Increasing Your TAM: Why to Integrate Payments with Your Veterinary Software

Meet Tilled’s PayFac-as-a-Service: the solution that generates revenue (dare we say almost immediately) for your Veterinary Software. 

For vertical SaaS businesses, it’s easy — and attractive — to look at unicorn companies like Mindbody and Toast and believe your product can become the ubiquitous solution for your industry. But one question you’ll have to answer first (for both yourself and your investors): Is your market segment big enough to justify a billion-dollar valuation?

In a Forbes article, venture capitalist Adeyemi Ajao argues, when you add in integrated payments processing, the answer to that question is much more likely to be yes. So why do venture capitalists like integrated payments so much?

Horizontal vs. Vertical

There are two key types of SaaS solutions: horizontal and vertical. Horizontal solutions — like Salesforce for instance — can be applied across any industry and result in massive market opportunities. Vertical solutions on the other hand, are products that are tailored to a specific certain industry, potentially making their Total Addressable Market (TAM) significantly smaller. For investors looking to generate venture-sized returns, the potential to increase your TAM can be a major factor in deciding whether or not to invest. 

Adding Integrated Payments

By simply adding payments to your vertical SaaS products, you can easily capture significant new revenue and increase your TAM instantly. For example, let’s look at Toast. Ajao calculated their TAM increased by 3.5x when they added payment processing to their software. This means that Toast was able to generate 3.5x the revenue from payment processing than they were able to justify through their core POS offering.

We’ve discussed before how adding payments can add revenue to your business, but this is about more than just your bottom line. This is how you make your company more attractive to potential investors and also increase your competitive edge with your customers. With Tilled, the infrastructure already exists to empower your vet software solution. Take advantage of integrated payment processing and increase your TAM, all with minimal extra energy, time, or money invested. 

Attracting Investors with Integrated Payments

From an investor perspective, increasing TAMs will greatly increase the chances your company will be able to provide the venture returns they require in order to invest. So what can you do to increase your TAMs and draw investors attention? Integrated Payments. Here’s why:

• With the implementation of integrated payments, you can increase your TAMs sometimes by as much as three or four times. For many vertical SaaS companies, their TAM without payments is simply too small to attract the attention of venture capital investors. 
• Integrated payments processing is so attractive to potential investors not only as a new revenue stream but also as a high-margin one that investors will look at favorably when evaluating your business. If you record it correctly, recurring payments revenue is nearly 100% pure margin for your business, especially if you’re working with Tilled where we take on the liability for chargebacks. 
• For investors, anything you can do to improve your ARPU is a good thing. Integrated payments can do just that by increasing your Average Revenue Per Unit (ARPU), or how much revenue you can generate per customer, per year. With payments, each customer will be worth that much more to your company, making your market potential much higher and/or making it easier to break even and start turning a profit. 
• That extra cash can also help you push out your next fundraise meaning less dilution for you and your investors. If you can add $500K per year of cash flow into your business, that is $500K per year that you don’t necessarily need to raise from investors. Your cap table will thank you.
• Finally, adding integrated payments to your vet software solution allows you to compete with other, more prominent players in the veterinary market which investors will evaluate before investing. With the additional payments revenue, there are several ways your company can have an edge over your competition.

Competitive Edge

One of the most obvious ways adding revenue to your business can give you an edge over your competition is by allowing you to reduce the cost of your solution to your customers. Once you’ve added integrated payments and doubled, tripled, or even quadrupled your average annual contract value, you have a few new choices to make. Either keep your veterinary software costs the same and pocket or re-invest the additional margin, discount the cost of payment processing, or discount the cost of your primary software solution. 

Many small businesses accepted long ago that there are costs to process credit cards, but they may not feel the same about your software solution. By adding integrated payments revenue, you can now offer customers your solution at a lower — or even no — cost. Take Toast for example: if they can generate 3.5 times more revenue from payments than from SaaS fees, they could give their software away and still generate more revenue than they ever could without payments.

If you’re the only software solution in the veterinary market that offers integrated payments processing, and because of that now offer your software for free, it’s easy to see how you could quickly dominate the vet industry. Conversely, if you’re the only solution that isn’t offering integrated payments, you’re a lot more likely to be fighting an uphill battle against your competitors. 

In addition to competing on costs, adding payments also adds value to your software solution. Many vertical software companies have integrations into popular CRM systems, accounting systems, or health record systems. This additional integration layer means more value and likely more margin. Customers also no longer have to put in the extra work and potential risks of finding a payments processor and instead have a seamless solution available to them with just a few clicks, making those customers much more likely to stay with your solution for the long term.

Infrastructure to Empower

As you scale up as a vertical SaaS company, once you hit a certain threshold you are not only risking valuable revenue and margins by not integrating a payments solution, but you are also risking your market share and ability to compete in your industry. 

With Tilled, we have the infrastructure in place to empower your business to implement a seamless integrated payments solution- in less than a week. Thanks to our technology and partnerships, your margin on payments with Tilled is essentially 100 percent. We take on the liability, and there’s no need to hire additional staff or add any overhead costs to your business. Plus, with our easy-to-integrate APIs and SDKs, we offer a turnkey solution that can be up and running in a matter of days, with no upfront costs or monthly software subscription required. 

There’s no doubt there are markets existing today that have yet to be penetrated by vertical software solutions. Many of them, on first look, appear too small to justify the work and investment. But what if you could increase their TAM by three or four times? With Tilled, you can make those new margins right out of the gate. Suddenly, new business opportunities that didn’t pencil out, work better than ever expected.

 

Learn more about the benefits of integrating Tilled with your veterinary software today!