Here’s an incredible number: did you know that 97.9% of businesses in the US have less than 20 employees? Even if you strip out the very small, home based businesses, 89.9% of businesses that have employees, have less than 20 in total. How does that compare to your customer base? This group is where the real impact of lower page volumes is going to affect your A3 MFP business.
What is the current ‘revenue floor’ for your outbound sales team? Last week I visited a customer whose sales rep said, “I’m not getting out of bed for $50 of commission.” Some managers might want to fire an employee on the spot for saying that, but I respect the honesty. Could you be profitable with sales reps engaging face to face for that kind of margin? It does explain why penetrating smaller accounts is getting tougher. With employees printing less, the printing needs of these small businesses are serviced by increasingly powerful A4 devices. Even if we assume that a $1,000 MFP sale generates $100 in gross profit, that sales person is not getting out of bed to close it—even if you gave them half of the profit in commission. This is what the sub-20 employee market looks like to a sales person today: it’s a no-fly zone. You likely have a sales floor of 20 employee companies with an outside sales team.
Let’s get back to those small business numbers again for a second. They also have tremendous implications for your social media and outbound sales activities.
Assuming you sell to small businesses, then 97.9% of the responses you get back from your marketing activities will come from businesses that are below your sales floor. I know it’s not often thought of that way, but it could mean that 97.9% of your time is wasted, and 97.9% of your money is wasted. When you cast a digital marketing net, you can’t help that you will get a lot of small fish trapped inside. In our B2B technology world, most of the fish are small!
Unless you have a different strategy to service this market segment, you will likely have to head for the SMB exit. Less than a decade ago, small businesses were well serviced with an A3 color MFP. It’s likely that it was also highly profitable for you—small business clients tend to pay higher margins for hardware, supplies, and service. Flipping these A3 leases are likely getting harder and harder. Not all customers will see the page decline and equate that with a need to change their segment/device - but many will. You can bet that A4 vendors, resellers, Amazon, CDW, and Staples will target this shift.
What is your strategy? Will you abandon this market segment? Will you harvest whatever revenue you can without investing more capital in it? It’s easy to say that you can “move upstream” to larger clients, but consider your geography. I bet you have a good idea of who those larger companies are in your area and you’ve likely been trying to close them for years. If you already count these small businesses as customers, it’s a hard pill to swallow watching them gradually move on. Servicing them with a high touch outbound model will not succeed, so what is your strategy?
Here’s another important consideration, small businesses are growing, larger businesses are getting smaller, and there are fewer of them. The page volume decline will continue, so today’s 20 employee/A3 floor will soon become 25 or 30. $1,000 A4 MFP devices capable of printing 10,000 pages per month will continue to become more powerful and cost less.
E-commerce, and a digital workflow that leverages an inside sales team enables you to engage sub-20 employee customers. Outside sales people have a future, engaging your small business clients, but not to make face to face sales. Instead, they should be the conduit between your company and an e-commerce workflow.