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SXSW: 10 Essential Things to Know Before You Target Small Business
[Photo: Flickr user Martin Cooper]

This is a big year for small business. Because of Groupon's apparent success, everyone is targeting mobile, local, and social for small businesses. At SXSW, I have been having conversation with some of those folks, and I have developed a short list of small business characteristics most of them don't know (yet). This list is based on twelve years of investing in startups, 30 years of owning my own businesses, and 8 years of training entrepreneurs for the Kauffman Foundation's Fasttrac program (over 600 of them):

1) Small businesses don't define themselves as small businesses. If you come up to them at a networking event and say "what do you do?" they'll respond, "I am a hairdresser," or I am a pool cleaner," or "I make widgets that go into airplanes." When you target them, go after them by vertical, or by neighborhood, not by "small business."

2) Small businesses don't want anything but more money or more customers. They don't buy web sites, social media consulting, or any other service to be hip and trendy. They don't buy new "solutions" if their existing solutions work. They buy only to get more customers. That's why they have been great targets for ValPak, Yellow Pages, and Groupon.

3) They won't use self-service web-based solutions, because they don't sit around surfing and Googling to find them. Groupon succeeded by hiring a large sales force.

4) They don't have time to learn new solutions. Twitter won't work for most of them, because they don't have time to tweet, and don't employ co-tweeters.

5)Since they only have money and time for direct customer acquisition and not for strategic marketing, everything targeting them has to produce results FAST, which is why most social media (Facebook Pages) won't work for them.

6)While many small businesses can't read their own balance sheets and P&Ls, I have never met one that couldn't tell you the ROI or lack of it on every dollar they've spent on marketing and advertising.

7)Their level of media and technical literacy is all over the map. Some love computers, and reading about business, but most do not. They don't usually read books about small business. They probably won't read this post.

8) They don't fail fast and start over, according to the Lean Startup principles and the Silicon Valley mentality. Mostly they don't allow themselves to fall, or recognize failure when it is upon them. They hang on long after they aren't making money, hoping things will turn around. They go out of business only when they can no longer pay the rent, make payroll, or hang on to the truck. They go down with the ship.

9)Many of them don't even know what their customers are buying; rather, they know what they are selling. There is a huge disconnect here that I always try to solve. After all, before it is solved, little else happens. Think about Zappo's, which figured out it was delivering happiness, not just shoes. Shoes can be bought anywhere. Happiness can't. But it's the company's big differentiator.

10) Small businesses in America fall into three main categories: retail, professional service, and manufacturing. The problems of each are completely their own, and so should be the solutions.