How to Sell SaaS to SMEs
Five Useful Pointers
When I ran our agency, a lot of our work was for clients that you’ve probably heard of: Barclays, BBC, Nestlé, British Airways, AIG. We were used to selling to larger companies because they were the ones who had the budgets. But when we launched our own side-products, we generally ended up selling to smaller companies. We probably thought that selling to smaller companies would just be easier than selling to large ones and didn’t give it much thought. But in fact there are some specifics to consider to really get the most from this group.
When you first launch your SaaS, if your product is something that appeals to SMEs (or SMBs as they are also known), then it’s actually not a bad place to be. A big advantage is that your sales cycles will be shorter, meaning you get to see more customers using your product quicker. On the flipside, if your product has a lower Annual Contract Value (ACV) then it will take a while until those customers are generating a meaningful amount of revenue for your business.
If I had the choice, I would go for SMEs to start with. Even if your product has the potential to be bought at an Enterprise level, just on the basis that they will buy more seats or licences for the same product, I would still aim for the SME early on. At the very early stage, your focus should be on learning what resonates, what is missing, why people pass you by or why they churn. The way to get this knowledge is to get as many people as you can to use the product. This is much easier if you are selling to SMEs.
The first iteration of our product gained thousands of customers in a relatively short space of time. And although our ARPU was tiny back then, we learnt a lot from all of the people who were using it.
Assuming you agree, let’s look at some specific things to consider when it comes to selling to smaller businesses.
1. Minimum Viable Product
Everyone knows about this, right? But with SMEs it helps to start with an MVP for a number of reasons:
You get volume if you can sell effectively to SMEs, which means you’ll get data much quicker. When we launched our SaaS we had a product feature (TL;DR: the ability to turn a screen to portrait orientation) that was way down our product roadmap. Turned out everyone wanted it. Had we not launched an MVP we would have spent months and money not building one thing that people really valued.
If you product is one massive collection of features without a really deep understanding of what customers genuinely value, you run the risk of overwhelming them. Just start with the best version of a minimal feature list and go from there.
SMEs are often forgiving of other small businesses. So long as you are honest and flexible where necessary, people are surprisingly patient when you explain that some features are coming online later. Enterprises, less so!
So, don’t feel embarrassed about going live with an unfinished product for SMEs: embrace it and enjoy all of the things you’r going to learn in a very short space of time.
2. Messaging and Positioning
Positioning is about figuring out who cares the most about the value you offer that is differentiated to the others out there doing a similar thing. But if we reverse that for a moment and think what is it that SMEs care most about and why that problem is in some way solved by you, then you can start to cut through any fluff in your messaging.
SMEs care about two things: survival and growth. Consider:
about 20% of small businesses fail in their first year.
around 50% fail within the first five years.
by the ten-year mark, approximately 70% have failed.
this translates to roughly 10% to 15% of SMEs failing per year, depending on the region and specific context.
I often say that your product needs to unlock a problem that keeps the CEO awake at night for it to be a need-to-have. Well, for CEOs of SMEs, it’s often just about keeping the lights on. Which often means managing their costs efficiently and ensuring any expenses have a direct impact on helping them grow.
For this reason, your messaging should probably include Return on Investment (ROI), Total Cost of Ownership (TCO) and Speed to Value (STV). SME owners will be thinking, “after install, training, licence fees etc, how much will this actually cost me over the next 12 months?” At the same time, “if I invest $Xk in that time, what sort of return could I expect?”
So you can imagine messaging that says something like:
On average, our customers spend $10,000 per annum which generates over $100,000 in additional revenues in their first year.
..starts to look like a no-brainer. Who wouldn’t want to spend $10k to make $100k?
Obviously not all SaaS products have a direct correlation to additional revenues, yours might be about cost savings, or not falling foul of the law. But the key is to show that anything they invest will pay dividends in a tangible way. Larger organisations will also want to understand their ROI, but they are prepared to take a longer view. SMEs will want to see a direct and (almost) immediate ROI. Figure out what that looks like and tell them about it.
And remember, focus on the value (get a 1,000% return), not price (now 50% cheaper).
3. Removal of Risk
Small business owners are highly risk averse. It’s often their own money they are spending, so they’re not going to ‘take a punt’ that easily. What if it doesn’t do what it says its supposed to do? Removing any risk for them could go a long way to getting people over the edge.
The most well-known method in SaaS is the free trial. People get to play with it and see for themselves how great it is, without risking any money. The problem with this is if your service promises a long-term ROI and they only have two weeks to give it a go, they might only see the potential, rather than any actual return. Think LinkedIn Sales Navigator.. you get a month’s free trial, but if you’re using it for outreach to drive leads that you convert into customers, you might not see a return for months.
Other options that people use include revenue-share or share of savings. Price Intelligently had a tool for dunning credit cards for SaaS companies to identify people with cards that had lapsed/about to lapse. They then sent tailored communications encouraging them to update their records before the subscription ended. Their revenue model was that they would take a percentage of every customer that would have otherwise churned had they not managed to prevent it. It’s kind of a no brainer if your fee is a percentage of something you would otherwise have lost.
If you were really confident you could guarantee the outcome you were looking to deliver. Alex Hormozi in his book $100m Offers, talks about using guarantees to reduce prospects’ perceptions of risk.
I know of one SaaS business I’m working with who provides an automated auditing service that pretty much ensures that the user will get full marks if they get an inspection. They’re currently working out whether to offer a guarantee as part of their value proposition.
If they did, it would be pretty compelling to their ICP.
4. Education and Support
One of the annoying things about selling to bigger companies is that there are several decision makers. But on the plus side, it means that there is usually someone there that understands the technology. I remember in my agency days, selling a technical product to a non-technical customer was a nightmare. We would add a premium to our quotes if we didn’t see any evidence of anyone technical on the client-side since we knew that it would end up taking us twice as long to explain everything.
If you are selling to SMEs, you’ll often find non-technical owners/managers, too. But unlike the higher fees of agency work, you need to be able to educate and support people at efficiently at scale. How do you best do it?
Frictionless Start
Remove as many barriers as you can. Show people how easy it is to get started: show the 5 step onboarding process (if that’s what you have) before people have signed up to be a customer, or even free trial.
Think about the busy owner of an SME knowing that they need your product but put off by the potential investment in their time of learning how it all works. If you can give them the onboarding guide even before they’ve onboarded, it will reassure them that it’s not going to be something they need to set aside a clear week to do.
This could be in the form of a ‘how to’ article, but could also be a video tutorial or even an interactive product demo.
One-to-many Webinars
If your price point is based on seats or licences, or if it’s just a low fixed price, you won’t be able to justify a lot of time and expense to win each customer. So how do you reassure a business owner that buying your product isn’t going to result in them failing to onboard? The answer is webinars. Run a webinar once a fortnight and get people to sign up. Typically you’ll get about twice as many people signing up than the people who actually turn up. But in my experience its worthwhile. You might get 20 people sign up, 10 turn up and between 2 and 5 people signing up. All for 30-40 mins work. Remember that if someone bothers to attend a webinar, they know they have a need and so long as you can convince them of the ROI, then you’ve got a good chance of getting them to enter their credit card details.
5. Retention
For some reason always playing second-fiddle to new business, you can’t ignore retention in SaaS.
SMEs are great in that they convert quickly and there are a lot of them. But they can often be flakey. Enterprise churn might only be 0.5%/month, whereas SMEs can easily have churn rates 10x that.
For this reason, retention is super important when it comes to SMEs and SaaS.
As you know, retaining a customer takes way less investment than winning a new one. So it makes sense to place customer retention at the heart of your GTM strategy.
Why do SMEs churn more than Enterprise? There are several factors, some you can control and some you can’t:
Going out of business (see my stats about that at the top)
Cutting costs during leaner times
Flipping to competitors if they think they can get better value there
Flipping to competitors if they feel they’re not getting enough love where they are
The ability to just wake up one morning and make a unilateral decision that is unlikely to have a wider impact on the business
The way to mitigate this is by getting customers to see a ROI quickly. Also, by giving them nudges either in the product or via email about ways in which they can get to an ROI. For example, if customers tend to do better when they take some sort of action, you can identify those users who aren’t exhibiting that behaviour and prompt them to start.
In conclusion
Keep it simple, focus on keeping your acquisition costs down, make it easy for them to make a decision and give them lots of love once they become a customer.
