Entrepreneur

A Step-by-Step Guide to Generating & Validating SaaS Ideas

Joel Falconer
Share

Picking the right SaaS idea is critical to your success as a startup business. This guide will show you how to generate ideas and know which one to pursue.

Starting a SaaS business or micro-SaaS can be a profitable endeavor – but first, you need to come up with the right idea. So how do you go about doing that? In this step-by-step guide, we’ll walk you through the process of finding and vetting potential SaaS ideas. We’ll also show you how to determine whether an idea is worth pursuing or not.

Let’s get started!

The complete guide to generating and validating SaaS ideas

What Is SaaS?

SaaS stands for software-as-a-service. In layman’s terms, it means creating and selling a software application that can be accessed and used by customers over the internet.

Some popular examples of SaaS businesses include Slack, Dropbox, and Salesforce.

SaaS businesses have a few key characteristics that you should keep in mind as you generate ideas:

  • They’re typically subscription-based, meaning customers pay a monthly or annual fee to use the software.
  • They’re usually cloud-based, which means they can be accessed from anywhere with an internet connection.
  • They often have a freemium model, which means they offer a basic version of the software for free and then upsell customers to a paid premium version with more features.

This combination of recurring revenue, scalability, and freemium-driven demand generation makes the SaaS model popular among entrepreneurs.

A Process for Generating & Validating SaaS Ideas

Building a business is hard work, and the risk of wasting years on something that doesn’t pan out can be daunting. The key to avoiding this disaster? Solving problems people are motivated to solve in their lives – enough that they’d pay for the solution!

There are many different ways you can go about generating SaaS ideas. We’ll dive deeper into these strategies in a moment. But regardless of which idea generation methods we use, we’ll follow a similar process from brainstorming to prototyping:

  1. Make a list of potential customer segments or target markets for your SaaS business.
  2. For each target market, brainstorm a list of potential problems or challenges they might face that your software could help with.
  3. Once you have a list of potential problems, try to come up with ideas for software solutions that could address those issues.
  4. As you come up with ideas, start evaluating them. Is this an idea that’s feasible for you to pursue? Is there a large enough market for this? Is this a problem that people are willing to pay to have solved?

There are a few benefits to using this framework:

  • You’ll know your market and target customer, which makes everything from user research to marketing easier.
  • You’ll know the problem you’re solving (and that it’s a legitimate problem people are having, and might pay to solve).
  • You’ll validate that there’s existing demand in the market.
  • You’ll validate your capability to deliver the result.

This ensures that your ideas are problem-focused and that you’ve done some basic due diligence on their market potential before spending time on a more formal validation process.

We can alter the inputs to get different results, but this is the framework we’ll keep coming back to for generating and vetting SaaS ideas. Let’s take a closer look at each step.

1. Identify your target market

The first step is to identify who your potential customers could be. SaaS businesses typically serve one or more of the following broad segments:

  • Small businesses: Businesses with less than 100 employees.
  • Enterprise businesses: Businesses with more than 100 employees.
  • Startups: New businesses that are looking for fast growth.
  • Consumers: Individual users who are looking for a solution to a problem.

These are the broadest categories you’ll tend to work with in SaaS, but you can get much more specific based on niche, income (or revenue) range and other demographics, interests, and so on.

Once you’ve identified a few potential customer segments, start brainstorming problems they might face.

2. Brainstorm a list of potential problems

For each target market, make a list of potential problems or challenges they might face that your software could help with. As you brainstorm, think about the following:

  • What are the common pains and frustrations your target market experiences?
  • What are their day-to-day challenges?
  • What are their long-term goals?
  • What processes or tasks do they find time-consuming or tedious?

Here’s a cheat sheet to kick off your brainstorming based on the top-level market segments.

Some common problems that small businesses face include:

  • Inventory management
  • Accounting and bookkeeping
  • Customer relationship management (CRM)
  • Human resources (HR)
  • Marketing

Common challenges that enterprise businesses face include:

  • Data management and storage
  • Security
  • Compliance
  • Integrations
  • Workflow efficiency

Problems that startups face include:

  • Rapid growth and scaling
  • Hiring and onboarding
  • Financing
  • Customer acquisition

And finally, some common problems that consumers face:

  • Productivity
  • Health and fitness
  • Organization and time management

Now that you have a list of potential problems, it’s time to start thinking about software solutions that could address those issues.

3. Generate ideas for solutions

As you generate ideas, keep in mind that the best SaaS solutions are usually ones that are:

  • Simple: They solve the problem in a straightforward way without any bells and whistles.
  • Scalable: They can be easily scaled up or down to meet the needs of different customers.
  • Flexible: They can be customized to meet the specific needs of different customers.

If you’re looking for more ideas, here are a few resources to help you get started:

  • The Lean Product Playbook: This book is all about using Lean Startup ideas to validate your business ideas quickly and efficiently, and find product-market fit quickly with Minimum Viable Products and rapid customer feedback.
  • The Lean Startup: This book by Eric Ries is a seminal piece that will give you an understanding of the broader Lean Startup framework.
  • The r/SaaS and r/SideProject subreddits: This subreddit is full of entrepreneurs who are looking for ideas for their next SaaS business.
  • GummySearch: Speaking of Reddit, this tool helps you mine Reddit audience research for insights. Discover what problems your customers are facing and how they want to be addressed.
  • IndieHackers: This site is a goldmine for case studies from successful SaaS entrepreneurs (as well as a great maker community).

Once you’ve generated a list of potential ideas, it’s time to start evaluating them.

4. Evaluate your ideas

When you’re thinking about which trends to capitalize on, it’s important to consider whether there’s a large enough market for your idea.

This intermediary step between coming up with ideas and validating ideas is essential. Validation requires a short but notable time investment, so you’ll never be able to validate every idea you have.

This will help you narrow your list of ideas down to the eventual winner without relying on too much sheer intuition. You don’t want to prematurely discard a prescient idea, but you don’t want to get bogged down here, either.

The idea is to quickly filter a shortlist for a more formal validation process.

As you evaluate your ideas, there are a few key factors you’ll want to keep in mind:

  • Is this an idea that’s feasible for you to pursue?
  • Is there a large enough market for this?
  • Is this a problem that people are willing to pay to have solved?

One useful way to guide your decisions with data in a hurry is to use Google Keyword Planner or your preferred keyword research tool. see how many people are searching for keywords related to your idea.

This allows you to see how many people are looking for solutions in a given area in a way that’s fast and rough, but data-driven. If there aren’t enough people searching for these keywords, it’s likely that there’s not a large enough market for your idea.

The benefit of using this indicator is that you’ll start with an idea that’s been evaluated for demand and that you know has a viable organic search strategy available to it.

We’ll come back to full-scale validation later.

Inputs for SaaS Ideation

When it comes to generating ideas for SaaS products, there are a few methods you can use.

Among others, you can solve your own problem, ask your potential customers, or conduct market research.

It might to help to think of these brainstorming lenses in terms of the perspective they emphasize.

  • Human-focused methods look at the problems people are experiencing directly and tries to fill the gap with an innovative solution. These approaches involve a lot of conversation and networking.
    • Look for problems in your own life or work that could be solved with a software application. 
    • Talk to people you know and ask them if they’ve ever faced any frustrating situations or challenges that a software application could help with. 
    • And talk to people who work in sales or customer service. Ask them what challenges their customers face that an app could help with.
  • Market-focused methods evaluate the market as it stands today, whichever market that happens to be.
    • Market research. Who are the established players? Who are the disruptors? How much money is being made across the industry today, and are there tangible factors that indicate continued or renewed growth over the next few years?
    • How much accessible opportunity is left in this industry at its current stage of maturity, presuming no other factors change?
    • If other factors do disrupt that market (such as a change in technology), what might they be? And can you capitalize on that prediction?
    • Identify trends in the tech industry and think about how you could create a SaaS business to capitalize on them. Keep your eyes peeled for news stories about companies that have been funded or acquired.
  • Business-focused methods look at the way each business that constitutes “the competition” operates. The idea is to find a substantial enough way to improve on shortcomings to give you a business case.
    • Look for SaaS companies that are struggling and try to figure out why. Is it a lack of demand, or a poor experience in the product you can improve on? 
    • This can also give you some insight into what doesn’t work in the industry and help you avoid making the same mistakes.
    • Look for SaaS companies that have outpaced expectations for growth or funding. Can you replicate their disruptive approach in your niche or in a way that capitalizes on your strengths?

Each of these methods can be a great way to generate ideas for SaaS products that could be successful.

1. Solve your own problem

One of the best methods is to look at the problems you’re experiencing in your own business or life.

  • What are the pains and frustrations you’re experiencing?
  • What processes or tasks do you find time-consuming or tedious?

You can also look at the SaaS products you’re currently using and see if any areas could be improved.

  • What features are you missing?
  • What processes or tasks do you find time-consuming or tedious?

These could be potential areas to focus on when coming up with SaaS ideas.

Basecamp is a great example of a company that solved its own problem. It created a project management tool because they were frustrated with the existing options on the market.

If you’re experiencing pain points in your business or life, it’s worth considering whether a software application could help solve them.

2. Ask your customers

Another method is to talk to people you know and ask about their experiences. This can be a great way to generate ideas because you’re getting first-hand information about the challenges people face.

Talk to other business owners and ask them about the problems they’re experiencing. You can also look at the SaaS products they’re currently using and see if any areas could be improved.

Zapier is a great example of a company that asked its customers for ideas. They created a tool that allows people to automate tasks because they were constantly being asked for recommendations on the best way to do this.

Another method is to talk to people who work in sales or customer service. 

These are the people who are on the front line and have direct contact with customers.

They’re likely to be aware of any pain points or frustrations that customers are experiencing. This information can be used to generate ideas for SaaS products that could help solve these problems.

3. Conduct market research

Conduct market research and see what areas are growing or declining. This can help you identify potential areas to focus on when coming up with SaaS ideas.

You can look at industry reports, read articles, and talk to people in the industry to get a better understanding of what’s happening.

Slack is a great example of a company that saw an opportunity in the market and created a product to capitalize on it. They noticed that people were using messaging apps for work and saw an opportunity to create a tool specifically for businesses.

4. Research trends in the tech industry

Identify trends in the tech industry and think about how you could create a SaaS business to capitalize on them.

This can be a great way to generate ideas because you can see what’s popular and identify any gaps in the market.

In the previous section, we thought about potential businesses by evaluating the competitive landscape in verticals and niches. 

Here, we’re employing similar methods in a different way. Which developments in the tech industry open the door to new solutions for old problems in existing industries? We’re particularly interested in applying these broad changes and developments to areas we’ve identified as those where we have skills, strengths, and experience.

Keep your eyes peeled for news stories about companies that have been funded or acquired. This can be a good indication that there’s demand for the type of product they offer. Even if you’re too late for a high chance of success in one of these markets, there are often adjacent gaps you can fill or ways to repurpose the strategy for a more specific segment.

  • You can check out popular tech publications like TechCrunch and VentureBeat to stay up-to-date on the latest industry trends.
  • You can also use tools like Google Trends and Trends Everywhere to see which keywords are being searched for the most on a relative scale. This can give you insights into what people are interested in and might be looking for solutions to.
  • The Trends newsletter has made a successful business out of surfacing trend-based opportunities for entrepreneurs.
  • For a more in-depth look at upcoming trends, check out Gartner’s Hype Cycle for Emerging Technologies.

Once you’ve identified a few trends that you think have potential, it’s time to start thinking about how you could create a SaaS business to capitalize on them.

For example:

  • If you’re interested in AI, you could brainstorm ideas for a SaaS business that uses AI APIs to help businesses automate tasks or make better decisions.
  • If you’re interested in chatbots, you could create a SaaS business that helps businesses filter and feed their customer service activity into the model in a more effective way.

Validating Your Ideas

To help you evaluate your ideas, here’s a simple framework you can use. This framework is based on the Lean Startup methodology, which is all about validating your business ideas quickly and efficiently.

The first step is to validate that there’s a real problem to solve, and existing demand in the market. You can do this by conducting market research and talking to potential customers.

Once you’ve validated that there’s demand, the next step is to validate your ability to build the idea. This is where you’ll need to do some feasibility research to see if it’s possible to build a solution that meets the needs of your customers.

The next step is to validate that your solution solves the problem. You can do this by conducting user research and talking to potential customers. During your conversations, ask:

  • What are the common pains and frustrations your target market experiences?
  • What are their day-to-day challenges?
  • What are their long-term goals?
  • What processes or tasks do they find time-consuming or tedious?

Then, validate that people are willing to pay for your solution. You can do this by conducting customer research and talking to potential customers. You’ll want to find out:

  • How much are they currently spending to solve this problem?
  • How much would they be willing to pay for a solution?

Once you’ve validated that there’s a market for your idea, the next step is to validate your business model, go-to-market strategy, and growth strategy. There are a few different ways you can do this:

  • Create a landing page: This is a great way to validate your idea quickly and efficiently. You can create a simple landing page with an email signup form. Then, you can drive traffic to your landing page through paid ads or social media.
  • Launch a minimum viable product: This is a great way to validate your idea with potential customers. You can launch a simple version of your product and see how people react. If people are willing to use your product, then you know you have a viable business model.
  • Create a sales deck: This is a great way to validate your idea with potential customers. You can create a simple sales deck and use it to pitch your product to potential customers. If people are interested in your product, then you know you have a viable go-to-market strategy.
  • Launch an MVP or beta: This is a great way to validate your idea with potential customers. You can launch a beta version of your product and see how people react. If people are willing to use your product, then you know you have a viable go-to-market strategy.
  • Conduct customer interviews: This is a great way to validate your idea with potential customers. You can conduct customer interviews and see how people react. If people are interested in your product, then you know you have a viable growth strategy.
  • Launch a paid ads campaign: This is a great way to validate your idea with potential customers. You can launch a paid ads campaign and see how people react. If people are interested in your product, then you know you have a viable growth strategy.

After you’ve gone through this process, you should have a good idea of whether or not your SaaS idea is viable. If you’re able to validate both demand and feasibility, then you have a good chance of success. However, if you’re only able to validate one or the other, then reconsider your idea.

One final note: it’s important to validate your ideas as quickly and efficiently as possible. The goal is not to spend months or years developing a product that no one wants. The goal is to validate your ideas quickly so you can either move on to the next idea or continue developing the idea.

Conclusion

The tech industry is constantly evolving, and it can be difficult to keep up with the latest trends. However, if you’re interested in starting a SaaS business, it’s important to do your research and validate your idea before investing too much time or money into it.

In this article, we’ve outlined a few tips for coming up with ideas for a SaaS business and how to validate them. With a little bit of research, you can be on your way to starting a successful SaaS business.