Three sure-fire techniques for losing small business customers

We're all trying to grow our businesses. Why then do many businesses make foolish and easy-to-avoid mistakes? In this edition of Software Business Crash Course, David Gewirtz looks into short-term thinking that can cost you in the long run.

When it comes to getting and retaining small business customers, many vendors are making some serious mistakes, and it's costing them business.

The types of mistakes vendors make that mess up the customer experience are across the map. In this article, we'll focus on three blunders that should serve as examples and help you start thinking about things from both a longer-term perspective and from your customer's point of view.

Let's first take a moment and understand the value of small businesses to your business. The Bureau of Labor Statistics (PDF) defines a small business (actually they use the term "small establishment" to include small branch offices of companies like IBM) as an economic unit with fewer than 100 employees.

BLS states that about half of the people working for private companies work for small establishments. That's a lot of businesses and a lot of business opportunity. But I'm going to take it further, to an area that our government refuses to track, so-called non-employer companies.

I looked at this in-depth when researching my book (free download). Non-employer companies are companies that don't issue regular payroll. Those businesses account for three out of four U.S. firms, but, according to the Census Bureau, "Because non-employers account for only about 3.4% of business receipts, they are not included in most business statistics."

These are tiny companies, usually nine employees or less. So why would you want to do business with companies this small? Let's start with the big reason: $600 billion. The U.S. gross domestic product in 2015 is roughly $17.7 billion. 3.4 percent of that is $601.8 billion dollars. Yep, our government is ignoring businesses that account for nearly a trillion bucks.

If they can ignore $600 billion, should you? Heck no! So don't make these mistakes.

Mistake #1: The five-seat minimum

Let's start with one of the most common mistakes of tech vendors, particularly cloud software providers: the five seat minimum. Many so-called business plans require companies to have at least five users to be eligible.

Let's take Dropbox as an example. Dropbox for Business is $15/mo/user, with a minimum of five users. It offers a variety of helpful add-ons to their single-user premium program, including company-wide accounts, both business and personal accounts on the local computer, and more.

At $180/year per user, it is more expensive than the company's individual premium plan, which is $99. I use that plan and like it, but I would have bought the business plan and added my wife on it. So I would have spent $360/year, not $99. But my 2-person employer company (we do payroll, even just for the two of us) isn't worth it to Dropbox as a business customer.

My husband and wife (and puppy) company is relevant to ZenPayroll. ZenPayroll doesn't care how many employees you have. They charge per employee and that's that. So we happily use their service and process payroll without any tears.

Let's take SugarCRM. I used to use their service. They advertise "It's time to see the customer's point of view." I had to host their community edition open source version on my server, because they wouldn't sell me just two seats. When I ran into a business-threatening snag in their code, they refused to offer support and refused to let me buy just two seats. At the time, their minimum was five seats. Now, it's ten seats.

By contrast, Salesforce.com has no minimum number of seats. Wikipedia estimates SugarCRM to have revenue of about $96 million, while Salesforce.com has revenues of $4.7 billion. Could there be a correlation?

I think so, and here's why. Most really small businesses (like mine) are adopting cloud services early, and then scale up. They may stay with cloud services for years and years. The first cloud SaaS service I bought was QuickBooks Online, and I've been using that for at least 10 years now.

But more to the point is that influencers in the tech world tend to be small contractors, consultants, and pundits like me. To lock out the very folks who are often asked their opinions means you're losing a very powerful form of goodwill that may cost you in the end.

Take the SugarCRM example. I may only have the potential of buying two seats instead of ten. But I regularly reach tens to hundreds of thousands of people a day with my blog posts. Each tweet goes out to 24,000 people. My wife, an RN who helps keep our firm's finances on track, reaches about 3,000 people per tweet and has hundreds of Facebook friends.

By deciding it's too much work to spin up another on-demand account (and seriously, it's no additional work, folks!), you're missing out on the enormous influence of the people you're not willing to sell to.

Okay, let's move on.

Mistake #2: No pricing, request a demo

How many meetings do you need to go to each week? How much time do you have for interruptions and long conversations? Speaking personally, I don't have an open daylight hour until the end of June, including Saturdays and Sundays.

When you're looking at services or products and researching alternatives, it's much more easier now in the age of the Internet than it was back in the 1980s and 1990s, when you needed to make phone calls, ask for catalogs, or request a brochure.

Product information is all available on-demand, 24/7. Or at least, it should be.

Let's say you're researching options for managing a media library. My media library is about 400,000 images, plus about 50 terabytes of video. At one point, I went on a search for a good media asset management tool.

Many products and services listed their capabilities and prices. But quite a few provided no details beyond a set of data entry fields. Said they: a sales person will call. Here are two examples that hide "a sales person will call" in another phrase: "request a demo."

MediaValet, for example, looks to be quite the product. But what size business is it suited for? No idea. First, you'll need to request a demo. At least they promise they'll call you back.

Adobe is well known for its Lightroom product as a photo asset management, but the company has a much larger product, Adobe Experience Manager. But do you want to know anything about the pricing or even get hands-on experience? You'll need to request a demo. Disclosure: CBSi (the parent company of ZDNet) uses Adobe Marketing Cloud, which includes Adobe Experience Manager.

Think about what happens when you tell a prospect that you're not willing to give them pricing information or make them beg for a demo.

  • You've just told them your agenda is more important than that of your customer
  • You've insisted they halt their project productivity and wait for you
  • You've implied that you will first evaluate their suitability for an audience to even see your product
  • You've asked them to invite you to interrupt their day at some undetermined time in the future
  • You've told them that your solution is complex and is likely to require a lot of work
  • You've also implied that the price you charge to one customer may be quite different than the price you charge for the same service to another customer.

In other words, you have just sent a giant eff-you in the general direction of someone you want to sell to.

Why would you do this? Are you afraid your competitors will know your pricing? They will, even if you don't advertise it. People talk.

Are you trying to force a lead capture so you can call the customer again? Trust me. If your offering is compelling, you'll get the lead.

Is your pricing so complex that you don't think your prospects will understand? That's your own darned fault. Fix it.

Are you really planning to price your offerings by the "what they'll pay" strategy? That's unethical and it will come back to bite you.

Post your prices. Make an online demo available. You will lose customers you don't even know you lost. In fact, you've been losing customers all this time.

Mistake #3: Charging extra for multifactor security

You're probably starting to understand the argument I'm making. It's not about your business goals or your short-term mind-set. It's about making sure you reduce unnecessary friction for the customer.

It's also about what you may think are advantages, that are really causing long-term damage to your company. In the first example, the five-seat minimum loses influencers, the exact people your biggest customers turn to for advice. In the second example, in the interests of capturing leads, you're turning away live prospects and you have no idea how many potential customers you've lost.

In this next example, in return for a few extra bucks a month, you're opening your network up to untold nightmares. It's not worth it.

Unless you've been living under a rock in a hermetically-sealed container while trapped in the Phantom Zone while locked inside a time-lock, you know that hacks and breaches occur all the time.

In our Web-centric world, where the keys to the kingdom are opened up in return for a user name and (all too often easy-to-guess) password, there is really only one defense against breach: a second factor of authentication.

Given that the first factor is "something you know" and the bad guys all know what you know about your accounts, we now need to rely more and more on "something you have," which is usually an authentication app or device.

Here then, is the core of the mistake. Some vendors have decided that they can charge for second-factor security. Microsoft, for example, charges a minor up-fee of $1.40 per user per month or 14 cents per authentication in Azure.

If you want to add second factor authentication to the popular X-Cart script, it will cost you $99. Yes, the company makes money by selling software, but I'd think these days, the baseline you'd want in an e-commerce script is as much security as possible. One "X-Cart has been hacked" is enough to kill a company.

Splashtop, which provides remote access solutions, has a free solution without additional authentication. But if you want second-factor authentication, you'll need to buy the enterprise version, which is a hundred bucks per user per year. Not even their business edition offers second-factor auth.

After all, if security is important to their customers, they'll probably want to pay a few more bucks a month for it. Right?

Right? Really? Does Microsoft really need that extra buck compared to letting their network be open?

First, that up-charge often ticks off budget-conscious customers and second, they realize their security is not as important as your raking in a few spare bucks. So in the short term, you might lose a few customers simply because you annoyed them by nickel-and-dining them.

A much more workable example comes from my favorite WordPress management provider, ManageWP (I'm a paying customer). The company does a masterful job keeping WordPress sites up to date, but if you want to have secured access to their service via SMS, it's only available in their business plan, which is about five times more expensive than their base plan.

They do, however offer second-factor auth through email. It's not great, but sending SMS can be costly for a small company. It would probably be better if ManageWP adopted Google Authenticator or something like Duo Security, which wouldn't cost SMS charges, but at least you can get a second factor without added cost.

Here's where the really short-term thinking on the part of guilty software and SaaS vendors comes into play. By not encouraging second-factor authentication on all their accounts, they're leaving a gaping open door for hackers to enter their system.

Yes, granted, they're entering only the user accounts of customers, not the overall system. But, really, how sure are you, really-for-real, that your servers are rock-solid secure?

Are you so sure absolutely confident in your security that you're willing to invite a whole raft of criminals into your systems and take the chance they can't jump from a customer domain to your protected domains?

How can any vendor be that stupid?

Wrap-up

So there you go. If you want to think short-term, risk the security and growth of your business, and alienate those people who you need to recommend your offerings to big whale customers, join many of your fellow vendors and keep making the sorts of mistakes I've outlined in this article.

But if you want to grow your business, stop thinking like it's 1990, look forward into the future, stop being penny-wise-and-pound-foolish, and grow up. Stop gaming your prospects and putting your business at risk.

Remember the contrast of SugarCRM and Salesforce: $90 million (a big number itself, to be sure) vs. $4.7 billion (a way, way bigger number).

Supporting small business customers isn't thinking small, it's thinking big and it's how you will grow big. Remember, half of all private companies are small establishments and more than 75 percent of all firms are teeny-teeny tiny -- but often house people with very, very big influence.

Think on it.

By the way, I'm doing more updates on Twitter and Facebook than ever before. Be sure to follow me on Twitter at @DavidGewirtz and on Facebook at Facebook.com/DavidGewirtz.


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