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How to sell to small businesses

How to Sell to SMB, Part 1: Product and Pricing

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The following is a post from Ben Deda, VP of Business Development for FullContact. In the coming weeks, Ben will walk you through different sales tactics that you will need to employ across various markets. Look for the whitepaper of Ben’s entire series to be available for download soon.


A while back I wrote about the difference between enterprise sales and all the other possible business to business (B2B) market segments.

I promised that next I would cover the different go-to-market strategies that align with those segments. Well, I finally got to it. So here is B2B go-to-market Volume I: Small Business.

First let’s review how I defined Small Business by the sales cycle.

Sale Size (Annual):

Most deals for Small Businesses are going to be between $1,000 and $10,000 annually. It’s possible to do bigger deals, but those tend to take on the characteristics of a Large Business sale because you are such a large percentage of the customer’s spend.

You will obviously need a higher volume of Small Businesses to build your top line revenue.

Sale Cycle Length:

Most Small Business sales can be closed in less than a month. The sale complexity is low enough and the sale size small enough that your customer can quickly make the decision if they are going to buy.

If your sale cycle gets too long, you are going to run into serious problems because the small size will hamper your growth rate.

Sale Complexity:

Chances are your user, decision maker, and buyer are all the same person. Makes it simple (unless that person sucks). Small Businesses are usually comfortable doing most billing frequencies (monthly/quarterly/annual) and structures (credit card or invoice).

Pros:

Sales to SMB can often be done without a traditional sales force (and the traditional sales force expense) through content, SEO, or distribution channels. There is less risk in churn because of the large number of customers you will have.

Cons:

Rapid growth selling to Small Business requires excellent distribution through the web or appropriate channels (marketplaces, partners, etc). Can be difficult to get immediate effects when you “step on the gas.” If your operating and support costs get too high you can easily eat through your margins.

Summary:

Selling to Small Business is a volume deal with some similarities to consumers. It’s all about having a high enough volume with good enough conversion and churn rates to grow. Lower customer Lifetime Value (LTV) also means your Customer Acquisition Cost (CAC) budget is lower — Lower cost to enter, but also harder to gain initial significant revenue.

After looking back at my original blog and a number of other musings about B2B sales I really do prefer defining the business by the sales cycle rather than the number of employees. The prosumer (real estate agent, financial planner, individual employee in a company), department in a larger business, and the Small Business as defined by the number of employees share a lot of the same characteristics when it comes to selling to both.

Okay, so now that the refresher is complete let’s talk about how you attack the Small Business market.

Product

The products that work best for Small Business share a number of characteristics with products for consumers. Here are some of the key characteristics:

Scope:

The product for Small Business works best when it is limited in scope. You are either selling into a business with a process that is not relatively complex (because of their own size or their own limited scope) or you are selling into a segment of a company that is limited in scope. Your product should solve one problem and solve it really, really well.

Ease of use:

The easier your product is to use, the more Small Businesses will adopt it. As we often discuss at FullContact, enterprise companies will put up with horrible UX/UI because their enterprise product is the only thing that does the myriad of different things they are looking for. And, there is the sales engineer and implementation staff to make sure that the system gets integrated. You don’t have that luxury in the Small Business market. If your customer cannot easily figure out how to use your product they will ditch it and find one they can use more readily.

Play well with others:

Chances are you aren’t the only tool that the Small Business is using. They will have a couple other key products that fit the above characteristics. These days its probably Google Apps and MailChimp for email or Square for financial (or Quickbooks if they are old school). So make sure that if it makes sense you have some very easy to use connectors pre-built.

Pricing

You are going to want to make your product as self-service as possible so your prices need to support that. You might be able to get charge enough to hit the magic amount to afford a sales team ($500 per month in monthly recurring revenue) but that takes a really incredible product. It is more likely that you will get better traction with a few different options at lower price points. How do you pick those price points? Here are some ideas:

Get users:

If you build a great product you should have confidence that users will become paid users. So come up with a way that potential users can try you out for free. This might be freemium or it might be a free trial, but figure out a way to give potential users a taste.

Turn them into customers:

Find the one feature in your product that people are willing to pay for. Then make them pay for it. It may sound harsh but it’s business. It’s probably the biggest difference between going after consumers and the B2B Small Business segment. What’s the magic dollar amount? Anecdotally it’s somewhere between $5 and $10 monthly. That’s the amount that you will get an individual to plunk down for a product they find useful. This is the far left of your pricing grid (if you go smallest to largest, which there are different thoughts about).

Get the team or get the power users:

Again this boils down to features. What features are your customers going to be willing to pay even more for ($20-$100 a month) to use your product with multiple users or even still just with themselves.

Have an option for the big fish:

You are going to have the customers who need your product and have the AmEx to be willing to drop $200 or more a month so they can get the points. You need to figure out what you need to provide to get that amount every month. It’s obviously going to be features but it is probably going to also be customer service.


That wraps up part 1 of Ben’s insights. Make sure to check back soon when we will dive into part 2 of Ben’s go-to-market strategies – The Sales Funnel and Conversions.

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