CRM technology

Differences Between Selling to Large Companies and Selling to SMEs

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To start with, let's talk about the 5 ways to build a 100 million euro business according to Christopher Janz:

Get 1.000.000 clients with an ARPA of 100€.
Get 100.000 customers with an ARPA of 1.000€.
Get 10.000 customers with an ARPA of 10.000€.
Achieve 1,000 customers with an ARPA of €100,000.
Achieve 100 customers with an ARPA of €1,000,000.

This very simple chart is super revealing for a reason. The sales process you have to follow in a business focused on mice, rabbits and deers has nothing to do with the sales process used by professionals who close deals of €20,000 per year and up.

In this 13-lesson course you will learn everything you need to know to implement a sales process in your business that allows you to "hunt" elephants and whales.

And the first step is to learn how to differentiate one from the other.

Differences in size between SMEs and large companies.

In economics, a company is defined as small, medium or large based on its number of employees and turnover.

In practice, there is only one condition that a company has to meet to be on your large accounts radar: Could this company pay €20,000 or more for you to solve a problem for them?

And that, translated into the table above, leads us to the first conclusion. As much as economists define a medium-sized company as a company with an annual turnover of 16 million and 130 employees, for us, it is a big game.

Differences in purchasing processes between SMEs and large companies.

Now this is important. Differentiating between large companies that may be potential customers and those that are not is not a big mystery. It is quite another thing to understand what makes these companies different from smaller ones when it comes to closing deals.

Here are 5 keys:

Priorities of large vs. small companies.

Most SMEs don't have the luxury of investing for the long term or betting on the future. They don't have much room for manoeuvre.

If they buy a product or service they need it to start delivering results almost immediately: "Either you reduce my costs, or you improve my ROI, or I'm not interested". Otherwise, they're going to lose it very quickly. Large companies, however, can (and should) plan for the long term.

They are less interested in immediate results, and more interested in finding suppliers with whom they can work reliably and securely.

For Iñaki Alcaraz, Commercial Director with almost 20 years of experience and speaker, this is one of the points on which we must pay more attention to start selling to large companies.

"The purchasing departments of large companies need to know that they can count on you as a supplier for long periods or large orders.

They need security and confidence to be able to buy from you. In fact, it is not uncommon for a large company to consult your profit and loss accounts and make sure that everything is in order before carrying out a transaction.

It is therefore very important to convey an image of solvency and to organise the company internally to strengthen the structure. In the same vein, strengthening your brand as a company and the personal brand of your team is a great way to build trust and confidence.

Now you don't need a lot of resources to do this. With digital strategies and LinkedIn you can achieve great results."

Personalisation in large vs. small companies.

In 2010, 3 billionaires launched TigerText with a great business idea: a secure mobile messaging platform to streamline communication and keep medical staff, their patients and other key parties in the hospital world connected:

They had the product: time is one of the key factors in providing good medical care.
They also had the money: they were multimillionaires.

However, they weren't getting traction or sales in any way. And they weren't because they didn't understand their customers: Incredible as it may seem, in 2010 every hospital in the world was operating with a technology patented in 1949, pagers.

And as much as the revolutionary system was much better than what was there, it was too complicated for hospitals to change all their systems to adapt to TigerText.

After pivoting several times, the company finally adapted its service to the hospital hardware of the day and began to gain traction. Today, in fact, they have become one of the world's leading companies in clinical communication and, of course, have banished the pager for good.

And all by understanding their customers and adapting to their needs. This story is very representative of what it means to sell to large companies.

While SMEs are used to self-service purchasing and predefined products, large companies expect and demand customisation and adaptation to their circumstances.

Your company has to be ready to take on this challenge before it can tackle selling to large companies. In return, this extra work pays. And it pays very well. The extra money they are willing to put on the table for a personalised service brings us to the next point.

Value of selling to large vs. small companies.

As we saw in the graph at the beginning, the value of the sale is one of the key factors in selling to large companies. There is quite a lot of consensus on this:

Sales below €20,000 are considered sales to small accounts.
Sales above €50,000 are considered sales to large accounts.

Where there is less consensus is in the grey area in between. Many authors maintain that, depending on the time it takes to close a transaction between €20,000 and €50,000, we consider it to be of one type or another.

In my opinion this nuance is not too relevant and it is more important to focus on the average transaction in your sector.

If you are a dealer and a company spends €25,000 a year on you for 10 years, you probably don't consider it a large account. However, if you are a printer and you close that same deal, it is probably a large account.

Large vs. small business buying cycle.

This is another big difference. The buying cycle for SMEs is usually straightforward: The buyer hears about a product or service that might suit him, consults colleagues and the internet, and eventually decides whether or not to buy.

This results in purchase lead times of between 2 and 90 days and unstructured processes. In large companies, the process is diametrically opposed: the purchasing or finance departments have very clear processes for approving a transaction and complete purchasing cycles often take between 3 and 18 months.

According to Jason Lemkin, former VP of sales at Adobe where he scaled ARR to over 100 million euros, these would be the most common purchase timelines based on the size of the deal:

"From the point where the lead is a "High Probability Opportunity" (i.e. they have said they are very likely to buy, it fits the budget and your sales person believes it to be true) approximate timelines would be:

Offers with an annual value of less than €2,000 will close on average in less than 14 days.
Offers with an annual value of less than €5,000 will be closed in less than 30 days on average.
Offers with an annual value of less than €25,000 will be closed in less than 90 days on average.
Offers with an annual value of less than €100,000 will be closed in less than 180 days on average.
Offers with an annual value greater than €100,000 will close on average in less than 270 days.

Note, to get to the point of having a "High Probability Opportunity" you may have had to spend up to 2 years on a lead. Also, depending on the type of sale (if you are selling an ERP where you have to make a huge change of processes in the company) it can take much longer."

It is important to keep these figures in mind before embarking on sales campaigns to large companies. You may be putting money into the project for many months before you make any money from it, and your cash flow needs to be able to support it.

Decision-maker in large vs. small companies.

One of the main reasons why the buying cycles in one case and the other are so different is the number of people in charge of making the decision. In the case of SMEs, the purchasing decision is almost always made by a single person.

This person is, according to a study by Channel Insider, 96% of the time the CEO. In the case of large companies, according to a study published in Harvard Business Review in 2017, an average of 6.8 people are involved in the purchasing decision.

For Iñaki Alcaraz, this point is also key:

"It will be necessary to diversify conversations with all valid purchasing decision-makers."

In small companies, it is more common for a single person to make the final decision on a deal, but in large companies, decisions are made by several people looking to find the best decision for the medium to long term.

Getting several people to agree requires more time... and a lot more patience! and a lot more patience! It is necessary to multiply the conversations with each interlocutor and often they do not even agree among themselves.

That is why it is advisable to thoroughly research each company you want to approach beforehand in order to identify these profiles. Each company is different, so using platforms such as LinkedIn allows you to find them, if you know how to use it with expertise."

All these differences in the buying process result in totally different sales processes.

While in sales to SMEs most sales processes follow the classic AIDA structure or similar variations, the special purchasing characteristics of large companies make it necessary to define completely different sales processes.

And that is precisely what we are going to see in the next lesson.

To access the next lesson of the sales course, click here.

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