What’s your definition of a small business? To me, the term brings back memories of the modest entrepreneurial ventures of my late father. A self-taught barkeeper, he ran a series of small restaurants and taverns in Atlanta, usually with partners but occasionally as a sole proprietor.
He knew nothing of formal business plans or sales and marketing strategies. He certainly didn’t spend his time poring over spreadsheets or worrying about quarter over quarter growth. Instead, he was content to be his own boss, make his weekly payroll, and build friendly, personal relationships with his customers over a cold glass of beer.
That my father was a small businessman is clear, but what would you call him if he had he built a chain of eateries pulling down $150M a year? In other words, when is a small business no longer small?
I’m pondering all of this because a blogger on AllBusiness.com recently asked: Is SAP for Small Business? I think the short answer is ‘Yes.’ But it also depends on how you define ‘small business’ and the focus of that business.
The US Small Business Administration (SBA) has an exacting measure of ‘small’ that takes into account your industry and number of employees. Their bottom line is that any business bigger than about $30M in annual revenue is no longer a small business.
The blogger noted above, TJ McCue, has a more expansive definition. He places the upper limit for small business status at $100M.
SAP raises the bar further still. According to McCue’s article, the company defines a small business as one with revenues of $500M or less. As an SAP channel partner, I would tell you their definition is a little more nuanced—but the figure cited highlights the fact that you can still be a very big business that’s defined as a small business by SAP and others.
The lack of agreement on what constitutes a small business is one reason Scott Shane, a professor of Entrepreneurial Studies at Case Western, says the term ‘small business’ is baloney!
Writing in Bloomberg BusinessWeek, Shane calls for more stratified small biz classifications that would range from ‘non-employer businesses’ and ‘microbusinesses’ (1 to 9 employees) all the way up to ‘large small businesses’ with 100 to 499 employees. It’s this last group, he notes, that accounts for most of the job growth commonly attributed to U.S. small business.
So let me again try to answer blogger McCue’s question: Is SAP a fit for small business? Again, the answer is yes, but it’s best suited, in my view, for small businesses that meet certain characteristics.
From a CRM perspective, a company will derive the most value from our solution if it has a significant investment in sales, marketing or customer service. If you have 5 sales people with small, local territories that are easily managed, an SAP product may not make sense. If you have 50 salespeople spread across the country, however, the ROI begins to look a lot different.
Relative to revenue, there are $20M companies that run SAP CRM (including some of our customers) and there are $200M and $2B companies. An important sizing question that we ask is not how big you are today—but how big you hope to become. We have customers who invest in CRM specifically to become larger companies. They see themselves doubling in size over the next three to five years and want a software product to help them scale more efficiently and reach aggressive revenue targets.
I like the term that Professor Shane has coined—that of being a ‘large small business.’ His 100-499 employee definition aside, I think you know a large small business when you see it. It’s one that may have annual revenue close to or in the hundreds of millions of dollars and builds its strategy around becoming even larger. To me, that type of company—presuming it has sales, marketing, or customer service functions—should have SAP on its short list when doing an enterprise CRM evaluation.
On the other hand, if you’re what Shane would call a microbusiness, with nine employees or less, then there are plenty of inexpensive SaaS-oriented CRMs that are likely a better fit for your needs than SAP.
I guess that means we’d turn away my father were he evaluating our product for any of his ventures. But somehow, I don’t think he’d mind. To him, good CRM was as simple as keeping everyone’s glass full.
