B2B sales strategy: Who should you sell to? SMBs, enterprise or...
If you've got a solution that could benefit customers of different sizes, how do you go about developing a B2B sales strategy? The worst thing you can do is to not make a decision, and instead try to sell to everybody.
Should you sell to small business customers? Fortune 500 companies? Medium-sized businesses? Solopreneurs? Micro-enterprises? Startups? Only restaurants, or restaurants and groceries and office supply stores? There are many ways to slice and dice it, and how you go about it can be the difference between success and failure.
First of all, let's be clear there are no universally accepted exact definitions of these terms. Different industries and different people will draw different distinctions.
These are the whale customers. Fortune 500 companies that are many times larger than your own company.
- Selling to enterprise customers can generate a lot of revenue. They've got huge budgets, and don't care about spending large amounts of money to solve important problems.
- You gain prestige and credibility. If you have Fortune 500 companies among your customers, and you feature that in your marketing materials, prospects will trust your company more.
- They're very sophistated buyers. They're willing to pay the price for the high level of support and service they require, and usually come into the deal with realistic expectations.
- It's very difficult to close an enterprise deal.
- Long sales cycles of 6 to 18 months are common. (A lot of startups try to close enterprise deals prematurely, and shut down their business because they simply run out of money before a deal gets closed.)
- Requires industry connection and networking.
- Complex sales has it's own playbook. You need to understand how to sell to large organizations with multiple stakeholders.
- Limited pool of potential customers, because there aren't that many enterprises.
- Even if you win a deal, if you don't have the team and infrastructure in place to properly serve them, it can all backfire and take your company down. There's no point in catching a whale if it will sink your boat.
Companies that do many millions in revenues and have thousands of employees, but are a step below Fortune 500 companies.
- Pretty much the same as enterprise customers, just to a lesser degree.
- There's are millions of medium-sized businesses around the world, and while they're not as big as a whale, you'll still catch plenty of big fish here.
- It's harder to define them, and because it's harder to define them, it's harder to find them. How can you effectively reach the right kind of prospects?
Can be anything from a local design shop to a restaurant. Small businesses are typically run by the owner and have less than 100 employees, most of them are in the range of 5 to 25 employees.
- You have a huge pool of potential customers, because there are so many small businesses. You can become very creative and targeted with your sales approach, and experiment more to find out what works.
- Buying decisions get made a lot faster, with a lot less complexity than enterprise or medium-sized businesses. Oftentimes you just need to get the buy-in from one decision maker.
- Lots of word of mouth happening. Small business customers that are happy with your solution will often refer you to other small businesses.
- Transaction size is smaller, and thus the amount of time and money you can invest in pursuing individual deals is also capped.
- Small businesses are typically not recognizable brands, so featuring their logo as one of your customers in marketing materials doesn't have as much value as well-known brands.
These are professionals who mostly run a one-person business, solopreneurs, maybe with the help of one or two people. Freelancers, single-practice doctors, consultants and so on.
- Very easy to identify and find. Their contact information can often be found in listings, on websites, in yellow pages, etc.
- Deal size here is very small, but if you pick the right kind of niche you can still find plenty of potential customers willing and able to spend several hundred dollars a month.
- Because most of these professionals basically "sell their time", they often don't want to spend it talking with people who want to sell them something.
- Sometimes it takes a lot of convincing to get them on board, they're usually very price-sensitive buyers on a tight budget
When you're selling to a highly-specific businesses that are not necessarily defined by industry, but by the stage of their company. Selling to startups is one common hyper-niche
- If you help a couple of hyper-niche customers succeed, this can often lead to many other hyper-niche businesses signing up with you. When something works well, it tends to spread rapidly.
- Hyper-niches can be a great target audience to focus on if you're very familiar with them, and know what makes them tick. It can give you a strong competitive advantage over others who don't understand the hyper-niche to the same degree you do.
- When servicing hyper-niche customers and optimizing your product for them, you might find that the specific features they want are not in-demand outside of the hyper-niche. This can limit your ability to grow.
Who should you sell to first?
If you've got one of these products that could be valuable to different-sized businesses, which one should you focus on first?
First and foremost, let your decision be guided by your own understanding of the audience. Pick a market you know really well.
Look for things that give you an unfair competitive advantage:
- Do you have a personal or professional network you can tap into?
- Do you possess insider knowledge?
- Do you have experience working in or with that kind of business?
- Do you have some recognizable branding within that space, are you known among these businesses?
What if you don't have any of these competitive advantages?
Start small. Map out the spectrum for which your product could be a good fit, and then pick the smallest kind of business to sell to. You want to sign up your first paying customers as quickly as possible, and build momentum, gain traction as fast as you can.
You want a high frequency of closed deals, even if they are small deals. As you build a steady stream of sales, look for signals that you're ready to move upstream.
At Close we're mostly selling to small companies with less than 100 users of our software (100 sales people or less), and initially we were focused on startups only.
As we gained momentum, build out our product and our ability to provide value to our customers and serve them, we started seeing medium-sized businesses or enterprises sign up for our product. Somehow they heard about us (this happened organically, mostly by word of mouth from our customers who knew people within those larger companies and talked with them about our product). Initially, these larger companies signed up, but mostly stopped using us after the free trial.
The more mature our product became though, the higher our win-rate with these large customers became.
This is the kind of signal you want to look out for.
This indicates that you're ready to start dedicating a certain amount of your sales efforts on selling these higher-level customers. You
This isn't the only way to grow, but it's what I advise you to do. Why? Because we see startups going this route have a much higher success rate than those who try to sell to enterprises from the get-go.
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