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Scaling Up – Small Is Best

Photo: Son Vu Le

Entrepreneurship

Scaling Up – Small Is Best

During an informal conversation about market share and scale, a comment was made that surely it’s easier to get scale if you have a large customer profile. In fact the reverse is more true than not.

 

If you’re successful in adding more of a broad range of customers, this begins to put a chokehold on truly scaling up in terms of profits and cash.

With a large and diverse range of customers, you’ll have to have a wide range of specific ways to deal with them. You would have to ensure that you have different value propositions, different pricing options, different skills to support them, different payment terms and financial arrangements, different products…. the list can go on.

Eventually potential profits get absorbed in too many execution cycles and variability.

 

At the same time however, selecting a narrow slice of the market (a niche) may be a scary thing… but it can be the best thing for you. Here are some questions to help you choose yours.

  1. Do you like them? Life is short and choosing a customer profile that you enjoy helps you deliver value for them consistently.
  1. Do you have access to them? If it’s hard to get your message to prospective customers they’ll have a hard time discovering you.

  2. Are there enough of them? It’s highly unlikely you’ll get all of the customers in your niche, so there needs to be enough to profit from even if you get a bit less than 100%.

  3. Can they pay?  Whether you’re at the premium, economy or mid-range price point, the target customers need to be able to pay for whatever you’re providing.

It seems like a paradox but look at the evidence: Ikea doesn’t sell high-end designer furniture and Apple doesn’t make a cheap phone!

Lastly – if you’re still not sure then pick a niche and try it. There’s not need to ‘marry’ your niche on the first go. Look at where you’ve been successful in the past look at who you love to deal with and you’ll get some clues.

Business is won over the long term, not the short.

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Originally from the UK, Ian has lived and worked in Southeast Asia for nineteen years. The last eight of those have been spent coaching and mentoring over sixty executives and business owners. Ian's specialist area is helping executives in mid-market growth firms improve their strategy and revenues, retain their key team members, improve execution and build cash.

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