I received this email yesterday from Momentum with the letter attached (with far too much private info not blacked out.)
"As many of you already know, Windstream is eradicating their SMB Business (Customers billing under $1500) and sending them letters like the one I have attached. Go get your customers and find them a happy home (preferably Momentum) before someone else does. Let me know how I can assist."
Windstream has decided to go up-market. Everyone has. RC, 8x8, Comcast.
There are 27.5 million small businesses in the US according to 2012 data from the SBA and over 22 million are self employed with no additional payroll or employees (these are called non-employers). The SBA defines a small business as an enterprise having fewer than 500 employees. There are only 18,500 firms with 500 employees or more in the US. [infographic]
So the 22 million will be using cell phones or services like Grasshopper, RC, FreedomVoice or other Google Voice type auto-attendant in the cloud service. That leaves 5.5 million that can be targeted in the SMB category. [By the way, IDC says that there are 8 million business with under 100 employees to target.]
SBA data shows almost 1 million businesses with between 5-9 employees. However, a 5 employee business at $30 per seat is $150 per month. You need a lot of them to scale and move the revenue needle.
Or you need to be like an MSP, roll a bunch of services together to increase ARPU to $1000 per org. 8x8 ARPU is $369 now (up from $309 a year ago) as they went up-market, but those numbers get skewed with 2 large deals (one being 2400 seats). It only takes one 100 seat sale to match 20 smaller deals, right?
Something to ponder: Can you afford the cost of selling to them and supporting them?
There are more than 75,000 business with 50-74 employees and another 37K with 75-99 employees. Over 100K business in the sweet spot. And that is not mid-market. That is the top of the heap of small business pyramid. Not many CLECs or ITSPs have more than 40K customers. There is room there.
When businesses talk about going up-market, I wonder if they realize that the competition in the Enterprise market is blood red - to chase firms who are risk adverse in procurement. By that I mean that they will only purchase from brand names because no one is going to risk it by buying from an unknown brand. No one gets fired buying from IBM, Dell, AT&T.