A software-as-a-service (SaaS) business delivers software applications online rather than requiring customers to install or manage them locally. Google Workspace and Slack are examples of popular SaaS tools: users sign up, log in, and access everything through a browser or an app. SaaS companies typically operate on a subscription model, in which customers pay monthly or annually for access, often with updates and support included.

The global SaaS market, worth an estimated $399.1 billion in 2024, is projected to expand at a compound annual growth rate of 12% from 2025–2030. New SaaS businesses can and should benefit from this growth. In this guide, we’ll discuss how to start a SaaS company, including how to develop your software product, common challenges you might face, and how Stripe can support your SaaS business.

What’s in this article?

• How do you develop a SaaS product?
  
• What pricing models work best for SaaS?
  
• How does Stripe support SaaS businesses?
  
• What are common challenges in SaaS development?
  
• How do you market a SaaS product?
  

How do you develop a SaaS product?

Creating a SaaS product requires you to solve a real problem by building a product people love that consistently works well. Here’s how to start developing one.

Identify the problem you’re solving

Figure out what problem you’re solving and who you’re trying to help. Talk to potential users to understand their challenges and get a sense of what’s missing in the products they already use.

Define your product’s value

What makes your SaaS product stand out? Think about your core value proposition and why someone would choose your product over others. Keep it simple: what value are you bringing to their life or business?

Focus on the basics first

Start small. Build a minimum viable product (MVP) that does one or two things really well, gather feedback, and plan to expand in the future.

Pick the right tools

Decide on the technology you’ll use to build your product. Choose platforms that can handle growth but don’t overcomplicate your starting point. Consider factors such as speed, scalability, and how easy it’ll be to add features.

Plan the foundation

Your architecture matters. Build it so multiple users can share the system without performance issues. Make security a top priority from the beginning.

Prioritize usability

Your product should be easy to use and feel intuitive and natural to customers. To test your progress, run prototypes with real users.

Build and test in cycles

Don’t wait to start testing until everything’s perfect. Build in small chunks, run continuing trials, and make adjustments as you go.

Set up hosting and updates

Choose a reliable cloud service to host your product. Automate updates to roll out improvements without disrupting your users’ work.

Determine pricing and payments

Decide on a pricing model that makes sense for your users. Monthly plans, annual subscriptions, or tiered options work well. Integrate with a payment processor to make payment easier.

Launch strategically

A beta program can help you fix problems and get valuable feedback before a wide rollout. When you’re ready to launch, have a marketing plan in place that includes ads, content, partnerships, or other means of getting your SaaS product in front of your target audience.

What pricing models work best for SaaS?

In SaaS pricing models, the objective is to match what you’re charging to the perceived value of your product. Most SaaS companies charge customers a recurring fee, usually on a monthly or annual basis, to access their products. Subscription-based pricing is predictable for businesses and users, which makes it helpful for budgeting. Below are some standard subscription models, along with how they work and when to use them.

Tiered pricing

With tiered pricing, you support several pricing levels, each with a different set of features or usage limits (e.g., “Basic,” “Pro,” and “Enterprise” tiers). This appeals to a range of users, such as startups, growing businesses, and large enterprises, with pricing that fits their needs.

• When to use it: Use tiered pricing when your product serves a broad range of customers with varying needs or budgets. It’s also a great way to encourage users to upgrade as their needs grow.
  

Usage-based pricing

In this model, users pay based on how much they use your product. For example, they might be charged by the number of application programming interface (API) calls, active users, or gigabytes of data processed. This model works like a utility bill: the more they use, the more they pay.

• When to use it: If your product’s value is tied directly to usage (e.g., cloud storage, API services), consider using usage-based pricing. It works well for users who want flexibility or frequently need to scale up and down.
  

Freemium model

With this pricing model, SaaS companies provide a free version of the product with limited features alongside paid plans with more functionality. It’s a great way to attract users who might upgrade once they see the value. However, the free tier has to deliver enough to entice people without giving away too much.

• When to use it: If your product is easy to adopt and has clear upgrade paths, this model might be a good fit. But be careful to avoid attracting many free users who never convert to paying ones.
  

Flat-rate pricing

This is the simplest model: one price, one product, and no tiers. Users pay a set fee for full access. Flat-rate pricing is straightforward, but it doesn’t leave much room for upselling or increasing revenue from existing customers.

• When to use it: If your product solves a single problem for a specific audience and doesn’t require intense scaling, consider charging a flat fee.
  

Per-user pricing

Customers pay a fixed fee for each user who accesses the software. Per-user pricing is easy to understand and scales with the size of a team.

• When to use it: If collaboration is a core part of your product (e.g., project management or team communication tools), per-user pricing might be a fit. But be cautious with this model, because per-user pricing can feel restrictive for larger teams.
  

Per-active-user pricing

This is a variant of per-user pricing. Customers pay only for users who actively use the product in a given month. It feels more fair to teams whose usage might vary widely.

• When to use it: Use this model when customers’ usage patterns are unpredictable or when you want to lower the barrier to entry for teams that are hesitant to commit to per-user pricing.
  

Custom pricing

Providers might negotiate custom pricing with large customers. This is common for enterprise clients with unique needs who require extra support or custom integrations.

• When to use it: Custom plans are often used for enterprise-focused products or those that serve industries with specific compliance requirements or workflows.
  

Hybrid models

Many SaaS companies combine pricing models. For example, a freemium model might use tiered pricing and usage-based add-ons.

• When to use it: Consider using a hybrid model if your audience is diverse or your product’s value can be measured in multiple ways.
  

How does Stripe support SaaS businesses?

Stripe supports SaaS businesses by addressing the unique challenges of running a subscription-based enterprise, from managing recurring revenue to scaling internationally. Here’s how Stripe supports SaaS companies.

Comprehensive subscription management

SaaS businesses depend on subscriptions. Stripe Billing is built for recurring payments, with support for the following:

• Multiple pricing models: Establish tiered, per-seat, usage-based, or flat-rate models or a hybrid model.

• Complex billing scenarios: Automatically handle midcycle upgrades, downgrades, and proration.

• Free trials and more: Offer trial periods, discounts, or coupons without building a custom system.

Support for global growth

Stripe simplifies local tax compliance and currency conversions for SaaS businesses with customers around the world. It also provides these features:

• Multicurrency support: Stripe supports more than 135 currencies as well as localized payment methods (e.g., SEPA transfers, WeChat Pay).

• Localized prices: Stripe displays pricing in the user’s local currency.

• Built-in tax calculations: Stripe Tax automatically calculates sales tax, value-added tax (VAT), and goods and services tax (GST) based on the customer’s location.

Smart retention tools

Churn is a major challenge for SaaS companies, particularly involuntary churn caused by failed payments. Stripe tackles this issue with these features:

• Automatic card updates: When customers’ credit cards expire or are replaced, Stripe works with card networks to update the details automatically.

• Smart Retries: Stripe uses AI to retry failed payments at optimal times to improve the chances of success.

• Customizable dunning emails: Stripe automatically notifies customers about failed payments so they can take action before service is interrupted.

SaaS-specific analytics and reporting

The Stripe Dashboard includes detailed metrics that SaaS companies need to closely monitor such as:

• Monthly recurring revenue (MRR) and annual recurring revenue (ARR)

• Customer lifetime value (LTV)

• Churn rates

• Trial-to-paid conversion rates

Simple invoicing

Stripe simplifies invoicing for SaaS companies by offering the following:

• Automated invoicing with custom branding

• Support for a variety of payment terms (e.g., net 30, net 60)

• Payment tracking to automatically follow up on overdue invoices

Customization for developers

Stripe’s APIs are especially useful for SaaS products. They allow you to:

• Build fully custom billing flows to match your unique pricing model

• Automate subscription upgrades, downgrades, and add-ons

• Offer custom payment portals for enterprise clients

Built-in compliance and security for SaaS

SaaS businesses handle sensitive customer data. Here are some of the ways Stripe manages security and compliance:

• Payment Card Industry Data Security Standard (PCI DSS) compliance: Stripe manages data security so businesses don’t need to store sensitive payment info.

• Strong Customer Authentication (SCA): Stripe handles SCA requirements for businesses in the European Union to secure transactions without adding cumbersome steps for users.

• Data security: All payment data is encrypted and stored securely.

Marketplace integrations

If your SaaS product includes a marketplace that allows users to process payments, Stripe Connect can help you:

• Split payments between multiple parties

• Automate payouts to sellers or service providers

• Comply with tax laws, even across borders

What are common challenges in SaaS development?

SaaS development presents unique challenges that can test even seasoned teams. Here are some of the most common obstacles you might encounter.

Balancing simplicity with functionality

One major challenge is deciding how much functionality to build into your product without overwhelming users. A SaaS tool needs to be developed enough to solve real problems but intuitive enough that people can use it right away. Overloading your MVP with features can slow development and confuse users. Users might abandon your product if it feels bloated or complicated to use so prioritize features that deliver immediate value while keeping other features in mind for the future.

Building flexible architecture

Many SaaS businesses start small with their products but want to scale fast. Designing an architecture that can handle thousands (or millions) of users is important, but overengineering from Day 1 might be a waste of resources. If your backend can’t handle a sudden influx of users, the resulting downtime and poor performance can damage your reputation. Conversely, building for a massive scale before you’ve proven demand is expensive and might be unnecessary.

Managing recurring revenue and billing

SaaS isn’t a one-time sale, and that makes managing subscriptions a core challenge. You should support different pricing models and manage scenarios such as midcycle upgrades and proration. Managing all of this manually can quickly exhaust your resources.

Balancing retention vs. churn

Getting users to sign up is only part of the battle; what’s equally important is keeping them engaged. High churn rates can hurt SaaS businesses. Customers could leave if they don’t see clear, ongoing value or if the onboarding process is lacking. Even satisfied users might leave due to budget cuts or a change in priorities.

Complying with security standards

SaaS companies are responsible for safeguarding user data. This presents substantial technical and legal burdens. Data privacy regulations, such as the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA), require businesses to meet strict standards, and noncompliance can result in hefty fines. A single security breach can shake customers’ confidence and cause them to search for alternatives.

Balancing customization with standardization

SaaS products often serve a range of customers. Some require custom solutions, while others need only a standardized approach. Customization can increase costs and complicate your product road map, while standardization makes development easier but risks alienating users who need specific workflows.

Handling infrastructure costs

SaaS relies on cloud hosting, and costs can grow considerably with your user base. Scaling your servers, databases, and storage while keeping costs manageable is a constant balancing act. Overprovisioning (i.e., buying too much capacity up front) can waste money, while underprovisioning risks downtime and slow performance, especially during peaks in traffic. Fine-tuning cloud costs requires you to closely monitor usage and automate scaling wherever possible.

Delivering continuous updates without disruption

Improvements are often necessary, but implementing them without inflicting the inconvenience of traditional software updates can be difficult. That means you need an effective system for deploying changes while avoiding downtime or bugs. You also need to maintain backward compatibility so updates don’t break existing workflows. Running multiple environments (e.g., staging, production) requires you to test features thoroughly before release. Downtime, even for minor updates, can frustrate users.

Nailing your pricing strategy

Pricing is particularly tricky if you have a SaaS company because you’re selling a service, not a product. If your price is too low, you could struggle to cover your costs or expand. When pricing is too high, you risk scaring off potential users. Different users value your product in different ways so a single pricing model might not work.

Standing out in a crowded market

The SaaS market is highly competitive, and you need a compelling way to stand out. While it can be tempting to compete on every front, finding a niche where you can dominate is far more valuable.

How do you market a SaaS product?

Marketing a SaaS product is about driving sales, but it’s just as important to showcase how your software solves problems to retain users in the long term. Here’s how you can effectively market your product.

Start with a defined value proposition

You need to answer two questions immediately for potential customers:

• What problem does this solve?

• Why is it better than the alternatives?

Your value proposition should be specific and show the benefits. Avoid vague claims such as “the best solution for your business,” and focus on what sets you apart, whether it’s the ease of use, unique features, or measurable return on investment. For example, instead of stating your product provides “better customer relationship management (CRM),” try saying that it “closes deals two times faster with an intuitive CRM system built for small sales teams.”

Use a freemium tier or free trials strategically

Most SaaS buyers want to try your product before they commit, so a freemium tier or limited-time trial can be a great hook.

The trial must be designed to encourage conversion. Deliver real value on a freemium tier but reserve premium features for paid plans. This strategy works best when users can clearly see how upgrading will improve their experiences.

Refine the onboarding for free trials to quickly guide users to their “aha moments” when they realize your product’s value.

Focus on content marketing

Since it’s common for buyers to research SaaS products before they make decisions, high-quality content can help capture their attention. Create blog posts, guides, videos, or webinars that address their issues and show how your product can help. Consider offering these forms of content:

• Case studies and success stories: Show real-world results from your customers.

• Comparison posts: Clarify how you stack up against competitors (without sounding too much like a sales pitch).

• Tutorials: Help potential users solve problems, even if they haven’t signed up yet.

Invest in search and paid ads

Targeting the right keywords with Google Ads can be an effective way to connect with potential customers. Focus on the following:

• High-intent keywords: These include phrases such as “best invoicing software for freelancers” rather than just “invoicing software.”

• Remarketing: Use ads to re-engage people who visited your site but didn’t convert.

Social media ads also work well for targeting specific industries or roles, especially on platforms such as LinkedIn for B2B SaaS.

Enhance your website for conversion

Your website is often the first interaction people have with your SaaS business so it needs to make a great impression. Strive for the following:

• Clarity: Make it immediately clear what your product does and whom it’s for.

• Calls to action (CTAs): These guide visitors to take the next step, whether that’s signing up for a trial, watching a demo, or requesting a quote.

• Social proof: Use testimonials, case studies, and logos of well-known customers to build confidence.

Do A/B tests on everything—headlines, pricing page layouts, and sign-up forms—to see what resonates best with your audience.

Use product-led growth (PLG)

With PLG, your product does the marketing. The idea is to make your product so helpful and easy to adopt that users naturally share it or invite others. This can include the following:

• Collaboration features: Encourage teams to bring their colleagues on board (e.g., with “Invite your team” buttons).

• In-product prompts: Use upsell or upgrade nudges based on user behavior.

Partner with influencers and affiliates

People value recommendations from figures they already follow. Collaborate with influencers, bloggers, or thought leaders in your industry to showcase your product. You can use the following:

• Affiliate programs: Incentivize users to promote your SaaS business with commissions for referrals.

• Guest appearances: Make appearances on relevant podcasts, webinars, or industry events to build credibility.

Nurture leads with email campaigns

Email campaigns are a great way to build relationships and develop leads. Here are some examples:

• Drip campaigns: Send a series of emails to new sign-ups that take them through your main features.

• Segmented lists: Send emails that speak to particular user behaviors or demographics. This means you send different messages to leads who abandoned their free trials and leads who haven’t started the trial.

Invest in customer success

Happy customers are one of your greatest marketing assets. A strong customer success team can:

• Encourage referrals and word-of-mouth marketing

• Turn satisfied users into case studies or testimonials

• Reduce churn by helping customers get familiar with your SaaS product

• Create programs such as webinars, live Q&A sessions, and personalized check-ins

Use metrics to refine your strategy

Tracking metrics such as the following tells you where to focus:

• Customer acquisition cost: How much are you spending to get a new customer?

• Customer lifetime value: How much revenue does each customer bring in over time?

• Churn rate: How many customers are leaving each month?