Many small businesses are becoming service providers rather than just selling products – but often it's the unexpected aspects of this transition that hold them back.
Although they often lack the market clout of larger firms, small businesses often come out on top because of their agility and flexibility. When customers demand something new, they can quickly innovate and evolve without the baggage of entrenched silos and systems to hinder them.
At least this is the accepted theory. But in practice, SMEs often have similar problems to larger companies when they try to turn their vision into a reality.
Take, for example, the market shift towards offering all types of products, from software to shoes, on subscription. This works well for small businesses and startups. Revenue streams are more predictable and the model enables the development of long-term supplier/customer relationships, which offer rich potential for cross-selling and up-selling of further services. But unfortunately, some businesses are finding this unsustainable. It's not that they run out of ideas – it's their infrastructure which holds them back.
The best ideas are usually the most simple, but the crunch comes when a copycat competitor comes onto the scene. This competitor may well undercut the first-to-market supplier, possibly by setting up in a cheaper location, and differentiation becomes difficult to achieve. The simpler and more successful the original idea, the quicker this inevitable pattern of events is likely to happen.
The original supplier needs to add more strings to its bow to regain its market edge. It needs to add more options for its customers, more flexibility around how it prices and packages its services – and it needs to do more cross-selling and up-selling to add value. Also, it must do all of these things without increasing its overheads.
This is where, despite its flexibility and creativity, a business gets held back by a seemingly straightforward back office process – its billing.
A business model based on subscriptions and usage needs to be able to offer variable pricing plans, which means investing in some kind of billing system. However, traditional on-premise billing systems are typically too expensive, or not agile enough, to handle this requirement. On top of this, they often take years to implement, configure and integrate with other applications. In short, not exactly the ideal choice for a business in this fast-moving environment, and definitely an inhibitor for any small business wanting to quickly monetise new services.
Read more: When billing becomes a barrier