Are You Trying to Crack the SME Market? [Learn From Experience]

The author has been running Knowlarity since 2009 with more than a 200 member strong team and offerings catering to SMEs...

India has 14 million small and medium size enterprises, second largest only to China. SME entrepreneurs are the ones that run import export companies, small manufacturing firms, call centers and marketing companies. The health of Indian GDP and its robustness depends on the health of this sector. These people are probably one of the most important drivers of industrial growth of the country.

However, if you look at the adoption of technology in this sector, you will be surprised. SME is not very tech savvy and their use of computing is limited to using emails and web browsing. This is a challenge but also presents an immense opportunity to build software for the sector. If the software is good, it can be incredibly useful for SME to improve its productivity.

And this is what is happening. Tally is selling accounting software. It is now a household name. Salesforce.com has been targeting SME sector to automate their sales processes. Real estate software companies such as Reality Redefined help real estate brokers and builders manage the real estate projects better. Practo is helping doctors better manage their clinics. These are useful software but serving SME has not been easy.

SME is not very tech savvy and it has consequences. There is a limited demand for vertical software because SME is not aware of the possibility of such solutions. Consequently startups need to spend a lot of time and effort in educating the customer. It is not easy. It also hampers the adoption rate of the technology. Real estate sector has aggressively used SMS marketing for lead generation but hardly used anything to manage those incoming leads. They have started using software for lead management and other activities only now.

SME is very cash sensitive. I used "cash" rather than "price". This is because cash is still the king in the SME sector. This makes subscription based yearly models a better fit than upfront cash investment models. Consequently most of the SME companies are using subscription as their pricing strategy.

SME sector is not that easily accessible. It presents unique challenges to quickly reaching out and selling them. Indiamart had to build up sales force of thousands to knock on the doors and sell web sites. Kudos to Indiamart to pull this through but selling like this is not an easy task. It also limits the revenue growth. Offline sales models are inherently slower than what online can be. However, currently that seems to be the prominent method.

SME sector uses archaic payment mechanism. Welcome to checks that bounce, cash deposits for yearly subscriptions, post dated checks (PDC) for future payments and ATM bank cards. Payment becomes a constant hassle. This adds to the overall cost of running a SAAS company selling to SME.

If you are building a company catering to the SMEs, sooner or later you will run into the problems. Do not lose hope though. The sector is massive and is going through quick transformation. Thanks to the hard work of companies like Justdial, Indiamart, Trade India and new startups, SME is learning the new ways. We are in a transition phase. I think these frictions will not last very long and when these are gone, he companies that are doing hard work to iterate their products and operations now will strike gold.

Will you be one of those companies?