If you’re reading this, you’re probably interested in starting a SaaS business in Germany. You’re also likely overwhelmed with questions about taxes, regulations and all the rest. Trust me, I’ve been there. When I started, I had zero clue about what I needed to get off the ground. This article is a deep dive into all those nitty-gritty details, sprinkled with my personal experiences and mistakes.

Hi, I’m Lukas, and I launched and grew Stagetimer from €0 to €10,000+ in recurring revenue in Germany. And here is how you can do it, too.

# Outline

1. My Journey and Why You Should Read This
2. What is Bootstrapping?
3. Software-as-a-Service and Pricing
4. Navigating German Bureaucracy
5. Handling Taxes
6. Do I Need a Tax Advisor?
7. How to Develop a Product
8. The SaaS Tech Stack
9. How to Start With Marketing
10. Final Thoughts and Resources

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# 1. My Journey and Why You Should Read This

# Timeline and Growth

On November 1, 2020, I made my first commit for what would become Stagetimer. About three weeks later, I made a Reddit post that led to my first user. Fast forward to February 2021 and I officially founded a German Einzelunternehmen, a sole proprietorship company. I got my first paying customer in June 2021. As of September 2023 I reached a €10,000 Monthly Recurring Revenue (MRR).

Stagetimer crossed €10k MRR 🎉

Free → Paid: 8 months
0 → 1k: 10 month
1k → 5k: 8 months
5k → 10k: 10 months

We’re starting to understand positioning, pricing and marketing in our niche. pic.twitter.com/uxagMDo5dV

— Lukas Hermann (@_lhermann) September 2, 2023

# How I Come Up with the Idea

One day, I visited a friend who owned a studio. They used an outdated Flash app on an old laptop to time speakers. To even start the timer, my friend had to run into the recording room, hit ‘Start,’ and then dash back to the video mixer. I thought, “There must be a more efficient solution.” After some research, I realized there weren’t any browser-based solutions, just a few native apps. So, I built the first version of Stagetimer in one weekend.

# Question I Had at the Start

The biggest roadblock I hit was how to handle payments. Stripe was the de facto solution, but it had gaps when it came to automating taxes. Here were my concerns:

• Do I need to collect taxes on every sale?
• How do I return taxes collected from international sales?
• What if I don’t collect any sales tax? (Many US startups ignore this, but it’s tricky for German companies)
• Do I need to set sales tax rates manually for each country?
• What about invoices for each sale, and how do I generate those correctly?
• Do I need to account for every sale? Do I need an accountant for that?

Another pressing question was about health insurance, which is mandatory in Germany. When you’re an employee, it’s simple; the cost is deducted from your paycheck. But what about when you’re starting your own business? What if the income is minimal? What if you’re running a side business? Is that even allowed?

So why should you read this? Because I’ve navigated through all these issues. I’ve been where you are, and I can offer you a roadmap to steer clear of the potholes I hit. We’re going to discuss all these aspects and more, to provide you with a comprehensive guide to bootstrapping a SaaS business in Germany.

# 2. What is Bootstrapping?

# Definition

Bootstrapping in the business context refers to starting and growing a company without external funding. In essence, you’re pulling your business up by its own bootstraps, using solely your own resources to fuel its growth.

# Bootstrapping vs. Traditional Startup Funding

Traditional startups often go through multiple funding rounds, including Angel Rounds, Seed Rounds, Series A, Series B, and so on. But it’s crucial to note that investor money never comes free. You cede a portion of your business, and investors generally expect a significant return within a 5-year timeframe. This pushes you to achieve roughly 300% Year-over-Year growth and then to exit, either by selling your company or going public. By this point, founders usually own less than half of their business and are under immense stress.

# Advantages of Bootstrapping

Bootstrapping is tough, especially in the beginning. However, the upside is significant. You retain 100% ownership of your business. This means you have the freedom to take a week off without answering to anyone. You also have the option of never exiting; you can either sell or let it run on low commitment while working on your next project.

# My Experience with Stagetimer

I began Stagetimer as a side project while keeping my day job. Working on weeknights and weekends, progress was slow, but it was steady. About 1.5 years in, I took the plunge and went full-time when Stagetimer was making roughly €3,000 per month. My wife and I then decided to travel in Asia for 6 months. When we returned, Stagetimer was generating enough income to cover all our living expenses in Germany. Fun fact: the cost of living while traveling in budget-friendly Asian countries turned out to be less than living in most German cities.

# Operating Costs

One of the benefits of running a SaaS business is the low operational costs. For Stagetimer, I spent barely €20 per month on tech infrastructure. Many tools and services offer generous free tiers, which can keep your costs down significantly.

# 3. Software-as-a-Service and Pricing

When you hear SaaS, or Software as a Service, think of software that’s running on a remote server and accessed through a browser. This is fundamentally different from the older model where you’d package software for local installation. Two major perks come with this model:

1. Recurring Revenue: Because you host and maintain the server, you can charge customers on a recurring basis. This is great for cash flow and for steadily growing your revenue over time.

2. Simplified Updates: Updates roll out automatically to all users since they’re accessing the current version of your software through a browser. You only need to update it in one place, saving you time and effort.

Utilizing cloud computing services like Firebase can further reduce your operational complexities and costs. It’s not uncommon for bootstrapped SaaS businesses to have over a 90% profit margin, if you don’t factor in your own time as a cost. This incredible profit margin can quickly cover your living expenses, leading you to what we bootstrappers call “Ramen Profitability”—the bare minimum you need to sustain yourself. For Stagetimer, it took about two years to reach this point, which is fairly standard.

If you’re considering going full-time right away, make sure you’ve got enough savings to last at least 1.5 years. Keep in mind that subscription models come with customer friction. People generally don’t like subscriptions, so your service needs to be compelling enough for them to want to use it regularly.

# Choosing a Price

Pricing is a huge challenge in the SaaS space, because there’s no real additional cost for each user you add. You could charge €5/month or €69/month, and the cost to you would essentially be the same. Your price is essentially just made up by you. Here are some factors to consider:

1. Target Customer: If you’re aiming at individual consumers (B2C), your pricing will typically be lower, between €5 and €20/month. Businesses (B2B), however, are willing to shell out more, potentially hundreds per month, if your solution solves a significant problem for them.

2. Revenue Goals: Your price point directly impacts your revenue and the level of customer service required. For instance, at €5/month, you’ll need 2,000 customers to hit €10,000/month, not even accounting for transaction fees. At €50/month, you’d only need 200 customers. Choose wisely.

So, in summary, SaaS offers a lucrative model with its recurring revenue and low overhead. However, the challenges lie in convincing your customers of the value you provide and nailing the right price point.

# 4. Navigating German Bureaucracy

# Getting Started: Ignore the Bureaucracy (At First)

Honestly, this was a big unknown for me at first, and that’s partly why I wrote this article. My advice? Just get started. When you’re building your first product, you’ll have plenty of challenges that demand your focus. Technically, you can operate as a private person until you reach €100 – €200 per month in revenue. It’s a legal gray area, but these amounts are unlikely to raise any eyebrows . Once you reach that point, then it makes sense to register a company.

# Choosing the Right Legal Structure

Don’t get entangled in setting up a UG or GmbH (limited liability companies) right off the bat. The overhead in paperwork and legal responsibilities can drain you. Sure, these structures limit personal liability, but let’s be realistic: SaaS businesses are generally low-risk in that department. What you can’t escape is tax liability. The best approach is to start as an “Einzelunternehmer” (sole proprietor). You can register this at your local tow