“No one sells to SMBs, there are too many of them.”
Yogi Berra’s insight about popular restaurants could equally apply to selling to small businesses. There are just too many of them. In fact, according to the US Small Business Administration’s Office of Advocacy, in 2021 there were 32.5 million small businesses. That is 99.9% of all businesses. Most marketers focus on selling to the 0.1% of organizations that are large, typically categorized as those with over 500 employees. The SBA estimated in 2020 that there were 20,139 large businesses in the US.
Small businesses employ 61 million people or 46.8% of the workforce in the US — so there’s a good chance that includes you. They represent 97.5% of all exporters totaling $473 billion in 2020. Small businesses are important to the economy as a driver of economic growth and a mainstay of employment.
So why don’t marketers target them more often — almost exclusively in fact? Because it’s hard to know who they are. The data doesn’t exist, or if it does it’s incomplete or outdated. Let’s take a look at why we got so narrowly focused on the 0.1% of organizations.
SMBs Keep Changing
Small businesses were particularly hard hit by the COVID-19 pandemic, with black-owned businesses being three times more likely to see a decline in business activity. Between March 2019 and 2020, small businesses accounted for 909,808 openings and 843,229 closings. That’s a lot of change.
The life of an SMB can be short according to the SBA: “From 1994-2018, an average of 67.6% of new employer establishments survived at least two years. During the same period, the five-year survival rate was 48.8%, the 10-year survival rate was 33.6%, and the 15-year survival rate was 25.7%.”
Information about an SMB has a short half-life of relevancy because the businesses themselves do not endure.
SMBs Are Quiet
Public companies are, by nature, public about their details. They are large, easy to identify, don’t change quickly and publish a range of metrics. Small businesses don’t do that — they leave only a small footprint. Perhaps you might find reviews on Yelp, but they aren’t announcing their audited accounts, diversity, equity and inclusion (DEI) metrics, or other significant milestones. The CEO could change, and it would be hard for the world to know.
From a marketing perspective, this is a challenge when it comes to building a persona and targeting specific segments. How do you know if this company is even in your target market? We need the equivalent of the James Webb Space Telescope to pick up the signals about SMBs accurately.
SMBs Are Diverse
SMBs may be unified by their relatively small employee count, but that’s where the similarities end. They have evolved to meet the needs of a hodgepodge of market niches from the local florist to the metal shop turning out custom stair rails to asbestos abatement specialists. The standard NAIC (National Association of Insurance Commissioners) or SIC (Standard Industrial Classification) codes that categorize businesses into groups such as mining, construction and manufacturing are still extremely broad.
From a marketing perspective, for B2SMB companies that means a lot of wasted spend and effort. It’s easier to hunt the big game on the organizational plains than to work out who these SMBs are, even if they might buy your product.
It also means that marketers want a variety of information to build a profile of each SMB. Simple revenue and employee data will not be sufficient. They might need details about the business model (is this a franchise?), footfall for a local retail store, online reviews, regional weather patterns, average income of the community within a 5-mile radius, social media presence, or ethnicity of the ownership. In fact, each marketer might want a different set of external data signals to the next. That’s a challenge for data providers who need to curate then sell that information.
Related Article: Intent Data and the Gap Between Sales and Marketing
Hidden Gold in Plain Sight
This is not simply the challenge of marketing to the long tail of businesses. That tail is 99.9% of companies. It’s actually a problem of economics. For the traditional data providers, there’s a good business in providing firmographic data about public companies to businesses large and small that want to reach them.
The fast-changing, multivariate, large-scale and difficult-to-reach data about SMBs look less appealing in contrast to the slower, more formulaic, defined and publicly available data about enterprises. So it simply hasn’t been available, and marketers have had to look elsewhere.
But there are signs things are starting to change.
First, SMBs themselves are starting to create a larger data wake and become more transparent. They have websites, their staff is profiled on LinkedIn, government entities are making information available in a more accessible and timely manner, and directories are being curated to profile small businesses that were previously locked up in doorstops like the Yellow Pages.
Second, advances in big data and ML mean the data sets can be cleaned, tagged and presented in a more accessible format. The costs of collating, cleansing and storing it are coming down due to automation, the public cloud and improvements in data storage.
Third, on the demand side, the value of that data is increasing. Beyond the marketing use case, SMB data is now being deployed by a wide variety of enterprises to develop new products for them. Many new fin-tech companies are designing payment, lending and insurance offerings specifically designed for SMB. And, they can do that because they have access to a wide range of alternative external data for SMB, beyond their address, revenue and number of employees, helping them identify the right target or evaluate credit risks.
For example, insurance firms are creating plans for SMBs. The risk profile for a gas station is far different from a barbershop even though they may have similar revenues and employee numbers.
Or take another sector, banking. According to the SBA, in 2019, reporting banks issued $87.1 billion in loans to US businesses with revenues of $1 million or less. These are higher-risk loans and open to fraud. Better information about these young companies can reduce that — a fake company is unlikely to have strong web traffic or robust social media engagement for instance so that’s useful data for fraud prevention. Suddenly, the economics of SMB data just improved.
With available SMB information, small- and midsized businesses will be better understood. They’ll find new suppliers, customers and partners. They’ll be offered more customized products suited to their needs and budgets. Historically, they’ve been misunderstood or ignored. That could all change soon — which is great for 99.9% of US businesses.
Ajay Khanna is the CMO at Explorium, the automated external data platform for advanced analytics and machine learning. Previously, he was the Vice President of Marketing at Reltio.