Running a No-Code SaaS Agency has given me an inside look at how SaaS business models work, why they’re so powerful, and what makes them tick. When I first got into SaaS, I realized quickly that this business model wasn’t just about selling software—it was about creating an ecosystem where customers continuously find value and stick around for the long haul.

SaaS isn’t just another business model—it’s a recurring revenue machine, but only if you get it right. In this article, I’ll break down what SaaS is, the different types of SaaS models, key metrics for growth, and the tools you need to scale. This is the article I wish I had when I started, so let’s dive in.

If you are familiar with SaaS business models and want to learn about the costs of building your own, consult this guide: How Much Does It Cost To Build an App?

What is SaaS?

SaaS (Software as a Service) is a cloud-based software distribution model where users subscribe to software instead of purchasing it outright. Think Netflix, but for business tools. Customers pay a monthly or annual fee to access the software, and the company takes care of maintenance, updates, and security.

Unlike traditional software, where you buy once and install, SaaS is all about continuous improvement, frequent updates, and customer retention.

Some well-known SaaS businesses include:

• Shopify (E-commerce platform)

• Slack (Team communication)

• Zoom (Video conferencing)

• HubSpot (Marketing automation)

• Figma (Design collaboration)

• Notion (Workspace and knowledge management)

If you’ve ever paid for Google Workspace, Notion, or Mailchimp, you’re using SaaS.

The SaaS Business Model: How It Works

1. Recurring Revenue Model

The subscription-based model makes SaaS unique. Customers don’t buy the software; they lease access to it, meaning revenue is predictable and scalable. The best SaaS companies master Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR), ensuring that revenue grows over time rather than fluctuating with one-time sales.

📊 Market Growth Insight: The global SaaS market size was valued at USD 237.48 billion in 2022 and is expected to reach USD 908.21 billion by 2030, exhibiting a CAGR of 18.7% over the forecast period.

2. Customer Retention is Everything

Unlike one-time product sales, SaaS thrives on keeping customers happy. If users churn (cancel their subscription), the business suffers. That’s why SaaS companies invest in customer success teams, onboarding experiences, and continuous updates.

📉 Churn Rate Benchmark: The average churn rate for B2B SaaS is 5-7% annually, while B2C SaaS sees churn rates of 30-50%.

3. Constant Product Improvements

SaaS products evolve constantly. While traditional software might release a new version every few years, SaaS companies release updates weekly or even daily. This keeps users engaged and reduces the chance of them switching to a competitor.

4. High Customer Acquisition Costs (CAC)

One of the biggest SaaS challenges is that acquiring customers is expensive. Whether through paid ads, content marketing, or partnerships, CAC (Customer Acquisition Cost) can be high. The goal? Keep Customer Lifetime Value (LTV) higher than CAC.

📈 CAC Trends: The average CAC for SaaS startups has increased by 25% since 2022, now averaging $700-$1,500 per customer, depending on the niche.

SaaS Business Stages

1. Early Stage (Startup Phase)

This is where most SaaS founders struggle. You’ve got an idea, maybe an MVP (Minimum Viable Product), but now you need customers.

Key focus areas:

• Product-market fit: Are people willing to pay for your solution?

• Building an audience: Content marketing, partnerships, and early adopters.

• Initial revenue: Even small wins help validate your business.

2. Growth Stage

You’ve validated your product, and users are signing up consistently. Now, the focus shifts to scaling up.

Key focus areas:

• Marketing automation to drive more signups.

• Optimizing pricing models.

• Securing funding (if needed) to scale faster.

3. Maturity Stage

You’ve reached a stable revenue stream, have an established team, and focus on expansion.

Key focus areas:

• International growth.

• Acquiring smaller SaaS companies to expand offerings.

• Optimizing operations to reduce churn and increase revenue.

SaaS Revenue Model Comparison

Key SaaS Metrics You Must Track

1. Monthly Recurring Revenue (MRR) – Total predictable revenue per month.

2. Customer Acquisition Cost (CAC) – Cost of acquiring one paying customer.

3. Customer Lifetime Value (LTV) – How much a customer is worth over their lifetime.

4. Churn Rate – Percentage of customers who cancel their subscription.

5. Net Revenue Retention (NRR) – How much revenue you retain from existing customers, including upsells and expansion revenue.

📊 High Growth Indicator: Top-performing SaaS companies maintain an NRR above 120%, meaning they generate more revenue from existing customers than they lose to churn.

In a nutshell

The SaaS business model is incredibly rewarding but comes with challenges. You need to optimize pricing, reduce churn, track key metrics, and constantly innovate.

Many startups have successfully navigated these challenges with no-code solutions. For example, Success Panda built a career development platform, Mini Sport scaled its operations globally, Wealth Buddies launched a financial planning tool, and SaaS Seeds helped startups secure funding—all with the support of no-code development from Million Labs.

If you’re launching a No-Code SaaS, you’re in a golden era—there are more tools than ever to build and scale a SaaS business without coding.

Want to check if your SaaS idea has what it takes? Let’s connect!

👉 Check more recommended resources to Start, Launch and Grow your SaaS:

• Building Your No-Code MVP: A Complete Guide to Launch Within the Next 60 Days

• Mastering App Scoping: The Only Guide You'll Need as A First Time Founder

• Launch to Lift-Off: Maximising Your MVP's Market Entrance