Selling Small Business 2013 ebook

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Selling Small Business Buyers in 2013

Managing revenues based on customer preferences.


Small businesses are a driving force behind the American economy, but they are being forced to work more creatively and more efficiently than ever before. Although the percentage of small businesses as a percent of the overall economy has declined, the total number of employees and the net new employee job growth still sustains the economy.

Revenue growth and profitability challenges coupled with an uncertain economic future have fundamentally shifted small business priorities. Plus, the cost of doing business has increased due to increased regulatory compliance, healthcare and administration costs.

Additionally, the workforce has shifted with the majority of workers by 2015 being Millennials and a third of workers being “no-collar” workers. “No-collar” workers include contingent workers, 1099 contractors, agents, supertemps, stay at home employees, consultants, and free agents.

Small and medium business (SMB) has weathered the recession and re-optimized their business models to support consumer demands. In order to create profitability, however, businesses have to provide extraordinary customer care more efficiently.

SMB buyers know that the primary source of growth capital is their operations profitability. To prosper, small businesses have to be more operationally efficient than their larger counterparts and competitors.

Small businesses share many common workforce attributes due to similar pressures from the economy and employees; however, these commonalities may create the temptation to create a single sales and marketing strategy. However, this would be a mistake. Each small business buyer expect a customized approach that shows sensitivity to their needs and business requirements. The following three trends have shaped the way businesses sell to the SMB marketplace.

1. Going beyond referrals to multiple channels of interaction and distribution. 2. Changes to management and organizational structures. 3. Community orientation (1:1 vs. 1:many).

# of Business by Firm Size Class by Year: Business by Employee Jobs #:

*119.4M state and local government employees pus 3M federal employees including defense in 2011 US Census.

1 http://www.census.gov/govs/apes/

Year < 50 employees 50 to 999 employees >1000 employees

1993 4095 187 8

2003 4574 230 10

2012 4608 233 10


1993 95% 4% 0.19%

2003 95% 5% 0.21%

2012 95% 5% 0.21%

Count of Private Sector Firms by Size Class in thousands

Firms by Size Class % of Private Sector Employers


1993 28,177 28,305 31,523

2003 31,557 34,190 39,296

2012 31,037 35,172 41,760


1993 32% 32% 36%

2003 30% 33% 37%

2012 29% 33% 39%

Count of Private Sector Employee Jobs by Size Class in thousands

Employee Jobs by Size Class % of Private Sector


SMB Buyers State of the Union & Small Business Economic Forecast

Small businesses do not expect the economy to return to the boom times anytime soon and are tempering hiring while focusing on areas to increase revenue growth and profitability.

Today’s small business buyer is more resilient, agile, operationally competitive, and perseverant than ever before. And that is the good news. Economic growth has averaged less than 3% since the recovery and is estimated to have slowed in 2013.

Business with fewer than 100 employees represent 99% of employers, employ more than half of the private sector workforce and create the majority of net new jobs annually. More than 2 million of the new job positions created this decade will come from low-paid openings for healthcare, home health and personal care aides, and retail services. The next largest growth area for net new jobs includes professional, technical, and scientific engineers.

Cost of Running a Business $ Compared to Business Employee Productivity:

Slowing sales (less than half of small businesses expect an increase in sales receipts in 2013) and lower profits are also expected as only 38 percent expect an increase2.

2 https://www.pnc.com


Major Trends in Small Business in 2013 and Beyond 1. Going beyond referrals: Historically small businesses relied on networking and referrals for the majority of new business. More profitable firms are utilizing eCommerce and alternative distribution strategies beyond direct sales “feet on the street” to more cost effectively source new customers. This is a new, more efficient revenue model for attracting business. 2. Changes to management and organizational structures: Management and organizational structures have co-opted and adopted social, technology communications, and other Gen Y management practices. This has enabled them to focus employees on the most critical activities. Also, this has enabled businesses to flatten hierarchies to individual contributors, managers or supervisors, and executives. The average employee has been empowered and given significantly more work and more responsibilities. Businesses now have streamlined management through empowered employees and streamlined administration via technology, partnering and outsourcing, eliminating many of the extemporaneous tasks and positions. 3. Community: Businesses now utilize community for sourcing talent, community for innovation, community for networking, community for partnering. Business is a community—local and global, small niches and large associations. In the last decade there has been a proliferation of both online (check out LinkedIn Groups) and offline communities. There is no longer one ad campaign, one marketing vehicle, even one email message for a campaign. Now, SMBs have come to have the same expectation in their business relationships. A blanket campaign will no longer work.

Key takeaway: SMB buyers represent a sizable revenue/market opportunity, but prefer to buy based on their preferences.

Small business is constantly searching for ways to put more cash in their wallet as well as stay ahead of their competition. The adoption of technology, tools, and managed services is increasing as companies learn to do more with less.


How does your business compare to the average industry revenue per employee? Industry Revenue Per Employee for Inc 5000 2012 Winners:

Annual Revenues ($ sales receipts) Per Employee by Industry:

Small businesses are seeking ways to be more profitable than their larger counterparts and competitors.

Industry Breakdown Inc 5000 2012$ Revenue Per Employee Avg

in millions

Revenues Avg $

millions

Revenues Total $ millions

Employee Count Avg #

Employee Count Total

#Companies

■ Advertising & Marketing $0.45 $36.36 $15,307.40 81 34,028 421

■ Business Products & Services $0.70 $280.31 $160,337.40 400 228,665 572

■ Computer Hardware $1.25 $143.55 $6,459.90 115 5,188 45

■ Construction $0.27 $33.08 $4,995.70 123 18,526 151

■ Consumer Products & Services $0.29 $88.98 $21,532.90 312 75,524 242

■ Education $0.17 $24.67 $2,022.70 142 11,639 82

■ Energy $0.78 $190.03 $19,573.50 244 25,129 103

■ Engineering $0.22 $23.44 $1,734.40 105 7,801 74

■ Environmental Services $0.54 $134.26 $9,129.50 249 16,931 68

■ Financial Services $0.29 $44.49 $10,989.10 152 37,530 247

■ Food & Beverage $0.05 $72.93 $9,918.40 1,540 209,463 136■ Government Services $0.36 $48.49 $12,850.20 134 35,616 265■ Health $0.16 $85.41 $32,198.50 549 207,048 377■ Human Resources $0.16 $92.56 $16,012.20 562 97,140 173■ Insurance $0.55 $78.00 $4,992.10 141 9,037 64■ IT Services $0.31 $47.77 $33,388.40 156 108,876 699■ Logistics & Transportation $0.36 $106.47 $16,289.30 294 44,944 153■ Manufacturing $0.64 $131.56 $32,364.80 205 50,360 246■ Media $0.55 $68.36 $3,828.10 124 6,921 56■ Real Estate $0.23 $37.82 $2,609.50 166 11,473 69■ Retail $0.08 $31.34 $5,923.50 403 76,212 189■ Security $0.22 $84.34 $6,325.70 383 28,702 75■ Software $0.36 $55.74 $17,557.30 154 48,502 315■ Telecommunications $0.53 $145.87 $21,151.30 275 39,929 145■ Travel $0.25 $206.26 $7,013.00 815 27,721 34

NAICS CODE Industry

Total sales

receipts $

(millions)

Sales Receipts Per

Employee $

Sales receipts per $

of payroll ($)Annual Payroll $

22 Utilities 398,907 601,630 9.4 63,97423 Construction 1,196,556 166,348 4.71 35,352

31-33 Manufacturing 3,916,137 266,412 6.8 39,19742 Wholesale trade 4,634,755 788,438 17.85 44,171

44-45 Retail trade 3,056,422 208,663 10.12 20,62548-49 Transportation & warehousing 382,152 104,675 3.29 31,770

51 Information 891,846 238,713 4.58 52,10652 Finance & insurance 2,803,855 426,194 7.42 57,42553 Real estate & leasing 335,588 172,215 5.57 30,90554 Professional, scientific, & technical 886,801 122,427 2.36 51,92155 Management of companies 107,064 41,095 0.6 68,70556 Administrative, waste, remediation 432,578 49,484 2.1 23,61561 Educational services 30,691 71,347 3.02 23,62962 Health care & social assistance 1,207,300 80,207 2.43 32,94271 Arts, entertainment, & recreation 141,904 76,760 3.14 24,43372 Accommodation & food services 449,499 44,413 3.52 12,60381 Other services (except public 307,049 88,352 3.7 23,870


Small Business Technology and Service Adoption

Technology has eliminated many barriers, but also created adoption challenges. The following chart highlights the market adoption and utilization among small to medium organizations regarding adoption and use by functional area.

Solution Most Common Tools (> 5% Market Adoption) Communication Microsoft Outlook, Google Apps, SharePoint, Skype, Citrix

Customer Relationship Management (CRM)

SalesForce.com, Microsoft Dynamics CRM, Zoho, Sage, SugarCRM, RightNow-Oracle

Enterprise Resource Management (ERP / Financial)

Microsoft Dynamics, QuickBooks Enterprise, Peachtree

Productivity Software Microsoft Suite, Google Apps, Basecamp

Administration Software Human Resources: ADP, UltimateSoftware, Ceridian, Paychex Recruiting Taleo-Oracle, Expense: Concur, ExpenseCloud, Intuit, Kronos, Timeforce, Nettime

Storage & Cloud Dell, HP, EMC, Amazon, Microsoft, Rackspace Marketing Wordpress, HubSpot, InfusionSoft, Marketo

Nearly 80% of companies are outsourcing at least one function. Approximately 10% of the market is currently evaluating outsourcing a new or additional function. While buyers continue to be cautious, the percentage of companies outsourcing is growing, and the number of functions being outsourced is too.


Selling SMB Buyers

The most successful approaches will have a complete understanding of the demands and expectations of the buyer. Today’s savvy companies seek to understand consumer behavior before the sell and focus resources on the best fit customer segments. Recently, the approach to selling the SMB buyer has been affected by three things: consumerization, workforce demographics and customer longevity. Without an understanding of these fundamental shifts, B2B companies will flounder in building new relationships.

1. Consumerization: There has been a fundamental shift in the development and release process for technology and its applications. In the past, technology was first released to the business marketplace. This happened all the way through the desktop computer because it was often cost prohibitive for consumers to own these devices at their initial release. Also, the customization required an understanding of IT the average consumer did not have. However, the tables have turned. Now, applications and devices are often released first to consumers and then picked up by businesses. To disappoint their customers companies today release mobile versions first and solicit feedback as they interact with consumers.

Business buyers demand the same experiences across technology and service that they demand as consumers. As consumers, they have been empowered by access to information, social feedback on every purchase and mobile technology. Rarely are high ticket items bought “off the shelf” without prior research. Consumers are not willing to behave any differently if the purchase is for their business rather than their home.

However, the quest for more information has caused information fatigue for many. Even though the SMB may desire the information, the do not intend to spend an undue amount of time searching for or decoding facts. Buyers are also less willing to spend time placing orders or deal with any degree of incompetence. Service must be fast, competent and accurate. Finally, buyers need support. Precisely because of the information available to them and the consumerization of technology, buyers have a greater information technology skills than ever before and will rarely purchase a solution without the ability to fully utilize it.

2. Workforce demographics: In a difficult economy, businesses have been forced to consider the value of every position against the cost. In this equation, many mid-level managers lost their positions in the 1990s and 2000s. The missing link in supply chain talent is mid-skill level professionals. While many companies have focused on hiring entry-level talent from universities, the looming issue is turnover and a shortage of mid-level professionals. While companies today are struggling with change management and the adoption of new business practices, the looming issue is upcoming baby-boomer


retirements and the rise of Generation Y Millenials into management positions. The most important activity that leaders can take now to mitigate turnover and attrition is to define clear job progression and career paths. This is particularly challenging in technical and professional industries.

Millennials are positioned to change the workforce with a different sense of loyalty and responsibility and an increased expectation for individualized attention. Some anticipate this influx with enthusiasm, as the upcoming generation is more tech savvy and eager to love their job, while others dread the demands and me-centered images many Millennials have created in behavioral studies. The no-collar workers, or temp, contract and contingent employees, also create unique issues for the SMB. While they offer production at a lower cost, they also create frustrations for managers as they are difficult to supervise and create communication difficulties. Without sensitivity to the changing workforce and the difficulties it has created, the SMB marketplace will not be receptive of any alleged new solution.

Buyers in the SMB market have limited time, budget, and resources. Decision makers must see the value of a solution quickly, because they are often overworked and lacking resources.

3. Customer for life: While this is ideal in every business, the focus often gets lost because the analysis required determining if a customer is truly a customer for life is difficult. In the Internet age finding the value in each customer and those interactions is more difficult but vastly more valuable. These customers rarely come through an impersonal media campaign and, on the same note, rarely continue because of impersonal marketing campaign. These customers often come because of word of mouth and personal testimonials. Once one of these “customers for life” has come to the company, they then begin circulating such reviews and testimonials. The value of a customer for life cannot be overstated.

Because of these three factors, the consumerization effect, workforce demographics and customers for life, repeat buyers become customers for life when they are educated and choose to opt in at every stage. Less selling and more education coupled with opt in marketing and solution consultation is essential in the SMB marketplace.

Key takeaway: Because of all this, repeat buyer’s become customers for life when they are educated and choose to opt-in at each stage. Less selling, more education coupled with opt-in marketing and solution consultation.


Revenue Strategies for Growth in 2013

I. Adapt to changed buyer behavior (Digital, Social, Mobile, Buy but not be sold mentality)

II. Connect social to not only marketing & sales but to customer loyalty.

III. Connect the product to product marketing and sales.

IV. Long-tail segmentation.

Push more marketing & sales resources closer to the industry sub segments, micro geographies, and product lines they serve and staff these positions with people from disciplines who have intimate knowledge of the customers’ needs. When it comes to lead generation, referrals are the most cost efficient sales and marketing tactic. The Internet has shifted the balance of marketing effectiveness away from outbound marketing which is more effective than mass advertising. Not everyone can sell, but everyone can ask for feedback and a referral!

LinkedIn drives the most referrals for B2B outside of client referrals. Client referrals have the highest close rate (typically 1 in 3 or better).

Companies using social to acquire clients:

Average Cost Per Client for B2B <$1,000 using Inbound Marketing versus 5 to 50x the cost for traditional advertising3.

89% of US business users search online before they make a purchase4.

3 Ephor Group 2011 research report http://www.ephorgroup.com/resources.asp 4 Big Research 2011.


Whether they are called sales or service reps, small business solutions experts, or business partners, those employees who specialize in the customers’ business and have an intimate knowledge of their needs and requirements are essential in the current business environment. Sales in the Internet age is best done by delivering a personalized service.

Buyers do not have the patience to explain their unique business proposition or industry—they will take their business to another company that understands them and their needs intuitively. Buyers want to cut

to the chase and work with the leaders in their field that will provide them with the information the way they want to receive it when they want it.

Increasingly, buyers are losing patience with companies that rely too heavily on push marketing. The average American see greater than 1,500 ads a day. Buyers are willing to research what they want or need, but they are not interested in “being sold”. The information on a product or service must be available to them in a digital format, when they are ready to receive it. When ready to buy, he or she is searching for other people who have experienced the company in question.

Once the buyer has located the product or service, they want to feel assured that the product will work for them, out of the box. Lengthy customization processes are no longer ideal—buyers want the best fit possible from the outset. This is commonly seen in the consumer marketplace—there is a service for every niche. Businesses expect the same level of catering for every product they purchase. Therefore, each product or service should have a unique marketing message. Every business is unique, and they want to purchase products that cater to them from businesses that will cater to them.

The concept of long tail segmentation has never been more relevant in the SMB marketplace. Businesses must push more marketing resources closer to the industries, geographies and product lines they serve and to staff these positions with people from other disciplines who have intimate knowledge of the customers’ needs.


SMB Sales Leadership in 2013

Penetrating the SMB market requires a personalized customer experience for each buyer. To start, identify your segments and personas.

Segmentation by: Personas:

Industry Sector Company Size Company Stage Buying Pain Buying Trigger

New Mover Lifestyle Serial Entrepreneur VC Backed Community Organization Conservative Young President Officer HiPo Gen Y (high potential) Boomer Owner

Key takeaway: Penetrating the SMB market effectively requires qualifying the buyer and educating them before selling them.


Multi-Channel Revenue Strategies in 2013

For years, marketing and sales teams have been focused on multiple impressions and multiple points of contact, but this has never been as achievable as it is today. However, in the rush to find the next new thing, businesses cannot forget to capitalize on the successes of the past. Over the past 20 years, few business processes have seen as much change as the outgoing sales process. For decades, the cold call was the first contact—often sent out from a call center in-house. Then, the nomenclature was changed to a customer contact center, but little actual change occurred. The first major shift was when the call center, its employees and its function were outsourced. Sometimes, the rest of the initial sales and marketing process was outsourced as well as part of the early business process outsourcing movement. After mixed results, many companies pulled some of their sales team back in house, recapturing the expertise and loyalty of these employees. Companies who rely partially on internal employees and partially on independent reps have a hybrid sales force, and they often experience the benefits of both outsourcing and in-house employees. Hybridization between the old ways and the new has also occurred in the response to incoming sales requests. In the past, the only option was live voice. However, as the internet emerged as a relevant vehicle for sales interactions for all businesses, it became a requirement to have the capability to interact with customers in a meaningful way. Initially, the only solution was email, which generated a personal response, but often with a considerable delay. That quickly became unacceptable. More and more websites integrated a chat feature. Instead of the list of pat responses available initially, chat now features a representative on the other end trained to deal with product questions as competently as any field sales representative. The transition, throughout the sales process and in all interactions, has been to a greater focus on the solution. Who can provide the best care to the customer and how can that interaction be created? That is where the focus lies for the successful business. The next evolution for businesses in the SMB space will be to solution partners. The space for once-off sales and temporary transactions with less than ideal businesses because of cost or availability is coming to a close because of pressures in the marketplace. Numerous pressures in the marketplace are affecting how the SMB buyer views transactions. These factors are creating demand for a better solution, a better company from which to buy. Cost pressures: When every purchase is scrupulously studied and any revenue will be gained in efficiency, there is no room for waste in the initial purchase or subsequent renewal or maintenance. Crowded and undifferentiated marketplace: In the case of many B2B service providers, they are one voice among many, with few differences in the product. The difference comes in the interaction. Demand for seamless channel integration: Because of consumerization, buyers expect more from every interaction, with sales and with the service team. Every component of the customer experience must deliver a consistent customer experience, and this requires merging offline, online and mobile communications. New and expanding contact channels: Companies need more than a 1-800 number. The same contact options customers have come to expect for B2C interactions must be available for SMB buyers as well. Businesses in the B2B marketplace must be on top of changes in the B2C marketplace, and their business must adapt.


Integration: Marketing automation and integrated technology platform no longer a nice to have, but a must have and a real differentiator. Data and analytics: Without knowledge of the customer’s business, excellent service is impossible. Data and analytics that tell more about current customer behavior and preferences will make it easier to serve those customers and target others who would be likely customers for life. Everything is measureable, and an understanding of that data is essential. The true differentiators available to those in the SMB space are data, contact, technology and analytics, all of which provide more information about the customer and enable a greater focus on their needs. Only those companies willing to truly become business partners will have longevity in the marketplace.

Each customer today deserves a personalized, quality experience that satisfies their needs. Cold calling is dead. Dialing for dollars is a legacy concept of the past and simply does not work in today’s Internet world. Pre-call research is a prerequisite to solution selling as customers want to buy and not be sold. A critical success factor is to know and understand the profile and preferences of your customers before the sales process initiates.

Knowing where to focus sales resources is critical. Here are a few example results:

On average, multichannel customers spend 30 to 50% more than single channel buyers.

10 to 20% increase in response rate

20 to 50% lower customer acquisition cost

50 to 300% > campaign ROI cost


Customer Preference Marketing

Today’s buyers have more information and resources than ever. But they also have less time, trust their peers and friends for recommendations, and yet are still creatures of emotion and habits. Buyer segmentation allows for faster, more robust and accurate market targeting based on buyer preferences, budgets, and readiness. In summary, buyer segmentation help clients find the sweet spot in the market.

Buyer Segmentation Best Practice

Segmentation Create segments based on demographics and personas as well as customer buying history and preferences.

Personalize Your Story for Each Buyer

Deliver the right solution based on company profile, roles, and challenges

Make Your Points Quickly

Tell your story using data, stories, drawings, graphics, animations, and more to communicate your value proposition like never before

Justify Your Proposed Solutions

I. Review the value of your solution and have the client repeat it back to you. II. Summarize the "Cost of Doing Nothing" and the benefits of your solution to make your

proposal a priority III. Provide the value justification your frugal buyers need to make a decision IV. Leave them with a Report: Create personalized leave-behind reports, empowering your

buyer to deliver your value story to other stakeholder

Raving Fan Gather a testimonial and referrals as well as feedback as part of the onboarding or checkout process (don’t wait till later!)


Questions Answered by Buyer Segmentation

Are you stuck in incrementalism? Build assets while producing greater results through an analytics by shifting from workforce activities to customer outcomes.

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