6 reasons startups should consider selling to small businesses, not big enterprises
Andrew Gazdecki is the founder and CEO of Bizness Apps, a do-it-yourself mobile app & mobile website platform for small businesses, and Bizness CRM, a CRM platform designed to make selling to small businesses easy.
With all the buzz these days about how sexy and cool the enterprise has become, there is a segment of business customers that startups are overlooking: small businesses. Small businesses tend to have far less capital than large enterprises, but as customers, they offer startups a number of advantages that make them ideal customers to focus on.
However, selling to a small business is nothing like selling to a large corporation. The interests of your target are often quite different from one context to the next. If your business is built to serve them, you will need a sales approach that is designed to address their main concerns head-on.
Below are some of the advantages that make small businesses such desirable customers to have:
1. The market is massive
In the U.S. alone, there are over 5 million businesses with fewer than 100 employees. For startups looking for a global reach, the worldwide number of small businesses is far greater than the number of big companies.
The number of big companies in the U.S. with over 1,000 employees is around 10,000, and the worldwide number is correspondingly small. Accordingly, chasing the small business market enables a startup to address an audience that is orders of magnitude larger than the enterprise audience.
If conversion rates on sales attempts were at a few percent, this would ultimately leave a startup that targeted small businesses with tens of thousands of customers.
A great example of a successful company that tailored an “enterprise product” to smaller buyers is Apple in the early days of personal computing. At a time when IBM was focusing on larger enterprises, Apple created a computer to serve smaller sized businesses and individuals. By doing so they gained a toehold in an industry in which the leader had a massive head start. Don’t overlook the power of the sheer number of potential customers that exist in the small business market.
2. It’s rewarding
Small businesses are generally one-person shops run by someone chasing a dream. Helping them succeed can be extremely rewarding, and along the way you can meet some very interesting people.
When serving the enterprise, it can be hard to make the connection between your work and the end product. But when you serve small businesses, you can often see a direct impact on the lives of others. Building your startup can be daunting, but this model can help motivate you in your day to day.
The folks over at 37signals, makers of Basecamp, have demonstrated this point pretty well. They serve the “Fortune 5,000,000,” a term they use to refer to all of their small business customers. In an insightful post, they highlight the fact that, when you serve small businesses, your buyers and your end users are the same people. They interact regularly with their end users, and the effort to keep them happy is, in the words of 37signals co-founder Jason Fried, “An absolute pleasure.” Sounds pretty rewarding, right? Compare this to selling to the enterprise, where the software buyers are not necessarily the company’s end users, and a painful disconnect can arise that makes development a sad affair.
3. Small businesses may be “sexier” than enterprises
You may take part in your share of exciting, high profile projects when working with enterprise-level clients, but small businesses can offer the exact same thing. Indeed, the “common wisdom” says that large businesses, due to bureaucratic slowdown, may be less likely to innovate and work on “sexy” projects. Whether this is a myth or not is up for debate. It has been suggested, however, that likelihood to innovate is controlled by culture and policies, not size.
If this is the case, you’ll find interesting, forward-looking projects when working with small businesses. In my experience, small businesses are more likely to adopt a strategy of innovation in order to break into the market, as opposed to adopting a strategy of trying to marginally improve on current offerings. This is because differentiation and taking market share from the market leader are often too difficult without some kind of advancement to promote.
If you’re looking for “sexy” projects, small businesses are more open to approach things in new ways and take big risks as they fight for a place in the market.
Take SquareSpace, for example. If anything needs to be beautified and sexied up, it’s small business websites. When websites are done hastily by someone who has their mind on a thousand other things (hello, small business owners!), they can actually wind up hurting a business more than helping it. SquareSpace has clearly decided to bring sexy back, and they didn’t have to target massive enterprises to do it.
4. The path can be easier
It doesn’t take a year to complete a sale to a small business. Many deals can be completed with a few phone calls. This means you don’t need an enterprise-level sales team to get a deal done. Selling to a small business also means you can keep your first products or services simple. There aren’t complex systems that you have to integrate into, there aren’t multi-layered policies to comply with, and there aren’t a bunch of departments that all need to approve the deal.
Small business deals are very streamlined – you can simply find a need and meet it. This simplicity can be a huge help when the tasks involved in getting a startup off the ground demand a lot of attention and are distracting you from attending to your main mission.
5. Product opportunities are endless
Small businesses, by definition, have a small staff and many gaps in their operation that they need help with. That is, almost every aspect of their business has room for development. There are opportunities to help small businesses with mobile strategy, social marketing, web technology, communications, transaction processing, and more. Want examples? Here’s a small sampling of successful companies that have addressed small business needs.
Save small businesses time, money, or both, and you’ve got a startup with a ton of potential!
Another take on this point comes from Bigcommerce, a company that helps small businesses create online stores with enterprise-level features and functionality. What’s interesting here is that small business had a gap to fill once upon a time – selling online – and it was filled, by companies like eBay and Amazon … but at a price. Bigcommerce is able to disrupt this setup, or perhaps offer a supplemental solution, which tells us that even where solutions already exist, there tends to be room for variation.
6. You can serve a greater purpose
What makes technology startups so special is that you have the opportunity to help people and businesses of every size at an unimaginable scale. If your product or service is useful to small businesses in your area, it may be useful to others around the world. And since the percentage of businesses that are small may be quite high in certain developing countries, your company can be a major force for the global good.
At the end of the day, small businesses offer many, many advantages to startups looking to develop their first customers. Compared to enterprises, it’s easier to design a quality offering, reach a decision maker, make a sale, and administer a working relationship going forward. Small businesses let you be flexible, obtain immediate success, and provide learning and development opportunities that are virtually endless.
Essentially, my point is this: When you chase the biggest game, you may spend a ton of time, money, and effort, and still go home with nothing. If you go after small game, on the other hand, and you’ll almost always come home with something.
And for a startup, obtaining “something” is cause for celebration.