5 Biggest Challenges for SaaS Companies (And How to Solve Them)

Born in the Startup Nation, dreams of my big exit and early retirement occur twice a week (Sunday at 2 am and Thursday at 4:30 am). While I don’t have the passion for writing thousands lines of code, my world is filled with concept brainstorming sessions, wireframe design (on napkins, of course), product development, marketing automation, and growth hacking tactics – all aimed to grow the subscriber base.


After a decade (plus) working in high tech and marketing firms, I’ve learned a lot about the biggest challenges facing SaaS companies – or as I like to call them – opportunities.


SaaS (Software-as-a-Service) businesses are the new norm – think of any service you use in your day-to-day life, from Netflix to Spotify, to Quickbooks Online and Google Drive for your work. But while SaaS can come with a lot of potential , bringing in new subscribers and nurturing your existing subscribers can be a lot of work.


So how can you take your SaaS company from a theoretical idea to a cash-flow positive business goldmine? The biggest challenges have to do with lead generation and customer retention – do that well and you’ll be bringing in new customers while also satisfying your existing ones.


Below are five of the biggest challenges that most SaaS companies face – the million-dollar question is, if all challenges are relevant to your business, which one should you solve first?


Challenge #1: Increase registrations

Challenge #2: Increase conversion rates

Challenge #3: Decrease the dropout rate

Challenge #4: Increase subscription revenue

Challenge #5: Increase cross-sells and up-sells


I faced that same problem when I was brought onboard to develop the marketing strategy for EtsyMarketingTool.com (EMT), a marketing automation software designed for Etsy sellers. The first thing I did was to take a look at those challenges and prioritize them in terms of what I thought would make the biggest difference, first.


For EMT, here were my top priorities:  

  1. Increase registrations – to do that, I need to increase traffic and conversion rates (turn visitors into users; then, turn free trial users into paying subscribers; and eventually turn subscribers into advocates).
  2. Increase customer lifetime value / increase subscription duration (how long these subscribers  were using EMT and also decrease the dropout rate)


Right about now is when someone usually stops me and says: “Wait! But all those challenges are important, how can you choose just a few to tackle? And how can you really prioritize them? My boss wouldn’t understand if I told him/her I wanted to focus on increasing registrations but not cross-selling.“


The answer to that is a four-letter word that really doesn’t get used enough: data.


The only way I was able to prioritize these challenges and focus on the right ones, at the right time, was using data to determine where the biggest opportunities lay.


What Kind of Data to Look for


In this case, I started by doing some research – these are the types of questions you should be looking for before you prioritize your challenges:

  • User analysis
    • How many existing users did EMT have? (For our purposes, users were visitors who created an account). How many were active users? (On a trial or subscribers)
    • What percentage of users were subscribers?
    • What were our conversion rates? (Both visitor-to-user and user-to-subscriber)
    • How many of them were free trial vs. paying customers? Of the paying customers, how many were paying month-to-month and how many purchased an annual plan?
  • Web analysis
    • How much traffic were we getting?
    • Which sources were sending us the most traffic?
    • Which devices were visitors using to get to our website?
  • Growth metrics
    • How many new users were we gaining per month? (a critical number to understand the overall performance)
  • Competitor analysis
    • How long is their free trial program?
    • How much were they charging subscribers?
    • What features did they offer subscribers?


That’s an example of the type of data you want to gather as you prioritize your challenges. But once I knew the answers to those questions, I was able to not just put together a data-driven marketing strategy, I was also able to justify my ideas to senior management.


If there’s one thing I want you to take away from this piece, it’s knowing which challenges are affecting your SaaS business and the questions and data to gather in order to prioritize tackling those challenges.


So what happened with EMT? Well, the data-driven approach worked. I helped EMT increase software signups by over 270% and monthly revenue by 450%!

In the next post, I’ll share the tactics I used to solve each of those challenges.