A Framework for Industry Selection: Building Vertical SaaS Solutions in Saturated Markets
Building a successful vertical SaaS (vSaaS) business in a saturated market requires a methodical approach. Here’s a step-by-step guide to selecting the right industry and positioning your solution for success.
Phase 1: Initial Market Research
Start Industry-Agnostic
At the outset, remain open to a variety of industries. Even small and medium-sized businesses (SMBs) in sectors like healthcare, finance, or logistics can offer massive opportunities. While healthcare organizations, for example, have complex operational challenges, the key is to focus on industry size and scalability.
Market Size: How big is the overall industry?
Business Distribution: What percentage of businesses are SMBs, mid-market (MM), or enterprises (ENTs)?
Regulatory Hurdles: Are there significant compliance or regulatory requirements that could slow down adoption?
Sales Cycles: Do industries have long sales cycles, or can decisions be made quickly?
Understanding these factors early on helps narrow down the best market fit.
Phase 2: Operational Overview & Customer Lifecycle
Once you’ve identified an industry, analyze the operational complexity and customer lifecycle:
SaaS Stack: What software solutions do these businesses currently use, and how sophisticated are they? Is there room for improvement?
Customer Experience: Assess current pain points in the user journey. Look for opportunities to improve operational efficiency or customer engagement.
Competition: Research existing SaaS products in the space and rank them based on features, pricing, and customer satisfaction.
This helps identify gaps where your product can add unique value.
Pro-tip: Look for the following to spot opportunities:
Workflows where highly paid and highly trained professionals spend hours on repetitive work like medical diagnostics, medical documentation, protocol development.
Industries with regulatory complexity like heatlhcare
Areas like drug discovery, insurance underwriting, due diligence or supply chain management. AI can reduce errors here and streamline the process.
Data heavy work like patient notes, sensor data from decentralized trials.
Fields with specialized language: any specialty in medicine would work for this one.
Industries that are divided up and not consolidated.
High utilization improves data quality like capturing sensor data.
Augmentation of human manual tasks.
Phase 3: Validate with Customer & Investor Insights
Customer Calls & Investor Insights
Talk directly with potential customers and private equity (PE) or venture capital (VC) investors to validate your findings. Ask questions about:
Revenue Growth: How can SaaS tools help increase revenue or reduce costs?
Compliance & Risk: Are there opportunities to support regulatory compliance or reduce churn?
These conversations not only clarify industry pain points but also help you map out specific SaaS product opportunities.
Phase 4: Build Prototypes & Financial Models
With your research in hand, create wireframes or mockups of your potential product. The goal is to show customers and investors how your solution can solve pressing problems. Alongside this, build a financial model to assess pricing, scalability, and potential profitability.
Product Mockups: Create visual representations of how your solution will work.
Financial Projections: Forecast potential sales, costs, and break-even points.
This phase is critical to aligning product features with market needs.
Phase 5: Demand Testing & Channel Iteration
Now it's time to test the market. Sell the wireframes or mockups to gauge interest and refine your go-to-market (GTM) strategy.
Rigorous Channel Testing: Test different sales channels—direct sales, online marketing, partnerships—to find the most cost-effective GTM strategy.
Product Iteration: Based on customer feedback, continue improving your offering until you solve a clear problem that a large number of businesses are willing to pay for.
At this stage, you should have a clear sense of your product’s market fit.
Phase 6: Build & Scale
Once you’ve validated demand, use capital from pre-sales or investor funding to build the product. The key here is to:
Fund Development: Leverage initial sales revenue or investor backing to develop your MVP (Minimum Viable Product).
Scale Smartly: Gradually expand your feature set and customer base while remaining focused on solving core business challenges.
Building a SaaS business is a long-term journey. The ability to stay agile and continuously improve the product offering is what sets successful companies apart.
Expanding the Product Line: Value Chain Expansion
To maximize success, consider building an ecosystem of products that serve various aspects of your customers' operations. By expanding your vertical SaaS offering along the customer journey, you can create additional value and capture more of the market.
For example, in a senior care center, the lifecycle might include:
Scheduling & Staffing: Managing employee shifts and schedules.
Resident Care: Monitoring patient health and optimizing care delivery.
Billing & Compliance: Ensuring regulatory compliance and managing payments.
By offering SaaS solutions for each of these phases, you can solidify your position in the market and increase customer retention.
The Importance of Iteration and Adaptation
The path to SaaS success isn't about finding a one-time solution—it’s about constant iteration and adaptation. The answers lie in the work, not in theory or intelligence. While the market may seem saturated, new opportunities emerge from solving pain points that established players have overlooked. Roughly every 5 years new workflows needs to be created for software tools. This is a great opportunity.
Succeeding in Saturated Markets
It's easy to assume that a saturated market offers limited opportunities, but the truth is that saturation breeds specialization. Vertical SaaS solutions cater to specific industries, meaning they’re built to tackle the unique challenges of a niche market. In crowded spaces, focusing on solving deeply specific problems can differentiate your product from generic solutions.
Moreover, the rise of no-code tools has democratized product development, enabling companies to quickly prototype and deploy solutions without the need for extensive engineering resources. Internal teams can now build custom applications that meet their exact needs, further driving innovation in already crowded markets.
Conclusion
Creating vertical SaaS solutions and leveraging no-code tools are powerful ways to carve out a niche in seemingly saturated markets. By thoroughly understanding the industry, developing strong customer relationships, and iterating on your product, you can unlock significant opportunities. Whether you’re targeting healthcare, logistics, or finance, success lies in identifying overlooked pain points and delivering tailored solutions that customers are willing to pay for.