On Small Business Growth
As entrepreneurs, we’re all familiar with the “right things.” These are the common recommendations that get passed around as the way to get ahead. I followed a lot of this advice for years and little of it made a positive difference.
The reason we didn’t grow gangbusters from applying all those great ideas was because context matters.
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There’s a common belief among entrepreneurs that serving a niche is better than being a generalist. Lots of smart people recommend this specialist approach.
Which is why I was surprised to see several research studies on the agency industry that showed that generalist agencies were more profitable than specialist ones.
Are all those smart people wrong? Not exactly. But there is nuance to specialization that few people understand or explain.
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We have a big challenge in our one year vision of doubling our service customers. Our current customer base took five years to develop, and we’re halfway through the year.
A good vision clearly establishes how the world is different, but it doesn’t tell you how to get there. What you’re left with are riddles to solve. Like: how to do in six months what it took you five years to do?
Riddles like this prompt you to think differently about growth.
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Four years ago I began the process of repositioning our agency. I spent nine months and around $12,000 doing research. The result of that was that I decided to reposition to focus on the association industry.
I created a new brand, Resurgent, and built up the marketing for it. After two years of work, we hadn’t landed a single client.
I did a retrospective on all the marketing tactics and channels I had tried. Over two years, I had executed a lot:
The most I had achieved was a single proposal that wasn’t accepted.
At a barbecue, I walked through all the things I had tried to one of my entrepreneur friends. After listening to my list, he asked, “How long are you going to keep trying to make this work?”
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Imagine that you’re a government contractor supplying widgets for the department of transportation. It’s a good setup, but one of the downsides is that Uncle Sam dictates when you get paid- which happens to be 60 days after you’ve delivered and invoiced 100% of an order. Manufacturing widgets takes four months. That means it takes at least six months to see a return. Your costs are immediate, but your income is delayed.
In this fantasy scenario, what happens when two more proposals suddenly get accepted in other states?
Now your immediate costs have tripled and sales have overrun your ability to deliver. You have to cancel the additional proposals.
A larger operation would have the capacity to handle the additional sales. Ironically, you could become that version and address the extra orders if you had your profits today and not six months from now.
If you’re trying to grow your business, you need resources in the form of cash to fund expansion. Most of us think acquiring more customers or taking on a loan are the only routes to get this. However, there are many alternatives and one tactic to create cash is to change payment terms so that you get paid in advance.
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What if you succeeded despite your best efforts?
Imagine a post apocalyptic setting where hundreds of years in the future someone discovered a functioning microwave. They do a dance of excitement, button smash the microwave, and accidentally start it up. Going forward, they believe they have to dance before splaying their hand in a certain pattern to start the microwave.
We all experience some form of this where an activity delivers what we want even though we’re not actually doing it very well.
As it relates to growth, what is effective is rarely improved to an excellent standard of function. We get something working well enough and then we just move on. And most of the time what we move on to doesn’t work at all.
This implies a huge opportunity to increase productivity in your business system. If you’re a coffee shop that gets customers through sidewalk traffic, rather than advertise in the local paper, you would be better served to figure out if you’re getting as many pedestrians as is possible.
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I remember walking to Trader Joes several years ago after a long bout of market research and thinking to myself, “There aren’t any opportunities.” It was an inconsequential moment, but the frustration inherent in that realization seared it into my brain.
Last week, I was doing research on how we might optimize some of our marketing tactics. I began to see the glimmer of an opportunity with a tactic and grew excited as I explored possibilities. And then I hit a wall: someone had already discovered and capitalized on it (ironically, a competitor we share a client with.)
I thought back to that moment on the sidewalk outside Trader Joes and said to myself, “still no opportunities.”
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When I started freelancing as a developer, I emailed my old boss, Joe, and asked for advice. Joe was a general contractor for more than thirty years and I wanted to tap into his business experience. I said something like, “I’m just starting out. What advice would you give someone brand new on how to be successful?”
I don’t know what I expected, maybe something about marketing or sales. Instead, Joe wrote back, “A plan is only as good as its options.”
This mystified me.
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“Your customers don’t care about this- look, even your headline says so,” Chris told me. Chris Lema is a WordPress business coach I hired to help work on our organizational structure. The headline on our homepage read, “Stop stressing and free yourself up to focus on what you do best.”
Chris was making the point that our focus on support as a service wasn’t the highest value application of our team. Customers only bought it because they had to. They didn’t care about support, except for in a few moments of pain. They wanted to move on and focus on things that they did care about. Things that were valuable.
When you want to grow your business, you have to figure out how to generate more profit to sustain growth.
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I spoke with an agency owner a couple of months ago who revealed that he had recently acquired a small web development business. As a part of integrating that business, he had grown his team by two developers. It was stressful because it meant that he had to figure out how to raise revenue. He said, “I have to find $70,000 before the end of the year.”
He had expanded capacity, but he didn’t have the pipeline to support it. To address this, he was doing what a lot of businesses do, beating the brush and looking for more customers.
For most contexts, marketing is a long term game with lots of challenges for any channel you develop. It’s an investment over time.
I asked him, “Are you taking full advantage of your past customers? When was the last time you had a meeting about their goals?”
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