Collin Holmes | Crain's San Diego

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Collin Holmes

Background:  

Based in San Diego, Chatmeter is a platform that helps enterprise retail brands with multiple locations manage their reputations online. Specifically, Chatmeter helps identify several areas in enterprises’ online presence that drives customers to choose their stores over the competition. Today, the company helps manage the reputations of more than a million storefronts.

The Mistake:

Not doing enough pre-launch research on our initial target customer, which was small businesses.

When I came up with the idea for Chatmeter in 2008, it was around the emergence of the iPhone, limited adoption of smartphones and even more limited adoption of local search. At this point, I thought there might be an opportunity to build a marketing platform for businesses with physical locations — and, knowing the space, I want to say there’s probably about 20 million of those locations, most of which are small businesses — as local search continued to be adopted.

So I decided to go after that space with a direct-to-small-business model, thinking that even if we could get just 1 percent of that market, we’d be crushing it and would have a super successful software company.

We bootstrapped the business, built the software, did a lot of outsourcing in India, while building a direct-to-small-and-medium-sized-business market. I was going out and speaking to small business owners to test the viability of our solution, and it looked like we were getting a lot of interest.

So we launched the product around 2010 ... and I spent the next two years banging my head against the wall.

Marketing to the small business space is way more difficult than people think. These businesses are time-starved, money-starved and knowledge-starved, in that they don’t know a ton about digital marketing. The other challenge with them is retention — probably about a third of them go out of business every year. The nature of the space is very challenging because you’re always going out to try to find new customers to replace the others.

...marketing to small businesses and retaining them presents a tremendous challenge.

The Lesson:

I should have done more research on the people we were targeting, or the people working in our market that have been through it before, because marketing to small businesses and retaining them presents a tremendous challenge. Many venture capitalists will run away from a direct-to-SMB model because they recognize all the challenges they present.

If your product is a marketing tool, you’ll probably have more success in the enterprise space; they have marketing people, they have budgets, and they are going to understand and retain the value you’re offering much faster than small businesses.

Right around 2012 and 2013, I made the decision to pivot toward enterprise — meaning they have at least 20 locations. And I think we realized it was a market fit in the first year. We’ve been increasing sales month-over-month, year-over-year, and have hundreds upon hundreds of enterprise clients. It’s been a tremendous success.

Chatmeter is on Twitter at @chatmeter

Photo courtesy of Chatmeter

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