SMBs Are Making Software Spend Decisions Faster Than 2022

Trends show SMB leaders are accelerating the software buying process, while some still struggle with long decision timelines. Find out why.

Each year, Software Advice speaks with hundreds of small and midsize businesses (SMBs) in the U.S. to discover how they go about making software spending decisions. Software Advice's 2023 SMB Software Buying Trends Survey [*] reveals that the process has changed for many of them—which makes sense given the current economic environment: Economic growth is expected to continue to decline, inflation is still on the rise, and energy costs are rising.

The five software purchase process trends we’ll cover below reflect a desire for faster, more comprehensive decisions in the face of economic headwinds. And while some of these trends may represent contrasting approaches, each provides lessons to apply to your own experience as an SMB leader driving the software purchase process.

Trend #1: Software evaluation timelines are getting shorter

Sometimes purchasing a software solution can save time and money over developing your own solution, but evaluating software still takes time.

Our survey* verified that 62% of SMBs took about three to nine months from software evaluation to purchase in 2021. In 2022, 76% of SMBs took the same amount of time, but fewer took longer than nine months.

What this means to your software evaluation process

The current economic conditions present one of the biggest challenges for SMBs. According to a recent NerdWallet survey, 37% of small-business owners are worried about the rising cost of inventory, 27% are concerned about rising rent, 27% are worried about passing the cost onto customers, and 26% feel pressure from higher interest rates [1].

Another one of their top challenges is finding the right tools to run their business more efficiently, at 25%. Even with all these concerns about the cost of doing business, many still understand that the right software can save them money in the long run, and instead of cutting back on software purchases, many are streamlining their decision process.

If your SMB is looking to save time and money on your next software decision, you can do the same, but it involves more than just cutting the timeline short. Doing this may result in a solution that doesn't quite fit, and the wrong software is worse than no software at all.

Start with a thorough software needs analysis. Once you have a good idea of the solution you need, systematically evaluate the technology whose features seem to best fit those needs. If you get stuck at any time, you can use our software selection checklist to get back on track.

Trend #2: Businesses are evaluating more software options

Another interesting statistic from our survey is that even though SMBs take less time to evaluate software, they evaluate even more solutions.

For many years now, the average number of software providers SMBs evaluated held steady at five. But in 2022, things changed. Businesses that evaluated seven or more systems grew by 10%.

What this means to your software evaluation process

While you are streamlining your software decision process, you need to make time to evaluate more solutions. Tech evolves fast, and every year, emerging technology has even more bells and whistles that can make your life better. Not all of these new options will be a good fit for your business, but if you don't look around, you could miss out.

Evaluating more software options can provide several benefits:

• Broader perspective: Evaluating a larger number of options helps ensure that your business is considering a range of approaches, which can lead to a more informed decision.

• Greater chances of finding the right fit: The more options you evaluate, the greater your chances are of finding the solution that meets your exact needs and goals.

• Improved negotiation position: Having a range of options to choose from can give your business more leverage when negotiating terms with vendors.

Establishing criteria for evaluating software options in advance and using a software selection checklist can help you evaluate more solutions in the same or shorter timeline.

Trend #3: Businesses are choosing to modify existing software more often

Small and midsize businesses always have the option to modify legacy software to fit their needs instead of buying new. This can often save time, money, and the struggles involved in learning a new system. More businesses are taking this route.

Software Advice's 2023 SMB Software Buying Trends Survey* finds that 68% of businesses have been modifying or right-sizing their existing software more frequently since the beginning of 2021.

What this means to your software evaluation process

When you add up all the costs of new business software, modifying the systems you have is often the better option. Here are some of the benefits of right-sizing the tools you already use:

• Cost savings: Updating existing software is often more cost-effective than purchasing a new system.

• Familiarity: Modifying existing software minimizes the learning curve for employees.

• Customization: Updating existing software can allow you to tailor the platform to business needs and specifications.

• Integration: Modifying existing software helps you reassess and ensure that the platform integrates seamlessly with other systems you use.

That being said, there may be situations in which purchasing new software is a better option, such as when legacy software is no longer supported by the vendor or no longer meets your business's evolving needs. It is important to carefully consider the pros and cons of each option before deciding.

Trend #4: Larger software evaluation teams translate into longer decision timelines

Our survey also finds that software evaluation timelines are closely related to the size of the evaluation team.

Seventy-four percent of SMBs that complete the entire evaluation and adoption process within three months use small software evaluation teams with two to six members. Teams with six or more members are more likely to take nine months or longer to find the right software.

What this means to your software evaluation process

It may take some time and experimentation to determine the right size for your software evaluation team because there are benefits to both small and large teams.

The benefits of larger evaluation teams include:

• Greater representation: Involving more people ensures that a wider range of perspectives and needs are taken into consideration.

• Increased buy-in: More people in the process builds support for the final purchasing decision and increases the likelihood of a successful implementation.

• Improved decision-making: A larger group brings more diverse experience and expertise to the table.

The benefits of a smaller team include:

• Faster process: A smaller group can make decisions more quickly and speeds up the evaluation process.

• Easier communication: Coordinating the input and feedback of a smaller group is typically more simple and efficient.

The right number of people to include in the software selection process will depend on your business's specific needs and resources. It’s best to strike a balance between including enough people to ensure that a wide range of perspectives are represented while keeping the group small enough to be efficient and avoid communication challenges.

Trend #5: Software reputation and solution completeness become more important than trust in longer evaluations

Our 2023 SMB Software Buying Trends Survey [*] also finds that 42% of businesses consider the trustworthiness of the organization and sales team as the most important factor in their evaluation of software vendors.

But, when the decision timeline is a year or longer, this number changes dramatically. At that point, the software's reputation and completeness of the implementation plan take the top spots, for a total of 44%.

What this means to your software evaluation process

When you trust a sales team, you can often shorten the decision process. But it is important to remember that the team is there to sell you a product and present information in a way that is favorable to their organization. Often, this can be a win-win, but there are ways to streamline the process while not depending as much on total trust of the vendor.

More time, more members on your evaluation team, or both, will help you more effectively match the features of the software to the needs of your company, but this can be counterproductive if your goal is streamlining the process. In that case, the best option might be to make the process more efficient with some of the tips we've already mentioned, including:

• Conduct a software needs assessment, and write a business case

• Use a consistent process to evaluate solutions

• Use tactics to increase the odds of a great match

• Use a software selection checklist

What does 2023 look like?

2023 looks to be a challenging one for most SMBs. Despite the outlook, software is not a sunk cost they are avoiding because they know they need to embrace new technology to address new challenges, stay competitive, and grow.

Many companies are updating their existing technology rather than purchasing new solutions. Sometimes, this process will be quicker. By adapting current software to your business's needs, you can get the same or better results without the inconvenience of finding, evaluating, and buying new applications.

Businesses are also streamlining the software decision and purchase process. Each year there are more options to choose from, but you still want to review as many as possible to find the best fit. Doing a thorough needs assessment and using a systematic approach for evaluation can help you do more in less time.

A smaller evaluation team can speed up the software decision process, but it doesn't always result in the optimal solution. A shorter timeline often means that the decision is based on trust in the software provider and its sales team rather than the reputation of the software and the completeness of the implementation plan. The key is to find the right balance between a quick process and a perfect solution.