The growing power of the intermediaries in the micro and small business markets

September 2nd, 2015 by Baber Ahmed

One of the trends we are noticing across the micro/small business sector is the rise of the intermediary as an advisor to the business owner.

There are three markets where we see this emerging:

• In IT and technology purchasing and strategy, as the outsourced IT support advises on new software, hardware and cloud strategy.
• In the insurance sector as the broker helps tailor the package of relevant insurance solutions to the risk needs of the small business customer.
• In the banking and finance sector as the accountant picks up the advice role on business finance strategy.

There are 3 main reasons why this is happening.

1. The first is to do with risk appetite, and the new caution that small business owners have in managing any investments that cannot be easily reversed if the winds of fortune should suddenly change. Sound, thought-through advice is now considered essential in what is now a very competitive and volatile business environment for finance and new technology, with increasingly complex ranges of offers available.
2. The increasing digitalisation of relationships with the larger suppliers of goods and services has created more efficiencies for the larger companies, but enforced self-sufficiency onto small businesses. Sometimes this works fine, and the small business owner is comfortable on making choices with online information and support. Certainly this development does allow the business owner to switch suppliers more easily. However, for many, digital interaction and communication is not sufficiently framed or tailored for their needs.
3. There is also the problem that without more human intervention there is less trust. Which leads to the third driver towards intermediaries, which is the powerful role that ongoing personal relationships play in the small business world. An intermediary who is not tied to any one supplier and has a track record of offering good advice and support has a powerful role in the small business owner’s world as the “guy he trusts” – the “Trusted advisor” in the lexicon of management consultants.

A small business owner will not buy anything that he or she does not understand

In the past, they might have been able to grasp what a server is, the features that they need for their IT business needs, the best brand and price. Now they has to consider the value of different cloud options and the implications of committing to longer-term contracts, each with their own security challenges. Advice is needed. The IT guys who frequently visits, knows the business IT and communications needs will be tuned into the professional conversations to help steer the discussion on strategy and edit down the choices.

And so it is with decisions on taking up loans for business investment which the accountant will often be party to, and in prioritising risks to be covered by business insurance solutions, which the broker will help support.

These changes in supplier relationships are continuing to evolve as small business owners navigate their own courses in the new digital business landscapes. But the implications for supplier brands are clear – the influence of these intermediaries needs to be incorporated in any marketing initiatives to the small business sector.

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