Last month I shared my love for the micro SMB market and my observation that many start-ups overlook it (see here). This week, I listened to a founder who’s targeting this market give an update on his progress. The TL;DR is that it’s starting to work. He’s beginning to land paying customers and see his monthly recurring revenue increase month over month. But it’s tough and taking longer than he expected.

A few of my takeaways from this founder’s experience so far:

• Go-to-market (GTM) – Finding and converting micro SMBs into paying customers is difficult. They’re scattered all over the place and busy operating. You likely can’t find them on tried-and-true places like LinkedIn. Instead, you have to think of them as consumers and market to them that way (I think of them as prosumers). Finding them in the places they’re already hanging out (e.g., Facebook groups or Reddit forums) is a good first step. Figuring out how to add value where they are builds trust and increases the chances that you’ll get them into your sales funnel.
• Wannabes – Targeting aspirational micro SMB entrepreneurs isn’t a great strategy. Even if your GTM is good and you find them, they still may not buy what you’re selling because the problem you’re solving isn’t real to them (yet). Target micro SMBs who are already generating revenue and trying to grow. They’ll instantly understand the value of the solution you’re providing. They’ve tasted some success, and they’re hungry for more. Position yourself as the person trying to help them build their empire.
• Start narrow – Building on the GTM point above, starting with a narrowly defined problem and a narrow persona for an ideal target micro SMB is likely a good approach. It’s much easier to measure the effectiveness of your marketing efforts and iterate on them when you’re focused narrowly. Going wide is akin to trying to boil the ocean (and the micro SMB market is HUGE).
• Moat – Because finding micro SMBs is challenging, many players tend to avoid this market and go after SMBs (mid-market businesses) or enterprises instead. Therefore, if you can figure it out, you’ll have a big competitive advantage. You’re less likely to have competitors because what you’ve done seems impossible to others. Less competition means you can capture a larger share of the market before having to worry about competitive pressures that erode margins.
• Partnerships – If your GTM is working well, other companies will likely want to partner with you or pay you to tap into your micro SMB customer base because they can’t figure out how to replicate what you’ve done. This creates all kinds of opportunities and leverage in relationship conversations. If done strategically, it could get your cost to acquire a customer to zero or even turn into a profit center.
• Runway – Finding your strategy to locate and acquire micro SMBs isn’t like executing a proven playbook, such as enterprise SaaS sales. It’s about creating something from scratch that may not have been done before. Lots of testing and iteration are required. Because there isn’t a predictable formula or strategy, you have no idea how long it will take. Maximizing your runway is critical so you’ll have enough time to experiment and, quite frankly, catch a lucky break.
• Small tickets – Selling to micro SMBs means the average amount you get from a customer is likely to be low. So, you need lots of customers to build a meaningful amount of revenue. That takes time, so you need to give yourself plenty of it. But once it starts rolling at a steady pace, it can snowball quickly.
• Payments – Offering a product that makes it easier for micro SMBs to accept payments from their customers puts you in the revenue path. Once they rely on your product or service to generate their revenue, they’re less likely to leave.
• Workflows – Micro SMBs usually have zero processes and are often one- or two-person companies. If your product offers processes where none exist or automates tedious manual processes, that’s huge to these micro companies because you can help them generate more revenue without needing to add headcount.

I’m excited for this entrepreneur. I think he’s on to something big. If he can crack the GTM for micro SMBs, I think he’ll build a shockingly big business fast.