Struggling to Grow Your Business? Become a Big Fish

One of the most common reasons for a small business struggling to grow, or even to keep on top of current business, is that they spread themselves too thin. They have too many customers spread across too many sectors.

When you start out you just want people to buy your products and services and you don’t care who they are and what type of business they have – you just want their business.

This is perfectly understandable because right now you have no customers. Maybe you’ve left your job because you are good at what you do and you’ve had enough of making money for someone else or you may have been made redundant or you have a burning ambition to follow your passion and dream and for it to deliver the return you seek to have the life you want.

Whether you’re an accountant, a marketer, a web developer or a graphic designer, if someone will pay for your expertise then that’s great because their money is as good as anyone else’s.

This is fine to start with because hopefully you have enough connections. You have people who know you and know your capability and who are therefore pretty warm prospects – some of who will become customers.

Having worked through those who know you what then? Unfortunately, this is where things often start to go wrong.

Of course, whilst working through those you know you’ve made yourself known to a wider audience. You’ve created a website, you’re building a presence online, you network, attend trade shows and so on.

But you find it harder to win a customer – suddenly you have to shout that much louder.

Others are offering the same as you to the same businesses as you, which up until now has been pretty much anyone you think could benefit from your services. And even if over time you’re winning enough business to sustain your needs, it’s such hard work.

You work hard at building an online presence but still attraction is poor and you sometimes wonder why you bother. When you do find an interested prospect you also find that she’s talking to your competitors and you invariably end up reducing your prices to win the business. And even then you might not because they have deeper pockets and under cut you.

But win business you do and you slowly build your customer-base until you finally have enough customers to sustain the lifestyle you want and a little more – great!

At this stage what kind of customers does a small business invariably have?

Most small businesses have too many low-paying customers.

According to the accounting software firm Xero “Accountants spend too much time on low value clients.” Which means they need a lot of them. In 2012, the average annual fee per client was around $2250 or say, £1500 and the average accountant employee was only making around £53 an hour.

To grow the business you want you need to have fewer, higher-value customers.

I know a local small graphics design business and having quizzed them about their customer base, I’ve worked out that 57% of their customers only make up 7% of their revenue. In other words, nearly 60% of their customer-base is next to worthless and their time would be much better spent nurturing and building the top say 30%.

I once had a client who developed a family of inexpensive technology products whose usage was only limited by imagination. There were so many possible applications and he sold his products to anyone who wanted them.

And there lay the problem. His top 3 customers made up half his business. The remainder of his business was spread over around 130 customers with and average annual spend of around a £1000.

He asked for my help because he couldn’t grow his business further. He worked all hours including weekends and was run ragged. He was stressed, tired and would get angry that competitors who only served one or two markets and applications were so much bigger than his business which served hundreds.

But that was the point. He sold to so many markets that he didn’t have a significant presence in any of them.

He was a very small fish in many large ponds.

Big potential customers didn’t know he existed and were serviced by suppliers who were bigger fish swimming in only 1, 2 or 3 ponds.

We identified which should be his target markets and overtime companies with a bigger spend became customers.

In this highly competitive, noisy world we live in, your business needs to stand out – it needs to become a big fish.

Generally, a start-up should target one market sector and establish a presence in it. The product or service should of course meet the needs of target customers better than the alternatives and should include features that are just what the market needs.

Just as important, the value propositions – the key benefits of the product or service – that meet the exact needs of an ideal customer must be clear and well communicated. This is only possible when you target a single market or application.

Even global companies get this wrong. They would spend millions of dollars developing and marketing a product that could be used in countless applications and was therefore marketed as such.

When I worked for large semiconductor companies in the electronics sector most of the marketing messages for the silicon devices were generic because the products themselves could be used in many different applications. This watered-down the value propositions and severely weakened the lead-generating results of the marketing effort.

As well as the type of market, which of course should be a great fit for the product or service on offer, the size of market is also important. Too large and you will struggle to gain enough market share and you could be hurt when trying to meet the too-big-a-demand of a large customer. Too small and before you’re ready a larger competitor could have you in their sites because the place ‘ain’t big enough for the both of you.

So, let’s say you’re a start-up with a revenue plan of $5m in two years, you don’t want to target a market sector that is worth $100m. Instead you should target a sector that is worth say $20m of potential revenue. That way you have a better chance of grabbing a significant market share but not becoming a target from competitors before you can handle them.

So, if you’re an accountant – become an accountant for firms in a specific market sector like technology or health care and become a financial expert in that field. If you needed heart surgery, would you pay more to have a surgeon who only carried out this kind of surgery or would you go for the cheaper option of a general surgeon who has done some heart surgery but does more knees and shoulders?

My consultancy started out in the technology sector because I came from there and therefore understood better what a technology company was trying to achieve. I worked for over 20 years in the sector and could speak their language.

Once established, you can identify the next target market sector, of the right size and adapt your product accordingly and, with a strong strategy plan in place, make the leap to that next, possibly bigger, pond.

You have history, case studies and a reputation, albeit in another sector, and so establishing presence in this new sector should be easier. And each leap to the next pond should be easier than the last and should target larger markets as your revenue and resources increase.

Coming back to today…here’s what you should do.

Review your customer base. Phase out those that don’t deliver a large enough return for the effort you make to deliver your offering and to look after them. Remember the 80:20 rule – 80% of your revenue will come from 20% of your customers.

Now you have more time to look after your larger customers. Are you winning enough of their business? Have you identified all the available business? Do you spend time with them to understand their business and bring ideas that could result in even more business? Do you ask for referrals?

Once you have as much of your top customers’ business as is worth having in return for the effort. And whilst building new relationships from their referrals you can create a marketing strategy to attract similar companies in the same sector.

Your marketing effort should attract more of the right kind of customers because you know what they need and your value propositions and marketing messages can be laser-focused on them. No more wishy-washy messages that try to capture the attention of too wide an audience.

Your prospects will be warmer because you’ve been talking their language and you already deliver products and services to others in their sector.

Eventually, you’ll have prospects coming to you wanting you to visit them and almost ready to buy before you’ve lifted a finger.

Become that big fish in that perfectly sized pond and struggle no more to grow your business.

Are your customers spread over too many markets or are you a big fish?

If your business is spread too thin it is vulnerable and you need to focus your efforts as quickly as you can. If you’re not sure how then contact me and let’s discuss how I can help.

Related posts:
The Biggest Risk To Your Business Is Also Its Greatest Asset
Strategy Equals Hard Choices
If You Are Struggling In Your business You Need To Read This