Are you trying to grow a business that requires a high level of trust between the customer and an individual at your company? Here are some of the challenges to keep in mind.
Many of us, Avondale included, are in a "high-touch" business. We have a business in which a customer places trust and partnership with the company, and in many cases, a specific individual or team. In an earlier article, entitled Building a High-Touch Business, we discussed some of the pros and cons. But many of us already are knee-deep in the challenges of growing this type of organization.
There are three important stages of growth in a high-touch business. These stages create plateaus that many businesses never overcome. Since the customer value equation is tied to an individual, growing these businesses is challenging. (Hitting one of these plateaus may be acceptable if the business is highly profitable and may not need to continue to grow to be successful.)
As you build a high-touch business, it's important to understand these stages of growth and the major obstacles that can inhibit your ability to reach the next phase.
This is typically an organization with fewer than 50 people, where every customer knows the CEO or key salesperson. In this type of business, the owner or founder often delivers much of the customer value directly. The challenge is that the founder has trouble growing above a certain threshold, requiring them to pass their customer relationships on to other individuals while retaining the same level of customer value.
Phase 2--Leveraging Expertise
Companies that reach this threshold are able to leverage a shared expertise or asset in their organization across multiple salespeople or relationship managers. In many cases, they have to provide much of the profits to these individuals, in the form of compensation or equity, to avoid losing them--and the customers they serve on your behalf. This phase typically tops out at 150-300 people.
Phase 3--Leveraging Strategic Assets
To get to the next threshold, high-touch businesses must convince their successful salespeople to remain a part of the larger organization. This is through both monetary, in the form of continued share of the profits, and non-monetary, in regards to the value the organization brings to them to achieve success. This non-monetary value is likely in the form of a solid brand reputation, resources to build new customer relationships, and potentially a customer acquisition platform.
Millions of businesses can be found in Phase 1, exponentially fewer in Phase 2, and fewer still in Phase 3. In many industries, you can count the number of Phase 3 businesses on one hand (think of the "Big 4" accounting firms). As you think about growth, it's important to decide whether you need to reach the next plateau and, if so, whether you have a solid plan to get there.
KARL STARK AND BILL STEWART are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree. @karlstark