One of our businesses is to sell accounting solutions to small and medium businesses. According to Small Business Trends, more than half of US businesses with 1 to 99 employees still don’t use accounting software. That means in the US, and more so in other parts of the world ( I reckon that the figure is higher — even upto 98% of SMBs in some parts of the develping world still don’t use accounting software) , there is still a huge market for this.

I will cover in other posts details about how accounting software can benefit businesses, but I would like to discuss the thought that contend that businesses who sell small business solutions is not that particularly lucrative — most vendors prefer to sell to the top 1000 companies where a single sale can easily get a hundred times or five hundred times more than servicing small businesses.

However, selling to small businesses does provide a personal satisfaction that you don’t get selling to big and faceless corporations. You interact with entrepreneurs who have hope and passion for what they do, for which the success will personally have a big impact on their family life, and you get some amount of fulfillment you don’t get by merely tracking revenue numbers.

Moreover, according to the Long Tail Concept, which is becoming an increasingly popular concept, this is becoming a lucrative market. To wit, the Long Tail concept says that although in some markets, only 30 to 50% of the market size is attributable to the bottom 80 or 90% of the market, it is the companies that can tap this market successfully and efficiently that will contribute to the best and healthy margins in the market.

In short, a lot of successful business is really understanding how to serve the many but small market efficiently. Think Google. The reason they aced Yahoo and MSN is not because of the better search engine, but actually Google AdSense and Adwords which allows millions of web sites to be both of their advertisers and advertising mediums in an efficient manner that is contributing to their coffers. Think Intuit, which have been raking huge sales selling to small businesses.

In a global arena, you cannot be a big player unless you also have a strategy on how to serve these markets well. This can be part of the strategy since cherry picking the big and profitable customers is now increasingly a not so brilliant solution as competitors try to angle their way to these customers. In order to be competitive, businesses should also start looking at the huge number of potentially small customers, and start to think how to serve these markets better.

What is your experience?