SMEs – A Tough Sell
By Bryan Mezue
An ex-SME CEO once told me, in one of my many business plan discussions with advisors at HBS, that selling services to SME is in effect like throwing pearls to swine. Even with a clearly articulated need, demonstrable value and seemingly attractive economics, many SME CEOs are reluctant to put money down for technology-based applications that can improve their business. In his words, they are:
· busy
· “cheap as can be” by default
· trapped in the daily grind, and not thoughtful about strategic issues
· plagued by inertia
Adding this mindset to the fragmented nature of the SME market, the implication is that there is a very high bar for any technology startup selling services into the SME space. Not only must the entrepreneur demonstrate real value to the SME CEO, they must also educate the CEO over and over again on why using a fancy piece of technology is better than how things are done today.
I am working with a classmate on launching Roundtable, a support platform for SME CEOs providing peer-to-peer networks, business advice and education. In our search for product-market, one of our biggest challenges has been to bring CEOs to even admit the need for support. We are falling and learning everyday, and tweaking our value proposition. Some of our quick takeaways for anyone in the SME space are summarized below:
· Meet them face-to-face. The SME space is very personal. At Roundtable we are meeting local CEOs in Boston to understand their needs.
· Focus on a niche. The space is so dispersed that many SME CEOs won’t take you seriously unless you have some claim to expertise. Don’t be everything to everyone. At Roundtable we started with an industry niche, but are quickly moving to a geographical focus
· Charge for your product. SME CEOs are busy, and always trading off between different options. Counter-intuitively you are better off charging them for your product than giving it away for free. They are more likely to ascribe value to it.
· Don’t build till you have customers. The beauty of the SME space is that you can very easily tell whether your product is worth making. Try to get a fixed number of committed paying customers before building your product. At Roundtable, we did this in reverse, only to find that many of the features we worked on were not necessary for version 1.
· Inbound Marketing is important. Hubspot gave a great talk about this in our Digital Marketing Strategies class.
The good news is that there are rays of hope. Intuit’s QuickBooks software took hold in the SME space (reportedly > 84% market share today) after a steady progression through word of mouth.[1] Referrals are king in the SME market, and if our product can take hold in a niche, there is massive upside potential. Additionally the SME market, by account of its fragmentation, is also very difficult to disrupt for incumbents. If you can make inroads with a core group of users, you can create a very defensible position in the market.
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