The Rise of Vertical SaaS: Achieving 110% NRR from SMBs with Mangomint’s CEO

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SaaStr CEO and founder Jason Lemkin chats with SaaStr Fund-backed Mangomint CEO Daniel Lang about why vertical SaaS is booming and how Mangomint got to 110% NRR at eight figures in ARR.

What was once often considered too small or too niche, vertical SaaS has recently emerged as a hotbed of innovation and profitability — and interest from Venture Capital.

But vertical SaaS isn’t new — it’s being reinvented.? So what’s changed in the space with the introduction of automation and AI?? And how did MangoMint drive such growth from a seemingly smaller and mature category of software, SaaS for spas and salons?

What’s Changed In Vertical SaaS

To give folks context Mangomint’s at double-digit millions, growing triple digits right now. That’s already pretty good, but even more so today. Its product provides software to spas and salons but it’s not new (the first salon software came out in the 80s), and neither is a lot of the vertical software getting hot today. But what has changed in the last five years is that you have all now embedded financial services (Stripe, etc.) readily available that didn’t exist before.

Consumers now also expect to talk to businesses through digital means. They don’t want to call at 9 a.m. to book an appointment. They want to do it at 10 p.m. on their iPads. Fintech coming into play has changed the trajectory of what vertical SaaS companies can be. 10-15 years ago, salon and spa software was essentially a calendar with bells and whistles. Now, there’s payroll processing, payments online or in person, recurring billing, and so on — effectively expanding the market and TAM.

Full-Stack SaaS for SMBs

Toast today is worth $14B at $1.5B in ARR. There will likely be multiple Toasts for SMBs. For restaurants, it’s the back end, front end, point of sale, payroll, ERP, and workforce management. 10-12 products make Toast work. SMBs want the full stack, but there’s this misconception that you can layer on all these services, and because they’re integrated, people will use them all.

It’s a fallacy. When you add a product like payroll or payments, it’s not enough to just integrate it. You’re going up against companies like Gusto who already handle payroll extremely well. You can’t compete with them on just payroll, so when you bring payroll into your product, you have to integrate it in a way that 70-80% of the time users will default to your software. You have to be an order of magnitude better than Quickbooks.

Toast didn’t just add payroll processing. They thought about what was possible when bringing that piece together with everything else and seeing what they could do as a whole unit vs individually as separate tools. Bolting payments or fintech onto SaaS isn’t going to work if it’s not effortless. Otherwise, users will stick with their existing individual tools, even if it means using more of them.

How to Make Onboarding Work for SMBs

While in some cases, selling to SMBs is easier than Enterprise in many ways, one way in which it’s fundamentally harder is onboarding. Onboarding, especially for vertical saas products and tools that oftentimes utilize hardware or require a vendor like a Mangomint to ingest 10+ years of existing data on the fly, is an order of magnitude harder since these businesses are open every day. They don’t have a dedicated person to set up the new software or an IT team.

The user just leaves if it’s too hard, and yet you can’t have a 4-second onboarding process with complex software. So how do you make it work when a business doesn’t have a lot of time or money to get going? Mangomint is all in on product quality. They’re fully product-led, and that includes onboarding. They have onboarding managers to manage complexity.

Another aspect of onboarding is employee training. A lot of SMBs like spas and salons have 10 – 20 people needing to use the platform every day on different devices, so you need to onboard and switch everyone all at once, not land and expand.

What’s worked is going deep on the product experience. Mangomint has one onboarding manager for every two sales reps, but with no contracts and a 30-day free trial, onboarding starts during the trial. Their sales team have become mini onboarding managers doing a lot of work during the sales cycle because if they can’t get the business to adopt the platform then, they’ve lost.

Mangomint has found an inverse relationship between speed and success rate, meaning that while you may think more momentum and speed in onboarding is a good thing, the success rate for them drops when they push for that too hard and onboard too fast. Instead of speed, for SMBs and onboarding, really the goal should be to get everyone on the platform at a comfortable rate since there’s so much risk from their perspective. For Mangomint, giving customers 3-6 weeks to onboard (vs 1-2) really takes the pressure off and produces better results.

The catch to longer onboarding cycles? Most sales reps hate it.

They want to onboard each customer as quickly as possible to earn their commissions and go to the next deal. So how do you incentivize sales reps to not only help onboard but also actively keep the deal size initially smaller? Mangomint has worked hard to create an incentive structure that makes it attractive for sales reps to invest in customer success. They pay an incentive on expansion over time since Mangomint has 3-4 products that someone can buy and they actively discourage their sales team and users from buying too many products on day one since they’ve seen a higher chance of success expanding existing customers once they’re fully onboarded and using the platform every day.

How to Get 110% NRR from SMBs

When you think about NRR, with most Enterprises, that typically comes from seat expansion and getting more people to use your tool. Mangomint doesn’t have that. The expansion can only come from selling SMBs new products.

To do this, you build trust. For Mangomint customers, this software is their operating system. If it doesn’t work, the business won’t know who their clients are, access records, book appointments or take payments — they might as well close. And Mangomint invests a crazy amount into making sure its systems don’t go down since reliability and quality of product is so important for its customers.

Mangomint has managed such a high NRR despite having no long-term contracts. That means they have to build the highest quality product and constantly ship more products to engaged customers. If they sign up a customer for their main platform, and then expand that in a few months to also include things like payroll or marketing, it slowly builds a higher bar for their customers to also switch away. And the more products they buy, the higher the NRR.

How Much Time Should a CEO Be Involved With Customers

When you have a high-velocity SMB motion that’s still sales-driven, how much time should the CEO spend in sales and with customers? Those are two separate considerations.

Daniel talks to at least 5-10 customers every week. How can you develop intuition or instinct as a CEO, whose job is to judge things and decide where to go if you aren’t spending a lot of time talking to folks? You should interact with customers in person as much as possible. The impact is so much greater, and there’s no substitute.

As far as how much time a CEO spends in sales, Daniel hasn’t talked to any sales prospect in the last 1500 customers. When you build a high-velocity sales motion, you must find systems to scale it. As a CEO, you can’t come in when deal sizes are only $6k-$8k ACV.

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This edition of the SaaStr Insider is sponsored in part by ANROK

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