With limited resources, you want to get the most out of each dollar in your budget and each minute in your schedule.
So you may then decide to focus on selling your software to high-value large businesses. After all, enterprise clients bring in thousands of dollars in revenue with just one sale! If you want to scale your software as a service business, you must capture the whales.
But this conventional wisdom actually keeps your company from continuously growing.
Large Companies May Be Your Dream, but SMBs Fuel the Trip
Small and medium-sized businesses (SMBs) can and should power your startup’s revenue targets.
Smaller companies have relatively large software budgets. Without standardized operations, they have the room to play around and test out different providers. This flexibility can make them your perfect customers for SaaS platforms.
But the revenue you can generate by closing SMEs (small and medium-sized enterprises) is only part of the story.
Small businesses have the same needs as big ones. Smaller clients can give you invaluable feedback, help you develop your offering, and test out your value proposition. Test the water with lower stakes first.
Then you’re ready to go whale-hunting.
If you think you might be ready, then read through the following sections of this guide:
- How SMEs Can Deliver Outsized Revenue Growth
- The #1 Problem Nobody is Helping SMBs Solve
- Secrets to Capturing Small Businesses and Increasing Revenue
- An Incredible Solution to Start Landing Lucrative SMB Deals Now
How Small Businesses Can More Quickly Grow Revenue
Small companies are, by definition, small.
Why should you waste valuable marketing dollars and sales time converting lower-value clients? Instead, you should chase coveted enterprise leads with their astronomical customer lifetime values (CLV). Or should you?
Contrary to popular belief, SMBs are a much better investment of your time and money.
Increase Sales By Expanding Total Addressable Market (TAM)
There are many more small businesses than you think.
The United States alone is home to over 30 million small businesses. And each one of them is a potential customer for your SaaS product. With your competitors ignoring them in favor of larger clients, you can close many more deals and much more quickly by focusing on the little guy.
Despite their size, small companies are spending big on software.
Small businesses in America spend $220,000 on software over 5 years. And those spend figures are across many services. SMBs have over 15 different apps per employee!
Numbers don’t lie. If you capture smaller clients, you expand your TAM many times over.
Lower Customer Acquisition Costs
Each dollar of your budget goes a much longer way with SME clients.
Large software purchases have much longer sales cycles. While an enterprise sales cycle can take over 6 months, a small business can pay you within a week. And every day saved on negotiation frees up more of your budget to focus on growth.
Small clients significantly lower your customer acquisition costs (CAC).
They have fewer decision-makers. And younger businesses rarely have an existing solution in place, so the sale is simpler. No switching costs mean fewer risks.
Take advantage of how flexible small businesses are when buying software.
Get Honest Feedback
Small business founders are a lot more likely, to be honest with you.
Your company contact will actually be using your product. While enterprise clients have dedicated software buying teams, an SMB employee will only buy the solutions they need. Small businesses live and die by their operations. You have access to fully integrated users, with their needs and frustrations clear whenever you ask. Only an active, day-to-day user can help you identify how well your software works and how you can improve it.
Small businesses don’t have to worry about complex internal policies or confidential vendor lists.
Capture honest feedback and improve your SaaS products and solutions accordingly.
Make Small Businesses Your Superfans
Your typical SMB is not just a local mom-and-pop shop.
SMBs can also be young startups on the verge of making it big. These people can help you break out of your own little niche and grow alongside you. No revenue projection can account for the value of being the favorite RevOps platform for the next Facebook or Plaid.
Remember, B2B relationships are long-term.
If you invest in your customers, they can invest in your success too.
The #1 Problem Nobody’s Solving For New Businesses
SMBs are lucrative customers for your SaaS products and solutions.
Small businesses cannot afford upfront software costs and business loans are predatory and nearly impossible to get. If you want to help your customers succeed, you need to address this urgent pain point.
The current system actively prevents small businesses from growing.
Small Businesses Can't Afford Expensive SaaS Solutions
For many small businesses, the price of a product is the most important factor in their buying decision.
Small business owners are often price-sensitive because they don't have spare cash. Even if your sales team locks them in despite their budget sensitivity, SMBs may simply not renew their contract. In fact, small businesses churn on a third of their software every year. Without access to affordable SaaS products, these companies are at a disadvantage. Their employees have to make do with inferior solutions or even waste time on manual tasks.
Even if they love your product, small businesses may not justify the cost.
Subscriptions Trap Your Customers Into Hating Your Company
Subscription models make little sense for SMBs, especially when they are just starting out.
For younger companies, signing up for a recurring monthly payment plan is risky, especially on rigid terms that you cannot get out of. SMBs don’t know how much value your product will bring or how quickly. An annual plan is too much of a commitment, but monthly subscriptions are often marked up at a higher rate. Small businesses are forced to choose between affordable plans and the ability to test the software first. And if their margins are low or they are operating at a deficit, even the best software can become an unjustifiable burden.
Trapping small businesses into a devil’s bargain will only erode their relationship with you as the vendor.
Many SaaS companies end up falling into the cycle of offering discounts to smaller customers, hoping to capture full value later on. SMBs like Service Provider Pro, which provides portal software for agencies, often buy software solely based on deals. According to their Head of Agency Success, Deian Isac, after they “test the service for a few months”, they wait for a seasonal discount on an annual plan.
But discounts and hidden costs make the vendor-client relationship too transactional, hurting your business. Revenue alone doesn’t build customer loyalty. And when the billing cycle is up, most small businesses actively consider alternative software providers.
Predatory Loans Doom Small Business Startups to Fail
So if your upfront costs are too high, and subscription plans are too risky, then can’t SMBs just take out a loan to buy your product?
With funding, small business loans are a last resort for good reason. They have high-interest rates, long repayment terms, and significant repayment penalties. Business owners often have to back up company loans with founders’ personal credit histories or personal guarantees. So even in a limited liability corporation, the owner may have to face personal damages.
And that’s if the business can get a loan in the first place!
The process is extremely slow and complicated because of manual credit and background checks. The Small Business Administration (SBA) loan application requires 11 different categories of documents. But even after that grueling process and waiting months for the decision, only half of the applicants get approved.
The result? Startups can’t get loans or get pushed into bankruptcy after taking them out.
The Secret to Capturing Small Businesses Without Compromising Your Bottom Line
Now that you’re convinced to invest in small company customers, how do you sell to them?
There are three simple steps to capturing the hearts of SMB buyers while maintaining low CAC:
- Provide flexible payment terms
- Make the sale simple
- Demonstrate value upfront.
Let’s go through them one by one.
Provide SMBs with Flexible Payment Terms
A large percentage of SaaS buyers hate the lack of pricing flexibility.
While this trend is true for companies of all sizes, small businesses are obviously the most sensitive. Payment options help them predict costs and control their cash flow, giving them control over their business operations. SMBs want options that are flexible, easy, and budget-friendly.
Keep things simple and let your customers pay on a schedule that fits them. Instead of forcing them to choose between monthly markups or annual discounts, let businesses pay through 3-month, 4-month, or any other array of options. Companies like Service Provider Pro “wish more companies would bill quarterly” because those terms would give them the best balance between price and flexibility when testing out new software.
Flexible payment terms also mean letting customers choose how they pay you.
Small businesses love paying with credit cards. Card payments are simple, convenient, and often automated with third-party services like Google Pay or PayPal. You want to offer them the ability to pay how they like, rather than forcing customers into wire or ACH transfers only.
Help your customers pay you by getting out of their way.
Make The Sale Simple
Help small businesses buy from you by simplifying the process.
Business buyers want their software purchases to be as easy as consumer checkouts. And SMBs, unburdened by red tape, are frustrated by lengthy and complicated sales procedures. More than half of companies buy software once they already need a solution.
Meet your customers where they are, without forcing them to wait for budget approvals or long sales negotiations.
Demonstrate Product Value Upfront
One major challenge for small business buyers is the difficulty of evaluating new products.
These companies have limited resources and lack the dedicated staff to create detailed service assessments. They want to shortlist vendors quickly and close the deal as soon as possible. To court them, you need to focus on the basics.
SMBs need to make sure that a potential product will:
- Increase their revenue
- Decrease their expenses
- Boost productivity.
As a vendor, you can make their job a lot easier by answering how your SaaS will accomplish those goals.
Make sure that your website clearly describes how you solve the buyers’ problems. Then, once you get the lead on a call, invest into showing them a one-on-one product demo. Put your value front and center.
Small businesses will thank you for helping inform their decision.
BNPL - An Easy Tool to Help You Close Small Business Customers
When small businesses want flexibility and simple checkouts, the consumer playbook may hold the secret to capturing their hearts.
The business world is investing into Buy-Now-Pay-Later (BNPL), a finance model that has already taken the consumer world by storm. Estimated to reach more than $166B in value by 2023, this industry is dominating across verticals and borders. And none of those estimates have even taken the B2B market into account.
Providing a BNPL option for your software can address the unique needs of small business buyers. After all, with BNPL you can:
- Offer Flexible Payment Terms
- Focus on Delivering Value
- Simplify the Buying Process
Offer Customers Payment Flexibility
We’ve already shown that small business buyers value flexible payment terms.
With BNPL, you can offer your customers the option to pay upfront if they can afford it or split up the payment into multiple installments if they need to. Why can’t B2B buyers enjoy the same experience as consumers? The main reason for BNPL’s popularity in the consumer segment is the ability to pay overtime.
Stand out from other SaaS providers by becoming the first to give your customers what they really want.
Focus on Delivering Value
By working with a BNPL provider, you can focus on making your SaaS product better.
With BNPL, you will still get all of your money immediately, even when your customers pay over time. With your cash flow secure, payments will no longer drain your company resources. Use that saved time and money to focus on what really matters instead.
After all, you can’t turn customers into superfans if you’re chasing them with invoices month after month!
Leave Payment Negotiations Behind Forever
With price sensitivity and payment schedules off the table, both you and customers can get exactly what you want.
A BNPL provider will take care of the messy details. Instead, you can invest in building a strong long-term partnership with all of your clients, be they big or small.
If you’re ready to score small business clients by offering BNPL functionality, book a call with our team today. Feel free to also take a look at our FAQ page where you can find a lot of answers to some of the most common questions we find from our users.