Part 1: Are Small Businesses Moving Faster Than Us?

Dave Walker

Fortune 50 CMO | Founder, B2SMB Institute | Building the Operating System for Enterprise→SMB Growth | Publisher, Between the Lines

January 6, 2026

Series Introduction

Everyone read the same headlines in 2025.

SMB confidence soared and stayed soaring.

Business formations hit 535,000 in November alone, on track for our 3rd record-setting year in the last five.

SMBs adopted AI (in its purest use form) at rapidly increasing rates. Some say as high as 92%.

That dead-sexy product category – “embedded finance” – suddenly found itself the center of attention, with 90% of SMBs deeming it “essential.”

Meanwhile, 46% of SMBs got hit by cyber-attacks this year, while only 17% had cyber-insurance.

Like you, my head is spinning with digits.

These numbers spiced up McKinsey reports and SMB podcasts and Google pitch decks and our own conference panels.

But here’s what I think most of us missed: we kept track of what was “happening” but we spent far too little time dissecting what it meant, or more to the point, what the numbers are foretelling.

And more importantly, I haven’t seen much conversation yet about what’s carrying forward into 2026 with enough force to reshape the $2.5 trillion small business marketplace.

That’s what momentum is. Not what happened. What’s still happening.

The patterns with mass and velocity.

Over the next three days, I’d like to open the conversation up to “Max Flow.”

Let’s start our series with five stories that show how SMBs are evolving faster than the 100s of the familiar B2SMB names who serve them.

1.  SMBs Integrated AI Into Operations – In Huge Numbers

We absolutely blew it here.

Back in August, we read it wrong: the drumbeat of negative AI anecdotes and analysis we heard over the first half of 2025 from our constituency of B2SMB executives.

We heard that AI adoption amongst SMBs – what we named “AI2SMB” – had slowed greatly, even dried up, across our B2SMB Enterprise Member-base.

Made sense, we thought, as we heard endlessly that SMBs were struggling greatly with AI implementation – a struggle they were not getting help addressing from their familiar B2SMB vendors.

We figured that the almost universal observation of “market softness” meant that SMBs were souring on AI.

On the contrary.

SMBs were simply (and very quietly) adopting AI for their own needs and in their own way, and in many cases, outside the channels of major B2SMB Enterprises.

According to the rapidly evolving metrics tracking total AI adoption, Small Businesses are creating their own revolution.

Amongst many reports over the last 6 months, the aggregate numbers are becoming much clearer.

Typical is Counterpart’s Small Business Insights Report, which found 92% of small businesses had integrated AI into their operations.

• 58% report AI saving them over 20 hours per week.
• 70% rely on AI for automation.
• Over 50% leverage it for research and analysis.
• 53% percent use AI-powered chatbots for customer service.

Counterpart called it the “fastest technology adoption curve in small business history,” outpacing smartphones and the internet.

SMBs didn’t wait for enterprise-grade or enterprise-generated AI solutions.

They found accessible tools and implemented them faster than Fortune 500s finished their C-Suite alignment debates.

This happened because AI became cheap and simple, not because it became enterprise-ready. Twenty dollars a month. Intuitive interfaces. Immediate value. Fitted to need. And most importantly, usable.

A coffee shop owner can suddenly answer customer, inventory, pricing and other core business questions with the same depth as Starbucks with a billion-dollar data science budget.

The technology that we presumed to require expert implementation and premium pricing is being adopted pragmatically by people who just want to save 5, 10 or 20 hours a week.

They’re not buying AI strategy. They’re buying time back.

For large-scaled B2SMB sellers, the value of your AI is rooted in what problem your AI solves for your SMB customer.

Like so many things “engineered” for SMB purchase, AI has no value if it doesn’t begin and end with an immediate, close-in problem solved.

AI in its most direct form is exactly what SMBs say they need: a problem solver.

If your solution requires explaining why your AI matters, you’ve already lost to the tool they found on YouTube that just works for them.

Q: What are you building that actually saves someone 20 hours a week? And can they get value from it in an afternoon, or do they need your implementation team first?

2. New Business Starts in 2025 Hit Another Record

The US Census Bureau’s December 2025 Business Formation Statistics reported 535,041 business applications in November 2025, up 7.1% from October.

The year averaged 478,800 new business formations per month, representing a 435% increase since 2004 when the average was approximately 110,000 per month.

Umm… your total addressable market grew by 19 million customers since 2020.

This cohort was born digital. They’re fluent in subscription software, expect consumer-grade experiences in business tools, and have zero patience for friction.

They learned about SaaS from Netflix, not from enterprise software sales cycles. They expect to sign up in three clicks, get value immediately, and switch providers without penalty if something better comes along.

Traditional B2SMB sales approaches built around demos, proposals, and annual contracts don’t match how this generation buys. They’re comparison shopping on review sites, testing products through free trials, and making purchase decisions before ever talking to sales.

And their asking Chat GPT for recommendations.

So – incoming reality check here – imagine your SMB customer evaluating your offering with the collective intelligence of all history?

For B2SMB sellers, this TAM-boom creates opportunity and challenge simultaneously. The market is enormous and growing. But your buyer personas from 2020, even 2023, are obsolete.

Your go-to-market strategy, product design, and customer success approaches must evolve to serve entrepreneurs who expect Stripe-level onboarding, Claude-level depth and Amazon-speed everything.

Can someone sign up for your product right now, without talking to sales, and get value in under five minutes? If not, you’re invisible to millions of new entrepreneurs entering the market.

3.  96% of SMBs Plan Payment Technology Upgrades

Business Wire recently reported that 96% of US SMBs accepting in-person transactions plan to upgrade their payments technology in the next 12 months.

Why? Because their customers are demanding it now.

Payments have rapidly evolved from background utility into strategic competitive advantage into tactical, practical necessity.

SMBs view payment innovation as a key driver of customer success and growth, not just a way to collect money.

The commoditization of basic payment processing is complete. SMBs now expect advanced capabilities like instant settlements, integrated financing, fraud protection, and data analytics as standard features.

When 90% of SMBs say they will pay premium prices for better payment efficiency, that’s a market explicitly telling you that payment friction is costing them customers.

The rise of BNPL, digital wallets, and embedded payments created new expectations for flexibility and convenience. Small businesses that offer superior payment experiences gain competitive advantages in customer acquisition and retention. Those that lag behind lose sales to competitors with smoother checkout.

For B2SMB sellers, payment capabilities have become table stakes, especially in retail, hospitality, and service sectors. The willingness of SMBs to pay premium prices for payment efficiency creates opportunities for differentiation and revenue growth, but only for platforms that treat payments as strategic, not operational.

Do you offer instant settlements, BNPL options, digital wallet integration, and fraud protection? If your payment features lag behind consumer expectations, you’re creating friction in the customer experience. What would it take to make payments invisible in your platform?

4.  90% of SMBs Now Call “Embedded Finance” Essential to Everything

In September 2025, PYMNTS found that 90% of SMBs say embedded finance (“the integration of banking and other financial services into nonfinancial apps and services”) is now essential to their operations.

Financial services have stopped being a separate vendor relationship.

SMBs now expect their day-to-day software to provide lending, process payments, and manage cash flow without leaving the platform.

This is about removing friction. When your business software can see your invoices, your revenue, and your cash flow but can’t advance you capital based on that data, that’s not a missing feature.

That’s a broken customer experience.

Shopify didn’t disrupt banking with superior financial technology. They disrupted it by doing what banks should have done years ago: meet customers where they already work.

Shopify proved that software platforms are now financial operating systems, and traditional boundaries between SaaS and financial services have collapsed.

For B2SMB sellers, the strategic question is simple: can your customers access capital, make payments, and manage finances without leaving your platform? If not, you’re creating friction that embedded-finance competitors will exploit. Every SaaS company without a financial services strategy is now competing with one hand tied behind their back.

Are you building embedded finance capabilities, partnering for them, or watching customers consolidate to platforms that already have them?

5.  Did You Miss It? The Tax Man Changed Your 2026 Game for the Good

A brief trip into the dense jungle of the US tax code…

The US Chamber of Commerce reported in August 2025 that the Section 179 deduction was doubled to $2.5 million as part of the ‘One Big Beautiful Bill’ provisions. Additional changes included bonus depreciation modifications, R&E deduction updates, and employer credit expansions, all creating significant incentives for SMB capital investment and equipment purchases.

This is the equivalent of a 21% to 37% discount on qualified purchases, depending on tax bracket.

Yet most B2SMB sales teams aren’t leading with this story.

Section 179 allows SMBs to immediately expense qualified purchases rather than depreciating them over years.

For a business in the 30% tax bracket buying $100,000 in equipment, that’s $30,000 in immediate tax savings.

That’s not a nice-to-have benefit. That’s the difference between ‘maybe next quarter’ and ‘send the contract today.’

Most B2SMB sellers mention tax benefits in footnote disclaimers instead of leading with them. This misses fundamental SMB buying psychology.

Small business owners don’t just – and never have – buy product features.

They buy outcomes. And reducing tax liability is a tangible, measurable outcome.

For B2SMB sellers of capital equipment, technology, or other qualifying assets, tax incentives create natural buying windows.

Quarterly-ends aren’t about budget flushes. It’s about tax strategy. Every year-end deal could close faster if you led with ‘this investment pays for itself in tax savings before we even calculate operational ROI.’

Does your sales team know how to calculate Section 179 benefits for your specific solution? Can they articulate it in one sentence? If not, you’re leaving deals on the table while tax-savvy competitors close business.

Tomorrow, part 2 in our 2026 Momentum Report, found right here.

Dave Walker

Fortune 50 CMO | Founder, B2SMB Institute | Building the Operating System for Enterprise→SMB Growth | Publisher, Between the Lines

December 17, 2025

Partnership Theater vs. Strategic Reality

Three press releases landed in my inbox over the last few weeks, each one breathless about “strategic partnerships” that would “transform” markets.

Here’s what none of them said: which company was desperate, which one was playing defense, and which one just figured out how to finally make money off the mid-market.

After 40 years watching companies announce partnerships (and sometimes being the person generating those announcements), I can tell you this: the gap between the lines of what they say and what they mean is where the real story lives.

So let’s take a little look…

Salesforce + OpenAI: When Your Competitor Forces Your Hand

What they announced: Expanded partnership bringing OpenAI’s AI into Salesforce Einstein. Better forecasting, smarter automation, personalized everything.

What they didn’t say: “Microsoft is eating our lunch with Copilot, and if we don’t move fast, enterprise customers are going to start wondering why they’re paying us this much for a CRM that feels increasingly… 2019.”

I spent 30+ years in Fortune 50 executive suites. I know what “expanded partnership” means. It means the first partnership wasn’t deep enough, wasn’t fast enough, or wasn’t scaring competitors enough.

Here’s what’s happening.

Salesforce had Einstein GPT, powered by their 2023 OpenAI partnership. It was fine. Respectable.

But then Microsoft went all-in on OpenAI, wiring GPT-4 into everything. Dynamics 365, Office 365, the works. Suddenly they’re not just selling enterprise software; they’re selling the future. And they’re doing it to Salesforce’s customers.

And Salesforce’s AI integration looked tentative, not transformative – sooo 2023.

So Salesforce went back to OpenAI. Not to partner (they were already partners). To partner harder. Deeper integration. More access. Better branding rights. The October announcement was effectively: “We’re still relevant, we promise.”

Industry analysts called it “necessary.” That’s analyst-speak for “they had no choice.”

What This Means If You’re Selling to SMBs

Two things are happening here that matter more than the press release admits.

First, the platform wars just went AI-native. Every B2SMB vendor is going to announce their AI partnership in the next 18 months. Most of them will be theater (a chatbot here, a recommendation engine there). Some will actually rearchitect their platforms. The difference will determine who wins the next decade.

Second, your SMB customers are soon going to expect AI-powered automation everywhere. Not just in their CRM. In their payroll system. In their inventory management software. In their HR. The Salesforce announcement just raised the bar for everyone, including those selling B2SMB.

If you’re running a B2SMB company and you don’t have an AI strategy that goes deeper than “we’re exploring ChatGPT integration,” you just got lapped.

Square + Grubhub: Playing Catch-Up by Skipping the Build

What they announced: Grubhub’s delivery network integrated into Square’s POS. One platform, all your channels, seamless operations.

What they didn’t say: “Square is toast in the restaurant vertical, thanks to Toast. We can’t build delivery infrastructure ourselves, and if we don’t move now, every restaurant is going to pick Toast by default.”

This one’s easier to decode because the competitive pressure is so obvious.

Toast built an all-in-one platform: hardware, software, payments, and integrated delivery. They own the whole stack.

Square owned payments and POS. Good, but incomplete. And in the restaurant world, incomplete means “we’ll look at you after we look at Toast.”

Square had two choices:

1. Build their own delivery network (2-3 years, $$$hundreds-of-millions)
2. Partner with someone who already has one (6 months, revenue share agreement)

They picked option 2. Pretty smart – but somewhat obvious – move.

Only one downside – and I’ve lived this one large: when you partner instead of build, you’re sharing the economics forever. Toast keeps all the margin. Square is now splitting it with Grubhub.

That’s fine if it holds the ramparts another day. It’s not fine if it becomes your permanent competitive position.

My second look? It’s Grubhub that needs this more than Square.

DoorDash and Uber Eats dominate delivery. Grubhub’s third place and fading. They needed distribution (access to a huge merchant base that wasn’t already using their competitors). Square gave them that.

This is a defensive partnership for both companies. Square defending against Toast. Grubhub defending against irrelevance.

When two companies team up because they’re both losing to someone else, that’s not innovation. That’s survival.

Not that there is anything wrong with survival.

At Toys R Us we bought an under-capitalized Baby Superstore chain because we absolutely sucked at our first few Babies R Us. We took defensive and made it offense.

What This Means If You’re Selling to SMBs

In B2SMB – and this is a forever thing – vertical-specific beats horizontal general-purpose. Every. Single. Time.

Square is a payments company trying to be a restaurant company. Toast is a restaurant company that happens to handle payments. See the difference?

If you’re selling horizontal infrastructure (payments, CRM, accounting), you’re going to lose to someone who built for a specific vertical unless you can assemble all the pieces they need faster than they can.

Square + Grubhub is what that assembly looks like when you’re playing from behind.

QuickBooks + Aprio & Rehmann: Superman to the Rescue

What they announced: Strategic partnerships with top accounting firms to implement Intuit Enterprise Suite in the mid-market. Accountants become implementation partners, advisory partners, growth partners.

What they didn’t say: “Intuit’s been losing mid-market customers to NetSuite for years, so we finally built an ERP that doesn’t suck, and we just figured out how to sell it without hiring 500 enterprise sales reps.”

Of the three partnerships, this is the only one that’s genuinely strategic.

It’s no secret, sort of a truism: Small businesses start on QuickBooks. They grow. And grow. And eventually after growing into mid-size businesses, QuickBooks can’t handle the complexity. So they switch to NetSuite, Sage Intacct, or Microsoft Dynamics.

Intuit loses them. It’s been happening for 20+ years.

But hang on: Intuit finally built an ERP that can compete: Intuit Enterprise Suite. Only one problem: mid-market buyers don’t trust software-platform companies to implement complex financial systems. They trust their accountants.

So Intuit did something most software companies don’t think of: they made SMEs in implementation (in this case accounting firms) the sales channel and the delivery channel.

This actually works because Accounting firms have three GTM problems:

1. Compliance revenue is commoditizing (everyone’s going cloud, it’s getting cheaper).
2. They need higher-margin advisory work.
3. Their clients keep asking them what system to switch to when they outgrow QuickBooks.

Intuit just solved all three.

Now when a client outgrows QuickBooks, the accounting firm doesn’t send them to NetSuite. They say: “Let me show you the Intuit Enterprise Suite. And we’ll implement it. And we’ll train your team. And we’ll help you redesign your workflows. And we’ll charge you for all of that.”

Accounting firms get advisory revenue. Intuit keeps the customer. The customer gets a trusted partner guiding them through the transition.

That’s not partnership theater. That’s structural GTM change.

What This Means If You Sell to the “M” in “SMB”

Not to be insulting, but for almost every SaaS player I’ve known, the best sales channel isn’t created by your own sales team. It’s someone your customer already trusts.

Intuit didn’t hire enterprise AEs. They didn’t build an inside sales team. They didn’t buy Super Bowl ads. They partnered with the people who already sit in the CFO’s office once a week/month/quarter.

If you’re trying to break upwards to mid-market or enterprise, ask yourself: who does your buyer already trust? And how can you turn them into your channel?

This is the partnership model everyone else should be copying.

So What’s Happening Between the Lines Here?

Three partnerships. Three different strategic rationales:

• Salesforce + OpenAI: Defensive move. Microsoft forced their hand. They had to match or lose.
• Square + Grubhub: Catch-up play. Toast was winning. This closes the gap but doesn’t win the war.
• QuickBooks + Accounting Firms: Offensive move. This creates a structural advantage that competitors will struggle to replicate.

Here’s the pattern I see in our little $2.5Tril slice of heaven called B2SMB: partnerships announced as “strategic” are usually one of three things:

1. Integration Theater – API connection dressed up as transformation
2. Tactical Defense – Plugging a hole so customers stop leaving
3. Channel Innovation – Actually rethinking how you go to market

Which one do you think matters long-term?

If you’re selling to or serving SMBs, here’s my point: don’t read these Partnership press releases as if they’re honest. They’re not lying, exactly. But they’re not telling you what’s really happening. The real question is always: did a competitor force this move?

Watch who’s partnering because they have to vs. who’s partnering because they saw something first. The first group is playing defense. The second group is playing offense. Bet on offense.

If you’re thinking about partnerships, ask the Intuit question: who does my customer already trust? That’s your channel.

And if you’re a services firm serving the B2SMB space (accounting, legal, payroll – whatever), pay attention to what Intuit just did. They turned their biggest churn problem into their biggest competitive advantage by integrating the trusted advisor into the sales channel.

That’s replicable. You should be thinking about how to replicate it.

What I’m Watching Next in Partnerships

Salesforce will need to announce something else in Q1. The OpenAI integration won’t be enough. They’re going to acquire or partner with someone in the vertical space (probably construction, healthcare, or professional services). They’ve learned from Toast that vertical focus wins.

Square will either announce another vertical partnership (I’m guessing contractors or professional services), or Block will spin Square out and let it actually become a restaurant company. They can’t keep playing horizontal against vertical players.

Intuit will sign 3-5 more large-network accounting firms by March. This model prints money once you prove it works. Every top-50 firm will want in.

You already know this: when one company figures out a better GTM model, everyone else copies it within 18 months.

So watch the Partnership announcements like you watch Knives Out. Read between the lines. Always something.

Next Between The Lines Newsletter Drop on 12/30: I’m tracking layoffs in B2SMB. Not the human story – which sucks – but the market signal story.

When three payroll companies cut headcount in the same quarter, they’re telling you something about where the SaaS payroll market is going. I’ll tell you what I’m seeing.

Meanwhile, what are you seeing between the lines? Where’s the competitive pressure forcing partnerships in your world?

I want to know, and the comments, like Kwik Stop, are always open.

PS – Watch for our Between the Lines “Year in Review” dropping January 7 in the big two-six.