Conventional wisdom (and terrible 80s movies) tell us that selling to enterprises or unwitting consumers is the only way to make real money. Go big or go home, right? Unfortunately, there are a lot of potential pitfalls when you target big business or individuals. The sales cycle is so long with enterprises that you could run out of money before you seal the deal. Add in complex contracts and lawyers, and you have an (expensive) headache. On the opposite end of the spectrum, selling to consumers requires scaling big-time in order to become profitable— and you could reach the end of your runway before that happens. Plus, you could be out-spent in your marketing channels by bigger, better funded companies with oodles of cash to pour into Facebook ads and cold calls.
Fortunately, small businesses are back and booming. Selling to small businesses gives you the target market volume of selling to consumers without the pressure and complicated sales cycle when targeting enterprises. This post outlines the potential benefits of selling to small businesses and why it’s a smart move now.
Small businesses are a big (and growing) market...
According to the Small Business Administration, there are over 28 million businesses in the US that employ fewer than 500 people, with three-quarters of those businesses being nonemployers. Firms with fewer than 100 employees make up the largest share of the small business pie. Apply these stats on a global scale, and you realize the small business market is huge.
Small businesses are also growing in the US; we’ve seen an uptick in wages, new establishments, and employment over the past year. By going after small businesses, you’re giving yourself tens of thousands of prospects, as opposed to a select few enterprises that everyone else is chasing after, too. A wider customer base also gives you more stability; if you’re serving thousands of small businesses, you don’t have to rely on a single enterprise to fund your payroll. Plus, you don’t have the same pitfall of economies of scale as you do with consumers—small businesses are more willing and able to consistently pay for your product than an individual would be. You don’t need a million customers to start turning a profit with small businesses (though it would be nice).
And they’ve been historically underserved.
Before the advent of the internet, big companies were useful because of economies of scale. It was cheaper to do business within a company, rather than outside of it.
However, things are changing. The internet allows people to make all kinds of transactions; markets are now global, and products and services can traverse the world via digital (and real) highways. In the words of Fintech partner Bernard Lunn, “Digitization erodes the value of traditional economies of scale and vertical integration,” tilting the playing field in favor of small business. New financing programs, readily available tech help, and online sales and marketing tools have also helped level the playing field, giving small businesses tools they never had before.
While some companies jumped on this trend early (think eBay, Uber, and AirBnB), many industries haven’t caught up. Small businesses are constantly searching for ways to save money and time, and your product or service could be their solution.
Plus, it’s easier and more rewarding to sell to them.
So we already know that going after small businesses gives us tons of potential customers hungry for new products and services, but the buck doesn’t stop there. Serving small businesses also offers you endless product opportunities. There are plenty of gaps in a small business’ operations, and your company could create the product or service to help them. And, you get to keep your products simpler; you don’t have to integrate into complex systems or satisfy niche needs according to your contract with an enterprise
Plus, your buyers and users are one and the same. Any feedback you receive is directly from the end user and can be applied to truly bettering your product from the user’s perspective, rather than satisfying the needs of management only. It can be very rewarding to work directly with users and see the effects of product changes firsthand.
Selling to small businesses also creates a simpler business plan for you. No complicated contracts, year-long sales processes, or meetings with everyone on the food chain, like you would need to do at a huge company. With small businesses, relationship building is the game. Your small startup has the benefit of appearing more personal than a large enterprise system, so use it to your advantage in sales and marketing. Emphasize your personal touch and capitalize on word-of-mouth marketing and influencer outreach to build credibility within different industries. When targeting small businesses, you can afford to wait on and nurture referral relationships instead of needing to scale quickly or hound out of reach consumers.
So there you have it: selling to small businesses is a smart move for your bank account right now and the future of your company. If you’re thinking of starting a company, consider what your life would look like if you focused on small businesses. If you already have a company, think about your product development and how you could eventually fold small businesses into your customer base. And if you’re like me and just find business trends interesting, I’m curious to see how the return of the small business shapes our future economy.
Like this post and want more like it? Check out more from our blog:
- Customer-Centric Companies
- Why small businesses should not use enterprise software
- How startup funding works, and why we've decided to bootstrap
Want to continue the discussion? Tweet at me @Julia_Zasso