Should You Build a SaaS for Agencies?
Being that my background was in funded tech startups and I now run two digital agencies, I see a lot of interesting questions at the intersection of these two worlds. A member of Microconf Connect recently started a thread that I just had to weigh in on, so today, I’ll be sharing the original question and my answer.
Here’s the original question:
I am a sub contractor for an agency but the ISV is small and doesn’t have many insights into software used and deficiencies in it. So my ask is, are there any gaps in the software you currently use? Things that you wish were better but can’t see yourself spending your own developers time on them?
I am still hunting for my saas idea and was wondering if any of you have come across something that you just didn’t want to tackle but you know could be a good saas if given time to develop.
Ultimately, you can boil this down to two questions:
- Should you attempt to build software as a service (SaaS) that is specifically designed to help agencies?
- If so, what type of software should you build?
1. Should You Build a SaaS for Agencies?
First off, modern digital agencies use a lot of software. I run a couple agencies, and while software exists for everything I need to do, it could always be improved.
The industry of software that serves agencies is huge and there is a lot of competition, but competition isn’t a bad thing. Competition means that there are active buyers looking for solutions. Every year, these buyers are looking at their bottom lines and reconsidering their software spend based on which tools actually drive the most value.
Selling to agencies also has some major advantages for SaaS founders. First, it’s a B2B sale, meaning you can likely sign long-term contracts and have larger deal sizes than in consumer software.
Second, it’s easy to find agencies. They want to be found by their customers, so vendors looking to sell to them should have no issue finding them on social media, email, or even in-person events.
Finally, agencies tend to have high turnover. While this could be bad, it can also mean the tools you build will spread as former agency employees leave and pick up jobs or start new agencies.
While there are a lot of reasons agencies make good SaaS customers, I don’t want to paint an overly rosy picture. The challenging part about building a SaaS for agencies is that competition is high and the switching costs for existing solutions might be very hard to overcome.
For example, if a vendor came along with a perfect project management tool, but our existing tool was good enough and the migration would take many months and thousands of dollars in employee time, I probably wouldn’t switch. Convincing agencies to spend time on non-billable work (which lowers their margins) is an uphill battle.
You can get around this by tailoring your SaaS to new agencies, but these are typically the most volatile and price sensitive ones. So, while I think building software for agencies is a great opportunity, it’s not without its challenges and it’s important to know what kind of problem you’re solving.
2. What Type of SaaS Should You Build for Agencies?
Assuming you’re ready to tackle this market, you need to figure out what you’re building and for whom.
The digital agency market is huge and highly fragmented, so you need to narrow down the type of agency you want to serve: a 2-person agency is much different from a 200-person agency, and they rarely have the same needs.
You might also want to segment your customer discovery by industry. Agencies that service small, local businesses will have much different needs and employee profiles than those that serve high-growth tech companies or large enterprises. Similarly, advertising agencies will have different needs from copywriting agencies. Getting as clear and specific about your target customer as possible will make answering this question much easier.
Once you’ve started to figure out your ideal agency customer, you can start to explore the types of software they use and some of the challenges each presents. The key is to find software that they’re using but underserved by in some way.
Here are some areas to explore:
- Billing, invoicing, and collecting cash - We use Bill.com and Quickbooks Online for this. Both are complicated and not really built for agencies, so we sometimes have to shoehorn things to make them work. Building in the payments/collections space is nice because you can tie your product’s success to more revenue collected faster.
- CRM/Customer Management - We use Pipedrive and Clickup for this, but these aren’t necessarily built for agencies either. The extra features they have and limited reporting often mean we’re doing extra work in spreadsheets to make them work. Again, the good thing about building a SaaS in the sales side of an agency is that your product’s usage is tied to revenue. I also find that many agencies don’t use a CRM at all or use them very poorly.
- Project Management Tools - These are the hardest to change because they’re core to service delivery. Agencies also view their project management tools as a “cost center” than a “revenue driver”, so SaaS founders need to work really hard to get people to switch.
- HR/Payroll - Agencies almost always employ a lot of people relative to their size, and with the increasing reliance on contractors and international talent, there’s a lot of opportunity here. That said, these tools are also cost centers, so you will often need to compete on price with much larger companies.
Conclusion
While I’m not planning to build a SaaS anytime soon, I do think that agencies make good SaaS customers. They’re easy to find, open to long-term deals for discounts, and less price sensitive than individual consumers.
But I’d love to hear what you think. If you have experience building or selling a SaaS to agencies, let me hear about it on X.