I talk about this so often in coaching that I sometimes forget whether I ever wrote it down. I don’t think I have, so here goes…
The 18-Month Rule
Yesterday I asked a founder whether we had covered the enterprise cycle and the small business problem. He said no. So, I did.
The 18-month rule: enterprises do not adopt new things on a clock shorter than about 18 months. Pilots, reviews, analysis, and politics stretch the path from “interesting” to “they pay what you think the thing is worth.”
It seems this is a lesson founders have to learn themselves. I’ve lost count of the startups I’ve advised who make enterprise their primary market, ignoring this, and then come back and tell me they should’ve listened to me.
How do you counter it?
If bigger businesses really are the sweet spot, the best bet is what the PC did: It snuck in under people’s desks without IT knowing.
For example, if you are building hiring software, you are not selling to HR as a department. You are talking to hiring managers who have budget and freedom. The catch is fragmentation. How do they find you? How do you find them? How do you price under their project budget and still run a business? Doable. Hard.
A champion inside a giant bureaucracy is gold. Better still if they can pay from a project budget instead of waiting on an enterprise subscription motion. A pilot that “will turn into a subscription soon” is a lot like engineering based on hope; it rarely turns out well. Be intentional about what the engagement is for: Is it revenue now, or proof that the pain is real and your product makes it go away? Those are different goals and require very different motions.
The Small Business Problem
I first really understood the small business problem while building Windows Home Server, with Small Business Server as the sister product. It has only gotten clearer since.
You can pick a vertical, say local machine shops or engineering shops, do the math, and prove that tens of thousands of them spend billions a year on hiring software. The slide looks great. What early-stage companies fail to recognize is the problem I call The Small Business Problem.
The Small Business Problem is fragmentation of reach. Unless you are Microsoft, Intuit with QuickBooks, or Verizon, you cannot get in front of all 10,000 shops in that vertical.
Small Business is a lot like Consumer, where the things you can control are friction and awareness. The product has to be easy to discover, easy to start, easy to get value from, and easy to keep using. Latency is friction. Awareness and satisfaction (NPS and the like) matter more than almost anything else.
I do not think most early-stage businesses have the resources to chase both. Pick one.
If you pick enterprise, design for champions, and “getting under the department’s desks”. Or, have the funding to last for more than 18-months.
If you pick small business, design for reach and near-zero friction, and stop pretending a “Book a demo” button is onboarding.