Grow Big by Selling Small
Enter the Project Grow Challenge presented by Entrepreneur and Canon USA for a chance to win up to $25,000 in funding for your business. Deadline is Sept. 15 2015. Click here to enter.
It's an easy fantasy to nurture; you land The Big One. That one giant, fat account that will launch your business into the big leagues, put the kids through college and secure an early retirement on that Hans Christian 48-foot sailboat.
Give it up. Instead, build your dreams around a wide and varied customer base of other small businesses, experts urge. Success with this model is more likely, less risky and a smarter way to grow a solid enterprise. Plus, in most cases small businesses simply aren't equipped to respond to a whopper of a sale.
"Smaller companies often pursue the big guys and leave low-hanging fruit, which is other small companies," says Don Mazzella, a small-business consultant and co-author of The Janus Principle: Focusing Your Company on Selling to Small Business . "However, it's easier and more effective to sell to your counterparts than to larger clients."
Why Sell to Small Businesses?
If a single sale to, say, FedEx or Wal-Mart would exceed all revenue expectations, why spend your limited energy on lots of small accounts?
First, as a small business you talk the talk of other small businesses, and the learning curve for dealing with a small firm is much easier than breaking through the cinderblock walls of a global corporation, Mazzella says. "Small-business owners are often surprised to learn that other small businesses make decisions the same way they do."
Further, selling to other entrepreneurs is actually where the money is. The U.S. Small Business Administration reports that this country is home to 27.2 million small enterprises that represent a market of $7 trillion--a sum equal to more than half the U.S. domestic national product and greater than the GNP of all but eight countries.
Finally, it's simply safer for your business to have many small customers rather than a few behemoth ones. The Janus Principle authors underscore the maxim that no one client should constitute more than 40 percent of your revenue.
Evolve IP, a Wayne, Pa., based tech-management services provider, strategically targets small-business customers. "By having 10,000 customers each spending $500 per month, we have the ability to build a stable revenue foundation that will sustain over a long period time," says Tim Allen, chief sales officer. The loss of one of those thousands of clients barely dents the bottom line, while losing one of a precious few could force a firm to scale back, or even go under.
How to Find Them
Quaint as it may sound, experts say you should network locally to reach potential small-business customers. "Small-business owners often [maintain close ties to] their community," Allen says.
Indeed, a survey conducted by the authors of The Janus Principle found that 73 percent of all business is conducted within a 50-mile radius of the firm. This figure is down from 84 percent five years ago, but still remarkably high considering the perceived effects of the internet on commerce. One key reason small businesses like to partner with local vendors: They know where to find them should things get ugly, Mazzella says.
Allen looks to local business associations for networking as well as for forging formal partnerships to offer services and products to members--usually at a discount. Membership in civic organizations such as Rotary and Kiwanis clubs can be especially effective when combined with media coverage to maximize your visibility. Use article mentions and advertisements in local newspapers and on radio and TV to target a local customer base.
Likewise, trade publications are an invaluable resource for businesses whose customer base is national or global. The key is to find familiar connections between your and the other businesses' target customers. Referrals from peers are one of strongest ways to secure a first meeting.
"Getting Donald Trump to endorse your product is not as good as another small-business owner promoting your product," Mazzella says, because small-business owners trust their peers above national spokespeople. Again, entrepreneurs understand other entrepreneurs.
Cold calls are far from out of date, experts say--especially when it comes to approaching entrepreneurs. The Janus Principle notes one New York City salesman who claims a 25 percent success rate landing meetings with small-business owners by cold-calling them and offering to bring a corned beef sandwich from the city's famed Katz's Deli. "For 15 bucks I am in the door," he says. Do you think any variety of salted meat could get you a meeting with, say, Oracle's Larry Ellison?
So once that meeting is secured, what happens?
The first step is to find out what the customer's needs are. Then find a way to prove your product or service fits that need. Finally, establish your reliability.
Keep it real. Don't be shy about mentioning a mutual friend or colleague, and spend time getting to know that decision-maker as a person. Everyone likes to do business with people they like and trust. This may be especially true for small businesses, as it's usually just one individual who makes all the company's buying decisions, unlike large corporations that run purchasing through layers of cumbersome processes, says Edward Dolan, principal of EPIC Results, a business consultancy for entrepreneurs.
"They have to have a sense of connection and trust, which comes from a rapport or shared value," he explains. "People buy from people they know and like."
It's this combination of listening, then filling a need and being accountable that secures a sale to a small business, Dolan says. "It's that old saying my mother used to tell me: Nobody cares how much you know until they know how much you care."
Evolve IP's Allen says that producing copies of stories in national media outlets that have mentioned your company can help you sell yourself to another small business; it underscores your company's credibility to a customer who may not fully understand your product, he says. This probably isn't necessary with large businesses; the big guys will often be staffed by a team of research experts armed with detailed questions about your product.
Sales for Now and the Future
The first sale is often the easiest one. It's building a long-lasting, mutually beneficial relationship that often proves tricky for small-business owners.
The key is to identify customers' challenges and remain nimble enough to accommodate them. Perhaps you provide creative financing options or, like Evolve IP, offer a purchasing credit in exchange for replacing your product with that of a competitor to whom the customer has already committed - thus removing the financial hurdle to the sale.
Dolan notes a distribution company that, unlike its competitors, refused to administer a fuel surcharge during the gasoline crisis a few years ago. Instead, the company asked its clients to consolidate orders when possible--proving a win-win situation for both parties.
"If you always have your poker face on and are always negotiating, that's the kind of [adversarial] relationship you'll have," Dolan says. "But if you look at [selling to small businesses] as [building] partners, the relationship can be mutually supportive."