Businesses of all shapes and sizes have found themselves facing some uniquely challenging economic conditions. Interest rates are high and credit is tight, meaning profitability is more important than ever before. This is especially true for small businesses, who already had very little financial wiggle room to begin with. Since money is especially hard to come by, SMBs have found themselves forced to reevaluate their spending. Unfortunately, when deciding what to keep and what to cut, “nice-to-have” business tools are often the first to go.
What Is Optionality in Saas?
The most important quality for small- and medium-sized business in SaaS tools is optionality, which means the ability to define their own workflow. That makes a tool customizable and allows it to grow to meet future needs.
What Do SMBs Want From SaaS Platforms?
In a McKinsey study of 3,500 SMBs, a quarter of businesses reported that they intend to cut their technology spending by up to 25 percent in the next 12 to 24 months. This cohort represents a massive segment of the U.S. economy, spending more than most large enterprise accounts in some technology segments, according to the IDC.
Although SMBs do intend to reduce the number of SaaS tools they’re using in an effort to cut costs, they don’t want to lose features. These tools and platforms provide vital features for businesses like payment processing, customer relationship management, booking and more. According to a survey by Vcita, 79 percent of SMB owners are using two or more tools to manage their business. Among those owners, however, 90 percent would prefer to combine those capabilities into just one tool.
In the report “What SMBs Want From Their SaaS Platforms,” my team at Duda confirmed these findings and detailed more opportunities for software providers that serve SMBs. Nearly 60 percent of SMB owners interviewed said they want to buy more products and services from their main technology platform, and 61 percent of them expect to spend more on industry-specific solutions in 2024 when compared to 2023.
Together, these findings indicate that SMBs are looking to consolidate their software tools. They want their primary software to do more, and they want fewer ancillary pieces of software to support it. That means, if you want your tech company to succeed in today’s changing marketplace, you need to ensure that you’re that primary piece of software.
Don’t Reinvent the SaaS Wheel
What these businesses don’t want, however, is for your company to attempt to disrupt their industries and create solutions where they don’t need one. I recently spoke with Alex Jekowsky, the CEO and co-founder of Cents, during a webinar focused on customer retention. Vertical SaaS companies like Cents hone in on a specific industry to create software laser-focused on their particular customers’ needs.
During the webinar, he argued that many vertical SaaS companies think they need to revolutionize an industry because there is such a lack of technology. “In reality, small businesses have always been able to run their businesses without technology,” Jekowsky said. I believe his thoughts hit a key trend in the wants and needs of business owners: greater efficiency. What they don’t need, however, is an entirely new workflow.
Instead, what these businesses truly need is optionality, meaning the ability to define their own workflow. Jekowsky says, in regards to creating software for today’s SMBs, that the first step is digitizing and providing optionality and delivering a product with what they need today, instead of promising the world and trying to do everything at once. And he stated: “If you build something that works, people will stay.”
Build Specifically for Your Customers
Your product should meet the needs of your customers today. Those products can be extended to meet their needs tomorrow as well, however, all without sacrificing that all-important sense of optionality. That means creating future-forward features that work well with a variety of workflows, specifically the workflows that your customers currently adhere to. Otherwise, they won’t adopt your product.
To accomplish this, you need to hear from your customers. Speaking to your customers, understanding their business needs, and developing specifically for those needs can reveal interesting product opportunities. Executing on these opportunities, in turn, can help your platform fulfill even more of your customers’ needs, helping them reach the goal of consolidating software.
Imagine, for instance, a field service business like plumbing. A software company may choose to create scheduling software specialized for plumbers. If they spoke to these customers, however, they’d quickly learn that they have additional needs such as fleet management, payment processing, website hosting, etc. A great vertical SaaS company can meet all of these needs to develop a truly indispensable product.
Yosha Ulrich-Sturmat of ZenBusiness can attest to this. During the same webinar, he said that SaaS companies should focus on the crucial need that they are satisfying. At ZenBusiness, they started with business formation services, but they know there are many other opportunities throughout the life cycle of an SMB. “So, we made that easier for them, and they feel that we’ve got their back, and we’re here for them every step of the way,” said Ulrich-Sturmat.
The opportunities Ulrich-Sturmat is referring to can, and should, be met with multiple, complimentary products. Offer solutions that meet all of your customers needs in a way that suits their current business practices drives customer satisfaction and retention. Research by Vendasta confirms this. Their study shows that businesses who sell an SMB one product have an average retention rate of 30 percent after two years, while businesses selling SMBs two products have a nearly 20 percent higher retention rate. In fact, businesses selling their SMB clients four products have an average retention rate of 80 percent!
Simply put, by further embedding your product into your customers’ businesses, your platform can greatly reduce the risk that these customers will churn.
Prioritize Your Customers’ Experience
At the end of the day, listening to your users is the key. Make sure they’re engaging with your product and, most importantly, make sure they’re doing so during their first month. Pay attention to their journey and recommend solutions at key moments to promote higher rates of adoption.
Understand the needs of your SMB customers and their end users. Address those needs to dominate an increasingly larger percentage of their software stack. Don’t fall victim to tool consolidation; become a genuine advocate for your clients’ productivity. That’s where you’ll see real growth.
