Running a SaaS business comes with inherent risks, but some problems can be outright catastrophic.

These aren't just minor setbacks, they can completely wipe out your business overnight. From payment disputes and market shifts to third-party dependencies and lawsuits, understanding these risks is crucial for your business's long-term survival.

This article breaks down the four most dangerous threats to your SaaS and how to mitigate them.

1. Dispute Activity Above 1%

If your chargeback rate exceeds 1% of your transactions for more than three months, your Stripe account could be deactivated or you may face higher fees. While chargebacks are typically an issue for early-stage businesses, they can become a major risk if not handled properly.

If this goes above 1% for 3 months, its gg.

However, your biggest risk with chargebanks is with credit-card testing. This is where fraudsters will semi-automatically make payments through your service with stolen cards. They can test upwards of 100s of cards on a hourly basis.

This might increase your revenue for a bit, but when the legal owners of these cards see the transactions, they will initiate chargebacks. A big number of chargebacks overnight can get Stripe to ban your account.

The best solution is to block fraudulent users from signing up. If your signup process is rock solid, they cannot automate their card testing service and leave you alone.

2. Target Market Crashing Overnight

Sometimes, the entire market your SaaS depends on collapses due to regulatory changes, economic downturns, or sudden shifts in consumer behavior. When this happens, your business may gradually decline until it’s no longer viable.

Some possible causes:

• A new law makes your service illegal or heavily restricted.
• A competitor launches with a 10x better offering and completely dominates your space.
• Customers no longer need your service due to technological advancements or industry shifts.

There are no possible solutions, only mitigations. For instance, if you develop a paid plugin for a tool, know that the tool owners can replicate your functionality for free.

If you're plugin gets popular enough, you want either expand to other marketplaces or offer a standalone version - or sell it off. Fomo's original plan came from this risk mitigation strategy.

3. Third-Party API Dependency Failing

If your SaaS relies on a third-party API, you’re at risk of losing your business overnight. Imagine building a service around Google Drive, only for Google to suddenly discontinue their API. Without warning, your product stops working.

This is especially dangerous for businesses that depend on:

• App Store policies (Apple/Google may change their terms, cutting off revenue streams).
• Cloud services (AWS, Google Cloud, or other platforms can increase pricing or change limits).
• Data scraping (If a website changes its UI or blocks bots, your SaaS might become unusable).

As with the previous risk, there are only mitigations available. For instance, if you have an App store app, you want to expand by offering an Android version and a web version.

With Api services, you want to choose providers that are not VC backed, or have multiple competitors, and/or have a open source version.

Don't get rugpulled!

The lesson we have to re-learn every 5 yrs pic.twitter.com/9rHqrDhLbs

— Jason Bosco (@jasonbosco) October 27, 2024

4. Lawsuits

Legal trouble can cripple your business financially and even shut it down completely. Getting sued by a much larger company can drain your funds, regardless of whether you win or lose.

Notable Examples:

• CalmFund vs. SureSwift Capital – Horrible lawsuit that drained CalmFund's resources. CalmFund no longer exists☠️.
• CoffeeZilla vs. Jake Paul – A media lawsuit that drained significant resoures of the plaintiff. Still ongoing.
• Cloudflare vs. Patent Trolls – Cloudflare survived due to its financial strength, but smaller businesses wouldn’t.

Possible solutions

• Make sure you're doing business under a legal entity as opposed to solo ownership
• Make sure your terms & conditions page is rock solid. Consider getting it vetted by a lawyer experienced in tech matters.
• Once your SaaS gets large enough, it is worthwhile looking into business insurance.
• Keep some money aside for legal expenses. A simple legal letter can cost ~1000 usd so save appropriately.
• Make friends with lawyers. No I'm not kidding. If something happens and legal intervention is needed, they can help you find referrals.

Closing Thoughts

While these risks are rare, mitigating them early on can increase your SaaS business’s longevity. Diversifying revenue streams, managing risk factors, and ensuring legal protection are crucial to survival.

Stay prepared, and your SaaS will have a much better chance of thriving.