The digital needs of micro-businesses vs SMEs

Micro businesses and SMEs are often treated as one and the same. Even business language reflects this, with the terms SME or MSME (micro, small and medium businesses) being used to mean any organisation with a relatively small workforce or turnover.

Actually, micro-businesses and SMEs have pretty sizable differences, thus their needs and how to engage them in long term success are vastly different too.

At BaseKit the term ‘micro business’ is a business that typically has less than ten employees and little or no capital. By contrast, SMEs may employ tens or hundreds of people, have teams that need to be coordinated either in-person or remotely, have established expertise and some financial capital at their disposal.

What matters most is for businesses that support both micro-business and SME communities to recognise these differences, or pay the price. Offering the wrong software to micro-businesses means customer acquisition rate spirals while churn rockets.

The International Labour Organization (ILO) estimates that around one-third of the world’s businesses are sole-person micro-businesses – an exciting opportunity for those businesses who invest in truly understanding the needs of the business communities they serve.

Simplicity over complexity

According to BaseKit research, for many micro-businesses a good work/life balance is frequently cited as a top priority, even above making money. Software that is complicated or expensive doesn’t appeal when it’s often funded by personal savings.

Time is of the essence, hours spent learning software is less time making sales. Our experience in the micro-business market has shown us that if a tool looks like it will take time to learn, it’s a sure fire barrier to adoption.

This need for simplicity reflects why so many micro-businesses start out on social media. It’s free and familiar: they already know how to use it. The problem with social media is that as a business owner you are at the mercy of the platform. A single algorithm change can devastate a micro-business that relies heavily on attracting business through social media.

Often, when a micro-business reaches a degree of success, an online presence makes much more sense and the passion, dedication and adrenaline of starting a new business means they want rapid return.

But many are going it alone, they don’t have the resources to get the training right the first time, they don’t have the capacity to become overwhelmed by the sheer scale of information on Google, they don’t have the budget to waste, they just need a very simple and intuitive tools that serve them everything they need, and nothing they don’t, fast.

Complementary tools and ROI

With larger teams, diverse skill sets and larger financial resources, SMEs are a different breed of business altogether. Digital tools must support collaboration, advanced knowledge, data analysis and, now more than ever, remote working, too.

The need to support teams of people can add a layer of complexity that is of no benefit to a micro-business. Software built for people with technical skills working in teams is inherently different from software built for a single-person micro-business. SME’s do have a budget for training and resource, they do have the expertise to not waste their budget. In essence they’re searching for tools that compliment or fill the gaps in their existing skill set.

SMEs are also far more objective about the returns. While they may have larger budgets to try new software, and are likely to trial it for longer periods than micro businesses, they expect to see results from their investment.

Education and motivation

Businesses need to change the way they think about SME and micro-business needs. Any company providing software for micro-businesses needs to recognise that the product value shouldn’t be assessed by counting the number of features.

For micro-businesses that may be put off by complexity, businesses must aim to enable them to do fewer things more effectively. That means moving beyond providing limited technical support and recognising the need to educate and motivate micro-businesses to get the best value from their software.

A business that provides an effective, user-friendly web presence solution is much more helpful to a micro-business. So, when the time comes to move away from social media, they feel confident to take that step. Building an online presence and learning to sell online is an iterative process. Nobody achieves success in one leap, it’s about making a lot of small steps and learning along the way. And that’s where the support of a big business is really valuable to micro-businesses.

That value goes both ways. When a business gets it right and offers appropriate tools to micro-businesses, the benefits are worthwhile: low churn, higher ARPU and a greater lifetime value.

Investing for the long term

For businesses that support both business groups, making the right software is only the start. Growth is often painful, for any sized organisation. This is especially true for micro-businesses that often believe short-term effort outweighs long-term benefits.

The role of businesses is to guide the businesses they serve through the tough growth phase and build resiliency. Resilient businesses stay afloat, grow, and become long-term customers.

Fulfilling needs based research, investment, product development and marketing builds business trust and long-term customer relationships. With the pandemic having accelerated everything from digital adoption to remote working, the number of side-hustles and those looking to gain more control over their working lives is unlikely to slow yet. If businesses are not confident in understanding and meeting the needs of micro-businesses and SEMs they serve, it makes sense to seek the expertise of those who are.

We’re excited to watch smart businesses rise to the challenge. We look forward to seeing how the next generation of micro-businesses and SMEs find success with the right digital tools and long-standing support from businesses that understand and serve them.

Telefonica reduced micro-business churn by 42% with BaseKit – Learn how >

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