It would make sense that if small businesses comprise the vast majority of companies operating in the U.S, and employing over half the labor force, they should be high on your list of people to sell too. As a matter of fact, small and medium size businesses are targeted often, but are very different and not easily sold on just any product.
However, if you drill down a little deeper into the statistics you will find that 23 million of the registered 28 million companies in the U.S. are solopreneurs, with annual earnings of less than $1 million, according to data from Entrepreneur Magazine. But what the small business market lacks in depth, it more than makes up for in breadth and scale. On the big tech side, Google has led the way in cracking the small business market, with over 3 million small companies paying for its array of development tools.
A once small business, HubSpot, a ScaleVP portfolio company, grew to a public company with a $5.9 billion market cap by initially targeting the small business market. So you’re saying I’ve got a chance?
According to Alex Niehenke, a partner at Scale Venture Partners, “Based on my experience helping companies like Hubspot, Box and DocuSign sell to small businesses, there are two critical strategies startups must learn if they want to do it right.” Let’s take a look at them.
Build Products Small Business Can’t Live Without. Big business has resources, both financial and labor, that afford them the luxury of not only purchasing the software or products they absolutely need, but secondary and tertiary products that small businesses cannot. To sell a small business you must meet their immediate needs and your product or service must be usable from the get-go.
Tap into markets that must meet certain government or regulatory laws, and target these companies. You know that they have to comply, so if you can make the process less painful to them, your odds of a sale are much greater. Intuit’s tax preparation software and ADP’s payroll solutions are great examples of this strategy. Both have built remarkably successful businesses targeting the small business market. The steps in the government contract procurement process shown below are all possible targets for “can’t live without” services.
Build products for huge addressable markets. Let’s go from target marketing and the shotgun approach to accessing markets with large numbers of potential clients. Everybody’s dream, right? To do this, focus on horizontal use cases or build products where the customer experience can be customized across many different workflows.
So what do we mean by this? A great case study of this is MindBody, which has seen breakout success with fitness and wellness small businesses of every kind in recent years. It has been able to take a core product, and spin it off to sell in different phases up and down and industry line. Also remember to price your product according to your market. In an information services company that I once worked for, we had our one, dynamic product, which we sold to our higher-end users at a premium price. We broke this product or service so to speak, up into smaller services at a lower price-point, to access more price-sensitive clients.
Utilize the two-pronged approach mentioned here to further your sales to the plethora of small businesses right under your nose.