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Developing a sales strategy is critical for software-as-a-service (SaaS) startups. The first step in developing a sales strategy is to build a robust market segmentation. I’ve used data from the US Census to develop a segmentation that reveals some surprising facts about the SMB market and may help inform your startup’s sales strategy.

Chart 1: 98% of businesses in the US employ fewer than 100 people.

98% of businesses in the US employ between 1 to 4 people. This large segment of businesses provides ample testing ground for product development, market fit validation and creation of word-of-mouth marketing.

Chart 2 : Only 1,000 companies employ greater than 10,000 employees and 12,409 employ greater than 500 employees.

Compared to the small business part of the market, there are far fewer potential customers – only about 12,500 – but these customers are worth orders of magnitude more in revenue.

Charts 3 & 4: The 4 market segments by revenue

Ultimately, the number of firms in a given segment shouldn’t dictate sales strategy.  Instead, the total number of employees within a segment (avg. employment per firm x number of firms) determines the revenue potential by segment.

For example, there are more employees working for companies from 20 to 500 people, about 39M, than there are working for companies with greater than 10,000 employees, about 33M.

Accounting for number of firms and total employment, I have divided the market into 4 segments, each demarcated by a different color, below. Broadly speaking, the two most attractive market opportunities, as measured by revenue opportunity, are the 20 to 500 person company and the 5000+ employee company segment.




The key for startup strategy selection is matching distribution strengths with market segments. It’s possible to build successful businesses serving any of these segments individually or a combination.

Outright, makers of accounting software, targeted the 0 to 19 person segment before their sale to GoDaddy. Expensify, providers of easy to use expense management solutions have targeted the 20 to 500 person organization. Salesforce began initially with the 20 to 500 segment before moving up market through the 500 to 5000 and is now serving the very largest enterprise customers.

No matter the segment you may choose to target, understanding the customer base is the critical first step to devising a successful product, sales and marketing strategy.

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