The 4 Differences Between Forecasting Enterprise Sales and SMB Sales
When it comes to sales forecasting, the old advice still rings true: first, know thyself. What does your typical or ideal prospect look like—a massive Fortune 500 firm, a tiny mom-and-pop store or something in between these extremes? The answer here is important; not only should it affect how your reps approach their sales strategy, but it should also play a major role in sales forecasting.
It’s no longer a sound strategy for sales teams to cater exclusively to bigger companies. After all, SMBs now account for 54 percent of all sales in the U.S. But enterprise sales and SMB sales are separate beasts entirely, and it does your reps no good to act as if there’s no distinction between them.
To paraphrase Leo Tolstoy, large enterprises are all alike, but SMBs are all different in their own way. SMBs tend to have a higher rate of employee turnover, which means that reps might interact with multiple people during the deal’s lifecycle; on the other hand, they may only speak with a single person—the owner and sole proprietor of the business. Many SMBs lack a defined process or point of contact for buying decisions. They tend to make purchases out of immediate rather than long-term needs, yet they’re also more price-sensitive than larger enterprises.
All of these factors (and more) mean that doing forecasting for enterprise sales looks very different than doing it for SMB sales. Here are four of the most important factors that your reps should take into account when forecasting sales.
Historical Data Works Better for SMB Sales
It’s tempting to assume that the future will look very much like the past—but this can be a dangerous assumption to make. Although past results don’t guarantee future performance, of course, historical data tends to be more valuable when it comes to SMB sales forecasting.
Why is this the case? It’s largely due to the fact that sales cycles are usually simpler and shorter when selling to SMBs. There’s no one in the C-suite who can derail the deal at the last minute, and no budgets that suddenly get reshuffled. Often, you can get someone on the phone and schedule a demo for the same day. With less time involved and fewer barriers in the way, SMB deals are more consistent, which means that past data is more meaningful and predictive.
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Long Sales Cycles Are Harder to Predict
Sales cycle length is one of the biggest differences between selling to enterprises and selling to SMBs. As mentioned above, SMBs tend to act quickly based on immediate needs. After all, in a year they might be experiencing explosive growth, or they could be out of business completely. This means that SMB sales cycles usually last anywhere between a few days to a few months.
With large enterprises, however, it may take six months to more than a year before the deal is closed, leading to greater unpredictability. This is mainly due to the complexity of big organizations, any compliance checks that need to be carried out and the greater number of people who need to sign off on the decision—which we’ll discuss in the next section.
Complex Deals Involve More Stakeholders
Selling to SMBs can be as simple as picking up the phone and convincing whoever picks up your call to buy. With fewer people at the company, there are fewer people who need to be consulted. Ninety-six percent of the time, the people signing off on technology purchasing decisions within an SMB are the SMB owners themselves.
When it comes to selling to large enterprises, however, it’s not just the company that gets bigger. You’ll also have to convince a greater number of people that you’re offering the right product or service—5.4 people, to be exact. What’s more, these stakeholders will likely be from different areas and different levels of the business, requiring your reps to adopt distinct approaches for each one of them.
Rep Turnover Impacts Enterprise Deals Harder
Although some amount of turnover or attrition is inevitable within your sales team, you should aim to keep the repercussions to a minimum. Not only do leaving sales reps cost your company money on training and onboarding their replacements, but they can also have a ripple effect by bringing down team morale and causing further departures.
This is especially true for reps working on deals with larger enterprises. For the reasons listed above—longer sales cycles and more stakeholders—turnover is more painful if your reps leave in the middle of an enterprise deal. Your reps will be taking away all those personal relationships that were formed and fostered during the deal, forcing their replacements to rebuild from the ground up.
As the four points above indicate, enterprise sales and SMB sales require different tactics. With SMBs, the buying process—if there’s a structured process at all—tends to be shorter and more casual, with fewer key stakeholders and decision-makers involved in the final deal.
Therefore, building a forecasting model for your enterprise sales team can require more insight than what you need to forecast SMB sales. However, both larger enterprises and SMBs offer a valuable source of revenue for your organization—you just have to know how to handle them. The best sales reps understand the differences in attitudes, requirements and processes between the two categories, and they know how to tailor their approach to the individual client.