Everyone wants their business to grow. However, in searching for growth, most firms still think this means taking on a broad church of clients; a growth-at-all-costs approach. But there is a better way.
Whenever I talk with business owners about narrowing their focus to a core or niche group of selected clients, there is some initial resistance.
People worry it will slow down their growth or reduce the size of their business, but it is quite the opposite.
Building your business is like renovating your home. You would not live in your home for 20 years without doing some maintenance or improvements from time to time. But when you renovate, what happens?
You have to tear out some of the old stuff or sand back the walls and floors. It can get pretty messy. In fact, halfway through the process, you sort of want to cry it looks so bad. Then you put it all back together in line with your vision – repainting, redecorating and restocking – and it looks better than new.
Exactly the same approach works on businesses, too. Every so often you need a clean-out or a refurb.
Yes, that might mean letting go of some clients who no longer fit what the business has become or the business you are trying to become. In the short term, losing some clients might have a small impact on revenue but the end result, as with your renovated home, is something even better than before.
Firms that embrace this approach on a regular basis, every two to three years, are constantly able to continue growing their business. They do this growing with a right-sized, trimmed and well-structured organisation. That is what professional business management looks like.
If we continue the housing analogy, just think about the homeowners in some streets that do not do any maintenance on their property. In the first five or 10 years, it does not seem to make that much difference. However, neglect a place for long enough and the only way to get it back up to scratch is to spend an absolute fortune, or to knock it down and rebuild a new one. The outcome is complicated, expensive and fraught with challenges.
The same is true for a business that has not been maintained and trimmed along the way.
Plan of action
So, what do you need to do? Start with these simple questions:
- Who do you serve?
- Who do you love to work with?
- Why do you love to work with them?
- How can you do more work with these people?
If you have been in business for a long time, I assure you the answer to these questions is already sitting in your current client data. Just take a closer look at your top 10 clients. The answer should be clear; you know who you work best with.
You can build a business around this group of clients. Going niche does not mean going broke. In fact, quite the opposite. Neater and tidier businesses outperform their sometimes larger (in turnover terms) competitors. In some cases, the larger firms are simply the property on your street that has not been well maintained. At some point, it will need a huge renovation, or have to be knocked down and reconstructed.
Several firms I am working with right now have followed this process and have almost doubled their revenue in the last four years. Average client size has also increased anywhere from 54 per cent to 74 per cent in the same period. As a result, business net profit margins (after all the owners get paid a market rate for their day job) are between 20 per cent to 25 per cent of turnover.
I know we have been in buoyant times too over that period but if we experience a market correction or crash in the near future, these firms are lean, clean and tidy. They are well placed to capitalise on any chaos hitting their local competitors who are not so well organised.
Take a few minutes to consider the possibilities:
- What could your business look like if you only worked with a smaller group of ideal clients?
- What if you elegantly disengaged from everyone else?
- How sanded back could you make your business?
- Could you shape up your team and shed some overheads along with the clients?
You might just find this course of action allows you to regroup, refocus and expand at a faster rate than ever before. Not only that but you could end up having a lot more fun at work and taking home more money than ever. Finding your niche might be the best thing to happen to your business growth.
Brett Davidson is founder
at FP Advance