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The Green Sheet Online Edition

March 13, 2017 • Issue 17:03:01

Small businesses: The most valuable B2B customer

By O.B. Rawls IV
iPayment Inc.

Small businesses can be tough. They're challenging to contact, often pressed for time with very little resources or support around them, and they typically buy the easiest solution at the lowest price.

In business-to-business (B2B), some companies focus on moving up-market, targeting midsize and larger enterprises, purposefully avoiding small businesses. But regardless of the challenges, small businesses are powerful, imperative to our economy and a critical cog in the wheel for many in and around B2B. I believe they're the most valuable customer and, like any targeted prospect, those focused on selling to the small business market must first understand who they are.

Power in numbers

According to the U.S. Small Business Administration, there are over 28.8 million small businesses in the United States accounting for 54 percent of all U.S. sales, and growing. The number of small businesses in the United States has increased 49 percent since 1982. Since 1990, small businesses have added 8 million new jobs, while big businesses have eliminated some 4 million. Small businesses (those with 1 to 19 total employees) represent 17.3 percent of all employment in the country, according to the SBA.

But who are they? And what are their core challenges and needs?

Independent owners

Demographically, small business owners might surprise you a bit. Here are a few key statistics from a 2016 Babson College survey focused on small business owners.

  • 51 percent of small business owners are over the age of 50, with 33 percent ranging in age from 35 to 39 and only 16 percent under 35
  • 36 percent of small business owners are female, while 55 percent are male and 9 percent are classified as equal ownership (male/female)
  • 39 percent have earned a bachelor's degree or higher, 33 percent have some college experience, and 28 percent have no advanced education
  • 72 percent of this group self-identifies as white, while 13.5 percent are Latino, 6.3 percent Black, 6.2 percent Asian, and 2 percent other

A recent SBA Small Business Profile report called out growth percentages by small business ownership, highlighting that, from 2007 to 2012, the percentage of minority ownership grew by 38.1 percent, while non-minority ownership shrunk by 5.5 percent. The following data excerpted from the report shows that small business ownership in the United States is becoming vastly more diverse.

  • African American-owned: +34.5 percent
  • Asian-owned: +23.8 percent
  • Hawaiian/Pacific Islander-owned: +45.3 percent
  • Hispanic-owned: +46.3 percent
  • Native American/Alaskan-owned: +15.3 percent

We know a little bit about who these individuals are, but what are their core business areas? Looking specifically at small businesses that fall in the one to 19 employees group, the top five industries are professional, scientific and technical services; other services; retail trade; construction; and healthcare and social assistance. Ironically, these are also the top five groups when you look at small businesses (those with up to 499 employees).

Wants and needs

It's often said that small business owners work in their businesses, not on them. Is this true? It really depends on the owner, business type and number of employees. A May 2014 TD Bank survey of small business owners found that 68 percent said they love speaking and engaging directly with clients and customers;15 percent favored the "back of the house" ‒ bookkeeping, business management, etc.

Many, especially in the beginning, wear lots of hats: customer service, inventory manager, bookkeeper, etc. Sometimes, they even do maintenance. They have no choice.

Goldman Sachs has been active in small business support since it launched its philanthropic initiative, 10,000 Small Businesses, in 2009. As part of this, the company regularly produces reports and shares statistics from businesses coming into the program. A recent 10KSB report outlined the top four challenges that owners identified as they entered their program.

  1. Finding and keeping customers (31 percent)
  2. Financing the business (21 percent)
  3. Developing and updating a business strategy (16 percent)
  4. Hiring and keeping good employees at reasonable wages (15 percent)

The biggest challenge for this group is how to manage all of this ­– working in and on the business at the same time. Even with a solid group around them, running a business and growing it is hard for small business owners, which is why about 33 percent of small businesses fail in the first two years and only half make it to five years.

Support and service

The statistics I've shared thus far reinforce the fact that there are a lot of small businesses (tons of opportunity); they're a diverse group and getting more diverse; and they face numerous challenges as they work to keep their businesses open and growing.

As service or product providers for small businesses, how can we help them and how can we both benefit from working together? I've been in the business of selling to small businesses for nearly 30 years, and it's a moving target, but I think a few pieces of perspective apply to all businesses working with small business owners.

  • Put yourself in their shoes: They are independent, they are stressed, they are pressed for time and they are inundated with solicitations. According to a May 2016 Alignable survey, 37 percent of small business owners indicated they receive more than six sales solicitations per week – wow! Conversations and communications need to be value based, succinct and focused on WIIFM (what's in it for me) for the small business owner, not your business.
  • Think conversation, not transaction: In some cases, margins on small businesses may be slimmer than other business types, so some specializing on small businesses endeavor to make the sales process as quick as possible, to move on to the next deal. It becomes about volume, not value. That's a dangerous cycle. To be successful working with small businesses, you need to ask questions. What does the owner need? What are their current pain points? Who are their customers? What are their business goals? Only then can you determine if you're a good partner for them, and, if so, what products and solutions you can offer that help them move their businesses forward.
  • Show them respect: Remember, these individuals are entrepreneurs. They've taken a personal risk to start and run their own businesses, and that is special. In 1945, Sam Walton owned one Ben Franklin store in Newport, Ark. He was 26 years old, fresh out of the Army, and he funded the investment with a $20,000 loan from his father-in-law. There were no guarantees, even though Ben Franklin was a franchise. But he had a dream, he had dedication and, in the end, it paid off.

Small businesses are a viable channel for any B2B-focused company. Payment companies need to understand who they are working with, what those individuals want, and how the product offerings or services they provide align with the individual's business needs. end of article

O.B. Rawls IV, Chief Executive Officer and President of iPayment Inc., has a proven record of achievement in the payments, banking and technology sectors. At iPayment, which provides payment processing solutions for small and midsize businesses (SMBs) throughout the United States, he oversees a staff of over 400 serving more than 150,000 SMB customers. Contact him at jennr@ipaymentinc.com.

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