I gave a talk this week at the Small Business Web Annual Summit on how to achieve big exits for startups serving the SMB Sector. If you don’t know about the Small Business Web Association (and your startup serves SMB), you should sign up. The event featured execs from 400 SMB-focused companies. It was a great opportunity to connect and compare notes on growing great companies in this sector.
Anyway, my talk was on SMB exits. The SurePath team helped me crunch a bunch of data, looking at IPOs, acquisitions, who the most active SMB buyers are and what the key success factors are for companies that achieved great exits in this space.
Here are the slides. Continue reading Achieving big exits in the SMB sector
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. Continue reading Creative ways to scale SMB customer acquisition
Many startups launch focusing on the small business (SMB market). Given how large this market is, it can be a compelling target. There are 30M small businesses in the US alone. In addition, SMBs don’t have big purchasing departments and corresponding long sales cycles. If you reach the owner and solve a need that she has, you’re in!
I love the SMB market. Many of my previous startups have addressed on it. Most notably FreshBooks, which has built a very large customer base here. However, I have seen over the years that most startups that launch with an SMB focus eventually go up market serving larger customers. They do this because while the SMB market is huge and sales cycles are short, each customer is small and not worth much. So, you need a lot of them in order to build a big business. Acquiring lots of small customers in a cost effective way is difficult.
Without further ado, here are the only two ways that I know off to truly scale SMB SaaS companies:
1.) Ridiculously low cost of customer acquisition: Continue reading The only 2 ways to scale SMB SaaS
Late last year, I wrote about SMB being the “third market” for VCs. Lots of VCs fund consumer startups. Lots fund enterprise startups. Very few truly target startups serving the small business market. Why?
The challenge and opportunity for startups targeting SMB is customer acquisition: there are 30 million small businesses in the US alone; 60M in the English-speaking World. Moreover, SMB is an evergreen market – more and more businesses start each year, more than replacing those that die. So, lots of customers, but historically they have been hard and costly to reach.
As such, VCs tend to be skeptical about a startup’s ability to acquire customers profitably. This concern has two vectors: customer acquisition cost & customer lifetime value. This last point is related to churn – the rate at which your customers cancel their accounts. Enterprise startups keep their customers for many years. And each customer is worth a lot. SMB startups keep customers for a much shorter period of time. And each customer is worth relatively little.
Continue reading Two keys to building a massive SMB startup