Amid the race to provide software solutions to the world’s largest enterprises, much of the software industry has ignored the needs of small businesses. There’s a good reason for that: They take just as much time and effort to sell and the deal sizes are puny. Plenty of SAAS companies have started with small company thinking and subsequently migrated upstream.

Business management suite-maker SohoOS has a solution to that: Free.

The company is tapping into a large appetite for what it calls its “Small Business Operating System.” The company says its signing up more than 1,000 new businesses per day and that it now supports more than 800,000 micro-businesses around the world.

“SohoOS.com is now the fastest-growing micro-business platform in the United States,” says SohoOS CEO Ron Daniel, a larger-than-life personality with a self-admitted “over the top vision” for his company.

SohoOS is a package of software tools that are traditionally available only to medium and large businesses. These tools include a comprehensive dashboard powering CRM, email and SMS broadcast, VOIP, inventory management, a sales flow manager, merchant-account free invoicing and billing, document and project management, and social media tools. And his company commits to maintaining its free price tag on these tools forever.

The system is currently accessible from any browser, smartphone, or Web-enabled tablet although the company is working to release an iPhone app, along localized versions of the service in several languages in the near future.

Of course SohoOS isn’t a non-profit, so enter the freemium business model. The company recently began offering a Pro version of its platform alongside the free version on which it built most of its user base. SohoPRO users get access to a library of business documents, increased storage capacity, personalized backups, embeddable lead-gen widgets, a shared job board, website customization, and improved support.

Beyond access the free business tools, SohoOS users join for collaboration. The micro-businesses within the platform create “virtual enterprises” that enjoy economies of scale and hopefully can better compete against larger competitors. SohoOS offers a business directory to enable connections among users for purposes such as referrals, cross-promotions, and distribution network formation.

Originally launched in Israel, the two-year-old SohoOS is now headquartered in San Francisco. The company has raised a total of $9.75 million to date from Morgenthaler Ventures, early Skype investor Mangrove Capital Partners, Kima Ventures, and Israeli incubator The Time. Since raising their Series B round in January of this year, the company has grown its marketing team, adding a new director of marketing as well as support staff.

Hundreds of companies have gone under trying to build a business on top of a big free installed user base. Converting small companies to paying customers takes time, money and serious execution chops. But there’s clearly a big opportunity here. This directory of small business customers alone holds tremendous monetization potential. Judging by the partners listed on SohoOS’s website, many of the largest businesses in the world are looking for ways to market to these otherwise difficult to reach micro-businesses as well. The list includes HP, PayPal, Vodophone, D&B, and others.

Acknowledging that there is an opportunity to build a profitable business, Daniels seems as much on a crusade to have a positive impact as anything else. He says:

The global economy is causing people to form their own businesses like never before. We want to see those businesses succeed, and to make it happen we intend to give them every opportunity that modern technology can offer. For many of these businesses, all they need to succeed—beyond good management tools—is the opportunity to connect meaningfully with potential customers and partners. SohoOS.com offers all these things in one place—and best of all, it costs nothing to use.

It sounds good, sure. More importantly, the traction SohoOS is receiving from its users demonstrates that, in a refreshing change of pace, the product actually backs up the lip service. Let’s see if sales conversions will follow.