Making the Most of Service Providers: A Guide for Midsize Businesses

Capterra's survey reveals the unique needs and requirements of midsize business-service purchasers.

In today’s labor market, working with service providers has become a popular strategy for businesses of all sizes to cut costs, improve efficiency, and free up time. However, midsize businesses often fall through the cracks in this trend. These businesses are too big to be served by small, local providers and too small to have the budget for large professional firms.

To explore how midsize businesses are using, evaluating, and investing in service  providers, Capterra surveyed 926 U.S. past business-service purchasers (those who have purchased or commissioned a service in the last 18 months) that work at midsize organizations with 100 to 999 employees.*

Before engaging a strategic partner, it's essential to understand the complexities midsize businesses encounter and how to address these specific challenges. We’ll reveal three top challenges that business-services purchasers identify and give you recommendations for what to do now to make better use of business-service partnerships.

Management changes and the pandemic have accelerated the need for midsize businesses to embrace strategic partners 

A change in management often means a reassessment of current practices and a desire for new solutions. This is particularly true for midsize businesses—given their size, these companies often feel a greater impact compared to smaller organizations. 

According to our research, 30% of midsize business-service purchasers say that a change in management triggered their decision to begin searching for a provider, compared to only 22% among small business-service purchasers. 

Business-service providers offer a wide range of solutions, from design and development support to marketing and advertising services, and can help midsize businesses navigate the aftermath of management changes. As a result, there is often an increased demand for service providers to address challenges brought on by changes in leadership as midsize businesses seek to improve daily operations or adhere to new strategies.

Additionally, the COVID-19 pandemic triggered a significant shift in the way midsize businesses operate, as many were forced to adapt to remote work, supply chain issues, and new economic challenges. This resulted in an increased demand for service providers that could offer innovative solutions to help these businesses stay afloat and remain efficient in a rapidly changing landscape. 

Sixty percent of midsize business-service purchasers say the COVID-19 pandemic contributed to their team needing to hire a services provider, compared to 48% among small business-service purchasers. 

Midsize business-service purchasers have strict budgets for service partners

Midsize businesses often face a lack of flexibility for strategic partnerships, compared to their smaller and more nimble counterparts. 

For example, 19% of midsize business-service purchasers say they had a strict budget in mind when they started searching for providers for their last service engagement, compared to only 9% of small business-service purchasers.

In fact, 15% of small business-service purchasers say they did not build a budget at all, compared to only 7% among midsize business-service purchasers.

Midsize business-service purchasers are very invested in the selection process and opt for long-term partnerships 

Selecting the right strategic partner is critical to a successful business-service engagement. A thorough and strategic selection process can help you mitigate risk, ensure quality, and achieve better results. 

We found that nearly three in four midsize business-service purchasers were involved in the selection process for their most recent services engagement because they identified the need themselves, compared to 65% of small business-service purchasers.

Below are the top resources midsize purchasers use to help inform their decision:

• Google/search: 34%

• Social media: 25%

• References from past clients: 17%

• Provider-authored materials: 17%

• Recommendations through their personal network: 15%

The level of involvement during vendor selection makes sense due to the fact that many midsize business-service purchasers contract for long-term engagements. Extended contracts involve a higher degree of commitment and risk compared to a one-off project. 

According to our survey, 60% of midsize business-service purchasers hired on a retainer or contractual basis for their last service engagement. Another 37% signed a contract that was longer than a year. Respondents are also more likely to rehire a provider compared to small-business purchasers. 

Among midsize business-service purchasers, 48% say if they were to contract with a provider for the same service in the future, they would be very likely to use the same provider, compared to 41% of small business-service purchasers.

Midsize business-service purchasers look for flexibility and a trusted brand name

One notable challenge facing our respondents is finding providers that can meet their specific needs and that offer the level of flexibility they require. 

Midsize businesses typically have limited resources compared to large businesses. They might not have dedicated teams or expertise to manage partnerships effectively. For example, 55% of midsize-business service purchasers say that a lack of bandwidth triggered their team to begin searching for a service provider. 

Additionally, communication and coordination can be a struggle for midsize businesses (particularly when working with multiple partners). Large businesses are often better equipped to manage outside relationships through their established processes and procedures.

Nearly a third (32%) of midsize business-service purchasers are seeking flexible providers— however, having a trusted brand name, the provider’s location, and the ease of integration with other systems are important qualities when selecting partners:

If you liked this report, check out our other insights on business-service findings and trends:

• Considering Using Business Services? Agility Is a Key Factor for Small Businesses