WHY SMALLER CUSTOMERS ARE YOUR FUTURE
A true story, I heard as a kid was about a driver called Karolis in Colombo, Sri Lanka. He quit his job to start his own business, selling fruits. Initially he sold at train stations and as demand increased, he opened a small stall outside the station. The demand continued to grow. 5 years later, he was the proud owner of 5 stores in 3 cities. He no longer sold directly but ran the business.
There are countless stories such as Karolis’s. Phil Knight started selling shoes from a room at his parents’ house. Today, Nike is a $32bn business.
Small business is big business
In Australia, the small and medium business sector is the lifeline of the economy. Australian Bureau of statistics (ABS) defines a small business as one which employs 20 or fewer employees. This sector accounts for 98% of Australian businesses (1) and growing at 5.5%. Small businesses account for 35% of Australia’s GDP and employ 44% of the Australian workforce. (1)
Given all this, how effective are organizations in selling to the small and medium businesses? In my experience, not very! I have not seen a single organization with an effective and holistic SMB strategy. Many organizations carve out a section of the SMB and then develop the strategy to grow in the selected area, ignoring a large section of SMB. This means lost opportunity to both the organization and SMB.
What is a Small and Medium Business (SMB)?
The Australian Bureau of Statistics (ABS) defines a small business as one with fewer than 20 people. A broad definition with 3 sub-groups. Smallest are sole proprietors and partners with no employees. Those employing 1-4 people are classified as Micro-businesses. If a business has 5-19 employees, ABS defines it as a small business. A medium business is one which has 20 to 199 employees.
The type of small and medium businesses (SMB) can be wide and varied such as lawyers, accountants, doctors, dentists, convenience stores, bakeries, delicatessens, hairdressers, tradespeople, restaurants, farms, photographers, web designers, programmers, scientists, artists, innovators.
Small and Medium Business (SMB) is not one sector.
Most large organizations look at SMB as one sector and that is incorrect. In Australia, 80% of the agriculture, forestry and fishing are small businesses. This is a $27bn sector with 73% either micro or small. Also, 80% of rental, hiring and real estate services are small businesses. (1)
Professional, scientific, and technical services industry is the second largest industry in Australia at $138bn with a growth of 1.9% in 2019-2020. Interestingly, this industry has an almost even spread of organization sizes with 25% micro, 16% small business, 27% medium and 32% large. (1)
Construction Industry is the 3rd largest industry in Australia and 41% are Micro in size.
How do you encourage these businesses to seek your products, solutions, and services? It would be incorrect to consider any one of these sectors do not have potential customers without diving deeper. Tech industry should consider opportunity to provide automated solutions to these vital industries.
Most SMB want and need your products to help them grow
An SMB Owner wants profitability, cashflow and new opportunities to expand. Many are passionate about quality, customer service, customer retention. A few SMB will aspire to grow large, grow globally and/or partner with a larger organization.
The products and services to a SMB can be categorised into 1) essential input for their business such as groceries to a restaurant or tractors to a farmer 2) supports growth and profitability such as automated devices. It is the later category that needs a well thought and constructed selling approach.
Selling to SMB is not just about product or price
When selling to the SMB organizations, keep it simple. Products and services need to be easily linked with reasons for the product or service contribution to profit and/or growth. The commercial arrangements of the product or service should consider not just pricing but also payment terms. For a SMB that is cash poor, helping to manage cash flow can be more attractive than the extra 5% discount. Larger organizations can go even further and consider support services to enable the SMB customer to expand. Support Services can include marketing programs, providing short term expertise. Even mentoring should be an option.
Care is needed to ensure the opportunity is not expanded beyond the comfort zone of the SMB owner/leaders. This is such an easy trap for many sellers.
Industry Approach: To effectively sell and support the small businesses, it is essential to consider small businesses within their own industry. Depending on their industry, their priorities and pain points will defer. For example, agriculture industry can benefit from predictive weather models, automation of manual effort, humane pest control, soil assessments with alerts. Of the 85,483 businesses in the agriculture industry, 80% of the businesses are classified as small. An untapped market.
The business model to sell and market in SMB should be a 3D model which looks at segmenting the market by industry, size, and customer needs.
Channels: How do you decide on which channel to sell or market to small and medium customers? Organizations cannot afford to have direct sales to SMB. Channels selected should have good insights on the SMB customers, their industry, and your products. Overall digital channels are having a significant impact on sales in SMB.
You do not sell, you market.
Given the volume of organizations classified as SMB an effective approach to sell is not to sell but market. Market via the essential input suppliers. For example, promoting an automated booking and pre-ordering system for restaurants can be via the suppliers of groceries. Another example is to target agriculture SMB with marketing programs via industrial equipment suppliers or hardware stores.
Given the volume of organizations classified as SMB an effective approach to sell is not to sell but market.
Sales Operations can unhide potential large opportunities
Some organizations classify customers based on current revenue from a customer and not on customer size. An approach that can result in large customers hiding inside SMB customers. It is critical to assess these customers during annual planning, especially if they show a revenue growth trend.
What does grow in the Small Business mean to Sales Operations?
A sales and business operations leader should use a multi-faceted approach to building the growth plan. This is where you can apply data science to understand, segment SMB and identify untapped markets. Develop a data model to enable your leaders to define the strategy for SMB. A data model that includes SMB by industry, size and customer needs. Support the data with analysis of the current and available channels. Then partner with leadership team to develop the growth plan.
A well-constructed strategy to SMB will have lasting growth opportunities for all organizations.
Small business is most definitely big business Devika. As you point out, so many trade businesses are small businesses and they keep a vast proportion of our economy ticking over.
Keep it simple when marketing - totally agree Devika Mohotti