Most founders start with the product idea.

I think that is backwards.

Before asking:

“What should I build?”

Ask:

“What kind of SaaS business do I want to own?”

Because two SaaS companies doing the same revenue can be completely different businesses.

One might need 20,000 customers.

Another might need 200.

One might lose 10% of customers every month.

Another might keep customers for five years.

One might require hundreds of thousands of dollars in advertising.

Another might grow through sales, integrations or word of mouth.

So before building your next SaaS, make these 7 decisions.

1. Choose WHO You Sell To

Your first decision isn't the product.

It's the buyer.

You could sell to:

• Consumers

• Creators

• Solopreneurs

• Small businesses

• Mid-market companies

• Enterprises

• Developers

• Governments

This decision affects almost everything else.

Consumers

Lower price.

Large potential market.

Usually higher churn.

You need excellent distribution.

Small Businesses

Higher willingness to pay.

Shorter sales cycles than enterprise.

Massive number of potential customers.

Often underserved.

Mid-Market / Enterprise

Higher contract values.

Better retention.

But longer sales cycles and more complexity.

Developers

Excellent if your product becomes infrastructure.

You can grow alongside your customers through usage-based pricing.

The question to ask:

Who has the problem AND already has a budget for solving it?

Don't just find people with problems.

Find people who spend money solving those problems.

2. Pick a Painkiller, Not Just a Feature

I look for SaaS ideas connected to one of four things:

Make Money

Examples:

Sales software
Lead generation
Conversion optimization
Marketing automation

Save Money

Examples:

Cloud optimization
Fraud prevention
Workflow automation
Vendor management

Save Time

Examples:

AI assistants
Scheduling
Automation
Document processing

Reduce Risk

Examples:

Cybersecurity
Compliance
Backup
Accounting
Legal software

The closer your product is to money, time or risk, the easier it usually becomes to justify paying for it.

Instead of asking:

“Is this useful?”

Ask:

“What happens if the customer doesn't solve this?”

If the answer is "not much," the problem probably isn't painful enough.

3. Choose Your Revenue Engine

Not every SaaS needs to charge $29/month.

There are several ways to monetize software.

Flat Subscription

$49/month.

Simple.

Predictable.

Easy for customers to understand.

Per Seat

$20/user/month.

Revenue expands as customers add employees.

Great for collaborative products.

Usage Based

Pay per API call, minute, generation, transaction or GB.

Excellent when customer usage naturally grows.

Platform + Usage

For example:

$99/month + usage.

You get predictable recurring revenue plus expansion.

Transaction Fee

Take a percentage of money flowing through the platform.

Extremely powerful when your product sits directly inside a transaction.

Annual Contracts

Better cash flow.

Lower churn.

Common in B2B.

The goal:

Create a pricing model where your revenue increases as the customer gets more value.

4. Design Retention Before Acquisition

Founders obsess over getting customers.

But keeping customers is where SaaS gets interesting.

Imagine two companies.

Company A:

Adds 100 customers every month.

Loses 10 every month.

Company B:

Adds 60 customers every month.

Loses 2.

Over time, Company B can become the better business.

Before building, ask:

Why will someone still need this 12 months from now?

Strong retention usually comes from things like:

• Stored data

• Automations

• Integrations

• Historical analytics

• Team workflows

• Customer relationships

• Personalization

• Embedded APIs

• Collaboration

• Switching costs

Your product should ideally become harder to remove the longer someone uses it.

5. Build Expansion Into the Product

The best SaaS companies don't only acquire new customers.

Existing customers spend more over time.

That can happen through:

More Users

Customer adds teammates.

More Usage

More API calls.

More AI generations.

More transactions.

More Products

Customer buys additional modules.

More Locations

A business expands from one office to ten.

More Data

Customer needs higher limits.

This creates expansion revenue.

And expansion revenue is one of the strongest characteristics a SaaS business can have.

Ask:

If this customer succeeds, will they naturally pay me more?

6. Choose Your Distribution Before You Build

This is where many SaaS founders get stuck.

They build first.

Then ask:

“How do I get customers?”

Reverse it.

Before building, identify your first acquisition channel.

Some examples:

Content

Best when your buyers consume education around the problem.

Cold Outreach

Best when you can identify exactly who has the problem.

Communities

Great for niche products.

Affiliates

Excellent when creators or businesses already serve your target market.

SEO

Powerful when customers actively search for the solution.

Product-Led Growth

Works when users can experience value quickly without talking to sales.

Paid Ads

Useful when customer lifetime value supports the acquisition cost.

Marketplaces

Shopify, Salesforce, HubSpot, Slack, WordPress and other ecosystems can provide built-in distribution.

The question is simple:

Where will your first 100 customers come from?

If you can't answer that before building, spend more time on distribution.

7. Run the SaaS Math Before Writing Code

Now run a simple model.

Let's say your target is:

$10,000 MRR

At $10/month:

You need 1,000 customers.

At $50/month:

You need 200 customers.

At $100/month:

You need 100 customers.

At $500/month:

You need 20 customers.

At $2,000/month:

You need 5 customers.

Same revenue.

Completely different businesses.

Now ask yourself:

Which customer can I realistically acquire?

How many do I need?

How much will it cost to acquire them?

How long will they stay?

How expensive will they be to serve?

This is why choosing the business model before building matters so much.

My Preferred SaaS Formula

If I were starting from scratch, I would look for:

A specific business customer

A painful recurring problem

Clear financial ROI

Frequent product usage

Recurring revenue

Natural expansion revenue

Some form of switching cost

A distribution channel I already understand

You don't need all eight.

But every one you add makes the business stronger.

The $10K MRR Test

Before building your SaaS, fill this out:

Target customer:

____________________

Problem:

____________________

Why they need it now:

____________________

Monthly price:
$____________________

Customers needed for $10K MRR: ____________________

Primary acquisition channel: ____________________

Estimated customer acquisition cost: $____________________

Expected customer lifetime: ____________________

Why they won't cancel: ____________________

How revenue expands: ____________________

If you struggle to answer these questions, don't start coding yet.

The opportunity probably needs more work.

The Rule I Use

AI has dramatically reduced the cost of building software.

That means building is no longer the biggest advantage.

Choosing the right market, business model and distribution strategy matters even more.

So don't just ask:

“Can I build this SaaS?”

Ask:

“Can I acquire this customer profitably, keep them for years and grow how much they spend with me?”

That's the business.

This is a much stronger companion to the Reel because the Reel creates curiosity, while the lead magnet teaches the framework behind the opinion.