Lessons from the 'Small Business Web'

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Ecocard began using FreshBooks to quote prices and send invoices early this year, and after trying other CRM companies settled on BatchBlue in part because the programs already worked together. "Things have to work straight out of the box," says Payne.

While their clients benefit from a network of online software tools that can talk to each other, the companies in the Small Business Web benefit from increased referral business. Ecocard signed up for FreshBooks on the advice of the company's Web designer, and Payne has since recommended the companies to 20 or 30 business associates. "It's just been a very fast growing avenue for us," says BatchBlue's O'Hara. She estimates about 40% of the firm's business comes from referrals by partners, and since launching the integrations BatchBlue has been growing by 30% each month, up from 10%. The company has stopped buying paid advertising—its last Google search ads went dark in May—and now relies solely on word of mouth.

Focusing on Core Strengths

The network also lets entrepreneurs stick to what they do best, knowing that clients can easily go to affiliated companies for other needs. "Instead of having a really watered-down solution that does everything half[way], we focus on a solution that does one thing really well," says Thomas Pederson, vice-president of business development at Zendesk, a 20-employee startup from Denmark (now based in Boston) that provides online helpdesk software for customer support. Zendesk recently joined the Small Business Web and integrated its software with FreshBooks. "We've seen a large number of signups specifically from the FreshBooks integration," Pederson says, although many of those users are still on free trial subscriptions, so it's not clear how many will become paying clients.

The Small Business Web also taps into a trend in the software market: Companies are increasingly using flexible online tools, paid for with monthly subscriptions, for business functions that used to require high upfront investments and customized IT setups. "The way they're set up and the prebuilt integrations, it removes the need for a lot of the IT," says Liz Herbert, senior analyst with Forrester Research (FORR). "It's now moved into a point-and-click configuration type model." Such solutions are particularly appealing to small businesses trying to hold down costs.

Of course, there are risks to the group's approach. Haque warns that the network must maintain its openness to avoid becoming an exclusive club. O'Hara says no software-as-a-service company that has asked to join the Small Business Web and published an API has been refused. The loose alliance has grown organically from five members in March to 20 today, but she envisions thousands of companies someday joining and committing to the group's open standards. She says they all should have three things in common: "You have strong customer support, believe in open availability of your API, and you want world domination."

Tozzi covers small business for BusinessWeek.com.

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