We have a plethora of technology solutions purporting to help small business owners manage and grow their companies. Small businesses subscribe on average to more than 20-point solutions for everything from accounting and CRM to supply chain, cybersecurity and more. However, these solutions don’t integrate with one another, resulting in an overwhelming situation that business owners are left to sort out on their own.
Small and medium sized businesses (SMBs) are the backbone of the economy, accounting for more than 99% of all U.S. firms and employing 59 million people – nearly half of America’s private workforce. It’s time that we work together to deliver technology solutions that are designed to meet the needs of SMBs. Through my experience connecting with thousands of small business owners to ask questions and understand their pain points, I have discovered several ways we can design SMB technology solutions to help these businesses grow and thrive.
Design for affordability
Most of today’s solutions were designed for large enterprises. To sell to the SMB market, solution providers realized they needed to lower the price point, which means they also lowered the features. For example, all businesses need to verify their suppliers as legitimate and financially stable entities. Credit checks are available, but at a cost. For SMB customers, credit bureaus have offered credit checks in low-quantity packages.
While reducing the price point and eliminating the requirement for an ongoing subscription, this solution does not address the need to monitor supplier performance over time. Once a small business owner purchases a package of credit checks, they soon realize they need to purchase more for ongoing monitoring. Though still easily costing over $100 per month, the idea was to encourage SMBs to subscribe at a low price point and then upgrade over time to gain the functionality they really need.
Rather than viewing SMBs as a sales extension channel, we must recognize they require and deserve the same quality of service as large enterprises. By designing to the needs of small businesses, we can deliver a solution that provides ongoing monitoring including credit, and even additional business verifications, to enable small businesses to pre-verify their suppliers and make informed decisions about the companies with which they choose to partner.
Acknowledge what makes SMBs different
When designing technology solutions, we must think about what makes SMBs unique. They often comprise one or a few individuals pooling their resources. We admire them for their resourcefulness and determination. At the same time, we must remember they manage every aspect of their business with limited resources.
As small businesses grow, they often expand beyond a cash model and seek alternate solutions for financing. Here again they encounter solutions that were not designed for the unique needs of SMBs. There are numerous financing solutions that were designed for large enterprises, and then shared on the market to see if they would work for SMBs too.
These solutions require lengthy business verifications, credit checks and more. But SMBs are different. They may not have verified tax returns if they have not been in business very long. They may need to provide a personal guarantee, which may be hampered by inconsistent credit history, given most SMB owners invest most of their available resources into their business.
Financial service providers spend almost $1,000 to acquire each new SMB customer. It’s a time-consuming, manual process for both parties. We need to rethink this entire model. While all businesses need access to financing, SMBs may not fit neatly into the traditional model for assessing credit worthiness.
Address SMB pain points
My conversations with small business owners almost always land on a common theme of cash flow improvement. Cash flow is often volatile for SMBs because of the traditional ways it has been managed, waiting 30, 60 or 90 days to collect payment on a delivered product or service. This can work for large enterprises, which operate at high volume and have leverage for negotiating their own payment terms. However, SMBs survive on much tighter margins. A study at the start of the pandemic by the National Bureau of Economic Research found that the median small business has more than $10,000 in monthly expenses and less than one month of cash on hand.
Some companies have begun addressing this pain point for SMBs. Why have most payment companies like Mastercard or PayPal invested heavily in alternative payment flows and models, which are becoming so popular, leaving behind many legacy payment companies? They have recognized that existing payment solutions were designed around banks, but that doesn’t always make sense for SMBs. They are providing new solutions that offer more options than cash or a business checking account, along with the ability to make and receive payments directly and quickly. However, we believe we can improve even further, by recognizing that small businesses can offer value in forms other than cash or credit.
With the technology solutions on the market today, we have failed so far to address the true needs of SMBs. By designing for affordability, acknowledging what makes SMBs different, and addressing the pain points faced by SMB every day, we can deliver new tech solutions that tap into the unique value of SMBs and help these businesses grow and thrive. Are you designing technology for good?