InFocus: Do you speak small business?

One of the well-known facts in telecommunications is the small business market is tough to crack with new technologies. Many VoIP service providers have chosen to compete for the mid-to-large enterprise market share first, leaving the small business market largely unattended and underserved. However, considering the scope of the opportunity it may be time to reconsider.

According to the U.S. Small Business Administration, 52 percent of all U.S. workers are employed by small businesses. More than 90 percent of all businesses in North America are comprised of small businesses. Small and medium-sized organizations spend as much as $43 billion on telecom products and services every year. Clearly, this is a valuable market.

But for service providers accustomed to speaking the language of large enterprise, the small business conversation occurs in a new dialect. In beginning this discussion, there are cultural barriers to entry for service providers. For business owners, personal relationships rank at the top of their list of requirements. The desire for trusting, mutually beneficial rapports is the common theme across every small business. This doesn’t mean doing business with golf buddies or over regular lunch dates the way it might in other markets with longer sales cycles. At the other extreme, it cannot be the one size-fits-all, press 7 to be treated like a number approach.

This desire on the part of small businesses for a personal touch underlines the level of dissatisfaction they express when asked about their relationship with their service providers. A survey of small business attitudes towards incumbents includes the following comments, “We don’t hear them, we don’t see them” and “I think of long lead times, expensive, and not a lot of value for what we pay”. This perception on the part of small business represents an opportunity for competitive service providers.

To establish the mutually-beneficial relationships this market wants from its service providers, there are a few important pain points that have to be addressed including simple solutions, customer empowerment, and the right economics.

Solution Simplicity

Simplicity is a key part of small business grammar. For the service provider, a simple solution comes with a host of benefits including less time spent setting-up and supporting each account. A simple solution also allows the service provider to deploy to more customers more quickly.

In terms of functionality, service providers need to offer small businesses a short list of intuitive, no-training-required features that they will actually use. Additional bells and whistles are unlikely to add value and more likely to contribute to support costs.

Simplicity is a huge competitive advantage for a hosted solution that can be delivered without expert support at the customer site. A hosted solution contributes to cost savings for both the small business and the service provider that no longer needs to dispatch technicians all over town.

On the customer side of the equation, a simple solution represents a must-have. Small businesses don’t have dedicated on-site IT resources to help them install and manage their voice services. It’s the office manager, receptionist, or owner that is responsible for administering the telephones. As a result, less is definitely more when it comes to removing complexity.

Once deployed, this simple solution must also be flexible when it comes to new business requirements. Every small business is planning to grow and most are wary of being locked into technology that could force them to choose between obsolescence and another costly upgrade.

Customer Empowerment

A second cultural barrier is the traditional ‘protect the customer’ mind-set that prevented service providers yielding control to the small business customer. In most cases, the original entrepreneur or partners that launched the business are still at the helm. They depend on their ability to understand every part of the operation to drive success. Giving them self-serve control over their voice services plays to their strength and allows them to make adjustments on the fly – a key advantage for small businesses in the competitive landscape. Besides, they are accustomed to the self-service model across a range of industries from banking to travel to online procurement.

This need for control is reflected in the increased importance these businesses place on local, long term relationships. Small businesses need to know and trust their vendors and partners and prefer to do it in person. For this reason, they overwhelmingly choose suppliers based within 50 miles of their own office. This has significant implications for how service providers promote themselves to small business and increases the importance with which service providers should view their local channel partners and resellers.

Micro Economics

Cost is a factor in any business relationship but for small business expenses take on an elevated importance. Ill-fated attempts to serve the small business market have typically relied on scaled-down ‘enterprise lite’ solutions that were only ‘lite’ in price. These were insufficient to the task at hand, or too labor intensive for small business. The typical start-up costs associated with customer premise equipment – not to mention the guaranteed ongoing expense to maintain it – are often deal-breakers.

To be attractive to small businesses, service providers need to limit or even better, to eliminate these start-up capital costs. Hosted solutions that do not require technician time to pre-configure phones or an on-site visit to install them gives service providers a head start towards profitability. Likewise, the solution must significantly reduce ongoing support costs by empowering user self-service for moves, adds, and changes.

Satisfying the cost-sensitivity of this market can also help to address customer churn – a primary concern for service providers. Loyalty is a hallmark of the small business arena and five year contracts are the new standard for service providers that can provide value.

The Two Call Close

The need for speed is valuable to service providers where profitability is contingent upon how quickly you can win as many customers as possible. They can’t afford the long consultative sales cycle that is common for large enterprises. The benchmark established by aggressive service providers is the two call close. To capture as much of the small business opportunity as possible, service providers need to achieve this level of sales efficiency.

The ability to close a sale with only two customer visits demonstrates that the sales organization speaks small business fluently. It means the service provider understands the market well enough to target only highly-qualified prospects, the solution is easy to sell and they have a channel that can effectively reach the small business market. Of course, easy to sell means the VoIP services solution being offered resolves the issues of complexity, empowerment, and cost that matter most for cementing a mutually-beneficial relationship.

Developing the relationships required to fill a profitable small business pipeline is challenging and time consuming work but the potential rewards are worth the effort. This represents the final cultural barrier which is the mind-set that the service provider ‘needs to do it all themselves’ and ‘own the customer relationship’. Instead, engaging with an existing channel that has already established valuable, trusted, small business relationships represents a fast and cost effective way to accelerate market penetration.

Language Training?

For service providers that want to ramp up quickly and tackle the opportunity head on, the best way is to ‘learn-by-doing’ through a mutually-beneficial relationship with a technology vendor who has a history of serving the small business market.

That vendor should have the operational data and experience to know what works and be able to use this experience to deliver a proven, repeatable successful program.

This must include the basics: how to recruit the right local channel partners, how to qualify prospects; how to sell to small business; and how to package solutions with the right messages for small business. These programs also need to deliver pre-developed branded marketing collateral that targets small business pain point and effective sales tools that support the accelerated sales process.

Learning a new language is difficult but rewarding. In this case there’s more than half of the US economy to gain in a market that’s eager for options.

David Cork is Co-Founder and CEO of Natural Convergence.