Is It Time to Expand? Key Signs You Should Diversify

Your SaaS company is growing. Your product is strong. But for how long?

Many SaaS businesses hit a critical turning point—the product matures, revenue stabilizes, and initial growth slows. At first, it feels like success. But if you’re not careful, it’s the moment your company stops moving forward—and your competitors catch up.

Just look at what happened to Evernote. Once a market leader in productivity apps, it failed to innovate beyond its core offering. Meanwhile, companies like Notion and Obsidian expanded their product suites, addressing new use cases and gaining market dominance.

The best SaaS leaders see this shift coming and act before it’s too late. They diversify strategically—introducing new products, expanding their feature set, or targeting new markets to maintain momentum.

But how do you know when it’s the right time to expand? Move too early, and you risk spreading resources too thin. Wait too long, and you might lose your competitive edge.

In this article, we’ll break down:

• Key signals that tell you it’s time to diversify.
• How top SaaS companies expand without risking their core product.
• Real-world examples of smart (and not-so-smart) product expansions.

Let’s dive in.

Diversification Prerequisites: When Is the Right Time to Expand?

Expanding your SaaS product portfolio too early can drain resources and kill momentum. But waiting too long can leave you stuck in stagnation while competitors overtake you. So, how do you know when it’s time to diversify?

Below are four key signals that indicate your company is ready to expand without jeopardizing your core product.

1. Your Core Product Is Feature-Complete

Before exploring new ventures, your primary product should be stable, functional, and delivering value to customers. This doesn’t mean it’s perfect—but the foundational features should be in place, and major bugs should be minimal. Think of it as a "1.0" milestone—your product should be solving the core problem it was built for.

Red flag: If your internal teams are still firefighting critical bugs or struggling to meet customer expectations, it’s too early to shift focus elsewhere.

Example: Slack perfected real-time messaging before expanding into workflow automation, huddles, and integrations with enterprise tools.

2. You’ve Captured at Least 60% of Your Addressable Market

While the "60%" figure is arbitrary, the key takeaway is this: when customer acquisition starts slowing down—not because of product issues, but because you’re running out of untapped customers—it’s time to look for new growth opportunities.

What to watch for:

• Your pipeline is shrinking, despite steady marketing and sales efforts.
• Competitors have taken the remaining market share, and winning new customers is becoming increasingly expensive.
• Your revenue growth has plateaued, even with continuous optimizations.

Example: HubSpot started as a pure-play inbound marketing tool. Once it had captured a dominant share of that market, it expanded into sales automation, CRM, and customer service—a move that propelled its long-term growth.

3. Your Financials Are Stable Enough to Support Expansion

Building and launching a new product is expensive and unpredictable. Before investing in diversification, your company should have:

• Strong ARR (Annual Recurring Revenue)
• Positive unit economics (LTV > CAC ratio is healthy)
• Enough cash runway to absorb potential failures

Unlike well-funded giants like Uber, most startups don’t have the luxury of launching new products while still operating at a loss.

Red flag: If your core product isn’t profitable or financially stable, launching a new initiative could pull the entire company into financial trouble.

Example: Atlassian only expanded beyond JIRA (its original core product) after achieving financial stability—allowing it to launch tools like Confluence, Bitbucket, and Trello without sacrificing its profitability.

4. There’s Clear Market Demand for Expansion

Expanding for the sake of expansion is a mistake. The strongest diversification opportunities come from clear market signals, such as:

• Customer requests: Are your clients frequently asking for a related feature or integration?
• Competitor activity: Are your rivals expanding into new verticals while you stay stagnant?
• Industry trends: Is there a growing demand for a solution that aligns with your expertise?

Be careful of hype-driven trends.

The AI boom, for example, has led many SaaS companies to force AI features into their products—even when their customers don’t actually need them. Following trends blindly can lead to wasted investments.

Example: Microsoft successfully expanded its Office suite by listening to customer needs and launching cloud-based solutions like Office 365. In contrast, Google rushed into the gaming industry with Stadia—a product that didn’t align with clear user demand, leading to its shutdown.

Expand Only When the Timing Is Right

SaaS growth isn’t about expanding for the sake of expansion. It’s about identifying when your core product has reached maturity, when your market share is saturated, and when financial & demand signals align.

Move too early → You risk spreading resources too thin and diluting your core business.

Move too late → You risk stagnation while competitors innovate around you.

So, is now the right time to diversify? If your core product is thriving, your market is slowing, and your customers are asking for more—it just might be.

Other Diversification Triggers: When You Can’t Afford to Wait

Even if all the prerequisites for expansion are met, that doesn’t necessarily mean you should diversify immediately. Some companies choose to focus on optimizing their core product for as long as possible before expanding.

However, in some cases, waiting is the bigger risk. Below are five key triggers that indicate you need to act now—or risk falling behind.

1. You’ve Discovered a Bigger Opportunity

Sometimes, while solving one problem, you uncover a much larger one.

• Your data might reveal new customer pain points.
• Your sales & support teams may hear frequent requests for a missing solution.
• Your existing product could be just scratching the surface of what’s possible.

If your team identifies an untapped market that aligns with your expertise, ignoring it could mean leaving significant revenue on the table.

Example: Amazon started as an online bookstore. As they optimized their logistics, they realized they could sell much more than books—leading to the largest e-commerce expansion in history.

Red Flag: If you see a major adjacent market opportunity that fits your capabilities but don’t act, someone else will.

2. Your Team Is Stagnating—Not Innovating

When teams work on the same product for years, a lack of innovation can lead to disengagement.

• Engineers shift from building to maintenance mode.
• New feature releases feel minor or unnecessary.
• Morale drops as creativity fades.

Expanding into new products can re-energize top talent, giving them fresh challenges while keeping them engaged within your company.

Example: Netflix transitioned from DVD rentals to streaming, keeping its teams focused on the future of content consumption. Had they stuck to physical media, they would have suffered the same fate as Blockbuster.

Red Flag: If your best engineers or product leaders are leaving due to a lack of challenge, it’s a sign that you need a new frontier for them to tackle.

3. You’re Sitting on Excess Cash Without a Scalable Use for It

Too much cash in the bank might seem like a good problem, but for companies, idle capital is a wasted opportunity.

Why?

• Money left unused is taxed, decreasing its value over time.
• Sitting on capital while competitors innovate puts you at a disadvantage.
• Investing in product expansion can drive long-term growth and increase company valuation.

Example: Apple could have stayed focused on computers, but instead, it used its massive cash reserves to launch the iPod, iPhone, and iPad—each one revolutionizing a new market.

Red Flag: If your company is profitable but has no clear reinvestment strategy, consider using some of that capital to test and launch a new product.

4. You’re Too Reliant on a Single Product or Market

What happens if your only product loses relevance?

Over-reliance on a single revenue stream is one of the biggest risks a SaaS company can face. Even successful businesses can be one industry shift away from collapse.

• If a new competitor disrupts your market, your entire company could be in jeopardy.
• If customer demand changes overnight, you may have no backup plan.

Example: Salesforce initially started as a CRM but later expanded into marketing automation, analytics, and AI-driven insights to avoid being boxed into one category.

Red Flag: If your entire revenue stream depends on a single product or customer base, you’re one shift away from being obsolete.

5. Your Competitors Are Innovating—And You’re Falling Behind

Your competition is launching new features.

They’re entering new markets.

They’re grabbing media attention.

What are you doing?

The worst mistake a growing SaaS company can make is standing still while competitors evolve.

Example: Microsoft nearly lost the enterprise software battle to Google’s cloud-based apps—until they pivoted and launched Office 365, catching up just in time.

Red Flag: If your competitors are expanding, innovating, and taking risks—while you remain stagnant—you’re losing ground.

Case Study: Scaling Product Development Without Slowing Down

One of the biggest challenges SaaS companies face when considering diversification is how to launch a new initiative without disrupting their core product.

Many teams hesitate to expand because they fear:

• Slowed development velocity on their flagship product.
• Strained internal resources—redirecting key engineers and product managers to new initiatives.
• High hiring costs—building a separate team for a new product can take months, if not longer.

But what if scaling new initiatives didn’t have to come at the expense of your core product?

That’s exactly what one of our clients faced when they needed to accelerate product development but didn’t want to overburden their internal teams. Instead of stretching their resources too thin, they partnered with an external team that integrated seamlessly into their development process—allowing them to execute faster without sacrificing focus.

Result: 40% increase in engineering velocity, helping them rapidly develop and launch a new solution.

Key Takeaways for SaaS Leaders Considering Expansion

You don’t need to choose between growth and stability. A well-structured external team can support diversification efforts without pulling resources away from your core product.

Speed matters. Market opportunities don’t wait. Instead of spending months hiring and onboarding, external development teams can help you move fast and execute efficiently.

Not all outsourcing is the same. Success depends on choosing a partner who understands your product vision, integrates seamlessly with your internal team, and takes full ownership of execution.

The Bottom Line: If You See a Trigger, Act Fast

Waiting too long to diversify can be just as dangerous as expanding too soon.

If any of these triggers apply to your business, it’s time to explore new growth opportunities.

Here’s the good news: You don’t have to do it alone.

At Appunite, we help SaaS companies explore, validate, and launch new products—without disrupting their core business.

Want to discuss how your company can diversify successfully? Let’s talk.