Top 5 Mistakes New SaaS Founders Make & How to Avoid Them

The most important thing to remember when starting a SaaS business for the first time is that you can’t treat it like a sprint because it’s a marathon. Brief sprints make you feel like you’re getting ahead and creating separation from the rest, but they’ll come back to haunt you once you start burning yourself out. Failure to maintain a consistent pace is often why first-time SaaS founders find themselves in trouble.

While there are downsides to being a first-timer in the SaaS business, there are also advantages. Such as the courage to make bold decisions that experienced SaaS founders might lack due to experiencing hardships that have drained their energy and resources. Recognize your strengths and weaknesses and learn from the top mistakes that new SaaS founders make so you can avoid them.

Inadequate Capital

Starting a SaaS business requires patience and foresight. These are requirements for any business, but when it comes to SaaS, this can be what makes or breaks your company. It is imperative to have a feasible plan that lasts until your business becomes viable. Avoid making the mistake of expecting your business to reach profitability in a matter of months or even years. This is the primary reason that so many entrepreneurs launch their ventures as side hustles and opt to maintain a full-time job in order to fund their startup.

Prepare yourself to start executing your initial plan with patience and ensure that you have adequate finances available. Otherwise, chasing money will prevent you from focusing on developing and growing your business. When you run out of operating capital, your business will cease to exist.

Inexperienced or Weak Founding Team

We’ve all worked on a group school project where some of your teammates didn’t pull their weight. Chances are, you’ve probably been part of a team in your professional career that drew some striking comparisons to those group project days. There’s nothing worse, or more tiring, than dragging everyone else along while you do all of the heavy lifting. Your SaaS startup is no exception.

If you want to build a successful business and eventually drop the “Startup” moniker, then you need a strong team to help you build the business. The most successful startups are usually founded by generalists who have vast experience across a number of functional domains such as product design, development, marketing in all its forms, sales, etc. Generalists are ideal co-founders because they are able to provide a lot of coverage across the functional domains which allows your startup to effectively do more with a small team size. Any skill set not belonging to the core team will need to be either hired for or contracted out, which comes at a price. Investors understand the value that a strong team offers, which is why they place so much weight in it when evaluating your business for potential investment.

Unrealistic Market Expectations

As an investor, when I hear the phrase “If we only capture X% of our market, we’ll still make $X”, I run. Banking on the size of your target market and making assumptions that your product will inevitably fit somewhere in the picture is extremely dangerous. Just because your total addressable market (TAM) is big does not mean that your product will take flight, let alone capture any share of the market.

Focus instead on defining your ideal customer profiles and going as deep as possible to understand the pain points and challenges that your target audience is struggling to solve. Make sure that the solutions you are providing are in alignment with your messaging and brand story, and that you have identified the most effective distribution channels to reach your target audience.

Failure to Solve a Problem

If your product doesn’t solve a problem, then you have a problem. This mistake is a direct result from a lack of research into the real market that you are entering. The SaaS market is highly competitive, and many companies have already taken products to market that solve common problems. Most of the most common mistakes that founders make can be averted through deep market research. Don’t make assumptions. If you’re serious about becoming a successful entrepreneur, roll up your sleeves and do the deep work first.

Research the market thoroughly by engaging with potential customers to understand their needs and find that “void” that you can fill with your product. Most new SaaS founders fail to go deep enough in the research. However, if you get it right, you can build a customer base that will keep returning to your software holding their money out for you to take it.

Dreaming Too Big

There’s nothing wrong with dreaming big. So long as you create a strategy with actionable steps to take in an effort to realize that dream. The ideation stage is full of pitfalls and a lot of would-be entrepreneurs never make it past this stage. Putting dreams onto paper is one thing. Building an actual business is another. A SaaS start-up needs to actually start, and you can’t keep waiting for the perfect opportunity to arrive while you miss those already present.

By failing to serve available customers, you will miss out on opportunities critical to your growth until you start getting the customers and deals you hoped for when you first started. However, customers are unlikely to present you with the offers you believe your company deserves unless you have already proven yourself. If you can’t develop a strategy with a clear plan of action, then just keep on dreaming!

About author


Patrick Parker is a pioneer in the SaaS and B2B industry He founded SaaS Partner to help entrepreneurs build million-dollar businesses In 4 years, Patrick has founded four companies and grow each of them to at least $1M in revenue. His life story is filled with challenges, and he credits his darkest times to being the catalyst for a turning point in his life. Today, Patrick is a self-made millionaire helping others to succeed in the digital age with the right tools and mindset.
Patrick Parker
Become a Trendsetter
Sign up for Davenport’s Daily Digest and get the best of Davenport, tailored for you.