Is your value proposition scalable?
Businesses exist – and maintain their existence – through their promises made to clients, and the way in which they provide a useful service or product to that client. What sets your business apart from your competition can often be referred to as your unique selling points (USPs), your points of difference over your competitors (PODs) and also your value proposition; exactly what it is that your business brings to the table that will act to win over clients.
One often-overlooked aspect of doing business is the fact that this whole value proposition becomes exponentially more difficult as your business expands. The problem is magnified if your business has become successful quite quickly, and you haven’t taken the time out to consider how this fair exchange will be maintained as the business expands. Some refer to it as no man’s land, others, adolescence for businesses: that period of time as you expand from a small operation into a medium or large-scale enterprise. It’s particularly vital to take this into account as (preferably before) you grow your operations, so you can maintain the same level of service, as well as assuring the promises you make to clients remain delivered.
An essential part of this process is running through the motions of a scalability analysis. This will help you determine whether or not - in your current form – you could scale your business up, and still maintain profitability, as well as deliver the promises you’re making to customers. This is done through the analysis of industry information, combining your operations with those already out in your industry to make sure your future operations remain feasible. Luckily for those with a quality management system in place, part of this process is already taken care of in your documentation and analysis of your systems. These considerations are also inherent in your thought process after implementing a quality management system, and you’ll have a much better picture of your operations after the process.
One thing to take into account here is that most small businesses are operating in what’s known as the high-performance, cheap labor mode, whereby figures like the founder and/or the CEO often act in other roles in the business - be it in the marketing or sales team- to maintain low operational costs. This model does not scale efficiently. You can try, but you’ll soon be inundated and spreading yourself too thin across various aspects of your business as it expands, so keep this in mind if you’re expanding: the numbers in your team will have to expand correspondingly. If you’re the CEO, head of marketing, HR and sales, once the business begins to scale up, you’ll have to loosen your grip and hand over responsibility to someone else to maintain a high standard for your clients.
From here, you’ve got two main options. If indeed it seems infeasible to scale up your operations and maintain a profit, it might be time to consider becoming what is often referred to as a small giant. We’ll get into more depth on the topic of small giants in the coming days and weeks, but safe to say they are often the most effective means of consolidating your operations, maintaining the promises you’re making to clients and improving the efficiencies of your business as a whole. Reducing the size of your business will almost certainly improve, at the very least maintain those promises you’re making to your clients, and you can rest easy knowing that your value proposition has effectively been refined with a much sharper edge.
The other option remaining is the scaling-up of your operations. If you’ve undertaken the scalability analysis and all identifiable signs are coming up positive for expansion, you’re ready to scale-up your business. In order to continue however, you’ll need to have a clear picture of your current business model, as well as an understanding of how this will change as the scope of your operations expands. You’ll need one key consideration at the forefront of your decision-making as you expand: maintaining that your business’ value proposition remains scalable. Management needs to determine whether or not they can perceive your existing business model as viable at a higher scale: will customers be better off? Will the quality of your services and/or responses to customer feedback be maintained in the expansion? These are important questions to answer before rather than after you’ve made the decision to expand.
In essence, while business expansion may seem like the next logical step, could ultimately be one of the worst decisions you could make. Some businesses remain profitable only as a small operation, framed around the CEO or founder of the company who retains some of that original vision for the company they founded. On the other hand, some businesses only survive due to the decision to scale-up operations, and enter a new segment of the market.
To find out which side of the fence you’re sitting on right now, try implementing a scalability analysis of your business, and utilize the documentation of your systems and existing business model to help determine which move is the right fit for your business.
“No Man’s Land”, Doug Tatum. Portfolio Press - 2008.