In particular, startups, who have historically had to make do with limited resources, are now faced with difficult decisions about where and when to allocate capital in order to extend their runways and foster growth.

For some context, UK venture capital funding for startups dropped by over 50% in 2023, and less than half of small business finance applications were successful by Q3 2022, compared to pre-COVID levels of nearly 64%. Simultaneously, the majority of small businesses (78%) are also having to deal with soaring operational costs, including utilities and fuel prices, adding to the financial strain​. Simply put, small businesses are increasingly cash-strapped and often required to bootstrap until investment lands.

Is SaaS the saviour?

Against this backdrop, the need to find alternative paths to business success is greater than ever. Small businesses have always had to make do with limited resources, but now those resources are even scarcer, restricting their ability to dedicate manpower to advancing business interests until the situation improves. This is one of the main reasons why software-as-a-service (SaaS) solutions have become such a crucial part of small business operations in recent times, as they can often be used to supplement workforces.

SaaS solutions serve several important purposes for small businesses. Not only do they help reduce the need for large teams, but they can also be leveraged to support data-driven decision-making through advanced analytics. This enables businesses to gain better insights into customer needs and internal operations, allowing them to optimise performance more effectively. Additionally, the month-to-month subscription model of SaaS solutions eliminates the need for significant upfront investment in infrastructure.

A sting in the tail?

For cash-strapped small businesses, this often seems like the perfect solution. However, there is another side to SaaS spending that is sometimes overlooked. Without effective management, SaaS expenditure can quickly spiral out of control, leaving small-to-medium-sized businesses (SMBs) to face the consequences. In fact, our research found that some SMBs are spending upwards of £30,000 per year on SaaS software. More concerningly, many of these businesses were unaware that their SaaS expenditure is so high.

I’m sure many readers will sympathise with this situation. Who among us can honestly say they have complete control over what leaves their bank accounts for monthly subscriptions, or that they’ve never been caught out by a subscription – or worse, a free trial – you were certain you had already cancelled? The issue for SMBs is that their monthly SaaS fees are often significantly higher than the B2C solutions many of us use, and given the additional pressures they face, such oversights can prove highly costly.

Getting a greater grip

Much like personal spending, the first step to gaining better control over sprawling SaaS costs is expense management. Recently, a new wave of SaaS management solutions has emerged, enabling SMBs to do this more effectively. These solutions allow businesses to consolidate subscriptions, identify overspending, gain insight into company-wide SaaS usage, and streamline costs – potentially reducing their average spend by up to 20%. By doing so, SMBs can prioritise achieving greater cost-efficiency in their SaaS usage.

This is nothing to be sniffed at, particularly with software being the third largest spend for SMBs in 2024. Given the challenging economic landscape, with funding drying up at every turn, these tools and services can help SMBs to build stronger businesses as cost-efficiently as possible. In doing so, they represent the perfect tonic for dealing with the challenges of today. Moving forward, they must be considered a priority for businesses across the UK who want to put themselves in the best position for success.

Embracing the cash efficiency era

The demands placed on SMBs, particularly startups, are constantly evolving. Just a few years ago, the emphasis was firmly on relentless growth, with companies prioritising this metric above all else to attract investors and secure the resources for continued scaling. In light of recent events, it’s probably safe to say that this era has come to an end. Now, more than ever, the focus is on businesses doing everything they can to achieve cost efficiency in order to remain viable until the market sees another upturn.

There’s no doubt that SaaS tools are invaluable for achieving this goal, and when managed properly, they enable companies to succeed without the need for significant investment in additional manpower. However, as with many aspects of business, the benefits only hold if managed effectively. Without the right tools and processes in place, SMBs can quickly face the problem of uncontrolled SaaS spending, bringing them back to square one. As such, the need for modern SaaS management solutions is a growing business imperative.