Small businesses across the United States are feeling the impact of tariffs imposed by former President Donald Trump on imports from China, Canada, and Mexico. These tariffs, which include a ten percent tax on Chinese products, are causing manufacturing costs to rise, leading many small business owners to increase prices for consumers. As reported in the Verge, Valerie Schafer Franklin, co-owner of Walnut Studiolo, a handmade leather goods company in Oregon, reported a twenty percent price hike on specialty screws due to the tariffs. The interconnected nature of modern manufacturing means that costs are passed down the supply chain, affecting even those businesses that produce goods domestically. As uncertainty looms, many small business owners are struggling to balance their inventory costs with the potential for decreased sales due to rising prices.
That’s being seen more widely. Inflation has surged at the start of 2025. The Consumer Price Index rose by zero point five percent in January, marking the highest increase since the summer of 2023. Over the last three months, prices have risen at an annual rate of four point five percent, significantly above the Federal Reserve’s goals. Notably, grocery prices have seen a dramatic increase, with egg prices up fifteen percent just in January and fifty-three percent over the past year.
In recent reporting by Rich Freeman, the market for Software as a Service, or SaaS, has shown significant improvement, particularly in the vertical SaaS segment. While horizontal SaaS applications experienced a healthy growth rate of twenty-eight percent last year, vertical SaaS solutions surged even higher with a remarkable forty-five percent increase in sales. According to Tracy Woo, a principal analyst at Forrester, this growth is driven by businesses seeking industry-specific solutions that address unique market and regulatory challenges. For instance, two-thirds of law firms in the United States still rely on traditional methods such as pen and paper, highlighting a significant opportunity for modernization. Companies like Clio, a legal SaaS vendor, are capitalizing on this gap, recently achieving a valuation of three billion dollars after a nine hundred million dollar funding round. The article emphasizes that specialized consulting services associated with vertical SaaS are becoming essential for managed service providers to maintain competitive advantage in an increasingly complex ecosystem.
Why do we care?
I am concerned about the troubled waters ahead. Small businesses already struggling with rising manufacturing and supply chain costs will likely tighten IT spendingor shift toward lower-cost solutions, particularly if they consider IT an administrative cost rather than a revenue driver. Expect increased interest in automation and AI-driven operational efficiencies, as SMBs look for ways to cut costs without sacrificing productivity. Not all SaaS is the same. The 45% growth rate in vertical SaaS—outpacing general SaaS at 28%—shows that industry-specific software is where the market is headed.
As regulatory and industry-specific challenges increase, businesses are willing to pay for tailored solutions rather than generic, one-size-fits-all platforms. Service providers and IT consultancies that specialize in vertical SaaS deployments, integrations, and compliance advisory will have a major competitive edge.
