What Startups Do Out of Necessity, and SMEs Should Do by Choice

The startup world is almost a parallel universe. A world with its own vocabulary, its own rules, its own dynamics, its own codes. A complete paradigm of its own.

Two Worlds, Same Constraints

Yet despite volatile funding, hanging almost entirely on investors’ next roll of the dice, these companies deal with constraints that are remarkably close to those of SMEs and mid-market companies.

Better: for a long time, growth at all costs let these companies put off the search for profitability. The last few years have reshuffled the deck. More and more founders are dropping the vanity metrics that mostly served to chain together funding rounds, and moving closer to profitability instead.

On the other side, today’s economic climate is pushing many SMEs and mid-market companies into a corner, as orders slow down and it gets harder to find B2B customers ready to invest.

That makes it all the more useful to look past the wall between these two worlds. SMEs and mid-market companies can find real inspiration in how startups operate.

The Most Uncomfortable Exercise

One of the keys to a startup’s growth is its ability to narrow its ICP (ideal customer profile).

It’s probably one of the hardest exercises for a founder convinced of the value of their product or technology: turning down a deal simply because the prospect doesn’t match the target defined from the start. It can feel brutal. But a customer for whom your product addresses a strategic, business-critical need has nothing in common with one for whom it’s a nice-to-have. Mixing the two in the same portfolio adds confusion all along the product or service lifecycle.

What makes a startup effective during its market-fit phase isn’t a culture, or some extra dose of collective energy. It’s the constraint. Without the resources to talk to everyone, it narrows its ICP to the point of discomfort. Without the resources to be wrong for long, it keeps talking to customers instead of assuming it already knows them.

An established SME faces exactly the same choice. The difference is that the choice got lost along the way, once revenue started flowing steadily: the capability is still there, it’s simply that nothing forces the issue anymore.

What the Research Confirms

This isn’t just a consultant’s hunch. A synthesis of 16 empirical studies conducted specifically on samples of SMEs (61 to 235 companies per study, with median headcounts between 10 and 250 employees) confirms it: 15 out of 16 studies find a positive link between what marketing research calls “market orientation” and firm performance (Raju, Lonial & Crum, 2011, Journal of Business Research). The authors specifically identify a narrow niche as a factor that, for smaller companies, makes it easier to actually listen to customers, the opposite of the common assumption that casting a wide net works better.

I lived this firsthand at Bump.sh: a narrow ICP, channels tested and dropped one by one, until something finally worked. It’s not proof, just one more illustration.

The Truth Lives in Your Customers’ Heads

In “SaaS Growth: Targeting Is Key”, I describe the ICP as a three-part science: firmographics, persona, and use case. Miss just one, and you can end up on the wrong planet entirely. And in “Go-to-Market & Discovery: When Is the Last Time You Talked to a Lead?”, the point is even more direct: your instincts aren’t enough, you have biases, so do your founders, so do your sales reps.

Nobody inside the company holds the answer. You’ll only find it by talking to the right customers, your ICP.

Three Things to Do This Week

Pull up your last 5 signed customers and look at which ones actually fall outside your target. Write down, in black and white, 2 or 3 disqualification criteria, and get your sales team to validate them instead of leaving them in the back of the founder’s mind. And, at least once, accept saying no to a customer who doesn’t meet those criteria, just to see what it does for the clarity of the rest of your portfolio.

This is one of the workstreams I run with the SMEs and mid-market companies I work with. Not really about selling less, but about selling better.

Cover image by Cecilia