SaaStr · 2014-07-07 · 4349d

The Emerging SMB SaaS Market: Why Verticalized Solutions at $300/Month are the Next Wave

Jason Lemkin argues that SMB SaaS is entering a new phase where small businesses are finally willing to pay premium prices ($300+/month) for true solutions rather than tools. Unlike enterprise SaaS which requires large budgets and dedicated buyers, SMB solutions must become indispensable daily applications that serve as core business process engines. The market opportunity is substantial: 15-20 companies could reach $100M+ ARR by dominating specific verticals.

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Metrics in this report

Development Timeline

18months

typical

In-house enterprise software development

Enterprise Customer Annual Spend

250000$

typical

Large Enterprise SaaS solutions

Expected SMB SaaS Winners

15-20companies

projected

reaching $100M+ ARR in 5-7 years

Historical SMB Software Spend

100-1000$/year

maximum

per individual software product before 2014

In-House Development Cost

500000$

fully burdened

18 months for enterprise development

Minimum SMB SaaS Price Point

300$/month

minimum recommended

True solutions for SMB verticals

Required Customers for $100M Business

2000000customers

required

$5/month freemium model

Required Customers for $100M Business

25000customers

required

$300/month SMB pricing

Revenue Growth Target

1.5$M to $10M

minimum velocity

6 quarters for market validation