Small and medium-sized businesses (SMBs) aren't just the backbone of the economy, they're also one of the biggest opportunities for marketing agencies today.
There are millions of SMBs worldwide. In fact, smaller companies make up roughly 90% of all businesses globally, and they increasingly need help navigating the digital marketplace.
These businesses are embracing digital marketing to grow, yet many lack the time, tools, or in-house expertise to do it effectively.
Recent research by vcita's InTandem shows more than half of SMBs now outsource marketing tasks to agencies, seeking external guidance to boost their online presence and reach customers in a crowded online world.
But marketing and digital agencies are facing a critical moment as SMBs demand more tangible results and ongoing value from their service providers.
Many organizations serving this segment report that traditional project-based services aren't enough to secure client loyalty or sustainable growth anymore. The same study shows 40% of SMBs that outsource marketing stop doing business with their agencies, and over half of those churn within 6-12 months if they don't see clear value quickly.
That high churn rate underscores a harsh reality: Agencies must prove their ROI quickly and deliver continuous support to keep clients on board.
To meet such heightened expectations and improve their own bottom line, many agencies are exploring a new avenue: shifting from pure services to incorporating subscription-based software-as-a-service (SaaS) offerings.
Let's take a closer look at this strategic play.
How SaaS Can Boost Agency Profits
Integrating a SaaS component into an agency's business model means offering clients a software tool or platform (often under the agency's own brand) on a subscription basis. Done right, that "service + SaaS" approach can transform one-off projects into lasting partnerships.
Here are the key ways SaaS can supercharge an agency's profitability:
Recurring Revenue Streams
Instead of relying solely on one-time project fees, agencies earn steady subscription income from a SaaS offering. Packaging a useful software solution into a monthly/annual plan creates predictable cash flow. It's a shift from chasing the next project to building and accumulating revenue.
Stronger Client Retention
A well-chosen SaaS tool can make an agency indispensable. When clients rely on your platform daily to manage leads, appointments, or customer communications, they become far more embedded with your agency.
Switching to a different provider isn't just a marketing change: It would disrupt their operations.
Competitive Differentiation
In a crowded agency marketplace, a proprietary platform sets you apart. Instead of competing solely on creative ideas or ad budgets, you can offer a unique and tangible solution—which not only impresses prospective clients but also deepens your relationship by providing them with tools they will use on a daily basis.
By integrating a SaaS offering, an agency effectively transforms into a hybrid solutions provider. This kind of innovation signals leadership, and it can be a deciding factor for clients who are evaluating long-term partners.
Higher Average Revenue Per Account (ARPA)
Monetizing software opens up new revenue channels beyond hourly work. Agencies can charge subscription fees for the platform, earn usage-based revenue (for example, a small cut of transactions processed through the app), or upsell premium features.
Each client engagement has the potential to generate more income over its lifespan.
The AI Wave and What It Means for Agencies
Another powerful trend reshaping the SMB landscape is the growing demand for AI-powered tools—for everything from automated content creation to intelligent customer engagement.
Small businesses increasingly recognize AI as a way to level the playing field with larger competitors.
That creates a unique opening for agencies: If your clients are going to adopt AI tools anyway, why not source them from you?
By curating, white-labeling, or embedding AI solutions into their offerings, agencies can ride the AI wave while ensuring clients get tools that are aligned with their goals.
Making the Shift: From Services to Service+SaaS
How can an agency practically transition into offering SaaS?
Jumping into software development comes with major costs and risks; many ex-agency folks have learned that building a SaaS company means years of investment before seeing profit, plus a whole new skill set in product management.
But the good news is, you don't have to build a software product from scratch to capitalize on this trend. In fact, most agencies find success through partnership or white-label arrangements with established SaaS providers.
Partnering with a SaaS vendor allows an agency to fast-track a solution under its own brand—a route typically far quicker and cheaper than developing software yourself.
When evaluating such a partnership, look for a platform that complements your services and a partner that offers reliable support and perhaps co-marketing assistance. The ideal scenario is a fully branded solution where your client might never know it's powered by a third party; they simply see it as your agency's proprietary system that makes their life easier.
A Win-Win for Agencies and Clients
The evolution from service to SaaS isn't about abandoning what makes agencies great, it's about amplifying value and creating win-win scenarios.
By blending high-touch services with a scalable software offering, agencies can achieve more stable and higher revenues while clients get more comprehensive support. It addresses the core issue behind agency-client churn: the need to continually demonstrate value.
Transitioning from service to SaaS is a strategic way for agencies to future-proof their business.
By delivering not just expertise but also enabling technology, you help your clients thrive, and in doing so you create new recurring revenue for your own firm. It's a model where everyone benefits: The client gets better outcomes and convenience, and the agency builds a healthier, more profitable enterprise.
