Selling SaaS to SMBs

Things to be aware of if your target is small businesses.

Photo by Tim Mossholder on Unsplash

If you’re an agency owner you may have sold to large and small businesses. The differences are often nuanced. Maybe the enterprise buyer has more hoops to jump through, maybe the smaller business was more price sensitive, but in my experience, you treat each new lead differently based on what they are looking to achieve etc.

With SaaS it’s a bit different, especially when selling to SMBs, because the product you are selling is the product you are selling. There isn’t much room for manoeuvre as in ‘we can make it do this for you’. More or less, it’s ‘this is what we have, take it or leave it’. So, how does that impact the way you sell to small businesses?

Use Cases and Long Tail Content

If you are selling enterprise and in an obvious category, your ICP is more likely to have an idea about what they are buying. The purchase will often be what we refer to as having ‘high consideration’, meaning that buying it is a big deal. And because it’s a big deal, the enterprise buyer can justify spending time properly considering the alternatives.

I’m not saying that your product is automatically low consideration to an SMB (it may or may not be), but you may find that the person buying hasn’t got the time or inclination to spend months considering everything that’s out there. Although, as I’ve written about before, it makes sense for you to give them an overview of the competitive landscape so they can feel reassured that they are fishing in the right pond.

What I’ve found is that focusing on use cases which might mean long-tail content is a good way to cut through. When I think back to early ScreenCloud days, we were in the ‘digital signage’ market. But we were targeting SMBs to begin with and most of those companies had never used any other kind of digital signage platform before. And in most cases they weren’t even aware that it was a thing.

Instead, they were looking to solve a particular problem such as ‘how can I show our Twitter (as was) feed on a screen in our lobby?’, or ‘how do I upload student artwork to a screen in our school corridor?’ The answer was to use ScreenCloud, but if we’d just focused all of our content around ‘digital signage’ they might never have found us because that’s not what they knew they had to look for.

SMBs need to understand quickly whether your product is going to solve their problem. So you have to show the value you bring straight away. They don’t have the time or the attention span to wade through a big vision statement on the future of your market category. But if you can get them to understand that the specific thing they are looking to do is something you can deliver, then that’s where you’ll win.

But that doesn’t mean your product has to be super narrow

If ScreenCloud had only existed to allow Twitter to be shown on a screen, we would have quickly run into problems. So even though you are serving a lower economic value market, it can’t be so narrow that your utility is quickly exhausted. Ironically, with an enterprise solution, you probably are better placed to provide point solutions if that’s what people want.

Attractions.io (who I’m a NED for) have a platform for theme parks and cultural attractions. But they also provide just their mapping technology via API to some of the larger organisations via a product called MapLayr. These companies have built their own broader customer experience platform, but recognise that Attractions.io’s awesome mapping tool is beyond what they could build and so are happy to integrate with it.

An SMB is unlikely to ever need that. If they want you to solve something for them, they’ll want you to solve the entire problem rather than just a small part of it. Especially if that means they may need to work out how to integrate several other vendors into their stack. It still might be a specific use case you are solving, but it’s just that use case can’t be so narrow that anything beyond it requires another solution.

Incidentally, ‘narrow’ and ‘niche’ are two different things. For SMBs it’s totally fine to be niche if you think the addressable market is big enough. So, for example, if you have a booking system and CRM tool designed specifically for independent restaurants, then that could be a great niche. It’s just that you don’t want that product to be so narrow in its functionality that they have to go and use a host of other third party tools to integrate with it in order for it to work.

Free Trial and/or Self Serve

SMBs don’t want to ‘hop on a call’ with a sales person unless they are basically at the point of handing over their credit card and need some help. If SMB owners ‘hopped on a quick call’ with every person who suggested it, they would have no time left to run their business. At the enterprise level, they will have people whose entire job it is to ‘hop on a call’ with vendors. Plus, if you are selling something with a low Average Annual Contract Value (AACV) then, you possibly can’t afford to do a 30 minute sales pitch with every Mom & Pop Shop who might be a customer.

The answer of course is to allow them to start a free trial and/or to self serve. A free trial, if it makes sense for your product, is a great alternative to a sales call. Assuming they understand the value straight away, once someone signs up for a free trial there is normally a predictable and relatively high conversion to paying-customer.

On average, the number of free trials a prospective customer takes during their evaluation of a new product is one. So, if someone is doing a free trial with you, you are likely down to the last one. Of course, the most likely outcome is still ‘do nothing’ at this stage. But you are at least in second place to them doing nothing as an outcome.

Non-consultative Sales Teams

You need good sales people to scale. Even where you have self-serve. In many cases, you still need a person to get someone over the line. But, that’s the difference: you need someone to help them get over the line rather than someone to navigate the enterprise buying process.

It means that you need people who are friendly, helpful, happy to demo the basics and assist with pricing queries. Not people who want to over-engineer a sales deck and feel they need to be paid a quarter of a million dollars to do it. It’s just a different type of sales person. It may be that they are earlier on in their career and on their way to selling to enterprise, but right now they can earn their stripes by selling at scale with a much lower involvement.

I’ve written in a previous newsletter that often there are challenges that arise when sales team have to move upstream. Switching from being Sales Efficient to being Sales Effective brings a whole lot of problems with it.

Low-touch Onboarding at Scale

SMBs don’t want to have to do a lot of training and customisation. And the unit economics mean it likely won’t be practical to deliver this anyway. In fact, for many companies I’ve worked with who have an SMB audience, one of the common sales objections is ‘I don’t have the time to train my team up on a new product’. It’s actually a major barrier for any company, especially SMBs to switch to a new solution.

This means that the product needs to be intuitive to pick up. And where it’s more complicated or involved, in-product tutorials that make the process easy to follow are invaluable. I’ve just started looking at a platform called Maven, as I’m thinking about creating a cohort-based course for agencies looking to spin out a SaaS product. And Maven’s onboarding is incredible. I’ve never experienced anything like it. (Let me know if you’d find a cohort-based course like that useful by the way, I’d love to pick your brains!)

Maven has a step-by-step process that you follow. It shows you how long each is likely to take. It shows you the ones you have completed and those you have left to do. And for each step there is a well-written page where you can watch a video, read the concepts in more detail and see examples of other customers’ efforts.

They have clearly understood that for individuals (aka SMBs), there is a lot to do and it can be overwhelming and that they are likely to not even start a course if they get lost in the onboarding. As a result the amount of thought and effort they have put into the automation is incredible. What’s more, I haven’t needed to speak to anyone from the company. Not even via a chatbot.

Flaky, Flaky, Flaky Churn

I almost can’t write a post without mentioning churn somewhere.

The problem with SMBs is that they are way more likely to churn than their enterprise cousins. One of the upsides of an involved purchasing and onboarding process when selling to enterprise is that, once it’s done, the last thing they want to do is rip it all out and start again unless they really have to. With SMBs, where the consideration is less all-consuming, the decision to churn isn’t as much of a big deal.

But it’s not just that they are less tied in. emotionally and practically, to the product in the first place. They are more likely to churn for a whole host of other reasons:

1. Price sensitivity and someone offering to do the same thing, for half the price. That happened to us. Someone came in and cloned our product and offered it for exactly half the price. We lost a lot of customers as a result, but they were all low-value customers and we’d already rebuilt our product to appeal to enterprise. So, although it was gutting, we also weren’t interested in getting into a race to the bottom either.

2. It’s just not a big enough problem you’re solving for them. If you’re only charging a few hundred dollars a year, then it may be more of a ‘nice to have’. When things get tougher and they look to cut back, nice-to-haves are the first casualties.

3. Your product was too narrow. Maybe it did one thing well, but now the customer wants to do more and another product does what you do AND a load of other stuff they need, too.

4. SMBs have a lower life-expectancy. Sadly, a good deal of SMB churn is just down to the fact that they went out of business. If all of your customers are publicly-owned multi-nationals then they’re not likely to go bust anytime soon. But a single-location restaurant or a newly launched independent shop? You have a much higher chance of losing customers just because they failed to exist than it being anything to do with a terrible product or cut-throat competitors.

In summary

Selling to SMBs is great because things move really fast and you have lots and lots of data to ponder. But it also means you have to be smart when it comes to your go-to-market:

• Content around the specific use cases to drive awareness among customer who might not even understand the market category in which you operate.

• Demonstrate value early on. Make sure you really understand how your product will make their lives better.

• Optimised onboarding with a highly efficient sales team to make the unit costs work, without sacrificing the customer experience.

• Plan for high churn. Despite your very best efforts, there’s not much you can do to protect against customers going bust.