How to validate SaaS idea in 2023: Complete Guide
Denis Shatalin
Founder of SaaS Camp
After killing 3 SaaS and 2 apps I came to a conclusion that if you want your startup to make money, it should make money. Many of us procrastinate by adding more features to the product and hesitate with talking to potential users. This ends with SaaS dying in a couple of months from not finding any users.
I used to think that collected emails equal validation, but getting 0 paying users from 160 emails proved me wrong. The best way to validate SaaS idea is to sell the product as early as possible.
I don't want you to give up on your ambitious product. That's why I wrote this step-by-step guide, explaining how to validate your SaaS idea by closing sales as quickly as possible.
I used to think that collected emails equal validation, but getting 0 paying users from 160 emails proved me wrong. The best way to validate SaaS idea is to sell the product as early as possible.
I don't want you to give up on your ambitious product. That's why I wrote this step-by-step guide, explaining how to validate your SaaS idea by closing sales as quickly as possible.
SaaS idea validation: the basics
Before diving into specific steps, let's go over the basics.
SaaS idea validation is all about finding out if there's a demand for the product you have in mind. If you don't validate it, there's a good chance you'll be wasting months (or even years) of your time on something that nobody wants or needs to pay for.
To validate your SaaS idea, you need to talk to potential buyers and get feedback on the product idea. But that's easier said than done, which is why idea validation is one of the things that SaaS founders struggle with most.
Why? Let's discuss.
SaaS idea validation is all about finding out if there's a demand for the product you have in mind. If you don't validate it, there's a good chance you'll be wasting months (or even years) of your time on something that nobody wants or needs to pay for.
To validate your SaaS idea, you need to talk to potential buyers and get feedback on the product idea. But that's easier said than done, which is why idea validation is one of the things that SaaS founders struggle with most.
Why? Let's discuss.
1. SaaS idea validation: the main difficulty
Pretty much all SaaS founders (and entrepreneurs in general) will have heard of the Build-Measure-Learn (BLM) loop made famous by The Lean Startup:
This is a great model in theory, but SaaS founders (myself included) often struggle when putting it into practice.
Why? For starters, it's really hard to get information. And when you do get information, it's really hard to interpret it.
The solution? Start selling your product as quickly as possible. Before you even start coding it. If that sounds like a wild suggestion, keep reading – I'll be walking you through the entire validation process from start to finish.
- Build: Turn your idea into an MVP.
- Measure: Collect data that represents the market's reaction.
- Learn: Validate or disprove your idea with the data (and then iterate and adjust).
This is a great model in theory, but SaaS founders (myself included) often struggle when putting it into practice.
Why? For starters, it's really hard to get information. And when you do get information, it's really hard to interpret it.
The solution? Start selling your product as quickly as possible. Before you even start coding it. If that sounds like a wild suggestion, keep reading – I'll be walking you through the entire validation process from start to finish.
2. Start with a problem
At the start, some startups get obsessed with pleasing a certain customer group. The issue is that it’s tough to identify the customer group before we realize what we want to do. It’s unclear how broad it should be, and that we’re talking to the same audience throughout our validation stage.
When we talk to 10 b2b salesmen and get various results, it’s unclear if we should group them by experience, salary, number of calls they have each week, or something else.
Other startups stick to the product. They ship the prototype and then start pushing it to potential customers. I usually lasted for 4-8 weeks before I dropped my products using this methodology.
I shipped something I’d partly use myself, and something I thought people would use. As a result, no one did. 90% of products die after founders ship them into nowhere and don’t find any customers within a few months.
I always prefer to stick to the problem: “difficulty in finding b2b leads”. There are thousands of profitable products solving this issue for dozens of customer groups.
When we focus on solving 1 problem, it’s a higher chance we’re going to find the proper solution after a few iterations. It’s best when the founder experienced the problem too. In this case, we’ll need less time to validate that it really exists.
We shouldn’t jump from one problem to another every 6 weeks. Instead, we’ll focus on a single issue we’re confident about and will pass half of this milestone before even building anything, by doing presales.
When we talk to 10 b2b salesmen and get various results, it’s unclear if we should group them by experience, salary, number of calls they have each week, or something else.
Other startups stick to the product. They ship the prototype and then start pushing it to potential customers. I usually lasted for 4-8 weeks before I dropped my products using this methodology.
I shipped something I’d partly use myself, and something I thought people would use. As a result, no one did. 90% of products die after founders ship them into nowhere and don’t find any customers within a few months.
I always prefer to stick to the problem: “difficulty in finding b2b leads”. There are thousands of profitable products solving this issue for dozens of customer groups.
When we focus on solving 1 problem, it’s a higher chance we’re going to find the proper solution after a few iterations. It’s best when the founder experienced the problem too. In this case, we’ll need less time to validate that it really exists.
We shouldn’t jump from one problem to another every 6 weeks. Instead, we’ll focus on a single issue we’re confident about and will pass half of this milestone before even building anything, by doing presales.
3. Put down your ideal customer profile 3. Put down your ideal customer profile
Validating SaaS idea starts with finding our ideal customer profile, ICP. ICPs are people who need our solution so badly they’re ready to pay for it. We’ll try 3 different segments and see which one converts easier.
After we put down hypotheses of our potential buyers, we brainstorm where they hang out and plan our outreach strategy.
After we put down hypotheses of our potential buyers, we brainstorm where they hang out and plan our outreach strategy.
4. Sell it even before you start coding
Yes, you read it right. Before we spend weeks coding our MVP, we want to close 3 sales. This takes 1-2 weeks but gives us great market knowledge. If people buy the product before it's even ready - imagine how easy it will be to convert others once we have our MVP.
We make a product demo with Figma. It will have 3 screens showcasing our 3 core features. It’s important we don’t embed extra stuff into our demo because we want to know exactly what people need. Check out an example of a wireframe for Fintech app below. Most of the time you want something simpler than that, so you can pitch entire thing in 1 minute.
We make a product demo with Figma. It will have 3 screens showcasing our 3 core features. It’s important we don’t embed extra stuff into our demo because we want to know exactly what people need. Check out an example of a wireframe for Fintech app below. Most of the time you want something simpler than that, so you can pitch entire thing in 1 minute.
I included community, extra APIs, and other stuff into my demos, which resulted in me misunderstanding what people really bought from me. The retention rate dropped within weeks and the product was gone. Success of our startup begins with getting the core 3 features right.
5. Go where they are
Our first 20 sales will be super personal outreach. The majority of founders are shy to call their potential users. They run ads, get the offer wrong and drop their startup after 4 ad campaigns.
It’s better to overcome shyness and jump into 40 calls than gift our $3000 to Facebook and $30k to the software development agency. I've been there too. But look at it differently: you aren't a needy guy bothering people, you are a doctor. People are struggling with a problem, what you want is to find out more about the problem, make a right pill and make their life easier.
We’ll look for groups, subreddits, Twitter accounts where our ideal customers hang out and send 20-100 messages daily. We won’t be trying to sell anything in our first message, because our current aim is to get insights in a call.
We have to answer if our problem is a problem at all, who has it, when they experience it, how much they currently pay to solve it, and if our MVP is useful. For two of my products, I tried to answer these questions in surveys. I spent months building something that 8/10 respondents never opened, and others wondered how I thought it would help them.
In case our SaaS is B2B we use Sales Navigator + Phantombuster + Hunter.io to send thousands of emails and schedule loads of calls quickly. My products were B2C and I did Reddit outreach myself. Now there are products that automate Reddit DMs like prospecdit.com.
It’s better to overcome shyness and jump into 40 calls than gift our $3000 to Facebook and $30k to the software development agency. I've been there too. But look at it differently: you aren't a needy guy bothering people, you are a doctor. People are struggling with a problem, what you want is to find out more about the problem, make a right pill and make their life easier.
We’ll look for groups, subreddits, Twitter accounts where our ideal customers hang out and send 20-100 messages daily. We won’t be trying to sell anything in our first message, because our current aim is to get insights in a call.
We have to answer if our problem is a problem at all, who has it, when they experience it, how much they currently pay to solve it, and if our MVP is useful. For two of my products, I tried to answer these questions in surveys. I spent months building something that 8/10 respondents never opened, and others wondered how I thought it would help them.
In case our SaaS is B2B we use Sales Navigator + Phantombuster + Hunter.io to send thousands of emails and schedule loads of calls quickly. My products were B2C and I did Reddit outreach myself. Now there are products that automate Reddit DMs like prospecdit.com.
6. Send outreach messages (keep them short)
Our B2B message should be super short and bait interest. This one got us 5 meetings for each 100 emails:
Subject line:
Question for [companyname]
Body:
Hi Jake,
Saw we're on the same Amazon marketing group on LinkedIn. Does your agency do Amazon Listings?
Regards,
Mike
This is it! It's short, identifies we're from the same tribe and doesn't push the sale at all. After we get a reply we effectively invite them to take value from our tool for Amazon marketing agencies. Keep in mind that the purpose of your cold b2b email is to get a reply, not to sell.
Subject line:
Question for [companyname]
Body:
Hi Jake,
Saw we're on the same Amazon marketing group on LinkedIn. Does your agency do Amazon Listings?
Regards,
Mike
This is it! It's short, identifies we're from the same tribe and doesn't push the sale at all. After we get a reply we effectively invite them to take value from our tool for Amazon marketing agencies. Keep in mind that the purpose of your cold b2b email is to get a reply, not to sell.
8. Handle calls like interviews
Everything gets easier when we run our call like an interview, not like a sale. We ask questions to validate there is a problem, when they experience it, and how much of a problem it is for them.
It’s important to ask if they’re currently paying for a solution because they’ll be more likely to pay for ours. Here’s the list of questions we've used to grow the SaaS for web dev agencies:
You see we moved from broad to narrow. A big thing we achieve is we let the person conclude they suffer from it.
When we feel that the person may benefit from our product, we simply show it to them and ask for their thoughts. If they like it - we close them.
It’s important to ask if they’re currently paying for a solution because they’ll be more likely to pay for ours. Here’s the list of questions we've used to grow the SaaS for web dev agencies:
- What do you do?
- Do you freelance or work at an agency?
- How many projects do you work on each month?
- How do you handle working with client feedback?
- What are the top 3 things that stress you out?
- What's the most annoying thing in your work that you'd love to get rid of?
- How much time do you spend on client feedback in each project?
You see we moved from broad to narrow. A big thing we achieve is we let the person conclude they suffer from it.
When we feel that the person may benefit from our product, we simply show it to them and ask for their thoughts. If they like it - we close them.
9. Scale up data generation
This basic method for SaaS idea validation works, but it doesn't mean you should stop there.
Eventually, you'll reach a stage where direct outreach is yielding the amount of information you need to make decisions, and you don't need to make changes. When that time comes, you’ll need to look for ways to scale up your data generation so that you have enough information to maintain your forward progress.
To do this, we start using other approaches, like paid ads and SEO (both of which I'll touch on in the next section). When we need more information to help validate the idea, we invest more in the channels that are performing well.
Doing this lets us access better data and build a better product.
Eventually, you'll reach a stage where direct outreach is yielding the amount of information you need to make decisions, and you don't need to make changes. When that time comes, you’ll need to look for ways to scale up your data generation so that you have enough information to maintain your forward progress.
To do this, we start using other approaches, like paid ads and SEO (both of which I'll touch on in the next section). When we need more information to help validate the idea, we invest more in the channels that are performing well.
Doing this lets us access better data and build a better product.
10. Know when your idea is validated
When you've validated your SaaS idea, there's nothing left but to make your idea a reality. You've done thorough research and have a well-constructed product. It's now time for you to build, launch, and sell.
Before that happens, it’s important for you to know when your SaaS idea is validated. To do that, you need to have a definition of what a “validated” idea means.
Validated ideas are those that have real customers willing to pay for them. It usually makes sense to define successful validation based on the number of real customers you've identified and the amount they'd be willing to pay (e.g., “40 customers willing to pay $50+ per month”).
You need to be sure that the number of customers you've identified is enough – that means there’s a large enough market out there to sustain your business in the long run. The amount customers are willing to pay also need to be able to offset acquisition costs.
Before that happens, it’s important for you to know when your SaaS idea is validated. To do that, you need to have a definition of what a “validated” idea means.
Validated ideas are those that have real customers willing to pay for them. It usually makes sense to define successful validation based on the number of real customers you've identified and the amount they'd be willing to pay (e.g., “40 customers willing to pay $50+ per month”).
You need to be sure that the number of customers you've identified is enough – that means there’s a large enough market out there to sustain your business in the long run. The amount customers are willing to pay also need to be able to offset acquisition costs.
Best practices for validating SaaS ideas (4 tips)
1. SEO vs direct sales
Question: can you plan your SEO strategy without knowing who needs your solution most?
No!
Some founders try SEO before having 5 paying users. But how can you plan your SEO strategy without knowing who needs your solution most? Going after our first users is the fastest way to get traction.
First startup that partnered with me for founder coaching was Feedbucket App, SaaS helping web developers manage client feedback.
Product had 0 users, and it was the first SaaS for the founder. We identified top 3 buyer personas, laid out our call structure and sent messages. We closed the first B2B sale in 17 days, 7 of which were their free trial. Then we got 4 more by the end of the first month. We closed all these while founder was working on startup part-time.
No!
Some founders try SEO before having 5 paying users. But how can you plan your SEO strategy without knowing who needs your solution most? Going after our first users is the fastest way to get traction.
First startup that partnered with me for founder coaching was Feedbucket App, SaaS helping web developers manage client feedback.
Product had 0 users, and it was the first SaaS for the founder. We identified top 3 buyer personas, laid out our call structure and sent messages. We closed the first B2B sale in 17 days, 7 of which were their free trial. Then we got 4 more by the end of the first month. We closed all these while founder was working on startup part-time.
2. Marketing data is great for idea validation
Data is the name of the game when it comes to SaaS idea validation – it's just hard to collect.
I already talked about my largely negative experiences with asking my ideal customers for data through surveys, but now I want to talk about data that you can collect without asking – marketing data from paid ads and SEO.
Data like impressions, clicks, bounce rates, and time on page can tell you a lot about the demand for your product. It's important to look at these metrics and compare them with your competitors – this will give you an indication of how well (or not) you're doing in comparison.
The key is to make sure that you're keeping track of all of your marketing data points and tracking them over time. That means tools for:
Both Google tools are free, and they'll give you an overall view of how your marketing efforts are performing. For more advanced features and metrics, you might need a paid tool.
I already talked about my largely negative experiences with asking my ideal customers for data through surveys, but now I want to talk about data that you can collect without asking – marketing data from paid ads and SEO.
Data like impressions, clicks, bounce rates, and time on page can tell you a lot about the demand for your product. It's important to look at these metrics and compare them with your competitors – this will give you an indication of how well (or not) you're doing in comparison.
The key is to make sure that you're keeping track of all of your marketing data points and tracking them over time. That means tools for:
- Collecting data: Google Analytics and/or Hotjar
- Visualizing data: Google Data Studio or Databox
Both Google tools are free, and they'll give you an overall view of how your marketing efforts are performing. For more advanced features and metrics, you might need a paid tool.
3. Competitors are great teachers
During the idea validation process, products and companies are going to start popping up on your radar. And that’s a good thing too, because researching your competitors can really get the ball rolling in terms of your SaaS strategies and ideas.
Competitors can help you pare down your unique selling point (USP) so that it's as narrow and specific as possible. For instance, you can look at reviews of the competitors, and find the pain points that customers are facing. That can be an area you focus on, optimizing your SaaS to deal with that specific problem.
This is helpful at any stage of the idea validation process, but especially at the beginning.
Competitors can help you pare down your unique selling point (USP) so that it's as narrow and specific as possible. For instance, you can look at reviews of the competitors, and find the pain points that customers are facing. That can be an area you focus on, optimizing your SaaS to deal with that specific problem.
This is helpful at any stage of the idea validation process, but especially at the beginning.
4. Be wary of blue oceans
Blue ocean markets are exciting. They're unexplored and untapped, with loads of potential. They can also be time and money sinks, though.
It’s possible to validate a blue ocean idea without spending too much time, money, or energy – this idea validation method is a great star, for example. But it's important to keep in mind that blue oceans come with a lot of uncertainty.
My advice: don't pour all your resources into a blue ocean idea.
Start with a smaller, more traditional idea and validate it quickly. Once you've seen some success with that one, you can start to pour more resources into the idea that you think has the most potential.
It’s possible to validate a blue ocean idea without spending too much time, money, or energy – this idea validation method is a great star, for example. But it's important to keep in mind that blue oceans come with a lot of uncertainty.
My advice: don't pour all your resources into a blue ocean idea.
Start with a smaller, more traditional idea and validate it quickly. Once you've seen some success with that one, you can start to pour more resources into the idea that you think has the most potential.
Get help with your SaaS growth
In this article, you learned how to validate your SaaS idea to make sure it generates revenue. But to see what I'm really capable of, apply to my SaaS Camp accelerator to get my support with growing your startup.
I've already helped dozens of SaaS startups get traction and sure have a strategy for you.
I've already helped dozens of SaaS startups get traction and sure have a strategy for you.
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