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

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.

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.

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.