My Four Rules For Using The Term 'SMB'
I’d like to continue the dialogue on SMBs that Business Solutions Executive Editor Brian Sherman started last issue in his From The Editor column. Like Brian, I hear the term ‘SMB’ all the time from almost everyone. In fact, I think SMB is one of the most overused and misused terms in the channel today. For example, I’m sure you’ve heard statements like, “The SMB market is ripe for VARs and integrators right now.” The SMB market? Using the term like this makes it sound like SMB is the name of a new planet full of technologically challenged beings just waiting to spend their money on a VAR’s solutions. The next time someone starts spouting off about SMBs, consider these four rules for using this acronym.
First, SMB is not a market in itself; it is a segment of every market. (Similarly, ‘enterprise’ is also misused in this way.) Second, everyone’s definition of the size of SMBs is different. It’s the same kind of confusion surrounding the terms tier-one, tier-two, and tier-three. To some people, tier-three includes SMBs, but I’ve heard others talk about tier-four and tier-five. Where does it stop? Who makes the determination as to what category a business fits in? Which leads me to number three: by definition, SMBs include midsize businesses, too. Many people think of only the smallest of companies when using the term SMB. And finally, the end users defined as SMBs are probably not as primitive with their technologies as some people would like you to believe, nor do they all have the financial resources to upgrade to your ‘better’ solutions.
Understanding these rules can help you when choosing new SMB-labeled products or deciding whether to attract a new size of customer. For example, my article on page 38 explains how POS (point of sale) VAR Business Automation Consultants (BAC) had to change to attract retailers with fewer than five locations, a group almost anyone would deem SMBs. To do so, BAC not only had to add new products, it had to change its internal business processes.
Indeed, numerous research analysts are predicting that SMBs — however they are defined — in all markets are planning to increase their IT budgets in coming years. Those IT budgets could include everything from virus protection to POS software. Furthermore, it’s clear that as technology has evolved, so has the technical know-how of even the smallest business. Just because SMBs are on the bottom rung doesn’t mean they aren’t going to demand top-rung functionality and service.
I’ve often heard VARs say that very small businesses aren’t worth their time. But with competition and margins the way they are today, can any VAR ignore a market segment that offers viable sales? That’s what prompted BAC’s President and CEO, Mahendran Ramanathan, to pursue a smaller type of retailer than he was used to dealing with. His message is one any VAR can appreciate. Earn these smaller retailers’ business now, even if it’s not extremely profitable. That way, when they do grow and need more of your value-added services and higher-margin products, you’ll already have your foot in the door. Like Ramanathan, you’ll incur expenses if you want to target SMBs (he doubled his support staff), but the long-term results probably will be worth your time.