Small business owners need to be a swiss army knife of skills: marketer, salesperson, IT specialist, HR manager, legal advisor, and financial guru. It’s no surprise that, every once in a while, they need a helping hand. The assist can come from other owners or actual coaches—but usually a small business owner has to figure things out on their own. 

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The good news is that help may be on its way. Vertical SaaS vendors (VSVs) that serve as operating systems for small businesses are starting to launch coaching services that can help the overwhelmed business owner work through key challenges. Video infrastructure and benchmarking data have allowed VSVs to deliver industry expertise, and sometimes live experts, in contexts and in workflows that don’t break the bank. 

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This digital coaching is not only great for small business owners, but it’s also great for the VSV. While helping merchants, a VSV can greatly improve conversion and onboarding, drive retention, expand TAM, create more surface area for cross-sell and upsell, and enable more product bundling and pricing innovations.

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The Customer Pain Point

Every small business owner wants to grow their business. But SMB owners tend to be incredibly busy with all the minutia involved in running a small business, with little time for networking, learning best practices, or researching industry data and benchmarks. 51% of small business owners reported the belief that doing this type of data analysis is a “must,” but only 45% reported actually doing it. Running a small business can be a lonely and challenging job, and opportunities to make significant operational improvements to the business may not be readily accessible or intuitive to the owner. 

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The SMB customer’s pain point around learning best practices for operations also applies to their use of a vertical software vendor (VSV). There is always a period of time during which a customer is still trying to figure out how to use a software product effectively and hasn't yet experienced the intended benefits. This period can be frustrating for users and ultimately lead to churn. Coaching and recommendations can provide pointers not only for optimizing business operations but also for helping customers get the most out of the software they rely on to run their businesses.

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Role of the VSV 

The data required to provide the help an SMB needs is often already available within the VSV, making it easy to create automated reporting and recommendations. For example, a platform could recommend that a business owner focuses on promoting their services on Wednesdays because the data suggests these are their most successful days. The platform could also provide benchmarks and insights based on the data collected from thousands of businesses, helping SMB owners understand how they compare to their peers. Once a vertical software platform has acquired a critical mass of data, extending to analytics and coaching becomes a low-lift and potentially high-impact investment. 

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If a vertical software platform has already established itself at a control point, especially in a place where it has achieved data gravity, then it has likely already established itself as a system of record for its SMB customers. Customers already go to these platforms to record all their data, and refer to them to manually investigate trends in that data—so these platforms are well-positioned to go directly to the customer with proactive analytics and coaching features.

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The What & The How

By analyzing data such as sales figures, customer feedback, employee performance, and more (some or all of which may already live in the vertical software platform), small business owners can identify areas in which to make operational improvements. Software can make this analysis exercise more precise, actionable, and time-efficient—leveraging the data within the software platform allows VSVs to save customers significant time that otherwise would have been spent analyzing data themselves. 

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Similarly, coaching can provide customers with expert advice that is tailored to their specific needs. This personalized guidance helps customers avoid common pitfalls and accelerate their learning curve, ultimately helping them achieve their goals more quickly. By providing customers with actionable advice and best practices, coaching and analytics can help customers apply the insights they've gained and start seeing results sooner.

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Community features can help small business owners connect with each other and share best practices. Many small business owners operate in isolation, without access to a network of peers to whom they can turn for advice and support. Community features allow customers to share tips, ask questions, and offer support, creating a sense of connectivity that could prove invaluable.

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Delivery

So how can a VSV provide the coaching that SMB owners crave? Here are methods we’ve seen out in the wild. 

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1. Call Centers: A call center is a traditional way to deliver customer support and guidance. Call centers can provide a personalized and interactive experience while customers clarify doubts and get answers to their questions in real time. However, call centers can be expensive to operate, and customers may have to wait on hold for a long time to get assistance. This is not an easy muscle for a software company to build.
2. Productized Content: This involves creating self-service educational content such as tutorials, videos, how-to guides, and auto-generated data visualizations. This method is cost-effective and scalable, as users can access the content anytime they want. An analytics or recommendations page within a mobile or desktop application is an example of this.
3. Community Groups: Community groups are online forums where users can interact with each other and share knowledge and experiences. These groups create a sense of belonging and foster collaboration among users, as they can get feedback and learn from other users' experiences. However, community groups may require moderation to ensure that the content is relevant and helpful. They also may not be suitable for users who prefer personalized assistance.‍
4. Live Chat Embedded into Workflows: Live chat is a real-time communication tool that allows customers to talk to customer support representatives without leaving the platform. However, live chat may not be suitable for complex queries, and there may be delays in getting a response. It can also be very expensive and technically difficult to create an experience where the context of any given customer question is effectively understood by the live chat. Companies like Intuit and LegalZoom have found ways to overcome these considerations and provide live, video-based help from certified accountants and lawyers, respectively. Of course, they enjoy high customer LTV on their core product and are able to charge for services, but Intuit and LegalZoom provide help in context and, therefore, in a highly repeatable way. By eliminating setup and discovery discussions and isolating the key questions for the service providers, these companies have been able to offer certified professionals at disruptive pricing.

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Digital Coaches We See in the World

Expanding TAM

Offering coaching can expand the TAM for a platform by making new customer segments addressable. For example, TurboTax, an Intuit product that helps millions of people file their taxes, was traditionally a self-serve product. TurboTax then expanded by launching TurboTax Live, an “offering that allows users [to] file their taxes and access help and guidance from a tax expert whenever the need arises mid-process.” TurboTax Live is the fastest-growing product in Intuit’s history. The tax prep space is divided about 50/50 (in terms of volume) between a do-it-for-me model of tax filing and the do-it-yourself model. Thus, TurboTax had originally only covered about half of the tax prep market (the do-it-yourself part). Live allowed Intuit to expand to cover the entire tax prep space. For more, see our case study on TurboTax Live.

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LegalZoom, a legal services software platform, has followed a similar approach—it has both a self-serve product as well as an offering that allows consumers to speak with legal experts as-needed. This allows it to cover both users who want to do it themselves as well as users who could benefit from having an expert on hand.

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Getting Customers Over the Hump

Operating systems are incredibly powerful but can be hard to get up and running. Our friends at Intuit always say that customer satisfaction during the initial onboarding process creates opportunities for future expansion sales. Coaching and recommendations built into onboarding journeys can help customers overcome key onboarding challenges, getting them to success and future expansion sales. Another example of this concept in action is GoDaddy. When GoDaddy senses a high-value customer is getting hung up in the site creation process, they will provide agency services to help finish the site. 

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The key conversion point can be more than just getting customers started. It can also include success metrics further downstream, such as getting customers their first dollars in revenue. Kajabi, a Tidemark portfolio company and Shopify for knowledge creators, views this as a critical point for their own revenue generation. The company’s sizable customer success teams are focused not just on getting customers but also on getting those customers to generate revenue.

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Social Proof

As we mentioned above, community features increase retention and provide forums for customers to share ideas and best practices. In addition, community features can serve as a powerful tool for new user acquisition. Social proof is always a compelling marketing tool, and community features have the potential to boost search rankings by virtue of all the user-generated content on the forums. 70% of all of UiPath’s web traffic went between their community forum and public-facing documentation. The community offering can also augment the analytics offering, opening the platform to a larger trove of data from which it can distill insights and send them directly to users. This is why we typically advise having your community live in an environment where it can be found by Google.

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Helping Customers Succeed

When customers have more tools and insights at their disposal, they can make more informed decisions about their businesses—which leads to more efficient and successful operations. More successful customers mean a higher-quality customer base. Square has highlighted many examples of business owners using Square Analytics to do things such as optimize their hours of operation, identify their top salespeople, and grow sales. One Square customer said the following: “When I opened Just Baked in Detroit, I was guessing when customers would stop in for a cupcake. Square Analytics showed that this location’s busiest hour was actually between 4:00 p.m. and 5:00 p.m. We would have closed at 4:00 p.m. and missed out on sales if not for Square Analytics’ hour-by-hour trends.”

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For platforms that also have adjacent offerings, this can have tangible benefits to other business lines, such as payments (higher-quality businesses have more transaction volume) or lending (higher-quality businesses may take out larger loans and be less prone to default). You win when your merchants win.

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Creating More Surface Area for Cross-Sell

An analytics or community offering could create more opportunities to cross-sell across the entire suite of products that a vertical software platform may offer. For instance, the analytics feature could be gated by only making it available to users who process payments or do inventory management with the platform as well—the logical customer justification being that analytics are not meaningful unless they have underlying payments or inventory data. In this way, analytics can drive attach rates on other features and products. Customers may already be on the platform, but features like analytics or exclusive community benefits provide that extra incentive needed to move them to use more of the product suite. The coaching and recommendations engine can also educate users on the full suite of benefits and products on offer, and nudge them towards trialing and adopting those adjacent offerings. Platforms like Pilot offer dedicated finance experts to support the use of their products, and these experts can be an additional channel through which Pilot pushes their customers to adopt other Pilot offerings. Driving attachment in such a way can be very powerful for growing the vertical software business.

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80% of gross profits came from sellers using 2 or more products, 38% came from sellers using 4 or more products with these sellers generating more than 10x the gross profit compared to those only using 1 product.

- Block (owners of Square) Q421 Shareholder letter

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Summary

There are considerations to keep in mind when implementing these ideas. Having a critical mass of data is crucial, and SMB owners must not feel like their data is being given away to competitors. The platform must also address the "cold start" problem for new communities, where it can be challenging to get engagement from the first few users.

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However, VSVs that figure out how to help small businesses succeed will be rewarded. Coaching, in whatever delivery method, can expand the TAM and help customers overcome critical challenges, making them more likely to stick. Call centers, productized content, community groups, and live chat—each can work either independently or in concert. It’s a worthwhile journey to embark upon. Your customers will thank you!

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Share your thoughts

We love the idea of bringing together a community to explore the boundaries of Vertical SaaS and are excited by what we can learn from each other. If you have thoughts or comments, or want to get involved, reach out to us at knowledge@tidemarkcap.com. If you would like to keep updated as we publish these essays, sign up below.