The hospitality industry is divided into before and after Airbnb. It is an American SaaS-based online marketplace that offers arrangements for lodging or tourism experiences, on a commission basis. Since the company’s launch in 2007, they’ve gone from one rental to 5.6 million active listings and over 4 million hosts in 2021. This startup idea was validated with MVP and made the cut.
Let’s dig into MVP development services. Why this stage is crucial for SaaS startups, and how to start off.
To begin with, let’s take a closer look at the Airbnb example. In 2007 Brian Chesky and Joe Gebbia created a simple AirBedandBreakfast.com. They bought air mattresses and put a part of their apartment in San Francisco to rent on their website for the first three visitors. It was enough to test the idea of short-term rentals, collect and analyze the feedback and move forward!
As of 2021, Airbnb expands beyond room bookings to vacation rentals, has 900M+ guest arrivals, 4M+ hosts, and over $9.6K annual earnings per host. Even with the 30% year-to-year revenue loss due to the Covid-19, Airbnb is still on top. In general, cloud businesses were not so badly affected by pandemics.
What’s in for you? If you are interested in software as a service domain or just have a business idea, you should start small. You don’t need to deliver a complex solution at once. The history of big brands, like Airbnb, proves the benefits of this approach.
What is an MVP for SaaS?
A minimum Viable Product (MVP) has a limited number of features to satisfy the first customers. It also collects feedback for future development.
When you have an idea of a product or service, you still need to check whether this idea is worth the effort. An MVP is a quick and effective way to build a functional product that can further be scaled. The delivered MVP product does not always coincide with your initial idea. In fact, it can be somehow or totally different.
To prove this idea, Henrik Kniberg, a product coach for Spotify, created a popular illustration of product versions. Every new version was based on the end-user satisfaction with the product and differed from the previous one. As a result, the initial idea and final product here are two different products with different functionality.
So, it means that the one who prompts the path for your idea and SaaS product development is your audience, first adopters, and end-users. Depending on their problems, your product should evolve and find the best shortest way to solve the users’ pains.
Benefits of MVP for cloud products
You, as a business owner, have certain risks and fears of starting something new. As a rule, the budget is also very tight for startups. An average SaaS startup with up to 100 employees spends a staggering $1.16m annually. Here comes the MVP approach to help you out. Below are the core benefits for your business to think about. You can:
- Check the product idea;
- Probe the market of interest;
- Reduce working hours of the team;
- Receive the first income or donations from investors;
- Analyze the first mistakes and feedback;
- Save costs and thus resources.
How to Start Off: 7 Tips for Minimum Viable Product Development
Tip 1: First, define the problem before you define the solution
The common mistake of a new SaaS product launch is adding new cool features without checking the need for them and not having following a production launch checklist.
Answer this question first: does my solution solve the right problem?
Tip 2: Know your market and competition
Sounds obvious but true for all SaaS startups. The market and competitors research gives you a clue on how to start, how much to spend, how to fill the market gap, and where you can offer a better service.
Tip 3: Find out your customers’ needs and pains
There are some basic types of pain points: the convenience of use, the financial part, and the shopping journey. Your sales team can actually talk with your current customers and ask the right questions to find out all the pains.
Some examples below:
- What problem were you solving when you first came across [product name]?
- Can you share more information about the problem(s) you have now?
- When do you need to fix this problem?
Tip 4: Narrow down the project scope and features list
The MVP approach will teach you to go small, identify the crucial 20% features and ignore or postpone up to 80% of other works. There are some helpful principles to narrow down the choices. For example, you can follow the Pareto principle or the 80/20 rule.
Tip 5: Test your idea with a prototype
Don’t confuse these two terms: prototype and MVP. While the prototype aims at checking the ideas; the MVP sticks to one selected idea and finishes with a product ready for the market.
Tip 6: Think about pricing models in advance
You can drive away a big pool of customers with a poor pricing model understanding. That’s why it’s smart to think about the needed model during the early stages. For instance, as per recent SaaS pricing strategy stats, 50% of SaaS companies still depend on usage-based pricing. Such a pricing model means that customers are charged only when they use a certain product or service.
Tip 7: Collect feedback after the SaaS MVP launch
The MVP approach has two main aims: to collect feedback from users and see whether this product brings value. After your launch your product, ask your end-users these questions to understand if you are heading in the right direction:
- What is the key benefit you have received from [product name]?
- What feature(s) are missing in [product name] from your point of view?
- How can we improve our product or service to better meet your needs?
Final thoughts
There are many bright examples of various SaaS solutions on the market today: Airbnb, Microsoft Azure, Spotify, Buffer, and so on. All these products provide their unique services and have their end-users. Still, they have one thing in common – they’ve started their success with an MVP. This approach proved to be of big advantage to check the idea and move in the right direction.
Dmitry Chekalin
CEO @ Codica. Software Entrepreneur with 15+ years of experience. Focused on the lean startup approach. I write about startups, marketplaces and SaaS products, and custom software development.
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