# Software as a service (SaaS)

Software as a service (SaaS) is software that people use through a browser or app while the provider hosts and maintains it, usually paid for by subscription instead of a one-time license.

Also called: SaaS, SaaS product, Cloud software, Subscription software, B2B SaaS.

## In short

- SaaS is software you **rent, not install**. The provider runs it, updates it, and stores the data.
- Every SaaS needs the same supporting parts: accounts, billing, permissions, email, and admin tools.
- Subscription revenue makes retention the number that matters most.
- A first SaaS release should do one job well for one kind of customer, then grow.

## What makes software SaaS

Before SaaS, businesses bought software on a disk, installed it on their own machines, and paid again for upgrades. SaaS moved the software to the provider's servers. Customers sign in through a browser or app, the provider ships updates continuously, and pricing becomes a monthly or yearly subscription, often per user or by usage.

Most SaaS products are [custom web applications](https://www.choie.co/glossary/custom-web-application), sometimes with mobile apps alongside. One running system serves many customers at once, with each customer's data kept separate. That model, called multi-tenancy, is a large part of what makes SaaS different to build.

## The parts every SaaS needs

Founders tend to focus on the main feature, but customers also expect a set of supporting parts before they will pay. These are often underestimated in quotes.

**Diagram: What surrounds the core feature.**

Core workflow (The job customers pay for) feeds:
- Accounts (Sign-up, sign-in, password reset)
- Billing (Plans, trials, invoices, cancellation)
- Teams and roles (Invites and permissions)
- Email (Receipts, alerts, onboarding)
- Admin tools (Support and account management)
- Data and security (Separation, backups, exports)

_A first release can keep each of these small, but most cannot be skipped once customers pay._

Most of this lives in the [backend](https://www.choie.co/glossary/backend), and much of it can come from established services: a payment provider for billing, an authentication service for sign-in, and an email service for messages. Building these from scratch is rarely worth it for a new product.

## The numbers that matter

| Metric | What it means |
| --- | --- |
| Monthly recurring revenue (MRR) | Subscription revenue you can expect each month |
| Churn | The share of customers or revenue lost in a period |
| Activation rate | How many new sign-ups reach first value |
| Customer acquisition cost (CAC) | What it costs to win one paying customer |
| Lifetime value (LTV) | Revenue you expect from a customer before they leave |

Because revenue arrives month by month, a customer who leaves after two months may never have paid back what it cost to win them. That makes [user retention](https://www.choie.co/glossary/user-retention) the center of SaaS economics, and [product analytics](https://www.choie.co/glossary/product-analytics) the way to see it.

## Building a first SaaS release

The same rules as any [MVP](https://www.choie.co/glossary/mvp) apply. Pick one customer type and one job, build that workflow properly, and keep the supporting parts minimal: one sign-in method, one plan, simple roles. Enterprise features such as single sign-on, audit logs, and custom contracts can wait until a customer asks and is ready to pay for them.

> **Charge early.** Payment is the strongest evidence that the product solves a real problem. Even a single paid plan at launch teaches more than a long free beta.

At Choie, a first release of a [web product](https://www.choie.co/services/web-app-development) is a fixed-price build starting at $19,000, taking four to six weeks, with the scope written down before work starts. Integrations such as payments and identity are among the things that set the price.

## Common mistakes

- **Building billing and roles first.** Weeks on plan logic and permissions before the core workflow is proven. In a Choie build, the first two weeks decide what to build first and what to cut, which is the point to catch it.
- **Too many plans.** Three tiers and add-ons at launch, before you know what customers value.
- **Weak data separation.** A permissions bug that shows one customer's data to another can end a young SaaS.
- **No way to leave.** Customers increasingly ask how they can export their data. Have an answer.

## Common questions

### What is an example of SaaS?

Familiar examples include Google Workspace, Slack, Notion, and Salesforce. Each runs on the provider's servers and is paid for by subscription, and customers use it through a browser or app.

### What is the difference between SaaS and a web app?

A web app is a technical description: software that runs in a browser. SaaS is a business model: software provided as a hosted subscription. Most SaaS products are web apps, but not every web app is sold as SaaS.

### How long does it take to build a SaaS MVP?

A focused first release with one customer type and one core workflow can take four to six weeks. Adding several user roles, integrations, or platforms makes it longer. Choie's builds send the first live link on the first Friday and spend the final week watching real customers use the product and fixing what gets in their way.

### Should I use a SaaS boilerplate?

Starter kits can save time on sign-in, billing, and settings. Check that the code is maintained, that you understand it, and that it does not lock you into choices you would not make yourself.

Related: [Custom web application](https://www.choie.co/glossary/custom-web-application), [Minimum viable product (MVP)](https://www.choie.co/glossary/mvp), [Backend](https://www.choie.co/glossary/backend), [User retention](https://www.choie.co/glossary/user-retention), [Product analytics](https://www.choie.co/glossary/product-analytics).

HTML: https://www.choie.co/glossary/saas