Many startups begin life selling to small business (SMB). SMB is a very appealing market. For one, it’s big (30 million businesses in the US alone). Also, they make quick buying decisions. Sounds great!
The challenge with SMB as a customer segment is that each customer is small. It might be easy to get your first few customers. But over time you become a victim of your own success. The bigger you get, the higher your customer acquisition costs go. Hubspot’s CEO Brian Halligan illustrates this challenge beautifully in his recent post ‘why aren’t there more Intuits”.
Building the next Intuit…
If you sell more to the ‘M’ (i.e. mid-sized businesses), then you can build a large inside sales team. This is what Hubspot does. This is also why they raised boat loads of capital. Once they got their fundamental unit of growth working, they never stopped hiring sales reps.
If you sell to smaller customers, you can’t really afford to hire sales reps. Your product and marketing have to sell for you. So if you want to go big you have to get creative. Here’s how a few other companies are tackling this challenge.
Buffer: Buffer’s customers are leading edge marketers who are online all the time. That makes it easier to reach them. You reach them through your own product. On top of the natural virality that their product has, Buffer has built a brand around it’s transparency. Everything down to team salaries is out in the open. How can you not trust a company that open?
FreshBooks: My beloved FreshBooks has a huge footprint in the SMB market. How did they get there?
- Amazing customer support: This is FreshBooks’ not so secret, secret sauce. When you truly delight your customers, they tell their friends.
- Mass media: Once you get to a certain size, direct response marketing doesn’t work. That’s when you need to build a brand. Mass media channels like TV and radio have tons of scale. You see other small business-focused brands like Godaddy also using TV.
Shopify: My friends at Shopify have done lots of interesting things on their path to World domination. Perhaps the most unique is their annual build a business contest. With the likes of Sir Richard Branson and Tim Ferris involved, they run a very unique annual contest that drives a lot of new merchant customers for them.
Wave Accounting:Nothing sells like free! From day one, Wave’s accounting service has been completely free. This has helped them generate massive reach. CEO Kirk Simpson says they sign up 55,000 new customers per day. From that massive base, Wave can then upsell premium offerings like payments and payroll.
Mindbody: Mindbody company powers many yoga and fitness studios. Their path to being a public company with $100M of revenue was built through direct mail. They used new business listings to find out when a new yoga studio was registered as a business and sent them a package. From day 1 these studios would start using their product.
Hubspot: Hubspot is a great example of several powerful customer acquisition tactics. The first is their inbound content strategy that they are most known for. What I’d like to focus on instead is their channel strategy. They have created programs, tools, software and events to help small web agencies build a business around their product. Those agencies now bring in about 1/3 of Hubspot’s business.
Channels are best for fulfilling demand rather than creating it from scratch. But once you reach a certain level of maturity, they can be powerful programs to help you grow.
So, there you have it. Just a few, creative, non adword ways to scale your SMB startup.