981,201,17N.A.
      Liquidity Ratios    
      Net Working Capital$117 919$145 041$141 415N.A.
      Interest Coverage000N.A.
      Additional Ratios    
      Assets to Sales0,440,540,53N.A.
      Current Debt/Total Assets4%5%5%N.A.
      Acid Test23,0728,3727,66N.A.
      Sales/Net Worth1,642,011,96N.A.
      Dividend Payout000N.A.

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