Determining the initial multi-products

The long-term goal of a Vertical SaaS (VSaaS) company is to create a diverse portfolio of revenue-generating products that drive stickiness in the customer base. The stakes are high to get expansion right—expansion offerings oftentimes represent multiples of the initial SaaS ARPU. The benefits of being multi-product are significant for both parties in the transaction.

For the Vertical SaaS Companies:

• Creates new revenue streams with high gross margins. You can increase overall gross margins for the entire company while having dramatically lower acquisition costs per product.
• Allows for diversification on top-line growth. Not all products have to hit annual goals over time; it’s a portfolio approach that allows for a more nuanced growth strategy.
• Enables higher stickiness for existing customers on the core software by increasing net dollar retention.
• Attracts prospects due to the additional features and functionality that can differentiate you from competitors.

For the Vertical SaaS Customer:

• A better experience for the end customers (e.g., they can do payments in the same UI).
• A better experience for their own staff by reducing the need to learn multiple systems.
• Ability to generate additional revenue via marketing automation.
• Ability to increase efficiency through things like embedded payroll and reduced errors from manual calculations.

One good approach is reviewing the customer’s P&L to understand areas of spend and where the VSaaS can provide value. This analysis should be done by customer segment—SMB, Mid-Market, or Enterprise merchants will have vastly different needs.

^{Follow the Workflow}

Understanding the merchant customer’s workflow can help prioritize where they may need multiple products and what you should build based on economics, level of effort, and customer adoption.

For a $600B GMV example in the US, we can look at tradespeople (roofers, floorers, plumbers, etc.). They have a variety of software options to choose from, but a Vertical SaaS company can provide the ability for tradespeople to consolidate many disparate systems and software. Across the workflow for a contractor, there are a ton of opportunities for add-on products, which are typically replacing existing software (i.e., share-of-wallet approach). Contractors are then moving spend to the SaaS product.

Example of a “Trades” workflow:

1. Marketing acquisition: Helps companies target new customers 
2. Inbound & outbound communications: Helps companies answer phone calls
3. Dispatching technicians: Helps track the location of vehicles 
4. Servicing in the home or business: Helps technicians in the field 
5. Taking payments: Helps technicians and office staff accept payments 
6. Marketing retention: Helps companies retain their existing customers ‍
7. Back-office capabilities: Helps office staff with inventory, accounting, etc.

Expanding GMV take is one of the strategic advantages for a VSaaS to increase wallet share and stickiness!