Should You Skip the SMB? š¤š”
Itās the eternal question every B2B SaaS and AI founder must face.
Should you skip the SMB segment and go straight for the enterprise? Letās dive into the pros and cons here.
The Allure of the Enterprise š¢āØ
Many CEOs and founders of B2B SaaS and AI companies dream of breaking into the enterprise market. The allure of big-name clients and lucrative contracts can be compelling. But today, I want to challenge that perspective. Iāve seen too many companies leap straight to enterprise sales while overlooking the SMB (small and medium-sized business) segment. In this post, Iāll share four key reasons why skipping SMBs might be a mistakeāand why embracing this segment can be a game-changer for your business.
1. Build Brand Awareness Through Volume š š£
When companies focus exclusively on the enterprise, they often struggle with awareness. Enterprise deals are typically limited to a small number of accountsāmaybe 100 to 500āand even fewer users within those accounts. This means fewer people know your product, which creates an uphill battle for your sales and marketing teams.
By contrast, SMBs offer scale. There are millions of SMBs globally. Even if you make less revenue per customer, the sheer volume can drive massive awareness. SMB users talk. They recommend your product to peers, creating a network effect thatās difficult to achieve in the enterprise world.
At Salesforce, for example, we prioritized the SMB segment. While we didnāt make as much revenue on the SMB segment, those accounts became a powerful marketing engine, fueling word-of-mouth growth. And when SMB users change jobs and move into larger companies, they often bring your product with them.
2. Lower Costs Through Simplicity šø āļø
Selling to SMBs forces companies to streamline their products and processes. Unlike enterprise clients, SMBs canāt rely on dedicated account executives or extensive customer support. The unit economics donāt work and itās just too expensive to service them this way. Instead, SMBās demand simple, self-serve solutions that are easy to adopt.
This need for simplicity can transform your entire go-to-market strategy. For example, building an intuitive, easy-to-use product reduces support and onboarding costs across the board, even for enterprise clients. Features like freemium plans or self-service upgrades further reduce friction and create opportunities for organic growth.
At Zendesk, we learned this firsthand. Initially, adding new agents required speaking to a sales representative. But SMB customers, especially those in retail, wanted flexibility, especially around the holidays. By enabling self-service for adding seats, we not only improved the customer experience but also reduced operational inefficiencies.
3. Create a Competitive Moat š”ļø š
Abandoning the SMB segment leaves a critical gap that competitors can exploit. SMBs are often the entry point for startups. If you ignore this segment, you create an opening for emerging competitors to gain a foothold, refine their product, and build momentum.
Conversely, maintaining an SMB presence acts as a protective moat. At Slack, Zendesk, and Salesforce we never abandoned the SMB and this strategy really helped us fend off new challengers. By capturing the SMB segment early, you establish a stronghold thatās difficult for competitors to penetrate.
4. Avoid the SaaS Cycle of Life š ā ļø
The āSaaS cycle of lifeā describes how many startups initially start in the SMB segment, then move up to mid-market and enterprise to chase higher revenues. In doing so, they often abandon SMBs entirely.
The problem? This leaves an opportunity for startups to dominate SMBs, build better, simpler products, and eventually move upmarket to challenge established players. If your company ignores SMBs, you risk becoming a legacy enterprise vendor, burdened by complex products and expensive sales models, unable to compete with nimble, innovative newcomers.
By maintaining a presence in the SMB segment, you avoid this fate. You gain brand awareness, drive innovation, and create a steady pipeline of users who can grow with your product. Well at least that my 2 cents on the topic (disagree, let me know in the comments).
Thanks for reading! If you are a podcast lover, please consider subscribing to my SaaS CMO Pro pod. Itās the same content but you get to hear my lovely voice when you are stuck in traffic.š
š About Bill š
Bill Macaitis is an advisor and board member guiding aspiring AI & SaaS unicorns/decacorns. Bill works with companies to build out capital efficient go-to-market strategies and world class teams. Over his 30 year career Bill has achieved five successful exits and powered growth at three of the fastest-ever growing companies: Slack (CRO/CMO), Zendesk (CMO), and Salesforce (SVP of Marketing).
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