Small Businesses, Big Spenders
Upselling tightfisted SMBs is easier than you might think -- if you know the right ways to go about it.
- By Rich Freeman
- May 01, 2006
Everyone knows that small and midsize businesses (SMBs) have small and
midsize budgets. So surely Jim Duckett, president and CEO of Phoenix,
Ariz.-based net Fusion Corp., must agree that getting SMBs to invest in
new or bigger technologies is the IT equivalent of squeezing blood from
a stone. Right?
Guess again. "Interestingly enough, we don't work very hard at upselling,"
says Duckett, whose company, a Microsoft Gold Certified Partner, offers
consulting, application development and training to both large and small
businesses. In fact, Duckett is currently in the closing stages of negotiating
a seven-figure Web-development deal with an SMB. "The original discussions
evolved around one very specific niche market and a niche technology,"
recalls Duckett. Now, however, thanks to weeks of requirements gathering,
business analysis and proof-of-concept studies, he says, "it has
morphed into a much larger deal."
His experience echoes those of numerous partners: Upselling SMBs may
be different than upselling larger organizations, but it doesn't have
to be harder. The key is taking a strategic, consultative approach, focusing
first on building trust. As Duckett puts it: "If we do our job up
front, create credibility and really lay out the possibilities, then upselling
is generally not that difficult" -- no matter what the customer's
Getting to Know You
Definitions of what constitutes an SMB vary depending upon who's doing
the defining. For Microsoft, the "small business" label applies
to companies with fewer than 50 employees, while "midsize" organizations
are those with 50 to 1,000 employees. Other tech companies use different
numbers, often placing a higher ceiling on the small-business category,
but nobody disagrees about the scale of the SMB opportunity. Gartner Inc.,
the Stamford, Conn.-based analysis and consulting firm, predicts that
SMBs worldwide will spend $400 billion on technology this year alone and
that IT outlays by North American SMBs will be 7 percent greater in 2006
Stephan Schiffman, a corporate sales trainer and author of Upselling
Techniques (That Really Work!) (Adams Media Corp., 2005), says
that vendors eager to grab a share of that opportunity should polish their
upselling skills. Getting an existing client to buy more, he says, is
inherently easier and less costly than developing a new client from scratch.
"You already have the account," he notes. "You're just
looking to increase the penetration."
In theory, then, SMBs should be excellent upsale candidates, as smaller
organizations lean hard on technology partners for guidance. "Typically,
the really small business doesn't have any IT staff. It relies exclusively
on us for advice," says Hormazd Dalal, president of Castellan Inc.,
an Encino, Calif.-based Microsoft Gold Certified Partner
that provides network strategy and implementation services to SMBs. Midsize
businesses count heavily on partners too, Dalal says, but adds that those
companies usually have at least a few full-time IT professionals on staff.
In any case, the reality is that while SMBs depend on their partners,
they're often wary of them as well. "The biggest problem with SMBs
is they've been burnt by far too many partners that do not know what they're
doing and are greedy," says Dalal.
"The biggest problem
with SMBs is they've been burnt by far too many partners that
do not know what they're doing and are greedy."
-- Hormazd Dalal, President, Castellan Inc.
That's why Christopher Smith, CEO of Enso Technologies Inc., a Microsoft
Gold Certified Partner based in Rockville, Md., believes that earning
an SMB's trust is critical. Smith, whose infrastructure deployment and
design company does 40 percent of its business with SMBs, discourages
partners from upselling too soon in a relationship. "Customers will
feel as though you're [just] there to make money," he says, "and
when that happens they're always going to be suspicious of you."
Instead, Smith says, tech firms should get to know an SMB thoroughly before
pitching an upsale. "Once you know what customers need, and they
understand that you're looking out for their best interests, realistically,
they will buy almost any product or service you recommend," he says.
Jim Holt, president of Wolcott Group LLC, an IT consulting and integration
company with headquarters in Fairlawn, Ohio, agrees. In fact, Wolcott,
which is both a Microsoft Gold Certified Partner and a Small Business
Specialist, often kicks off new relationships with a formal services engagement
expressly designed to assess the customer's business and technology needs.
SMBs see the in-depth analysis -- performed for a fee, or, with especially
qualified prospects, gratis -- as a relatively low-risk commitment offering
potentially useful insights. Wolcott executives see the study as an opportunity
to establish their company as a trusted advisor, while simultaneously
uncovering hidden upsale possibilities. For example, investigating how
well a company converts leads into sales might expose a need for customer
relationship management (CRM) software. "Once we get them to really
share with us their approach to the market," says Holt, "it
all seems to fall into place."
If you've already got strong relationships with your customers, finding
upsale opportunities is sometimes simply a matter of keeping your ears
open. Especially in smaller businesses, executives are often unaware of
technologies that can relieve their headaches. For example, if a CEO mentions
during a casual chat that she hates struggling into work during winter
snowstorms, that could create an opening to discuss remote-access capabilities.
Similarly, Smith recalls the time a customer said he wished there was
a way to flag contacts in Outlook as prospects. Your real problem, Smith
replied, is that you're using Outlook to track prospects when there's
a much more powerful solution available. "The customer placed an
order for [Microsoft Dynamics] CRM within a week of that conversation,"
Smith says. (For more general tips from the trenches, see "Tricks
of the Upsale Trade.")
Preparing to Spend
Of course, persuading an SMB to approve a technology investment isn't
always that easy. Because they're typically short on funds, SMBs are notoriously
more hesitant than enterprises to green-light major IT expenses. "The
more dollars you're dealing with and the larger the budgets are, the easier
it is to deal with [upsell] situations, because there's just less pressure
on the client," says Peter Barrera, vice president of client services
at Greystone Solutions Inc., a Boston-based technology services and business
consulting firm and Microsoft Gold Certified Partner.
Precisely because money is often tight at SMBs, emphasizing projected
savings can be a highly effective tactic -- especially if the savings
are significant. "Anywhere they find a project that can save money
for them, they're going to do it," says James A. Browning, a Gartner
research vice president who covers the SMB market.
Ultimately, what matters most is not what
you upsell but how you upsell. In fact, the best upsellers
upsell at all.
Keith Eades, chairman and senior managing partner of Sales Performance
International LLC, a sales-training firm located in
Charlotte, N.C., adds that savvy partners can "back into" return
on investment calculations even when a proposed solution's top benefit
is hard to quantify. For example, if a sales force automation application's
main selling point is increased productivity, ask your customers how long
it typically takes to complete a deal, and then calculate how many more
sales a year they'll make if the new system saves account managers 10
minutes a day. "Every time you upsell and there are intangibles,
you want to have specific metrics" for valuing them, Eades says.
"If they buy into one or two, it justifies the sale."
Sometimes, however, even concrete ROI data isn't enough to convince a
cash-strapped SMB. In those cases, Castellan's Dalal often emphasizes
not what customers will get if they move ahead, but what they'll suffer
if they don't. When urging clients to invest in data backup technology,
for example, he details the likely damage and cost from a serious system
crash. That vivid picture is often enough to do the trick. "A lot
of small businesses don't realize that spending on IT is really like spending
on insurance," he notes. "It's just a necessity."
Eades recommends using similar tactics even when customers aren't facing
immediate risk of disaster. To upsell an SMB executive on a new messaging
solution, for instance, you might ask him to imagine he's at the airport
with too many voice-mail messages to sort through while waiting to board
a cross-country flight. Now have him imagine that one of those messages
he never got was from his administrative assistant, reporting that the
meeting he's about to fly to has been canceled. More sophisticated technology
would have prioritized that message, saving that executive two days of
wasted time. The key to getting SMBs to buy, Eades says, is "to create
business anxiety around real-world situations that would cause them to
have need for what you are proposing."
If tightfisted SMBs still balk, Eades recommends sweetening the deal
by discounting prices or tacking on extra licenses for free. When even
those generous measures don't work, consider breaking the project up into
smaller pieces. For instance, if a solution's $400,000 price tag induces
sticker shock, Duckett, of net Fusion, asks whether that figure is eight
times the customer's budget or just two. In the latter case, he says,
completing 60 percent of the project now and saving the rest for a later
phase is usually an option. Never be afraid to take a project in steps,
he advises: As a salesperson, "I want the million-dollar win, but
if I can get that million-dollar win by three $333,000 wins, then so be
it. I've still got the million."
of the Upsale Trade
Following are more tips for upselling
Keep it simple. SMBs are often
less tech-savvy than larger businesses. Overwhelming
technical detail is likely to scare them off. "Don't
make the sale so complicated that they don't understand
it," says sales expert Stephan Schiffman. "It's
got to be transparent."
Be persistent. That same lack of
technical know-how is a good reason to be patient with
small business executives, says Christopher Smith of
Enso Technologies. "Literally, it might take four
or five different conversations before customers understand"
what you're proposing, he says. But eventually they'll
get it -- and when they do, you'll get the business.
Learn about licensing and loans.
Smith also encourages partners to study up on Microsoft's
SMB-oriented licensing plans. The Open Value program,
for example, allows customers to spread payments over
three years, and because it comes with Software Assurance,
companies get any new releases Microsoft issues during
that period at no additional cost. In addition, SMBs
leery of paying everything at once for a new solution
can get 36-month loans directly from Microsoft Financing
on deals priced as low as $3,000. (See "Get
Negotiate openly. "With so
many vendors inundating them with new products and services,
the whole area of vendor negotiation has become a big
challenge for SMBs," says Gartner analyst James
A. Browning. That's one reason Jim Duckett of net Fusion
sets clear expectations early in the sales cycle regarding
payment plans, project schedules and the consequences
for missing deadlines. "Our customers and prospects
think that's pretty refreshing because no one [else]
we know does that," Duckett says.
Tap into incentives. You'll find
a complete list of Microsoft's latest special offers
Smith once spotted a $5,000 voucher for Office implementation
services there and passed it along to a grateful client.
In the end, everyone won: The customer saved money and
Enso landed an Office upgrade that would have otherwise
gone to one of the big wholesalers. "That $5,000
made the difference," says Smith.
Apply the "Rule of 12". Salespeople
often call on as few as one or two people per account.
Schiffman encourages them to meet at least once with
12 contacts in every company they serve. "If you
can locate 12 people and have meaningful conversations,
what you do is uncover the opportunities that other
people don't know about," he says. -- R.F.
Where the Money Is
Browning, of Gartner, encourages partners to become familiar with the
latest SMB spending priorities before devising upsale strategies. For
instance, last year's catastrophic Gulf Coast hurricanes have SMBs thinking
more about disaster recovery, and rising energy prices are driving greater-than-usual
interest in cost reduction and process improvements. As a result, he says,
"business intelligence has actually come up from [numbers] seven,
eight, nine on the priority list to two, three, four for a lot of these
guys." Demand for server consolidation solutions is heating up as
well. "If they're reducing their servers by 20 percent, they're recognizing
cost savings there," Browning notes.
Partners cite several other top opportunities for upselling to small
and midsize businesses:
Security: Dalal often urges customers to replace stand-alone
desktop security systems with more robust and easily managed network-based
solutions. "You want to be buying the enterprise software that the
big boys use," he tells them. Smith, of Enso Technologies, views
anti-spam software as another promising upsale candidate. "When all
else fails and a company has all of their other technology, spam is one
of those things where it's just annoying enough that a customer will probably
mention it as being a top-five, top-10, problem," he says.
Small Business Server: Customers in the market for individual
server applications are often open to the argument that an integrated
server suite makes better economic sense. "Small Business Server
is probably the number one upsell, because there's so much more [capability]
for such a small dollar amount," Smith says.
Mobility: "Remote access to work from home is a hot
button right now," says Dalal, and because no one needs an explanation
about the technology's benefits, it's not a difficult sell. Smart-phone
and PDA-based solutions are currently popular as well -- so popular, in
fact, that customers sometimes upsell themselves on such systems, observes
the Wolcott Group's Holt. Every time SMB executives see their peers check
e-mail from the golf course, he says, chances are that the first thing
they'll do the next morning is contact a vendor. Partners wishing to be
more proactive, of course, can simply schedule a brief demo.
CRM: Sales and marketing technology is often a weak point
for SMBs, notes Holt. "[Many] small and medium businesses have put
in point solutions that are nothing more than contact databases,"
he says. Once they understand the power of a full-fledged CRM application,
they usually want one.
Ultimately, what matters most is not what you upsell but how you upsell.
In fact, the best upsellers don't intentionally upsell at all. "I
really don't like the term," says Barrera, of Greystone Solutions.
"If you're upselling, you're implying that you're trying to sell
something they really didn't need." The correct approach, Barrera
argues, is to keep your eye squarely on the client's long-term interests
and let the dollars follow. "I've got no desire to sell them more
licenses or more product than they need. What I'm really looking to do
is provide people with value and positive return on investment, so when
they think of future needs, they'll think of us."
Following are additional resources about selling to small and midsize