Linear #018: Verticalizing Payroll, Hiring Your VP of Sales, Learnings From Blackbaud
Linear #018: Verticalizing Payroll, Hiring Your VP of Sales, Learnings From Blackbaud
One Vertical SaaS Breakdown. One 'How To'. One Business Story. In your inbox once a week.
One Vertical SaaS Breakdown:
The Verticalization of Payroll
Vertical SaaS is all about extending your product to cover every operational aspect of the businesses you serve.
A topic not often talked about, but a big opportunity, is extending your product line into employee tooling.
Let's talk about the verticalization of Payroll 👇
Payroll software is a commodity dominated by horizontal software tools.
Generic legacy providers rule the space, like ADP or Paychex.
Payroll is also BIG, like really big.
ADP's market cap is currently sitting at an astounding $89B.
But vertical SaaS companies have an incredibly unique advantage to eat into this.
When you become the defacto platform for a specific market -- meaning employees in an industry log-in to your tool every day to perform key functions, payroll is an AMAZING expansion opportunity.
A few dominant vSaaS companies have gotten into the vertical-specific payroll game.
Toast: vSaaS for Restaurants
Wrapbook: vSaaS for Production Studios
ServiceTitan: vSaaS for Field Services
So why is it such an intriguing opportunity for industry-specific software businesses?
#1. Every industry has unique payroll needs
Restaurants have tips, hourly pay, and can be multi-site.
Gyms have ever-evolving schedules & high employee turnover.
Trades businesses are heavily regulated.
A horizontal tool can't meet ALL of these challenges...
Wrapbook (vSaaS for production) is a great example of this in action.
Movie sets are chaotic. They are short term, have a lot of contractors, and a lot of compliance complexity. Horizontal payroll tools don't allow for the flexibility of this.
Wrapbook is now a $1B+ company.
#2. The "Laws" of Payroll are outdated
Who came up with the rule that you get paid every two weeks?
How many industries have happier employees via early wage access? Especially in industries that serve hourly workers.
vSaaS businesses can take advantage of this.
#3. Payroll is a beautiful business model
Most payroll companies charge a pretty heft fee every month for every employee.
On top of that, some take a small transaction fee out of every payroll that get's processed.
This adds up.
FAST.
#4. Payroll is STICKY
Payroll is a pain to change. It's designed that way. That's why publicly traded horizontal payroll companies have top tier customer retention rates.
Once someone moves to you, they're not going anywhere ESPECIALLY if they use use for other day-to-day work.
#5. Payroll is no longer hard to build
Stripe pioneered embedded payments, enabling any software company to add it into their App.
Two new upstarts, Zeal and Check, are doing the same thing but for Payroll, and allowing you to tailor it to your industries unique needs.
Vertical SaaS companies WILL build payroll for their industries and kick out horizontal peers.
If employees in an industry use your software for their daily work, they'd much rather use you for payroll as well.
Especially if you tailor it to their industries requirements.
One ‘How To’:
How To Hire Your VP of Sales (SaaStr)
One Biz Story:
5 Interesting Learnings From Blackbaud (SaaStr)
