Over 99.9% of businesses in the U.S. are small businesses. And nearly half of all U.S. employees are employed by a small business.
Across climate, industrials, and construction, small businesses are usually the ones turning the wrenches. “Mom & pop” subcontractors across these industries are hired by large enterprises to build and operate the world around us. With such a big market, it can seem like an attractive proposition to build a software company for small businesses. But be warned, not all customers are the same.
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Without getting too in the weeds, imagine the following: you build an app that helps construction companies track project progress.
After you build the app, you hire the top sales and marketing professionals to sell it. You run an expensive advertising campaign and you send gifts to the offices of 1,000 subcontractors in your state.
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You start to realize a few things:
Many mom & pop businesses are hesitant to buy software. Because these businesses are family-owned, any additional spend is “borrowing directly from the family’s money.”
Many of these small businesses operate on razor-thin margins. They cannot afford to spend more than a few thousand dollars on software, and they are less resilient to changes in the economy.
After spending millions of dollars selling and marketing your app - just to sign up a few small business customers - you realize that your own economics aren’t working out.
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If you’re selling to small businesses, you have to be able to minimize your sales and marketing spend for your own economics to make sense. This usually means generating buzz at tradeshows or building in “virality” into your product so that the product sells itself. For example, create features in your app that enable small businesses to share your product easily, and allow small businesses to sign up with a credit card on your website. This enables more customers to find and sign up for your product at no cost for you.
If you sell to large enterprises with big software budgets, you can afford to have a white-glove sales service because these will ultimately be bigger, more resilient customers. But if you sell to small business, you need to ensure that you are controlling your sales and marketing spend.