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Top 5 Tips to Successfully Begin Investing in SMBs

For investors focusing on the B2B market, there are many benefits to be had by turning their attention to the SMB sector as well.

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As a serial entrepreneur in the tech space, I’ve done my fair share of riding the waves through different business arenas. I’ve learned a few things along the way, and some of these things are causing me to shift my sights to the SMB market. 

There are many reasons to consider moving into SMB if you’ve traditionally focused on the B2B sector. Speaking candidly, it took me too long to execute on a conviction I developed a long time ago about this market.

If you’re thinking about making a move to start investing in SMBs, here are five key tips to help ensure the investments are successful. 

1. Don’t be misled: SMBs are not smaller versions of B2Bs

Be cautious of thinking that you can take your B2B strategies and scale them down to appeal to SMBs. That’s not how it works. The structure and fundamental needs of the two spaces are not the same.

The B2B market is high-touch. People don’t want a self-service approach to business: They want a dedicated representative who will answer the phone when they call and provide them with as much time as they wish. When working in the B2B space, you will likely have a smaller number of customers and a higher cost to service them. 

This is not the case for SMBs. Customers still want excellent service, but they’d rather access things on their own time for a lower cost. SMBs often don’t have dedicated IT departments — they have more folks who wear many hats. They are poised for self-service.

In an SMB organization, there is a much lower tolerance for mediocre performance. If an SMB provides poor customer service, it’s much easier to dial into the problem and train or replace the problem employee. As B2Bs have historically found, this is very difficult to scale up. The larger the organization, the more difficult it is for the company to maintain buy-in at all levels and in all departments.

Related: How SMBs Are Embracing Digitalization for Business Resilience

2. Lock in your leadership

One of the most significant takeaways my team has discovered in the move to SMBs is how important good leadership is. We didn’t want to fall prey to having too many cooks in the kitchen. We experienced losses as we learned our way through this process, but once we established a strong leader in our SMB arm, we could lock in strong regional leaders, and I truly believe this was a key to our success.

3. Be nimble

B2Bs seem to love long, complicated vetting processes, but the investment in risk management isn’t always warranted. A smaller company has the privilege of moving much quicker while making the same decision. 

Red tape was created for a reason, but sometimes it gets extended to many other areas and ends up in a lot of wasted costs — and time.

Related: During Uncertain Times, SMBs Can Rely On What They're Best at: Talking to Their Customers

4. While scaling globally, think locally

There are 400 million SMBs in the world. It’s a huge market, and it’s full of diversity. Set your sights narrowly and determine where you should position yourself as the most desirable in a competitive landscape. Then, keep in mind the following to propel your success:

  • Set up a separate business division to manage your SMBs.

  • Though it is often easier said than done, the power of creating an incredibly capable help desk cannot be understated. 

  • Distribute your decision-making. Don’t rely on global leaders — make sure you have competent regional leaders whenever possible, especially in sales and marketing.

  • Minding cultural nuances is so important. In addition to navigating different languages and cultures, you also encounter differences in laws, payments and business practices. It will behoove you to make yourself aware of these differences and adjust your business accordingly.

Related: When Is a Good Time for SMBs to Move Their IT Infrastructure to the Cloud?

5. Adapt, and then adapt again

Keep an open mind about disagreements within your team. Doing so allowed me to discover better talent and leaders that would not have risen up if I had tried to control everything myself. I am used to creating solutions, but in this case, I just presented the model. Solutions emerged — and so did leaders.

Be prepared to make mistakes. Learn, fix, adapt, evolve and iterate. I’ve learned that business is a machine that uses negative feedback to achieve balance. Consider failures to be stepping stones to success and go build your dreams. We should all recognize that the business landscape is changing, and some functions are better performed by specialists and small groups organized as a business. For entrepreneurial spirits, now is the time to take the plunge.

Par Chadha

Written By

Entrepreneur Leadership Network Contributor

Par Chadha is the founder, CEO and CIO of HGM Fund, a family office. Chadha also serves as chairman of Exela Technologies and is the co-founder of Rule 14. He currently holds and manages investments in the evolving financial-technology, health-technology and communications industries.