Vertical SaaS is the future of SMB software
SMBs exist for a very specific reason, they are a barbershop, a small law practice, a car dealership, a restaurant, a toystore. Their core business is typically not technology, they provide a service, sell products, or operate a storefront. Delivering a tailor-made solution for them will quickly cause them to ditch their patched together approach which has a lot of manual effort in favor of one great fitting technology. Once they do so they will try not to further adopt piecemeal solutions.
Vertical SaaS is the future of Software for SMBs. Quick primer:
- SMBs are most often non-technical and have few integration capabilities, therefore will eventually adopt one vertical SaaS solution tailored to their industry (Example: Squire - Barbershops, Tabit - Restaurant ) that serves all of their needs
- Many SMBs currently use a wide variety of tools (e.g., CRM, credit card payments, banking, website, scheduling). This is complex to set up, expensive and creates a lot of manual work. Combining them under one roof specifically designed for a vertical adds massive value.
- This is already starting to happen and will continue in full force. Vertical SaaS players will start embedding additional solutions (e.g., SMB insurance, Payroll) to grow their all-in-one offering.
- Overtime horizontal SaaS go-to-market will be to go through the Vertical SaaS providers who will “own” the customer. This also is already starting to happen (e.g., CheckHQ.com is offering Vertical SaaS a way to embed payroll in their product)
- Building software is becoming cheaper (especially with no-code tools) this will allow new Vertical SaaS companies to focus on even smaller niches and solve their highly specific needs.
- Many niches that were considered too small to focus on are now much more attractive since once you have them you can also cross-sell fintech products to them