Two professionals at a vertical SaaS startup solves a work problem together.

Four Common Vertical SaaS Challenges and How to Overcome Them

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It’s an excellent time to be a SaaS provider. 

  • The SaaS market grows an average of 18% annually. 
  • Gartner forecasts that end-user spending on SaaS will reach $396 billion in 2021 and grow 21.7% to $482 billion by 2022.
  • By the end of 2021, 99% of organizations will be using at least one SaaS solution.
  • Nearly 78% of small and medium businesses (SMBs) invest in SaaS options.

It’s a particularly good time to be a vertical SaaS provider. In terms of SaaS trends, the organizations, publications, and influencers forecasting those trends unanimously agree that 2022 will see an uptick in vertical SaaS. In the past decade, the market size for vertical SaaS companies has tripled, and the number of vertical SaaS companies that went public grew by 28% since early 2020!

Vertical vs. Horizontal SaaS

We traditionally think of horizontal SaaS when discussing SaaS providers: SaaS giants like Microsoft, Slack, Salesforce, Zoom, or HubSpot catering to a broad, industry-spanning customer base to help the most customers strengthen their businesses.

Vertical SaaS solutions are niche, created to service a specific business model or industry. Vertical SaaS providers focus on an industry’s niche paint points, needs, and solutions. SaaS specifically built to serve spas, restaurants, education, golf courses, automotive service industries, or insurance are examples of vertical SaaS. 

Why Are Vertical SaaS Companies Thriving? 

Vertical SaaS providers are typically smaller companies serving smaller markets and thus have the ability to adapt and pivot to the demands of clients and their industries quickly and efficiently. This results in greater flexibility and upselling opportunities, as well as lower customer acquisition. Additionally, fewer competitors within each niche industry allow early leaders to dominate their respective fields. 

Niche Industries Have Niche Problems

Since vertical SaaS aren’t interested in being all things to all customers, they can concentrate on being the best solution to the customers in their industry. In some instances, this makes marketing, selling, and growing a vertical SaaS solution easier than a traditional, horizontal SaaS. However, a small, niche industry can present its niche challenges, whose solutions aren’t as studied and discussed as their horizontal counterparts. 

Four Common Vertical SaaS Challenges and How to Overcome Them

1. Legacy Products Dominate the Industry

Because the tech boom initially ignored so many niche industries for “bigger markets,” one or two legacy solutions were often able to gain an overwhelming foothold, becoming industry standards customers are unwilling to part from even if they’re outdated. 

Solution:

This solution may seem over-simplistic, but it’s the best approach: showcase how your product is better. It might take some extra marketing or sales efforts, but if you have confidence that your SaaS can outperform the legacy product in every way, you just need to get future customers to see it in action.

Another approach? Provide solutions these legacy programs don’t. What additional value can you add to the vertical you serve that no one else is yet? If your platform has all the same functionality as the legacy platform plus additional solutions your future customers need, there’s almost no way you won’t be gaining new customers. 

 An applicant tracking system can give your vertical SaaS platform an additional solution your competitors don’t have. 

2. Horizontal SaaS Users

As a niche platform services a niche industry, you’ll always come up against potential customers using traditional SaaS platforms because of name recognition and ubiquity. While you may have the best solution for the customers you serve, it’s hard to compete with the resources a company like Zoom or HubSpot has at its disposal. 

Solution:

Give your customers an unmatched customer experience. This could mean customer service that goes above and beyond what an overworked junior account executive at a huge corporation can offer, or offering specific customizations, insights, or workflows bigger organizations don’t have the bandwidth or expertise to complete—84% of customers say the experience a company provides is just as necessary as its products and services (and 86% more customers are willing to pay more for a product that comes with a great customer experience).

3. Small Lead Pool

You’re serving a niche industry, which means your lead pool could only get so big in some cases. What happens once you exhaust all the leads, even if you convert them all to customers?

Solution:

72% of businesses say improving customer success is their top priority. Helping customers succeed is even more relevant for SaaS companies because If you help your customers grow their businesses, they’ll need more of your services. What solutions can you offer to help your customers expand their business? What plans do you have to scale alongside them? In the world of SaaS, if your customers grow, you grow.

Vertical SaaS providers may want to look into expanding into similar niches. For example, SaaS created for spas may want to explore breaking into the world of salons, or SaaS for golf courses may want to explore offerings for tennis clubs. 

4. Too Niche

You’re focused on a particular solution for a very niche industry—you’re the best at what you do, but at some point, you risk working yourself into a corner.

Solution:

Increase your functionality! What related solutions can you provide customers? Every new capability you can add that solves a solution for your customers increases your value for them, meaning you can start charging current customers more instead of relying on new ones. Studies find monetization is 4x more efficient than acquisition and 2x more efficient than retention at improving revenue growth. 

A Private Label Applicant Tracking System (ATS) May Help

No matter the industry you serve, recruiting and hiring is something your customers need help with. An ATS is human resource software that automates tasks, designates workflows, and takes the stress of organizing and communicating to job applicants off an organization’s plate. 

A private-label ATS allows organizations to choose what features and workflows work for their market and apply their logo and branding to an ATS so that end-users get a value-add they think is proprietary software. A private label ATS can help solve the vertical SaaS challenges outlined in this post. Want to learn more about how a private label ATS can help you grow your business? Check out “Five Reasons Vertical SaaS Platforms Can Benefit From ATS Integration.”

About HiringThing

HiringThing is an integrated recruiting platform that creates seamless hiring experiences. Our private label recruiting technology enables organizations to add hiring capabilities to complete their solution. Approachable and adaptable, the HiringThing platform empowers everyone, everywhere, to hire their dream team.

Sign up for a demo to see how HiringThing can help transform your business.

Author: Pat Brothwell

Pat Brothwell is a content marketer at HiringThing, an award-winning online recruiting software provider dedicated to changing the way businesses hire talent. Questions? Contact HiringThing Marketing.


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