Three Points of Leverage When Expanding Down Market

There are more than 5M small businesses in the US, while the number of companies in the US with more than 1,000 employees is roughly 10,000. If you have a solution that can serve both Enterprise and Small Business segments and you can successfully penetrate both segments, then the likelihood of building a valuable company is extremely high. Edison companies Tangoe (10X return) and Vocus (12X return), among others, have done just this.

In the last decade, a number of SaaS companies have successfully proven out the "attack from the bottom" strategy, a la the Innovator's Dilemma. Salesforce, Netsuite and Vocus are great examples. Hubspot is another more recent example.  And yet another example is my former stomping grounds, LivePerson - with double-digit revenue coming exclusively from Small Businesses, the company pivoted to transform its product offerings (and, in an established category, it wasn't easy) to attack the Enterprise market and propel revenues to more than $100M.  

Salesforce, Netsuite and Hubspot had a vision at the outset and never strayed from it. If your company is anything like these companies (building your business from the outset focused on Small Businesses), you will be keenly focused on delivering product that is easy-to-use and easy-to-deploy, and this lends itself favorably to moving up market over time. Conversely, if you've started in the Enterprise segment with a product that requires significant resources to deploy, firming up your footprint in the Enterprise segment, while maturing your product, can serve you well before eventual expansion down market.

For companies already selling in the Enterprise segment and setting their sights on Small Businesses, there will be plenty of new investments, roles, processes and practices required. However, there can also be points of leverage.  Following are three examples:

1. Value Translates

The value you prove in the Enterprise market will translate to Small Businesses. Whether speeding time to market (or speeding up anything), reducing costs or boosting revenue, businesses of all sizes will connect with a value message. 

2. Flexible Provisioning

A subset of the features of your Enterprise product will be relevant for your Small Business customers. If you have architected and developed your product for flexible provisioning, tailoring your offerings for the Small Business segment should be a relatively straightforward packaging exercise. Agile product development is a major enabler of this where a MVP can be rolled out as the basis for customer feedback, and because, chances are, you have already built 80+% of the required functionality for the Enterprise, you can rapidly innovate by "turning on" features in response to market needs. 

3. Existing Sales Methodology

Selling to Small Businesses is dramatically different than selling at the Enterprise level -- lower average selling price, shorter cycles, less product complexity, lower cost per lead, and lower overall cost of sale. However, there can be some tactical leverage of your Enterprise marketing and sales investments when you begin to go down market, e.g.,

• Live Chat. If you have live chat as a contact option on your website for lead generation/qualification (and/or customer service, for that matter), this will become an even more productive and effective channel for engagement with Small Businesses, i.e., an inside sales rep can handle three chat sessions at a time, vs. only one email or phone call at a time.
• Lead Development Reps. These folks have been qualifying leads and building pipeline for your Enterprise salespeople. Typically, they are striving for a career in Sales. Promote them to a transactional role selling to Small Businesses via inside sales.
• Process. Use your current method of marketing funnel management, i.e., Marketing Qualified Lead vs. Sales Qualified Lead, BANT qualification, etc. And tailor your existing pipeline opportunity management practices for reduced number of pipeline stages, e.g., go from an 8-stage process to 4 or 5 stages.  

For growth-stage companies currently selling into the Enterprise market, prove value and establish yourselves there before going down market. And be thoughtful about where new investments will be needed vs. where your existing investments can provide leverage.