The Developer Opportunity That Exists In The Small Business World

A number of technology vendors started off as small business offerings but eventually tried to move up the food chain – file sharing vendor Box and enterprise social network Yammer are two examples. The orthodox view is that the more lucrative opportunity that exists when creating enterprise products is an easier win. Box is a good example of a company that started off with a direct sales approach but now looks very much like a traditional enterprise IT vendor – sales staff in flash cars included.

But this orthodox view that the enterprise holding all the value belies the reality: building tools for small and mid-sized businesses (SMBs) is a massive opportunity. While SMBs may not pay the multi-hundred thousand dollar license fees that enterprises do, there are millions and millions of SMBs in the world – a far larger market, numerically speaking, than the enterprise.

To enumerate the value that exists in the SMB market, Intuit recently commissioned a study from Nielsen. The study looks at the current usage of applications within small businesses and SMBs attitudes towards cloud solutions. The objective of the report was to give developers, deciding on an enterprise versus SMB focus, some insight into the SMB opportunity. Additionally the report aimed to give developers some ideas about the sort of application areas that offer the best opportunity.

The bottom line of the report is that the small business market is a lucrative developer opportunity. The report found that small business owners currently spend $630/year on software solutions, and 85% of small businesses are willing to invest more in the next five years.

While Intuit, as an accounting software vendor, can naturally be seen as biased, the next finding confirms what I see when talking to SMBs. The report found that the center of the small business cloud is financial management. Respondents already spend 4 hours/day online running their business. The top three online activities are: bookkeeping and accounting (65%), generating invoices and/or accepting payments (65%), and managing existing customer relationships (58%). Part of the reason that accounting software is the central hub for SMBs lies, in my view, in the day to day reality for SMBs. SMBs are generally cash constrained; the typical SMB lives on a day-to-day cashflow basis. As such their receivables and payables, alongside their bank account balance, is the most critical part of their business. It is for this reason that accounting software, perhaps the most boring SMB software that exists, gets so much attention.

In another finding that mirrors my own experience, small business owners want seamless integration between solutions. The cost and hassle of integrating discrete solutions is a serious burden on small businesses. While an enterprise can afford to have an integration team, or pay for a top shelf integration product, SMBs need their applications to work out of the box. The survey found that 81% of small business owners say it is important that the different software solutions they use work seamlessly together. Increasingly this includes mobile solutions, with nearly half (43%) of small business owners using a smartphone as the primary device to run their operations.

In terms of the opportunity areas, the top three categories of software small business owners want are:

  • Help staying organized by better managing the back office (67%)
  • Solutions that save time and money by automating work (63%)
  • Tools that make it easier to maintain relationships with existing customers (48%)

There is some good food for thought in those results. While the survey was a modest undertaking (a sample of 504 US-based businesses), the results are, in my view, symptomatic of general attitudes in the SMB community in the US and globally. Application developers have a massive opportunity delivering to SMBs, but they have some groundwork to do first.

credit: forbes.com

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