Mat Orrego, CEO of Cornerstone Information Systems, shares some tips that might help new entrants or other technology companies in travel or expense management as they enter the small and mid-sized business market.
The small and medium-sized enterprise (SME) market in business travel is an attractive prospect for many companies in our sector. This segment appears ripe for expansion, with many potential customers eager to optimize their travel processes and adopt new technologies.
However, despite the apparent opportunities, the SMB market presents unique challenges that can trap travel technology and services companies in a tangle of bureaucracy, limited resources, budgets and diverse needs.
The attractiveness of the SME market
The SMB market falls somewhere between small businesses, which may not have the resources to adopt sophisticated travel management solutions, and large enterprises, which are typically anchored to legacy systems. On paper, SMBs seem like the sweet spot: companies that are agile enough to embrace new technology, but strong enough to warrant significant investment. According to the U.S. Small Business Administration, there are more than 33 million small and medium-sized businesses in the U.S. alone, suggesting that the potential is enormous.
However, this perception can be misleading. In reality, there are only 220,000 companies with between 50 and 500 employees, and only 18,000 with more than 500 employees. While the number of mid-sized companies far exceeds that of the giants, the revenue potential must be adjusted accordingly. For example, the average number of employees in mid-sized companies is around 119, while large companies have an average of 3,100 employees.
Since the effort required to sell to an SMB is almost as great as it is to sell to a large enterprise, the return on investment is considerably lower.
If you’re working on a subscription or transactional model, this challenge increases as you juggle fewer transactions to meet your goals.
The paradox of bureaucracy and SME budgets
One of the biggest obstacles is the paradoxical nature of mid-sized businesses. Although smaller than large companies, many have already developed internal processes, layers of management, and bureaucratic structures that complicate decision-making. This bureaucracy slows down the adoption of new technologies, because implementing an online booking tool or a spend and expense management system requires extensive coordination and training.
People wear many hats, and asking them to add another one can be overkill. When these key players leave the organization, the systems they were managing often stumble, leading to costly cycles of reinvestment and retraining.
Additionally, SMBs often have tight budgets. They may recognize the benefits of robust travel management solutions, but need help justifying the cost. Compared to larger enterprises that can absorb the expense, SMBs are more cautious about investments that require large upfront costs and ongoing support. This combination of bureaucratic complexity and budget constraints creates the “worst of both worlds”: long sales cycles with limited financial reward.
The Diversity Dilemma
Another challenge in targeting the SMB market is its lack of uniformity. Midsize companies vary greatly in their industry, operational needs, and maturity level. For example, a 100-person tech startup will have very different requirements than a 100-person manufacturing company. The former may be eager to adopt the latest tools and technologies, while the latter may be more conservative, with limited IT support and a preference for stability over innovation.
How an SMB uses its technology has a direct impact on how quickly and effectively it can adopt your solution. APIs, single sign-on, and information security protocols are not only nice-to-have features, but are a must-have, just as they are for larger customers. Seamless integration is essential to making your solution sustainable and increasing customer lifetime value.
The diversity of this segment means that managed travel solutions must be highly customizable, which can hurt profitability. A one-size-fits-all approach doesn’t work in the SMB market, and the cost of tailoring solutions to each customer can be prohibitive. Additionally, marketing efforts become more complex because segmentation by company size fails to account for the nuanced differences that drive purchasing decisions.
Strategies for Success
Despite these challenges, companies can succeed in the SMB market by taking a strategic approach. First, it’s critical to recognize that “midsize businesses” are not a market segment. Instead, companies must focus on specific industries, problems, and customer profiles, creating solutions tailored to the unique needs of each segment.
Second, automation and scalable service models are key to reducing the cost of customer acquisition and ongoing support. By streamlining operations and leveraging AI-powered self-service options and open APIs, businesses can serve smaller accounts more efficiently, making the economics of the SMB market more viable.
Finally, patience and persistence are essential. The sales cycle in the SMB market can be long, as can the implementation process when the client’s resources are often taking on multiple tasks at once. However, with a clear understanding of the client’s needs and a tailored approach, companies can successfully overcome the challenges and carve out a profitable niche.
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