4 Reasons Why SaaS Entrepreneurs Should Target SME’s
I see and hear a tremendous number of great ideas for mobile in the enterprise. The majority of these are aimed squarely at large enterprises. Organisations with big budgets, structured buying processes and complex IT needs. This is natural. Big customers mean big revenues. Software sales teams gear up for major accounts. Account executives and upsell go with the model. But there is another way.
The SME sector is crying out for help. It is the largest sector of the economy. The European Commission estimates that 99% of EU businesses are SMEs. They account for two thirds of private sector jobs and more than half of all business value added.
Many of these companies have less than 10 employees. Virtually all use mobile. Big capital spend is too much for a small business. SaaS is the best way for SMEs to buy and use digital. Yet the competition to bring services is much less fierce. Products which make it easy for small businesses to grow and improve are rare. So here are my top 4 reasons why SaaS entrepreneurs should aim at the SME sector:
- We know SMEs are the biggest sector. Small and medium enterprises are also the most dynamic sector of the economy. This truth is most evident in Germany, the most successful economy in Europe.
- The scope for business improvement through mobile and digital technology is greater for SMEs. Higher growth, international expansion and greater market penetration are obvious possible wins.
- If your product is simple and well designed, the cost of sale to an SME is much lower. Ongoing service can minimised. Get the product right and keep service low key. Upsell will be low anyway. There is no need to pester SME customers.
- There are some core cloud ecosystems that a new product can link with. Salesforce and Xero are just two companies that provide an excellent channel to market.
Of course the market is diverse and distributed. Many raise concerns about the costs and potential waste of targeting so many customers. These challenges are valid. A different business model is needed to succeed in this sector:
- Marketing is the most important business generation tool. Choosing the right channels and partnerships. Clear focus for advertising and promotions. Good SEO and social media habits are all essential.
- Direct sales are almost redundant. Few small business have the time or interest to spend with sales callers.
- Customer onboarding is also vital. It must be simple and pain free for customers to get set up with your product. Make sure new users see benefits early in the process. Be clear when these arise. Offer a personal touch during this process.
- The economics of business focused on SMEs are different. Cost of acquiring customers is often much lower. Revenues per customer are also smaller and churn can be higher. Those customers that do stick with you will be friends and advocates for life.
Nothing in business is easy. But building a great business offering quality SaaS to SMEs is possible. Think again before going straight for the big spenders.