Entrepreneurial Fast-Growth

(27302)

Description:
1. Moving from little or no profit to around $1 to $2 million a year in steady profits
2. $1-$10 million in revenue
3. 9-50 employees (Seven functional managers each hiring 7 or so second-tier people)

Problem: You’re breaking even or losing money

Challenge: Creating additional products that are profitable

Opportunity: Though ongoing innovation, increase cashflow and be profitable

Skills:
1. Get going
2. Selling
3. New products

The majority of Stage One companies derive all their revenues from a single product offering.The challenge of continuing to grow your business through Stage Two is to bring to the market a range of new products targeting additional market niches. To keep growing, you have to develop and market additional products that you either to your existing customers or that you use to enter into new market niches.

One of your keys to growth as a Stage Two company will be to make the distinction between front-end and back-end marketing. Stage One companies typically focus on getting front-end customers only. Stage Two companies grow their revenues by ramping up their front-end sales efforts at the same time as they harness the back-end to grow revenues and profits.

Front-end: Sales to new people who have never done business with you before

Back-end: Sales of add-on or additional products to your existing customers

In other words, product innovation is the key to second-stage growth. You have to find new ways to attract customers and then create a line of back-end products your customers will want to buy.

The traditional view of innovation is that you come up with a breakthrough idea that is completely new and revolutionary. That’s all well and fine, but the odds of pulling that off are actually very low. A much safer route is to develop innovations that are variations on what is already successful in some other market–a knock-off idea rather than something completely out of left field. You want something that is not entirely new but that is genuinely better than the hottest product in your market at the present time.

To continue to bring in new front-end customers at an accelerating rate, you need some “tipping-point” innovations that align with rapidly growing consumer trends. You can then sell more and more backend products over time because you’ll be appealing to a growing base of customers. And importantly, you can usually sell back-end products at a higher price point than your front-end products because people know and value what you have to offer.

To come up with innovative front-and back-end product ideas that are worthwhile:

Look for “one stop removed”: new ideas that build on the competencies you already have. To illustrate this concept, suppose you operate a successful steak restaurant. You could then look at:
1. Opening a similar restaurant specializing in fish.
2. Going into selling wholesale to other restaurants.

Both of these concepts are one step removed from what you already know. You’ll be selling to a different market niche admittedly, but you’ll have a fair idea of what systems will be required to succeed in both.

Use the “magic product cube” approach: look at the three basic dimensions of your product and develop three variations on each dimension. For example:
1. Price: inexpensive, moderate, expensive
2. Service: self-help, assisted, fully managed
3. Type: product, service, add on

You then look at what hybrid product offerings could be made available if you very those dimensions away from where you’re positioned at present.

Form an executive brainstorming creative team: who get together and bounce new ideas around. If you rotate different smart people in and out on a regular basis, you can generate an ongoing stream of new ideas. The more people you get involved, the better this becomes and the more fresh new product ideas you can up with.

Whatever you do and however you work, you need to do things quickly. Speed is of the essence in a Stage Two enterprise. To change from being a one-dimensional mom-and-pop operation into a fast-growth commercial enterprise with a sound future, you need to teach everyone how to move faster. The amount of growth you achieve as a Stage Two company will be in direct proportion to your ability to generate and then market test new product ideas quickly.

Business builders come up with and then implement good ideas as fast as possible. The advantages of more speed are:

You can test new product ideas quickly in the marketplace and find out which are worth developing further and which are a waste of your time and resources.

You can offer new products to your existing customers in prelaunch or beta format as a good heads-up indicator of how they will perform in the broader marketplace.

By accelerating your failures, you can get to what will work faster.

In fact, so far-reaching is the impact of enhanced speed on a Stage Two business that you can use this rule of thumb:

80% of Stage Two growth=Innovation * Speed²

Speed is of the essence as you move from being a single-product company into an organization that develops and markets many products.

By the time your Stage One growth has flattened out, your business will probably be moving towards break-even or losing a little money. This will be the spur for you to undertake some serous Stage Two growth initiatives. The beat way to approach these is:

Ready>Fire>Aim

When you have an idea that looks promising, don’t put it on the back burner until
you can perfect it. Test it as soon as possible, even if in draft format. You then make adjustments later on once you know the basic idea is working. The Ready, Fire, Aim methodology is all about creating velocity and deriving the benefits of moving from an idea into action as fast as possible.

Ready

In the ready phase, you need to find the answers to seven essential questions

1. Do I have a good idea? Is this genuinely better than an existing product or can I sense this is something the market needs and will respond to?

2. Does it feel like this will work? Does your gut say you can pull this off?

3. Are my sales targets realistic? If your costs are double what you anticipate and your sales are half what you project, will it still make money?

4. Can we afford to test the idea? Can we do test marketing on a small scale to see how it pans out?

5. Do we fully appreciate what’s involved in making this? Are the tasks that we would need to complete within our current capabilities and competencies?

6. Do we have the people who can do these things? Are there champions who will push the idea forward, superstars who will sell it and workers who will do everything else required to fill the orders?

7. Do we have a Plan B or an exit strategy if the idea turns out to be bad? Can we identify in advance a stop-loss point at which we will either make the idea work or drop it entirely to stop incurring further expenses?

It’s extremely helpful at this point to put together a brief Ready, Fire, Aim business proposal. This should take 24-hours or less to prepare so that momentum is not lost. Your business proposal:

Will be between one and four pages long.

Sets out your initial ballpark financial projections, including costs.

Identifies the critical tasks involved.

Names your product champion and his or her key support people.

Sets out a rough timeline for the major tasks to be completed.

Describes your plan B options and sets out in writing your stop loss point.

Brevity is the soul of velocity, so velocity, so developing your proposal is not intended to slow you down, Rather, it is intended to keep you in the Ready, Fire, Aim mode rather than descending into the potentially destructive Fire-At-Will mode.

It’s amazing how many good ideas never get off the ground. There are two general reasons for this:

1.People have an uncontrolled desire for perfection: and therefore they keep thinking they need to get the new idea absolutely perfect before launching it. Unfortunately, things keep on cropping up and therefore nothing ever gets to the marketplace. It just disappears into some internal corporate back hole.

2. Little chores keep getting in the way: and taking up all the time that should have been applied to getting the new product to market post haste.

The very essence of Ready, Fire, Aim is that you should begin while you’re enthusiastic about an idea, You can’t tell in advance what will work and what won’t work , so you’re betting something imperfect out there and then steadily working to improve it if it sells.

Software companies are particularly good at applying Ready, Fire, Aim. The first version of any new Microsoft software is used to establish the viability of the market. Subsequent updates and upgrades then develop the software into something that is more useful and more bulletproof. Packages that bomb in the early market are then quietly dropped, never to be seen again.

It’s always better to get your products ready and launch them immediately. There’s plenty of time to perfect them later if they sell well. For every product that follows this pattern, there are probably a hundred or more that never get launched because their developers get caught up on the make-it-perfect-first treadmill.

The other key benefit of being action oriented is that you avoid all the potential pitfalls of procrastination. By getting your products in reasonable shape and then launching them immediately, you start down the learning curve. You start accumulating the hands-on knowledge you will need to make your product better in the future. Procrastination is a real emotional barrier you need to get through in order to move your Stage Two company onwards and upwards.

To aim in this context means to do two different things:

1. To improve your product: so you sell more and more over time because you’re adding features that deliver more value to customers. The Ready, Fire, Aim approach is that if a product fails to sell well initially, drop it and look for something that work to improve and enhance it still further. You should be feeding incremental improvements through all the time rather than waiting for a big bang relaunch. This also means you can contact your past customers again and invite them to exchange their old model for the new and improved models you now offer.

2. To fine-tune your marketing : so you become better and better at attracting new customers. Once you clear away all the usual marketing myths and misperceptions, you’re left with the plain truth that there are only three ways you can increase the revenues of your business:

Sell your product to more people : by developing additional lead products that target new niches and market segments you’ve never before approached.

Sell more products to your existing customers : as add-ons or upgrades to what they have already purchased from you. There are the back-end sales that can be so profitable.

Charge more for your products : by moving your product line to a different part of your market where you can charge more for a premium offering.

Generally speaking, you should keep your best marketers working on generating more front-end sales during Stage Two. Put together a second team to concentrate on back-end sales that can be priced differently and direct-marketed. Back-end sales need to take into account all of the dynamics of the marketplace as a whole. The back-end team can find out what customers want and devise products that deliver that spades.

To become great at marketing, master these lessons:

Always remember that customers don’t care about your company.
They care about themselves.

80/20 applies–a small number of customers will be highly profitable. Target these people.

Try to learn why customers buy from you all the time.

Use direct marketing to generate leads.

Don’t ever rely on just one channel–generate leads three or four different ways.

Treat your customers the way you want to be treated and your sales will flourish.

Inject in every marketing campaign a Big Idea (that is engaging), a Big Benefit, a Big Promise and solid proof of your claims.

Use customer complaints and objections to learn how to sell better.

Avoid dead ends–once you sell one thing, figure out what your customers will want next and offer that.

Make additional purchase automatic if at all feasible–the “bill-till-forbid” business model.

Treat your best customers like VIPs.

Have a unique selling proposition (USP) for every product you’re trying to sell.

Give each of your product lines a unique identity.

Always track the effectiveness of your marketing and sales initiatives individually.

Understand your customer’s core worries, fears and desires. This will unlock their lifetime value to you.

Use reciprocity–give valuable things away before you ask them for an order.

Keep talking with customers so you know their intimate interests and preferences.

Be confident and enthusiastic when you sell, and never be afraid to provide and always pre-qualify.

Base your marketing culture and mindset around three sentiments:
1. You want to provide genuine value to customers.
2. Delivering value is the heart of all marketing.
3. You will be genuine and sincere in what you do.

The key to Stage Two growth is not to be a one-shot company. In addition to bringing more new and innovative products to marker, you should also be creating genuine opportunities to sell more to the people who have already purchased from you.

As counterintuitive as it may sound, the best time to sell an add-on product to an existing customer is when they have just made their first purchase. You have to create a “buying frenzy” that builds on their feelings about completing their first transaction. Remember, 20 percent of your completing will generate 80 remember, so it’s absolutely vital to watch that 20 percent closely for hints and clues on how to sell more to them.

To sell more to your customers on a regular basis:

1. Go through and identify who are the big spenders with discretionary money at their disposal.

2. As soon as these people have made their first purchase, immediately give them an attractive offer for add-on products. Hit them while they’re hot.

3. For this type of marketing, you appeal to the buyers, psychological desires rather than their physical needs. Appeal to their preferences rather than appealing to their need to achieve something.

4. Keep selling to them until they have spent themselves out of their buying frenzy and feel good about what they’ve purchased.

Getting things going quickly is more important than planning them perfectly.

–Michael Masterson

Ready, Fire, Aim doesn’t mean you are willing to produce mediocre products. On the contrary, it is the best and most efficient way to achieve product quality. And product quality matters. It’s how you maintain a good and productive and long-lasting relationship with your customers. Nothing else matters as much. Not ever customer service. The difference between the traditional do-it-right-the-first-time approach to product development and my Ready, Fire, Aim approach is that Ready, Fire, Aim is more realistic. Ready, Fire, Aim is a more practical way of developing good products. Being more practical, it is a more likely to work. Ready, Fire, Aim ultimately results in higher-quality products, bets, mechanisms and details the Ready stage means more resources are available at the Aim stage. And that’s what you need to create good products.

–Michael Masterson

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