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Field Services SaaS: Growing Top-Line Revenue by Integrating Payments

  • How payments integration offers a viable revenue opportunity for field services SaaS proviers
  • Why integrating payments improves a SaaS provider's M&A prospects

For a field services SaaS provider, adding payments processing to their platform can be a powerful strategic move to grow their business and make a great exit.

When a SaaS provider operating in the field services or construction sector serves a specific discipline (e.g. contractors, roofers, landscapers, and so forth), that narrow focus can result in a highly sticky product.

As such, sticky field services products are well positioned for growth and a great exit outcome. But in spite of strong customer retention, SaaS providers in field services commonly have to address issues like:

  • A constrained TAM in consequence of their tight focus
  • Resistance to technology adoption by long-time operators in their niche
  • Relatively small ACVs with little tolerance for price increases

Despite these challenges, the field services software space has seen growing adoption. In recent years, SaaS providers have started employing a strategy that has had the effect of increasing their top-line revenue, solidifying their product’s stickiness, and also addressing the challenges mentioned above. The strategy: integrating payments processing into their platforms.

The Opportunity of Payments Processing in Field Services SaaS

Some of the greatest challenges that operators in the field services space grapple with are processing payments from customers and paying their employees. Often, companies juggle various software solutions to accept and make payments, and these solutions aren’t necessarily tied closely with other processes or software solutions.

Integrating payments processing into a field services SaaS platform enables operators to easily accept and make payments as part of their standard company workflows. When employing this model, a SaaS provider can charge a percentage fee for each transaction the operator incurs.

How difficult would it be for a field services SaaS provider to incorporate payments? Because a vertical SaaS platform supports the end-to-end operations of a company in a given category, the SaaS platform is the system of record for that company. That system of record tracks all key data related to payment flow: employee salaries, time tracking, job costing, job management, asset management, and so on. Because all the data and processes are already in place (and with the help of API-driven payments software like Stripe and Square), integrating payments is a fairly light lift. In that way, a SaaS platform can seamlessly evolve from pure SaaS to SaaS + Payments.

The greatest benefit of integrating payments into a field services platform is the most obvious: another revenue stream from a captive customer base. If a SaaS provider had only 100 customers that each processed $1M in transactions per year, a basic 1% processing fee would add an additional $1M in high-margin revenue to the SaaS provider’s top-line.

Above and beyond what can be a significant increase in revenue, adding payments to a field services platform also addresses the common hurdles a field services software provider faces:

  • With payments processing, the TAM of the software provider expands to include both the operational and payments aspects of their target sector.
  • Operators are more willing to adopt technology that addresses the most acute challenge of their business: getting paid or paying bills.
  • The SaaS provider’s average revenue per customer increases as operators are more comfortable tying value to processing fees as opposed to a subscription.

Implications of Payments for M&A

In most cases, buyers and investors view transactional revenue as less attractive compared to subscription revenue because of a lack of predictability. However, for SaaS providers employing a dual pricing strategy (i.e. a base subscription + processing fees for payments), that transactional revenue looks more like predictable recurring revenue and is therefore worth more to buyers/investors. Because payments processing also addresses common hurdles in the field services space, a SaaS provider employing this model will be an even more attractive asset.

Even in cases where a SaaS provider has yet to enact this strategy (or is in the early stages of doing so), this model represents a powerful opportunity upon which a buyer/investor will stake their investment thesis, and is therefore a strong driver for improving transaction outcomes.

What Founders Need to Know and Do

Founders of field services SaaS companies would do well to capitalize on this opportunity, as integrating payments is driving multiples higher for SaaS providers who have either already added a payments feature or could easily do so. Founders can position this opportunity in several ways, depending on their circumstances:

  • If vertical SaaS founders have not yet integrated payments, they should demonstrate to acquirers the revenue opportunity in doing so.
  • If vertical SaaS founders have integrated payments but not all customers have adopted the feature, founders should help acquirers see the potential for growth.

An investment bank can help you build a story that buyers and investors will find compelling. Learn more about the role of an investment bank in positioning your business.

Modified on Dec 09, 2021