As an ever-growing number of companies shift to Software as a Service (SaaS) models for their infrastructure needs, a growing number of entrepreneurs have taken their startup ideas to the cloud, offering solutions to everything from customer service to supply chain management. The cloud computing model makes a lot of sense, considering it’s more affordable, scalable and reliable than traditional onsite IT. SaaS aims to simplify functionality so that a company or individual can drive their service with a dashboard (as opposed to needing an advanced computer science degree). It’s an exciting time to be launching a SaaS company, but like any endeavor worth doing, achieving success doesn’t come without its challenges. Here are 3 common hurdles faced by SaaS startups looking to create sustainable growth and profit, along with insider tips on how to overcome them.

1. Conducting Cohort Analysis

There’s a lot of data to analyze when trying to get a SaaS startup off the ground, but some of the most important information to be gleaned comes from cohort analysis. Cohort analysis takes the data from a given platform or application and rather than looking at all users as one unit, it breaks them into related groups for analysis. This provides great metrics on improving user onboarding, free trial conversion rates, churn, and customer lifetime value. With payback periods often longer than startups would like, it’s essential to retain as many early free-trial customers as possible. Converting these free trial members to lifelong paying customers will ensure profitability.

Gartner has found that 80% of your SaaS startup’s future revenue will be generated by just 20% of your current customer base, meaning it’s critical to identify the correct 20% as early as possible. Cohort analysis is the best way to do that. Check out this great lesson from Nick Franklin of ChartMogul on how to easily calculate your startup’s trial-to-paid conversion rates, and how to improve them. Cohort analysis can also be used to help you find takeaways about product acquisition by device type and user language. For a more in-depth discussion of forward thinking cohort strategies, check out Mode Blog’s post.  Hubspot also has a great post on cohort analysis with a free trial conversion rate template.

2. Onboarding Users

Another common hurdle in SaaS territory is onboarding users through free trial conversions. The goal here is to have as little product abandonment and churn as possible. Successful SaaS startups convert a high percentage of free trial users for long-term paid recurring subscriptions. So how do you do this? Your free trial should demonstrate to a potential subscriber why they need your product in their life. It should do so in 5 minutes or less. To do this, your user interface should be designed to communicate sufficient value for a customer to convert to a paying user. To do this, you need to be able to define what success looks like for your customer base. What are they hoping to achieve through your product? What’s their desired outcome in using it? Identifying these desires will help you achieve a higher trial conversion rate. is a great resource to study the onboarding processes of successful startups that have come before, from Apple Music to Twitter. This post on growth hacking site conversionXL contains helpful tips and tools for optimizing your customer onboarding process and tracking it through funnel analytics. The bottom line is that your company’s profitability depends on converting a high rate of free trial users into lifetime subscribers.

3. Creating Buyer Personas

Buyer personas are fictional, generalized representations of your ideal customers that are a key tool in inbound marketing efforts. Creating personas is essential for understanding and attracting the kinds of customers you want. From product design to marketing, having a deep knowledge of the audience you’re targeting allows you to tap into the narrative you want your company to tell. Pulling users into your story leads to greater engagement, which leads to more growth. So who are your ideal customers? What are their buying habits? Their backgrounds? Their pain points? The more info you compile on them, the better. Strong buyer personas are based on market research as well as insights you gather from your actual customer base through outreach like conducting surveys and interviews. The Hubspot blog has a free template you can download to create buyer personas. Get to know your ideal customers like the back of your hand, and you’ve got a much better shot at speaking their language.

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