Subscribe to Inc. magazine
STARTUP

Why Fewer Customers Will Help You Grow Faster

Focusing on a smaller number of customers might actually fuel your growth instead of impeding it. Here are four ways to make it work.
Advertisement

Growing means expanding your business, right? That's what many entrepreneurs and CEOs assume they need to do. But, in almost every successful growth story we've seen, the CEO has done exactly the opposite.

In a recent article, Growing Like Gangbusters?, we discussed the three things that companies need to do to adapt their business as they grow. As they move from a start-up to an established company, they need to adapt their organization and leadership model.  But, at the same time, growing companies need to find a way to create more value for their customers, and then scale that customer value.

Small entrepreneurial companies need to adapt to their customer needs, adjusting their business model accordingly to grow revenue. But once you've built a successful company, you've also likely built a reputation and distinctiveness around a specific product, service, or customer segment. CEOs who are able to sustain this growth actually get more narrow in their focus, which allows them to scale the business around that key strength.

The CEO of Rise Interactive, Jon Morris, recently told us, "We focus on doing one thing well: Helping companies drive traffic to their website."

Duncan Barbaro Sant, a director at Alberta, a 200 employee fire, safety, and security company based in Mriehel, Malta, shared his plan of action. "Rather than focusing on winning all the projects we come across and trying to spread our wings further than we possibly can, we have taken to choosing carefully the projects that make sense for us and that can sustain the company's healthy growth," Duncan told us. "This will give us the time to monitor and exploit all the projects we are being awarded/accepting whilst keeping our clients faithful to our company."

Here are four things CEOs can do to narrow their customer focus and create more growth:

1. Find your most profitable customers. Do some back-of-the-envelope math to rank order your customers in terms of high to low profits. The customers that pay more and cost less to serve are creating the most value for your business.

2. Understand the unique needs of your most valuable customers. How are they different from your less profitable customers? Identify the drivers of why they rise to the top.

3. Understand what you are doing for these customers that no one else can do as well. Determine your key strengths and the offerings that they find the most value in.

4. Ruthlessly prioritize and focus organizational resources and investment on these customers. Always choose projects and investment that favor your most profitable customers. Challenge yourself to free up time and resources to devote more to these customers.

Creating a narrower customer focus is somewhat counterintuitive to growth. But when it's done right, this approach typically results in more growth rather than less.

Send us your experiences with focusing on your core customers. We can be reached at karlandbill@avondalestrategicpartners.com.

 

Last updated: Feb 14, 2013

KARL STARK AND BILL STEWART | Columnist | Co-founders, Avondale

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.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: