Against a backdrop of technological change and economic crunch, how do product-based SMBs choose and evaluate their digital tools? Our integration partner, Codat, has conducted some new research that shows how product-based needs and attitudes toward tech differ from service-based counterparts. Here are their findings.
Product-based businesses are more reliant on financial systems
Product-based businesses tend to use more specialist financial software tools than service-based businesses, perhaps due to their tendency to need to process a greater volume of transactions. In particular, the product-based businesses we surveyed were more likely to use bookkeeping/accounting software (used by 84% of product-based vs. 76% of service-based), accounts payable software (46% of product-based vs. 37% of service-based), and accounts receivable software (62% of product-based vs. 49% of service-based).
Managing expenses, inventory, and supplier payments are particularly painful processes
Whereas service-based businesses are more likely to struggle with tracking their invoices and getting paid, product-based businesses find managing spend particularly time-consuming. When asked about their top three business pain points, 34% of product-based businesses selected managing expenses, 37% selected keeping track of inventory, and 23% chose supplier payments against 28%, 11% and 15%, respectively, for service-based companies.
Product-based SMBs are twice as likely to use lead generation, inventory management, and advertising software
As you would expect, product-based businesses are much more likely to use specialist software for inventory management. However, less obvious is the greater need for sales and marketing software. Product-based businesses that were surveyed were twice as likely to use lead generation and advertising software such as Google Analytics, and 20% more likely to use specialist design and customer relationship management software.
They have a greater appetite for software integrations
Thirty-seven percent of product-based businesses rate the ability for software to integrate with the other systems they use as one of their top three purchase drivers vs. only 26% of service-based businesses. This is in keeping with the tendency of product-based businesses to use more software to run their operations, and therefore to experience greater frustration when these systems don’t work well together. When the value of integrated software was explained in more detail, the number of respondents citing that it was important to them increased to 66%, highlighting the gap in education when it comes to the benefits of connectivity.
What’s next?
In the current challenging economic environment, product-based businesses are leaning into their tech stacks to help them navigate uncertainty. Only 8% said they were looking to remove software to save costs, whereas 20% said they had become more reliant on their financial software. This is a dynamic market in which there is ground to be won by software providers’ product-led SMBs. By prioritizing features that save small businesses time and make their lives easier, fintech providers can continue to retain and win new customers in spite of the headwinds.
About Codat
Codat is a universal API that makes it easy to connect to every major accounting, open banking, payments, and e-commerce platform with a single integration. In 2021, Intuit® announced our official integration partnership with Codat to make it quicker and easier to develop secure connections to QuickBooks®. To find out more about Codat and how you can use their API to build better integrations, faster, visit their website.
About the research
The data in this article is based on a specialist cut of Codat’s “The state of small business software report, 2022.” The research was carried out by YouGov and based on 526 online interviews among senior decision makers in SMBs. Download the full report here.