What is Software as a Service (SaaS)?

Software as a Service (SaaS) is software you access through the web and pay for on a recurring basis — usually monthly or yearly — rather than buying once and installing. Email tools, design apps, and accounting platforms you log into in a browser are all SaaS.

The subscription model is what defines SaaS. Instead of one big sale, the company earns predictable, repeating revenue as long as customers keep their subscriptions, which makes retention the heart of the business.

Why SaaS is attractive

SaaS has become the default model for software because its economics are appealing — high margins and recurring revenue — but it comes with a catch: you have to keep customers happy every single month or they leave.

• Recurring revenue (tracked as MRR and ARR) makes growth predictable.
• High gross margins because copies of software cost little to deliver.
• Churn is the constant threat — value must be re-earned continuously.
• Customers can start small and expand over time, growing revenue per account.

Why SaaS matters for validation

Because SaaS revenue depends on customers staying, validation isn't just 'will someone buy?' but 'will they keep paying?' Early retention and low churn are the real tests of a SaaS idea. A simple, even partly manual, MVP that customers renew month after month is far stronger proof than a flashy launch with high churn.