How to Develop a Successful SaaS Application: Guide for Founders

The global software‑as‑a‑service (SaaS) market is projected to exceed $1 trillion in revenue by 2032. Companies that offer cloud-delivered software reported a 25% median growth rate, showing a consistent growth in recent years. According to various estimates, there are over 40,000 or even 100,000 software-as-a-service providers worldwide, with an increasing number of companies joining this trend.

The reasons are clear: the SaaS business model appeals to startups and SMBs thanks to its reduced infrastructure costs, easy scalability, and predictable revenue. However, it’s not all roses: most tech startups, including SaaS, fail. So if you have an idea and want to reach your target audience with a new cloud-hosted product, you need to have a clear go-to-market strategy and a reliable, experienced development partner.

In this article, we’ll talk about SaaS apps that are growing in adoption, the principles of their work, and the benefits they offer to businesses. We’ll also share insights on how to build a SaaS app that stays successful, highlighting essential things to consider at each development stage.

What is a SaaS application?

A SaaS application is cloud‑hosted software delivered via subscription. Users access it through a web browser or mobile app, while the provider manages the infrastructure, updates, and security.

SaaS solutions can perform virtually any actions and be dedicated to various niches. There are products designed for particular verticals (healthcare, logistics, etc.), while other SaaS products focus on a particular functionality niche (AI automation, team and remote work management, marketing, etc.).

Compared to traditional software, SaaS is more flexible and cost-efficient. Here’s why:

• SaaS reduces infrastructure costs and IT overhead: Instead of buying and maintaining your own servers and hardware, you’ll have a provider that handles all infrastructure.
• SaaS promises a wider reach due to accessibility: Since SaaS solutions can be accessed via a browser on any device, without installation, you can quickly gain customers from anywhere.
• There are lower upfront costs and easier maintenance: You pay a subscription fee rather than investing in hardware, and you don’t face the obstacle of a big upfront licensing cost.

Key characteristics of SaaS products and their development include the following:

• Cloud-based nature: SaaS applications are hosted on the provider’s servers and accessed through a web browser or mobile app.
• Subscription-based payment model: Instead of a one-time license fee, users typically pay a recurring fee (monthly or annually) to access the software. Typically, SaaS businesses offer different subscription tiers based on functionality or usage limits, while some also offer pay-as-you-go models to allow users to only pay for selected features.
• Automated updates: The provider handles all software updates and patches, ensuring users always have the latest version. 
• Multi-tenant architecture: Most SaaS solutions allow multiple customers (tenants) to share the same code, while keeping individual data secure. 
• Scalability: SaaS products are easily scalable by design: they allow adding or removing users and features as needed, which is more flexible than traditional software. 

Types of SaaS applications

As we’ve mentioned, there are SaaS apps for virtually any need and industry. The most popular SaaS categories are:

• Project management: Tools like Trello or Asana help teams organize tasks and manage collaboration in one place. 
• Customer relationship management: CRMs like Salesforce or HubSpot allow businesses to track contacts, manage sales pipelines, and improve customer communication.
• Enterprise resource planning: ERP systems connect finance, HR, supply chains, and other components to give companies a complete view of their operations.
• Accounting and finance: Applications like QuickBooks or Xero simplify invoicing, payroll, and bookkeeping.
• Marketing automation: Platforms like Mailchimp help send targeted emails, while analytics tools like Mixpanel help track campaign performance.
• AI-powered tools: Many SaaS solutions leverage AI/ML development to generate content and automate workflows.
• Industry-specific verticals: A large share of the SaaS market belongs to niche solutions targeted at healthcare, fintech, education, and other industries. Vertical SaaS companies show higher revenues compared to horizontal solutions, but they require a more complex development process, especially for highly regulated niches such as healthcare.

How does a SaaS application work?

SaaS products run on cloud infrastructure (AWS, Azure, Google Cloud, or other services). Users connect via browsers or apps; their requests are processed on servers and results returned over the internet.

While most SaaS have a multi-tenant architecture, some employ a single-tenant one for a more targeted, individual approach to customers.

Multi-tenant vs. single-tenant SaaS

In a multi‑tenant solution, individual user data remains separate, but the application itself, including all its databases, is shared. What it means is that updates and bug fixes happen simultaneously for all users (tenants). The biggest advantages of this model are lower setup costs and easier scalability, which are crucial for most startups.

In turn, a single-tenant SaaS implies a dedicated application instance and database per customer, sometimes running in its own virtual private cloud. It’s more expensive to maintain and update a single-tenant architecture, but it offers more customization possibilities.

Many providers use a hybrid approach (multi‑tenant for core services, single‑tenant for data storage) to balance cost and compliance. To choose the right approach for your product, consider a potential user base, current data security challenges, and available resources to allocate for individual update cycles.

Benefits of SaaS application development

The SaaS model attracts founders for a lot of reasons:

• Recurring, predictable revenue streams: Whether you go for a subscription model, other payment options, or a hybrid approach, SaaS allows you to have a steady income that can be calculated from the number of customers, their behavior, and usage statistics for different features.
• Global accessibility: Anyone with access to the internet can use your software from any device, which helps you reach more customers.
• Automated updates: You can roll out improvements and bug fixes without forcing customers to download and install updates.
• Strong security: Security measures like data encryption and compliance certifications are the norm in the SaaS field.
• Built-in analytics: If you integrate analytics from the jump (which is the best practice in SaaS development), you’ll have plenty of real-life user data to work with. It will help you understand customer behavior, identify at-risk customers, build more personalized flows, and so on. 

SaaS offers a simpler entry for startups and small businesses, reducing setup and maintenance costs, speeding up time-to-market, and giving plenty of opportunities to analyze usage data for growing and improving the product. 

The step-by-step guide to SaaS application development

To understand how to develop an effective SaaS app, let’s discover the 8 major steps and things you should take into consideration at each of them.

Step 1. Validate your idea

Start by identifying customer pain points through market research and competitor analysis. Talk to potential customers: interview people in your target audience, participate in online forums, and read reviews of competing tools.

Sketch user personas based on your findings (fictional characters representing your ideal customers) and use the Jobs-To-Be-Done framework to describe how they will interact with your product.

Once the initial research data is collected, you can plan the key features and development steps. But the idea will be fully validated only after you launch an MVP to a test audience to see if it resonates with real users.

Step 2. Define core functionality

Break functionality into must-have and nice‑to‑have categories using prioritization frameworks like MoSCoW (must, should, could, won’t) or RICE (reach, impact, confidence, effort).

Essential elements usually include secure sign‑up and authentication, account management, role‑based access, billing and subscription logic, data export/import, and analytics.

At this early development stage, you should also consider non‑functional requirements like security, accessibility, and compliance. Document your requirements in a product specification that will guide designers and developers.

Step 3. Select a monetization model

While SaaS is normally based on subscriptions, there are many additional options to consider: whether to offer a freemium version, whether to incorporate usage‑based billing (as the main pricing strategy or on top of subscription tiers), how many tiers to include, and so on. You can go for a hybrid approach: combine a subscription base with variable extra fees.

Here are some tips to choose the right monetization strategy for a SaaS app:

• Analyze customer acquisition cost (CAC) and customer lifetime value (CLV) to understand the big picture. A good SaaS business model aims for a CLV that is at least 3x higher than CAC. If your CAC is too high or your CLV is too low, you might be overspending on ads, targeting the wrong users, or struggling with churn.
• Analyze the usage cost on your side (API calls, storage, etc.) to build adequate pricing tiers. Track your cost-per-user based on usage, offer plans that scale with usage, and build in safety nets (usage caps or overage fees).
• Continually test and adjust pricing based on user feedback, conversion rates, and trends among competitors.

Step 4. Choose the best-fitting development stack

The tech stack you pick will affect scalability, development speed, and, ultimately, the longevity of your product.

First of all, it’s essential to find the best cloud service for your needs.

• AWS offers the broadest set of tools, services, and regions. Great for scaling globally, but can feel overwhelming for small teams.
• Azure is a solid choice if your team is already using Microsoft tools (like .NET). It’s also known for strong compliance features.
• Google Cloud is known for its ease of use, competitive pricing, and machine learning capabilities. Works well for startups building data-driven or AI-powered apps.

While it’s possible to migrate later (for instance, when your usage grows), it will require a lot of resources and a carefully curated migration strategy.

For the frontend, choose a modern, responsive framework. Popular options include JavaScript tools like React, Vue, and Angular. For backend development, many SaaS apps use Python (with frameworks like Django and Flask) or Ruby on Rails.

MEAN vs. MERN

A lot of SaaS applications are built on JavaScript development stacks called MEAN (MongoDB, Express.js, Angular, Node.js) and MERN (MongoDB, Express.js, React, Node.js). Generally speaking, MEAN is suitable for larger, more enterprise-focused solutions, while MERN offers higher flexibility and is easier to get started with.

Step 5. Craft a product roadmap

Define the desired timeline for your software to outline what should be delivered and when. Set major milestones (MVP launch, beta testing, full release) and decide on high-level epics (major functionality components). Note that it’s best to build in some buffer time for unexpected delays.

Having a clear roadmap, you can use Agile methodologies such as Scrum or Kanban to organize tasks and track progress. Your development team and stakeholders should understand what success metrics exist for each milestone so that it’s easy to measure each step and plan improvement iterations. 

Revisit the roadmap regularly and modify it based on the current progress. It should remain flexible to a certain extent: your priorities might shift based on first real-world feedback or market changes.

Step 6. Build a SaaS development team

If you already have a tech team or want to build one in-house, this will give you better control but cost a lot more resources. On the other hand, partnering with experienced development firms can accelerate delivery and fill skills gaps. With this approach, you can look for companies that have already created similar solutions and know first-hand about the challenges of your niche or particular functionality.

A SaaS app development team typically includes a product owner, UI/UX designers, frontend and backend developers, DevOps engineers, and QA testers (depending on the scope, it might be enough to have one designer / developer / tester on the project).

Step 7. Develop and test your SaaS

This is where your idea is finally getting brought to life. The process of development usually goes through several stages:

• Architecture design: Finalize requirements and select the optimal technical architecture.
• UI/UX design: Designers create wireframes and prototypes that illustrate user flows.
• Coding: Engineers build your SaaS application, with regular code reviews and CI/CD as best practices. 
• QA: Testers use manual and automated approaches to assess different aspects of a SaaS app. Make sure to incorporate testing as early as possible to catch issues before they affect users. 
• Deployment: At this stage, your application is ready to be finalized and prepared for the launch.

Don’t forget that once the development is done and your solution is released, you should have a tech team that handles continuous maintenance and support. 

Step 8. Launch and iterate your SaaS app

Releasing a beta version first is a valid, proven way to see how your application performs in real-world scenarios before marketing it in high gear. It means releasing your SaaS to a limited group of users and collecting feedback from them. 

With in-built analytics, you can monitor adoption, churn, and other valuable metrics to see if the app fulfills customers’ needs the way you expected. Based on the early feedback and KPIs, you can understand where users drop off and which features drive engagement. Then, use these insights to prioritize improvements and fix issues.

A SaaS app is never a “finished” product: continuous iteration is essential to stay competitive and meet evolving customer expectations.

The major challenges of SaaS development (and how to overcome them)

Knowing some of the biggest obstacles you might face with your SaaS app will help you be prepared. SaaS businesses struggle with the following:

• Data security and compliance: SaaS providers need to protect sensitive data and comply with local regulations (for instance, GDPR for EU markets and HIPAA for US-based healthcare products). The solution here is to have an experienced engineer on a team who specializes in security, and implement the best practices such as encryption, multi-factor authentication, regular security audits, and role-based access control. If your SaaS app is designed for a regulated area and targets multiple countries and regions, it might make sense to hire a compliance specialist. 
• Integration complexity: In many ways, SaaS development relies on third-party services, and integration costs range from $1,000 to $50,000 or higher. Adopt API-first design: build your SaaS app with APIs in mind from day one.
• Scalability and performance: Sudden user growth can cause slowdowns if your architecture isn’t prepared. For effective development, plan for horizontal scaling, implement auto‑scaling and caching, and monitor performance metrics.
• User adoption and churn: SaaS companies face an average churn of 5%. You’ll have to constantly analyze metrics and user behavior to prevent churn and improve engagement. Intuitive onboarding and responsive customer support are among the major driving forces to keep your users satisfied. But the most crucial thing is the value your product delivers: it should respond to a particular need and fulfill it the way your target users expect.
• Budget management: Many early-stage SaaS projects stall or fail due to budget issues. Start with a narrow scope and prioritize must‑have features. Speaking of ways to develop your SaaS app, outsourcing can significantly reduce costs and take off many administrative burdens. To understand a rough estimate of how much your SaaS development might cost, micro products tackling a narrow problem can be built for $10-20,000, while average apps will take around $50-100,000 and more.

Does it make sense to migrate an existing app to a SaaS model?

Migrating a legacy or on‑premise system to SaaS can unlock recurring revenue, improve user experience, and enhance scalability. However, the migration process has its own costs and requires a lot of qualified resources.

Here are the major things to consider when planning a migration to SaaS:

• The state of current architecture: Evaluate if the current development stack can support multi-tenancy and what on-premise-only dependencies there are, if any.
• Volumes of data to migrate: Estimate how much customer, transaction, and settings data you’ll need to move.
• ROI estimation: Calculate expected recurring revenue based on pricing models and projected user growth, and then compare these numbers with migration costs.

Future trends in SaaS development

In the SaaS field, you need to quickly react to market shifts and adapt to new development technologies. Let’s review some of the biggest trends in SaaS applications.

• Vertical and micro SaaS: Niche solutions continue to gain traction and achieve higher retention.
• AI and automation: Enterprises will increasingly integrate AI to personalize experiences and automate workflows.
• Low‑code platforms: Tools that enable non‑developers to build applications will accelerate product discovery and reduce costs.
• Enhanced security protocols: Continuous authentication methods and automated security testing are among the major trends that appear to respond to rising cyber threats and global regulations.
• Flexible pricing models: Value‑based and usage‑based pricing will grow as companies seek to align cost with delivered value.
• Hybrid and multi‑cloud strategies: Flexible hosting options will become increasingly more common.

It’s important to stay on top of SaaS development trends and emerging tech to improve your solution and survive in a saturated market. 

How can generative AI help create smarter SaaS products?

Generative AI models produce novel content based on patterns learned from large datasets. Integrating these models into SaaS apps can supercharge functionality, reduce costs, and provide more value to users.

Gen AI use cases in SaaS development

Gen AI can enhance SaaS solutions in a lot of ways:

• Personalization: Generative AI can tailor dashboards, recommendations, and messaging based on individual user behavior, preferences, or past actions.
• Marketing content and documentation: AI models can instantly generate or update product descriptions, blog posts, help center articles, or emails.
• Predictive analytics: By analyzing historical user data, AI can forecast trends like churn risk, feature adoption, or revenue projections. 
• Chatbots: AI-powered assistants and chatbots can handle onboarding and support. 
• Coding and testing: AI tools can assist developers with code generation and produce data for testing.

The benefits of Gen AI in SaaS development

AI speeds product iteration and can improve customer satisfaction thanks to personalized flows. The major benefits for companies thinking of implementing AI in SaaS development are:

• Reduced operation costs: Due to automation, you’ll need fewer tech and support staff.
• Increased user retention: Personalization opportunities can keep customers engaged.
• Monetization opportunities: You can offer premium AI features in your SaaS app or optional add-ons to grow your revenue.
• Easier compliance: For regulated sectors, automated governance tools can reduce compliance risks.
• Data-driven insights: AI helps you analyze user behavior and improve your product based on real-life feedback.

Gen AI implementation tips

Don’t adopt AI just for the sake of it. What’s recommended for efficient implementation:

• Partner with experienced tech vendors: Companies that have already successfully integrated AI can help you avoid costly mistakes.
• Start with small AI features: Experiment with simple automation to see how your customers respond and how new functionality impacts your particular product. Expand based on your findings. 
• Monitor performance metrics: Track how your AI features affect user engagement and retention, and how the cost of development and maintenance corresponds to a revenue increase.

Build your SaaS with an experienced development partner

If you have an idea for a SaaS application, you’ll have to navigate a range of strategic and technical challenges to build it. It’s crucial to ensure data security and compliance, plan cost-effective integrations with third-party services, and adopt efficient frameworks for analyzing key metrics. 

You’ll also need to keep track of market trends such as gen AI implementation or the growth of low-code development platforms. Staying ahead of these trends and aligning product development with evolving user needs can help turn a strong idea into a scalable, profitable business.

Ultimately, the success of your product largely depends on strong planning and thoughtful architecture choices. It also relies on the development team that will create your SaaS application. Partner with Binary Studio that has the expertise to turn a rough idea into a full-fledged software, built on a modern tech stack and with real customer demands in mind.

About Binary Studio

Binary Studio is a custom software development company that has been delivering MVPs and full-scale software with custom-trained product teams since 2005, specializing in ideation and product discovery, building MVPs, full-cycle custom software development, dedicated development teams and QA services with core expertise in Node.js, React Native, .NET, Flutter and AI/ML integration. We serve a range of industries, including greentech, healthcare, real estate, construction, fintech, and education. For more information, visit binary-studio.com.

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