The Final Type of SMB: The Subsidiary of a Large Enterprise

 

Last week I attempted to further segment the SMB market. It turned out to be my most popular post, so I guess the topic is of some interest to the public… A clever comment made by my friend Philip Lay reminded me of one type of SMB company I forgot: the subsidiary—a company for which a majority of the voting stock is owned by another company.

For many businesses, selling to subsidiaries of large enterprises is the ultimate prize, the golden trophy. See how proud Microsoft is, as one example… There are several reasons for this desire:

  • The brand impact… selling to a subsidiary of Chevron or to Chevron itself looks the same on your customer list. Companies that sell to SMBs are always starving for brands that people actually recognize on their customers’ list.

  • Follow the money… owners of SMB companies often spend their life savings on major purchases, which makes the decision hard and emotional. Subsidiaries, just like large enterprises, will have a dedicated budget, which makes the process easier.

  • The promise… one can’t avoid developing the dream of selling to the other 7,987 subsidiaries of a large enterprise, not to mention the ultimate dream—penetrate to the large enterprise from below. Sneaky…

These are all very good reasons (the first two more so than the last) to add subsidiaries into your marketing plan. But before you do, here are some things to know about this beast.

Subsidiary is like an adult brain trapped in a child’s body… Unlike the independent SMB, they have to adhere to cretin corporate rules, most commonly HR rules and branding rules. The level of independence of the subsidiary is critical: if you sell software and they can’t make IT decisions on their own, you have just tripled the length of the sales process and cut the success rate in half… You will be surprised that some would not even let you put their name on your website and will explain at length some global marketing rules. So, make a point during your first meeting to understand the level of authority the subsidiary has. It will help you plan your sales cycle better and prevent the usage of the famous negotiation excuse: “we have to check with corporate” just when you think you agreed on a price…. The only upside is the chance to get to know the corporate decision makers and perhaps get a foot in the door for other subsidiaries.

Another thing to keep in mind is culture. Don’t expect to meet the father of the Italian family mentioned in the SMB post: you will meet an organized management team just like in a large company. They will often form comities to evaluate your product and hire a consultant to write (OK, to copy from his previous gig) a long RFP. Don’t be surprised if you are asked to provide a different level of service (like 24/7 service): there is a feeling of entitlement in many subs, and part of it is to ask for the best…

So, what’s the net? If subsidiaries are part of your strategy, spend time asking yourself why. If it is for the brand recognition, make sure at an early stage that you can use their name on a press release or a web site. If it is for the network, make sure that decisions are made centrally for your area. Make sure you map the level of authority early on and, if you give anything (say a special discount), try to secure something in return (like a testimonial).

What’s to remember?

Pros—brand, money, potential future business.

Cons—long sales process, more demanding, lower profit, unclear decision making process.

Gadi Shamia

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The Final Type of SMB: The Subsidiary of a Large Enterprise

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