Three Keys To Penetrating The SMB Market
VARs that try to sell technology to small- and medium-sized businesses (SMBs) face multiple (and sometimes perplexing) challenges.
Inexperienced VARs dream about landing one gargantuan sale that will make their business ultra-profitable. Unfortunately, after reality sets in, they realize that fantasy won't come true. One of the keys to succeeding as a reseller is selling to multiple small- and medium-sized businesses (SMBs).
Experienced VARs know selling to SMBs is complicated. Heck, even defining an SMB is difficult. One of the distributors we talked with classified an SMB as a business with fewer than 1,000 employees. Another placed that number at fewer than 100. And what's the typical sales cycle for an SMB? "It's all over the map," says Brian Wiser, VP and GM for U.S. VAR sales at computer product distributor Ingram Micro (Santa Ana, CA). "There's no typical sales cycle. It depends on the level of solution you're selling and the makeup of the company."
Confused? Don't worry. Following these guidelines will help you sell to the SMB market.
1. Focus On Core Vertical Markets
"Pick a vertical market and know it very, very well," says Rick Heller, broadband business consultant for communication technology distributor TESSCO Technologies (Hunt Valley, MD). "Create a compelling technology solution based on that vertical market, and sell a version of that solution over and over. You end up with a repeatable solution that can be cost-effective."
Growing markets in the SMB arena include education, public safety, legal, and Internet service providers (ISPs). The most popular new technologies being sold to them are wireless, voice and data convergence, storage, and security. "Determine what market you're going after and develop a solution that will set you apart from your competitors," Heller says. "Bundle together different technologies that can solve multiple problems, and then have your customer choose which problems it wants addressed first. Don't just pitch one technology to them and say, 'Try this.'"
Your solution should address most (if not all) of your customer's issues. But, anticipate that parts of your solution will need to be incorporated in phases because SMBs have especially tight IT budget constraints. There is an upside to this elongated installation approach. "You become a part of your customer's planning process," Heller says. "Build a utilization plan together, and you have that customer for a long time."
2. Lean On Your Distributor For Financing And Product Availability
Before you develop plans for SMB customers, work with your distributor to build a sales plan for yourself. A distributor can help you finance the deal quickly and get the product to the customer immediately. This is especially important in the SMB market for two reasons. First, smaller end users often purchase technology in emergency situations because they have a limited (or no) IT staff to anticipate problems. If the solution is not ready to ship now, you may not make the sale. Second, smaller end users often need creative financing to purchase the technology they need.
"Many studies show that small businesses tend to buy from small businesses," says Dan Schwab, VP of marketing for computer and electronics distributor D&H Distributing (Harrisburg, PA). "Based on that, small VARs may not be able to get all the credit they need. Distributors need to provide creative tools to help solve this issue."
Jonathan Elster, senior VP of sales and marketing for computer and wireless technology distributor SED International (Tucker, GA), agrees. "In terms of pricing and financing, we like to work with the reseller and vendor early on," he says. "We work the quote through and we bid the job together. Financing allows smaller VARs and customers to get all the equipment they need."
Even if the financial terms are negotiated, the deal isn't closed until the product ships. "Product availability is key, too," SED's Elster says. "Customers just can't wait these days. Distributors with multiple warehouses can get products to a VAR customer the same day by local courier."
3. Sell Your Brain, Not Just Products
Small- and medium-sized businesses don't have staff to research technology. Many VARs err by not cashing in on the SMB's predicament. "VARs need to realize that for most small end users, they are the solution - not the technology," says D&H's Schwab. "The hardware, software, and peripherals they offer customers should tie into a service agreement."
Ingram Micro's Wiser sees many resellers making a mistake by not charging for their expert service. "Too many VARs give away intellectual capital for free," he says. "If they provide a complete needs assessment for a potential customer, they should charge for it up front. If they don't do that, they end up providing the assessment, and the customer might pull the product away from the VAR and purchase it on their own."
TESSCO's Heller, himself a reseller for six years, encourages VARs to charge for their services and not fear potential price objections. "Four out of five resellers are still shooting for the lowest price," he says. "You can be the most expensive and win the bid if you bring the most value. When I was a VAR, we were never the lowest cost. If you sell a complex solution and become a consultant to your customer, he's paying you long-term to be on his team as his technologist. You won't be competing with everybody who can open a catalog."
SMB Market Poised For Growth
One pitfall of the SMB market is that the individual companies VARs sell to have very limited IT budgets. However, SED's Elster says those budgets may be spent in late 2003 or early 2004. "Every SMB upgraded in 1998 or '99 because of Y2K," he says. "Nobody has done a serious upgrade since Y2K, and they need to upgrade now. You're going to see an increase in business in the SMB market."