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Here’s How SMBs Are Maximizing Their Software Spend in 2023

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HERE’S HOW SMBS ARE MAXIMIZING THEIR SOFTWARE SPEND IN 2023

By: Stephan Miller - Guest Contributor on March 28, 2023
On this page:
How much are SMBs spending on software?
How are SMBs maximizing what they spend on software?
Making the most out of your investment

Planning how much you’re going to spend on software for the next year can be a
monumental task. As a business leader, you want to be sure that you’re making
the most of your budget while also keeping up with industry trends.

Looking at what your competitors are doing with their software budget can help
you stay ahead of the curve. Every year, Software Advice asks hundreds of small
and midsize businesses (SMBs) to participate in our SMB Software Buying Trends
Survey*, and the results from the 2023 survey are in. 

From which industries are most likely to increase their software spend to the
circumstances driving SMBs to change or upgrade their existing software, we’ll
cover everything you need to know to make informed decisions about your own
software budget.


HOW MUCH ARE SMBS SPENDING ON SOFTWARE?

Knowing how much other SMBs are spending on software can help you make better
decisions yourself:

 * It can help you determine if your software budget is reasonable, compared to
   other businesses that are the same size and in the same industry, and avoid
   overspending.

 * It can provide insights into which software categories are popular among
   similar companies.

 * It can help you find areas where you may be underspending compared to your
   peers.

So let’s take a look at the numbers and how you can use them to make better
buying decisions.


SMBS ARE SPENDING MORE THIS YEAR IN GENERAL

The majority of SMBs are investing in software and technology to help solve
their most pressing challenges and remain relevant. According to our survey, 69%
of small businesses are planning to increase their technology spend this year,
with another quarter planning to maintain their current levels of spending. 

This trend highlights the importance of developing a clear strategy to ensure
that your software budget covers the functionality you need. 

An ecommerce retailer might want to purchase new customer relationship
management (CRM) software to manage customer data and automate personalized
marketing campaigns. A law firm may need to invest in case management software
to track cases, manage deadlines, and collaborate with clients.

To make the most of your software spend, you should prioritize your team's
current needs, then evaluate software based on factors like functionality, ease
of use, and cost.

If you're new to the software-buying process, Software Advice can help you
figure out which tools would best suit your needs. Check out "Make Your Software
Search More Seamless With a Software Advisor" to get started.


HOW MUCH THEY SPEND DEPENDS ON THEIR INDUSTRY

According to our survey, marketing (89%), retail (85%), and financial services
(83%) industries are most likely to spend more on technology in 2023. With the
rapid evolution of technologies for marketing and retail, as well as quickly
changing consumer demands, these two industries are likely to continue spending
in 2023. 

On the other end, healthcare organizations (17%) are most likely to spend much
less. 

Marketing is core to the strategies of many businesses, and the tools available
to marketers are evolving rapidly. To stay competitive, professionals in the
marketing industry need to keep up with the latest trends in marketing
technology to improve their campaigns, data analysis, and customer engagement.

Retail is another industry where technology advances quickly. If your business
is in this sector, you may need to research and invest in software solutions
that help you manage inventory, streamline order processing, and offer an
omnichannel customer experience because the numbers show that your competitors
plan to.

On the other hand, healthcare organizations, which are less likely to spend on
technology, might miss out on opportunities to improve patient care, streamline
operations, and keep up with regulatory requirements.

Consider the specific needs of your industry and your business goals when
deciding on technology investments. You should also regularly evaluate your
software spending to ensure that you are investing in the right solutions and
there aren’t more effective options available, especially if your business is in
an industry where technology advances quickly.


HOW ARE SMBS MAXIMIZING WHAT THEY SPEND ON SOFTWARE?

SMBs are not only spending more on software this year, but they are also
figuring out ways to stretch their budget and make better buying decisions. This
information and the insights it provides will help you in these ways:

 * You can use the same strategies and tactics to get more value for your money,
   which can be especially useful if you have a limited budget.

 * It can help you determine if spending more time finding the right solution is
   better than working around the wrong one.

 * It can help you avoid some of the common pitfalls in the software purchasing
   process.

Let’s see how other SMBs are getting more value out of every dollar they spend
on software.


THEY ARE LEVERAGING EXISTING SOFTWARE FOR NEW FUNCTIONALITY

The data from Software Advice’s 2023 SMB Software Buying Trends Survey* shows
that 68% of SMBs have been replacing, modifying, or right-sizing their software
more frequently since the beginning of 2021. They are scaling up their licenses
to manage more projects (55%), adding more functionality to the software they
already use (50%), and adding more user seats to existing licenses (34%). This
trend indicates that SMBs are seeking ways to get more out of their existing
software investments.

This finding is especially helpful to small and midsize businesses that have
limited budgets and resources. Instead of immediately searching for new software
solutions, SMBs sometimes find it more cost-effective to evaluate their current
tools and consider how they can be scaled up or modified to meet their changing
needs. 

For instance, if your project management software is no longer meeting your
team’s needs, your business can explore upgrading to a license that includes
more features or adding more user seats rather than starting from scratch with a
new solution.

By leveraging existing software for new functionality, SMBs can save money,
reduce the time and effort it takes to implement a new solution, and achieve
similar results. Additionally, scaling up licenses or adding user seats can also
help SMBs avoid the disruption that comes with implementing new software.

You should regularly evaluate your software to identify areas where these tools
can be scaled up to meet your evolving needs. You should also keep an open line
of communication with software vendors to learn about available upgrades or
add-ons that could improve your current software’s functionality. Lastly,
approach your software decisions with a long-term perspective and consider
scalability when making an initial purchase.


THEY ARE EVALUATING MORE SOFTWARE TO FIND THE BEST FIT

SMBs are increasingly evaluating even more software options before making a
purchasing decision. The average number of software products evaluated has
increased to five. But our survey shows that nearly a quarter of SMBs evaluate
seven or more products before making a decision, which is up 10% from 2022.

There are more choices on the market than ever before, which can be good and bad
for SMBs. There are more options available to match your business needs, but you
also may have to spend more time evaluating solutions and face a complex process
to identify the right software.

It is easy to get overwhelmed with the options available, which can cause
decision paralysis. This is especially true for those with limited resources who
may not have the time or staff to do a thorough job.

Take a strategic approach to your software evaluation process. Focus on the most
important features that your team needs in a software solution, such as
functionality, ease of use, pricing, and security, and be mindful of the time
and resources required to evaluate software options.

One way to simplify the software evaluation process is to use online reviews and
ratings from other businesses in the same industry to get an idea of what works
and to narrow down your options.


THEY ARE BEING MORE FLEXIBLE WITH THEIR SOFTWARE BUDGET

SMBs often work with limited resources and budgets, so finding ways to save
money while still investing in technology is important. Our survey respondents
that said they kept budgets flexible and finalized them only after evaluation
spent, on average, 10% less on software in 2022. This highlights the importance
of a flexible budget and proper evaluation of all options.

For SMBs, it’s crucial to determine the functionality and security requirements
you need before negotiating an agreeable price with the provider. By keeping a
general upper limit in mind, you can remain flexible with what you are willing
to pay while still getting the best value for your money.

For example, a small marketing agency may need a new project management tool,
but they also have a strict budget. Rather than immediately choosing the most
affordable option, they should evaluate multiple software options to determine
which meets their functionality and security needs. By negotiating with the
provider and remaining flexible with their budget, they can potentially save
money without sacrificing quality.


MAKING THE MOST OUT OF YOUR INVESTMENT

By following the strategies we covered, you can get more out of the money your
business spends on software and find solutions that are a better fit. This may
involve simply upgrading or modifying existing software to add more features or
evaluating more software options and holding off on setting a hard budget until
every potential tool has been examined.

The goal is to find software that meets your requirements, not just to buy new
tools for the sake of it or to let your budget dictate your decision process. By
carefully evaluating options and being flexible with budgets, SMBs can make the
most of their investment in software.

To discover more tips to help you make better software buying decisions, check
out these resources:

 * SMBs Are Making Software Spend Decisions Faster Than 2022

 * Trend Report: These Are The 5 Most Important Tech Trends for SMBs in 2023



--------------------------------------------------------------------------------


SURVEY METHODOLOGY

* Software Advice’s 2023 SMB Software Buying Trends Survey was conducted online
from August 2022 to October 2022 among 1,513 respondents from the U.S., U.K.,
Canada, Australia, and France and from SMBs with revenue less than $1 billion
and between two and 999 employees. Respondents were screened for their
involvement in software purchasing decisions and those who were a leader or
member of the group or had significant influence qualified for the study.






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