Should I sell to SMB or enterprise businesses?
Startup

Should I sell to SMB or enterprise businesses?

One of the first decisions a startup makes in building their sales process is choosing their target market.

This deck explores the difference in selling to SMBs (small and medium-sized businesses + startups) and enterprise companies (1,000+ employees), as well as the process of deciding which to pursue for your startup.

Most startups love selling to other startups. Landing a single enterprise customer on the other hand can change the trajectory of your entire business. Whomever you decide to sell to first, you will require an entirely different sales strategy altogether.

Factors to consider while selling to SMB customers: 

There are three factors that you must pay attention to while selling to SMBs:

  • Qualification: Smaller businesses have less information available online than larger corporations. You'll need to invest more time and effort in determining whether they're a good fit based on their available budget, organizational structure, and growth rate. 
  • Simplicity: Sales efforts frequently target SMB executives. These businesses do not have divisions dedicated to obtaining new tools. To cut through the noise, keep things simple and digestible. In terms of execution and onboarding, simplicity extends to your product offering.
  • Flexibility: SMBs are often more receptive to new technologies, but every dollar matters. Be prepared to convert them with flexible contracts, free trials, or purchase choices. To convert them, be prepared to provide flexible contracts, free trials, or purchase choices.
Crossing the Chasm

Factors to consider while selling to enterprise customers: 

The lengthy, complicated sales cycle you will experience when dealing with enterprise businesses is the key distinction. Selling will take place at the corporate, departmental, and individual levels throughout this process. Navigating and comprehending your prospect's organizational structure is necessary for closing an enterprise contract.

  • Internal Champion: Your internal champion in the target firm is where enterprise transactions get started. This person has a profound understanding of the company's problems and thinks your product can provide a solution. They will be the ones to advocate on your behalf within the company. Many prospects will demonstrate their ability to be the champion by being enthusiastic about your offering and making big promises. A genuine champion needs both influence and authority to be effective, therefore that is not sufficient on its own. You can mold a champion on your end by:
  1. Leveraging warm referrals and personal connections where possible
  2. Listening attentively to their individual and company needs
  3. Painting a clear picture of your offer and getting them to love your product
  4. Building a real relationship - enterprise deals end up being much more about the trust and connection you’ve forged and whether it can withstand all the bumps of an enterprise deal
  5. Making it easy for them to advocate on your behalf by building the business case, marketing materials, specs, etc.
  • Digging into the organization: In addition to internal champion, you need to figure out the following as well: 
  1. The prospect's product-purchasing process
  2. The incentives of all the stakeholders involved
  3. Who the real decision makers are and what they are looking for
  4. Who in the organization has incentives not to onboard your product. These can be personal (connections to competitors) and professional (risk-averse)
  • More differences in enterprise: Gatekeepers (budget holders, IT, and leadership) exist in all enterprise firms but do not exist in the SMB organizational ladder. They will see your burgeoning business solely in terms of the personal risk it may pose to them, rather than the benefits you may deliver to their firm. Your role is to reduce the risks and drawbacks people see in your offering.

SMB Pros and Cons: 


Enterprise Pros and Cons: 

Choosing where to sell first: 

It is difficult to deny the benefits of selling to business customers. Examine whether you and your team have a major personal advantage as a result of: 

  • Personal network 
  • Experience building for/selling to enterprise companies
  • A well-known founder's name in the industry

Exceptions can be made if your firm primarily delivers value to large-scale enterprises for hundreds of thousands of dollars per year, addressing a pain problem that does not exist in SMB. Without any of these advantages, most startups should start with SMB. This is especially true without funding in place.

Conclusion: 

Startups have a higher success rate starting off by selling to other SMBs first than they do in pursuing the enterprise customer right away. In the past, you would go upmarket as soon as possible. Today, the ultimate objective is to find product-market fit as quickly as possible, which requires rapid iteration and feedback. The quickest way to do this is working with SMBs and startups which can be closed and onboarded much quicker.

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