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Scaling up - small is Best

September 7, 2018

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.

 

With a large and diverse range of customers you have to have a wide range of specific ways to deal with them. Not only that you have to have different, value propositions, different pricing options, different skills to support them, different payment terms and financial arrangements, different products....and eventually potential profits get absorbed in too many execution cycles and variability.

 

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


But selecting a narrow slice of the market also called a niche may be a scary thing...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.

  2. 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.

  3. 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%.

  4. 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.

 

Ian

 

More about Scaling Up

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