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SaaS: How the Business Model Works

Subscription software. Recurring revenue and high margins once it works, and a long unpaid stretch before it does.

By Arnjen, SEO consultant 路

Make money with SaaS

How to Make Money with a SaaS

SaaS (software as a service) is cloud software sold on subscription. Revenue is predictable, and one codebase serves any number of users.

Common pricing models:

  • Freemium: Free basic tier, paid upgrades (Dropbox grew to 700M+ users this way).
  • Tiered subscriptions: Starter ($9/mo), Pro ($29/mo), Enterprise ($99+/mo). OpenView Partners puts 80% of SaaS companies on this model.
  • Usage-based: Per API call or per user (Twilio bills $0.0075 per SMS).
  • White-label: Agencies resell your tool for a cut.

Beyond subscriptions: upsells, add-ons, affiliates, and marketplace deals like AppSumo. Baremetrics data puts bootstrapped SaaS margins at 70-90% once scaled.

Solve one painful problem for one niche, say a $19/mo invoicing tool for solopreneurs.

How Much Can You Earn?

CB Insights puts SaaS startup failure at 90% within 2 years. IndieHackers' analysis of 1,000+ products puts the bootstrapped average at 12-24 months to reach $10k MRR (monthly recurring revenue).

Typical ranges from IndieHackers, Baremetrics, and SaaS surveys:

  • Beginner (0-12 months, solo): $0-$5k MRR. Most stall at $0 for lack of validation; the top 10% reach $1k with a no-code MVP. Median after launch: $129 MRR.
  • Intermediate (1-3 years, small team): $5k-$50k MRR. About 25% of IndieHackers products pass $10k, usually on SEO and content. $20k MRR is $240k ARR.
  • Advanced (3+ years): $50k-$1M+ MRR. ConvertKit bootstrapped to $30M ARR; VC-backed Calendly sits at $200M ARR.

Keep monthly churn under 5%. At 20% month-over-month growth, $1k MRR becomes $10k in 12 months.

Getting Started

You no longer have to code from scratch. The usual sequence:

  1. Validate (1-4 weeks, $0-500): Survey 100 potential users on Reddit, Product Hunt, or LinkedIn. Pre-sell from a Carrd ($19/yr) or Gumroad landing page; 10 sales at $49/year is a reasonable bar.
  2. Build an MVP (4-12 weeks, $0-5k): No-code first with Bubble ($25/mo) or Airtable plus Zapier. If you code, Next.js plus Supabase (free tier). One to three core features, tested with 50 beta users.
  3. Billing and legal (1 week, $100-500): Stripe (2.9% + 30垄 per transaction), Paddle for global tax, an LLC via Stripe Atlas ($500), a privacy policy via Termly (free).
  4. Launch (day 1, $0-2k): Product Hunt (a top 5 spot brings around 10k visitors), Hacker News, Twitter, 50% off the first year.
  5. Acquire and retain (ongoing): SEO for the bulk of traffic, two blog posts a week, Facebook or LinkedIn ads at a $5-10 CAC target, ConvertKit for email. Aim for LTV:CAC above 3:1.
  6. Scale (6+ months): Freelancers on Upwork, Intercom for support, more tiers and integrations (Zapier marketplace).

$1k MRR in 3-6 months is possible. Budget $1k-10k to bootstrap.

Pros and Cons

Pros:

  • Recurring revenue: 5-10x the lifetime value of an ecommerce customer.
  • Scalable: One user or a million on the same code, with 80%+ margins at scale.
  • Global: No inventory, and Stripe reaches 190 countries.
  • Exit potential: $3-10M acquisitions are common (SavvyCal sold for $5M).
  • Flexible: Remote and side-hustle friendly; half of IndieHackers founders are solo.

Cons:

  • Competition: 30k+ new SaaS products a year (BuiltWith).
  • Churn: 5-7% monthly is average, which halves your user base in a year.
  • Upfront cost: 500+ hours for an MVP, and $50k+ in marketing to reach $10k MRR.
  • Tech debt: Scaling means developers at $100k+/yr.
  • Dependency: AWS or Stripe outages hurt; downturns spike churn.

Suited to technical founders or no-coders with grit. Not passive income at the start.

Tools You Need

Under $200/mo to start:

  • Building: Bubble ($25/mo), Webflow ($12/mo sites), Supabase (free backend).
  • Payments: Stripe (2.9%), Lemon Squeezy (global, 5% fee).
  • Analytics and marketing: Google Analytics (free), PostHog ($0-450/mo), ConvertKit ($29/mo emails).
  • Support and SEO: Intercom ($39/mo), Ahrefs ($99/mo), Notion (free).
  • Deployment: Vercel (free), Render ($7/mo).

Start no-code and migrate to code around $5k MRR.

Real Examples

Bootstrapped examples from IndieHackers and Product Hunt:

  • Carrd (AJ): One-page sites. $1.4M ARR ($108k MRR) at $9-49/yr per user. Launched 2016, solo-built, no VC.
  • ConvertKit (Nathan Barry): Email for creators. $30M ARR in 2024, bootstrapped through blogging and SEO. Churn under 1%.
  • Pieter Levels (NomadList): $500k+ ARR across his suite, built in public on Twitter.
  • SavvyCal (Dharma): Scheduling. Peaked at $1M ARR, sold in 2020, no-code MVP built in weeks.
  • Failure: 80% never reach $1k MRR. Generic CRMs without product-market fit are the classic case.

HubSpot did $2.17B ARR in 2023, but $10k-100k MRR solo is the more useful benchmark. The launch write-ups are on IndieHackers.com.

About this page

Until September 2026 this guide linked out to fifteen niche-by-niche earnings pages. Those pages were removed. The income figures on them were estimates rather than measured results, and that is not the standard this site is supposed to hold. The overview above stays as a starting point. Niche-level numbers will come back only when they can be backed by real data from businesses I run or have direct access to. The full story, with the Search Console data, is in the write-up of what happened.

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