The third annual “State of SMB Software 2018 report from our friends at SurePath Capital Partners paint a picture of a robust small business software market in 2018, with money pouring in to make big bets on companies that are enabling SMBs to in effect run their businesses through their phones.

We asked SurePath’s founder Mark MacLeod to jump on Above the Cloud this week to talk about report highlights and what he thinks the year ahead will bring.

Our conversation loosely followed the takeaways from the report, found on page 41, with a few detours in the conversation. Here are a few items that jumped out from the conversation.

• The state of SMB software is strong. Demographic trends suggest a growing addressable market for small business software. This could help mitigate rising customer acquisition costs.
• SMB software can benefit from a recession. When companies begin mass rounds of layoffs, a new class of involuntary entrepreneurs will emerge, and they will be looking for affordable software to run their newly formed businesses. Additionally, as businesses sharpen their pencils, software that helps businesses save money will benefit. Of course, software that fails to meet the “must have” test faces higher churn in a recession.
• There might be a winner in restaurants. The discussion of all in one software solutions is increasingly a conversation about solutions that specialize in a vertical because their solutions adapt to a vertical’s unique requirements. This is something generic all-in-one suites struggle to do. MacLeod suggests restaurants might be the first category where one company becomes the de facto operating system for restaurants. MacLeod wouldn’t pick a winner outright, but he likes Toast‘s chances and he thinks Open Table is vulnerable to disruption.

You can listen to the podcast below. And we encourage you to access the full State of SMB Software 2018 report.

And as always, we thank the sponsors of Above the Cloud and the Tech Adoption Index.