Edition 421 – Go Niche!
In my opinion, too many small and family business owners aim too high! Not in their expectations of success, but in what they’re trying to build.
Perhaps, they should aim lower. Get smaller. Be niche!
Two current consulting engagements are leading down very interesting paths for each of the family business owners that we’re working with.
In one client’s business, rapid growth over recent years has led to really good profits being generated. The numbers have been great. Cashflow has been strong. There’s no debt. However, success has come, in my opinion at a substantial cost, being the health and welfare of the family business owner and, by extension, to their family.
In the work we undertake with our clients, we ask them to dig deep into themselves and think through what it is they truly want to achieve in their family business. My concept of “Building a Purposeful Family Business”, which we’ve been rolling out since early last year, has made them question “is this all worth it?”
By asking these questions, in the company of their life partner, we’ve been able to work out that there’s an element of the work they undertake which is very niche, very profitable, very much in demand and has little to no competition. We’re working through the numbers at the moment, however, my guess is that this business will generate 75% to 100% of their former profits, on 50% of the former turnover. The impact it will have on their wellbeing, on their available time, and on their family life, by going down this road, will be immeasurable in dollar terms, in my opinion.
In the second business, by drilling down into the numbers, and asking the simple question of “what work do you really want to be doing”, we’ve been able to prise open their mind, much like a criminal would bust open a safe, to release a treasure trove of information about their business, and the true essence of why they’re in business. This is another situation where I believe the revenues could sit around 65% of where it sits now, and profits will be considerably stronger, all as a result of focussing on their niche offering.
The interesting thing about this second business is how animated the owner becomes when they talk about the work they really want to be doing. It’s less than a quarter of the business’ revenue now, but they illuminate very descriptively the value of the work they do, and the joy they receive from doing it. In this case, we’re talking of an evolution in their business over the next few years, where the numbers will shift, from 25% niche to 75% niche. The ultimate aim, is to be only operating in that space.
When businesses get bigger, we take on more employees and more debt, which requires more work in the door to fund it all. Eventually, we take on work for the sake of cashflow, not profit, and ultimately, we end up chasing our tail. We all know where that ends up.
What are you doing in your business right now, that is niche, or bespoke, and either brings you joy, or would alleviate substantially your day to day stress levels (or both)?
What would it take to transition your business from the runaway machine it is today, to something more enjoyable, more controllable and most likely, more profitable, than what it is today?
This Weeks Tip
“These transitions in business don’t happen overnight. They can take a number of years. However, the key is to know where you’re heading, and resist the temptation to deviate from the path when things get tough.”