Where To Start When Your Growth Stops

Why would two companies in the same industry, with the same financial
performance, command vastly different valuations? The answer often comes down to how much each business is likely to grow in the future.

The problem is that a lot of successful businesses reach a point where their growth starts to slow as the company matures. In fact, the price of doing a great job carving out a unique niche is that the specialty that made you successful can start to hold you back.

If you make the world’s greatest $5,000 wine fridge, you may have a successful, profitable business until you run out of people willing to spend $5,000 to keep their wine cool.

Demonstrating how your business is likely to grow in the future is one of the keys to driving a premium price for your company when it comes time to sell. To brainstorm how to grow beyond the niche that got you started, consider the Ansoff Matrix. It was first published in the Harvard Business Review in 1957 but remains a helpful framework for business owners today.

Sometimes called the Product/Market Expansion Grid, the Ansoff Matrix shows four ways that businesses can grow, and it can help you think through the risks associated with each option.

Imagine a square divided into four quadrants representing your four growth choices, which include selling…
1. Existing products to existing customers,
2. New products to existing customers,
3. Existing products to new markets, and
4. New products to new markets.

The choices above are presented from least to most risky. In a smaller business, with few dollars to gamble, focusing your attention on the first two options will give you the lowest risk options for growth.

Existing products to existing customers 

It’s natural to feel like you’re being greedy when you go back to the same customers for more of their dollars, but the opposite can often be true. Your best customers are usually the ones who know and like you the most and are often pleased to find out that you – someone they trust – are offering something they need.

Greg is a hardware store owner who came to understand the Ansoff Matrix. Greg earns a 150% mark up on cutting keys but his cutter was hidden in a corner of the store where nobody could see it. As a result, he didn’t cut many keys. One day, Greg decided to move the key cutter and position it directly behind the cash register so everyone paying for his or her hardware could see the machine. Customers started seeing the cutter and realized – often to their pleasant surprise – that Greg cut keys.
Not surprisingly, Greg started selling a lot more keys to his loyal customers. The key cutter didn’t woo many new customers, but it did increase his overall revenue per customer.

If you want to sell more of your existing products to your existing customers, draw up a simple chart of your products and services. Don’t be afraid to dust off those old products that you haven’t paid much attention to lately. List your best customers’ names down one side of the paper and your products across the top. Then cross-reference your customer list with your product list to identify opportunities to sell your best customers more of your existing products.

New Products to Existing Customers 

Another approach to growth is to sell new products to existing customers. For example, there is a BMW dealership owner in the Midwest whose typical customer is a family patriarch in his forties. When he felt like he had saturated the market for well-heeled forty-something men in his trading area, he thought about what other
products he could sell his existing customers. But instead of defining his customer as the forty-something man, he decided to think of his customer as the financially successful family and his market as their driveway.

Instead of trying to sell more BMWs into a market of diminishing returns, he bought a Chrysler dealership so he could sell minivans to the spouses of his BMW buyers. He then realized that a lot of his customers had kids in their teens so he bought a Kia dealership to sell the family a third, inexpensive car.

Once you become successful, it can be tempting to sit back and enjoy your success. But in order to drive up the value of your business, you need to be able to demonstrate how you can grow, and the least risky strategy will be to figure out what else you could sell to your existing customers.

Take the Sellability Scorecard Questionnaire now!

After completing The Sellability Score questionnaire, you will immediately receive a Sellability Score out of 100, along with instructions for interpreting your results. The higher your Sellability Score, the more sellable – and valuable – your business is likely to be.

9 Warning Signs You’re a Hub-and-Spoke Owner

If you were to draw a picture that visually represents your role in your business, what would it look like? Are you at the top of a traditional Christmas-tree-like organizational chart, or are you stuck in the middle of your business, like a hub in a bicycle wheel? 

As anyone who has tried to fly United when O’Hare has been hit by a snowstorm knows, a hub-and-spoke model is only as strong as the hub. The moment the hub is overwhelmed, the entire system fails. Acquirers generally avoid hub-and-spoke managed businesses because they understand the dangers of buying a company too dependent on the owner. Here’s a list of nine warning signs you’re a hub-and-spoke owner and some suggestions for pulling yourself out of the middle of your business:

1. You sign all of the checks

Most business owners sign the checks, but what happens if you’re away for a couple of days and an important supplier needs to be paid? Consider giving an employee signing authority for checks up to an amount you’re comfortable with, and then change the mailing address on your bank statements so they are mailed to your home (not the office). That way, you can review all signed checks and make sure the privilege isn’t being abused.

2. Your mobile phone bill is over $200 a month

If your employees are out of their depth a lot, it will show up in your mobile phone bill because staff will be calling you to coach them through problems. Ask yourself if you’re hiring too many junior employees. Sometimes people with a couple of years of industry experience will be a lot more self-sufficient and only slightly more expensive than the greenhorns. Also consider getting a virtual assistant (VA), who can act as a first line of defense in protecting your time. You can find a VA by filling out the request for proposal at http://www.ivaa.org/.

3. Your revenue is flat when compared to last year’s

Flat revenue from one year to the next can be a sign you are a hub in a hub-and-spoke model. Like forcing water through a hose, you have only so much capacity. No matter how efficient you are, every business dependent on its owner reaches capacity at some point. Consider narrowing your product and service line by eliminating technically complex offers that require your personal involvement, and instead focus on selling fewer things to more people.

4. Your vacations suck

If you spend your vacations dispatching orders from your mobile, it’s time to cut the tether. Start by taking one day off and seeing how your company does without you. Build systems for failure points. Work up to a point where you can take a few weeks off without affecting your business.

5. You spend more time negotiating than a union boss

If you find yourself constantly having to get involved in approving discount requests from your customers, you are a hub. Consider giving front-line, customer-facing employees a band within which they have your approval to negotiate. You may also want to tie salespeople’s bonuses to gross margin for sales they generate so you’re rewarding their contribution to profit, not just chasing skinny margin deals.

6. You close up every night

If you’re the only one who knows the close-up routine in your business (count the cash, lock the doors, set the alarm), then you are very much a hub. Write an employee manual of basic procedures (close-up routine, e-mail footer to use, voice mail protocol) for your business and give it to new employees on their first day on the job.

7. You know all of your customers by first name

It’s good to have the pulse of your market, but knowing every single customer by first name can be a sign that you’re relying too heavily on your personal relationships being the glue that holds your business together. Consider replacing yourself as a rain maker by hiring a sales team, and as inefficient as it seems, have a trusted employee shadow you when you meet customers so over time your customers get used to dealing with someone else.

8. You get the tickets

Suppliers’ wooing you by sending you free tickets to sports events can be a sign that they see you as the key decision maker in your business for their offering. If you are the key contact for any of your suppliers, you will find yourself in the hub of your business when it comes time to negotiate terms. Consider appointing one of your trusted employees as the key contact for a major supplier and give that employee spending authority up to a limit you’re comfortable with.

9. You get cc’d on more than five e-mails a day

Employees, customers and suppliers constantly cc’ing you on e-mails can be a sign that they are looking for your tacit approval or that you have not made clear when you want to be involved in their work. Start by asking your employees to stop using the cc line in an e-mail; ask them to add you to the “to” line if you really must be made aware of something – and only if they need a specific action from you.

Take the Sellability Scorecard Questionnaire now!  http://ow.ly/ix1YB

After completing The Sellability Score questionnaire, you will immediately receive a Sellability Score out of 100, along with instructions for interpreting your results. The higher your Sellability Score, the more sellable – and valuable – your business is likely to be.

Climb For Captives – The Fight Against Human Trafficking

In July, yours truly will be attempting to summit Mt. Rainier, along with 11 other men, while raising money for a non-profit named Rescue: Freedom International.

Rescue: Freedom International is a registered 501-C-3 and Climb for Captives (C4C) is an initiative that uses mountain climbing to rescue children from slavery and forced prostitution.  C4C has been around for 5 years and has raised tens of thousands of dollars to rescue women and children from human trafficking.  This year we are climbing Mt. Rainier in an effort to provide 44 rescued girls with an entire year of education, food, shelter, and care. Our goal is to raise $52,800.00.

Each year we give 100% of the funds we raise directly to our non-profit partner, Rescue Freedom, and pay all the expenses out of our own pockets.  In order to do so we rely on generous organizations and sponsors who help to make this possible.

This year, C.O.O. Services, LLC, will be matching contributions, on a dollar for dollar basis, of any gift that mentions my name in the message box on the donation tab of the web site, up to $5,000.00.

Will you please consider giving to this very worthwhile effort? All donations are 100% tax deductible.

Just go to the Climb for Captives website and click the donation tab. While you’re there… check out the pictures of all the climbers and the videos. http://www.climbforcaptives.com/the-team/

In addition, you can check us out on facebook and twitter. Don’t miss the our 2013 Climb For Captives video where we released the exciting fundraising goal we are aiming to complete!

Remember; mention my name in the message box and C.O.O. Services will match your gift.

Also, for anyone or any company making a gift of $1,000.00 or more, I will carry your company hat to the top of Rainier for a photo opportunity!!