Despite what some may believe, SMBs (small and medium-sized businesses) are not simply smaller versions of enterprise organizations. The size of a company has a deep impact on how a company is organized, but most importantly, it impacts the purchase processes. Since we are talking about different sales processes, we also need to define a different forecasting approach for each type of company. In the following post, we will go through the most important factors that dictate the differences between enterprise and SMB forecasts.
The sales cycle
The complexity of the sales cycle is the main factor that affects the differences between enterprise and SMB sales forecasts. For starters, enterprise sales have more complex sales processes and longer sales cycles. This happens because the decision-making process is often divided between several stakeholders, not to mention the fact that decision-makers are harder to reach in an enterprise. Moreover, each enterprise can have its own purchase process, which can be more or less complex, affecting the length of a sales cycle. On average, an enterprise purchase decision requires the consensus of 7 stakeholders. The longer a sales cycle is, the harder it is to predict its outcome. SMBs have shorter cycles because their needs are more urgent, and their purchase processes are less complex. On the other hand, with enterprises, a cycle can take more than 6 months, so it will be harder to make quarterly forecasts for these companies.
The accuracy of historical data
Historical data is the heart of a forecast, but the accuracy of this indicator can vary based on the size of the company in question. The reason for this is very simple: smaller companies tend to have shorter and less complex sales cycles, which leads to more concise and more accurate historical data. Enterprises, on the other hand, have complex sales cycles which can be affected by numerous variables such as the availability of decision makers, internal purchase processes or last-minute budget cuts. Due to the complexity and volatility of enterprise sales, enterprise forecasts need to be more complex and include as many variables as possible to increase the accuracy of their historical data.
The sales reps
As the sales processes differ for enterprises and SMBs, so do the skills and the goals of the sales reps. Enterprise sales representatives are often more analytical as they use more market date to state their points and stay ahead of the competition. Moreover, enterprise reps are also farming sellers, which means that their end goal is not just to make a sale, but also to get as much business as possible out of a new or existing client. SMB reps, on the other hand, are more aggressive, they deal with less competition, but they also have less experience and less data to make informed predictions. Since there are several forecasting methods which consider the predictions of the sales reps, it makes sense that the different skills of the sales rep will impact the final predictions.
Another way in which sales reps can impact forecasts is by abandoning leads in the middle of a sales cycle. This has a bigger impact on enterprise sales which can take months to finalize. Having an enterprise sales rep leave in a middle of a deal will not only impact the morale of the whole team, but that rep will take with him all the business relationships that he nurtured, relationships which will have to be rebuilt from scratch.
The complexity of the deals
Enterprise sales are far more complex than SMB sales. When selling to SMBs, you could close a deal from the first contact with a new lead, but this would never happen with an enterprise client. The more people there are in a company, the more complex the deal will be. Enterprise sales also leave more room for upselling or cross-selling, not to mention the fact that most enterprises prefer customized products.
Conclusion: As you can see, enterprise and SMB sales deal vary greatly. The differences in the sales processes require a different set of indicators which will affect your options in terms of forecasting strategies. To know which metrics, you need to track and to increase the accuracy of your forecasts, it is essential to understand the needs of your clients and the complexity of your deals.