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Should You Charge Enterprise Clients More Than SMBs?

Should You Charge Enterprise Clients More Than SMBs?
If you’re used to selling to SMBs, the enterprise sales process can be a bit of mystery. Is your pricing strategy too low? Too high? Here are four reasons why you should increase your enterprise quotes.

This blog post was inspired by a question from one of our UK readers, Dean. Dean’s a WordPress web designer who normally charges his SMB clients £4-6k for a high-end brochure-style website; no gateway, no API, no bells, no whistles.

As luck would have it, Dean has a lead with a large £1Bn+ company who wants a similar kind of straightforward website. He’s wondering if he should charge this enterprise-level business with VERY deep pockets the same amount that he charges his small/medium sized business clients for the same service.

Here are four reasons why I think he should:

1. Enterprise clients usually have a longer sales cycle

When it comes to enterprise sales, you typically don’t deal directly with the founder or the key decision maker. Instead, you’re probably working through a VP, a director, or someone involved in procurement.

If you’re working with a procurement department, their job is to try to squeeze as much out of their vendors and suppliers as possible. They’re also not usually the person making the final decision; it may need to be approved by several other departments first. That may require the IT department to do an audit, or the CFO to review the proposal and budget before the purchase is finalized.

There can be lots of hoops to jump through during the enterprise sales process, and clearing those hoops takes time, maybe even six months to a year, or longer. So you need to account for your cost of acquisition: the number of phone calls, emails, meetings, and other extra requirements to land this deal  - it all takes time so you should be sure you cover that time in your pricing strategy.

2. Larger clients demand attention

In general, larger clients are higher maintenance than SMB’s; they need more hand-holding, more attention. In the same way they had a lot of requirements and questions during the sales cycle, the same usually holds true once the work starts.

They may want extra reporting, rounds of revisions or presentations; particular terms and conditions; or demand a special contract be drawn up, meaning more time and legal costs.

You’ll need to assign an account manager to deal specifically with this client to provide the kind of white-glove service they expect, so you want to account for the extra time in your enterprise quote.

The good news is that while large clients usually want more upfront support, they're generally easier to please than small clients (we've all had that client that had champagne taste on a beer budget, am I right?).

3. Bigger clients, bigger value

Dean mentioned that he would deliver the same quality of work for this potential enterprise client as he does for his SMB clients, but this is where I disagree. If you’re selling to a larger company, you MUST deliver more value than to a smaller one.

If you’re building a $3,000 brochure website for a flower shop, that’s fine, but you can’t deliver that same level of service to an enterprise company that you’re charging $100,000. That’s when you want to build some extras into your proposal to increase the value.

Maybe that’s a dedicated account manager, or training for the staff on how to use the software, or a maintenance retainer - whatever adds to the relief of the client’s pain point, you want to overdeliver that value.

The real beauty of landing an enterprise client is to nurture them for the long haul; you don’t want this project to be a one-off. Building your roster of larger clients is a smart way to scale your revenue, and larger clients are a better long-term ROI.

For example, here at Proposify, our enterprise-level accounts bring in 2.8X the revenue, their lifetime value is 7 times larger than small accounts, and the customer churn rate is less than half.

So think about opportunities for upgrades, retainers, and other features you can upsell them on to demonstrate the long-term value of your relationship. You want to prove that you’re not just offering a short-term solution to their challenge, but than you can offer ongoing solutions so their business remains pain-free.

4. Enterprise clients expect a larger price tag (and might balk at a small one)

The buying mentality of an enterprise business is not the same of that of an SMB, or you as a personal consumer. You might pay $10/month out of your own pocket for Spotify or Netflix, and that’s cool, that’s good value. But if you had to pay $1000/month for Netflix, you’d likely turn that purchase down on the spot.

To an enterprise buyer who maybe does tens of millions or more in revenue, $1000/month for a software product that solves their problem is nothing, it’s like you buying a pack of gum. They’re not going to question the cost of products or services if they deliver value and provide a solution they need.

So if you’re a consultant or an agency charging $3000 for a website or a marketing strategy, that’s going to seem too cheap to them; they probably won’t buy  it because they’re skeptical about the value you’ll be able to deliver at that price. They’re going to question the expertise and skill level of your people executing the work. It’s like buying something from Dollarama  - if you pay $1 for it, you’re not expecting it to last.

Enterprise clients have big expectations of their vendors, so they expect to be charged accordingly. To get the attention and recognition of enterprise clients, you need to charge them rates that make sense to them.

They’re not going to go through the effort of having their procurement office look into your proposal, have the IT department do an audit, or hire their lawyer to handle the legal stuff, for something that only costs a few thousand dollars. They don’t waste their time on a pack of gum.

Go big

The bottom line is, you can sell enterprise-level deals that are worth hundreds of thousands of dollars or maybe even millions of dollars, IF you demonstrate that you can solve a massive challenge for them.

If you’re just giving them a tool or a nice-to-have, they’re not going to be open to paying that much money. But if you can prove in your enterprise quote that you’re going to save them millions of dollars a year, or freeing their team up to focus on more valuable work, you can charge those higher amounts.

A word of caution: you don't want one client to become a huge percentage of your annual revenue, otherwise it could make your business fragile if the client ever leaves. (You know, all your eggs in one basket kind of deal.) So if you land an enterprise client, immediately start looking for more (after you pop the champagne, of course).

So to answer your question, Dean: Go big.

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