By far the most businesses in the world are so-called micro-businesses. This means they have less than 10 employees and a turnover below 2M. The definitions vary per country and there is no global research on this. In the US more than 80% of the small businesses reported less than $50k
. If you have such a business, what do you have to do to scale it up? How do you get from being a hustler to an IPO? I will show you what makes the difference between survival and growth.
1. Set aside a budget for growth
To grow you will need to break things. Breaking things will lower your profits and it will cost to fix them. For example, say you’re going to your shop each day at 08:00 and you’re going home at 19:00. That leaves little time to work on a growth strategy. If you close your shop to work on this you’ll lose money at first.
2. Optimize your team
If you’re great at running a business, chances are you’re not great at growing it. Making a choice between existing customers and new markets is hard. Hard choices are better made with a team. Team members should not be your friends. It helps if you can have a good relationship with them but friends make you feel good, team members make you work harder.
3. Brand your business
In general, it helps to first establish what you want the business to be about. ‘Core values’ is an overused term, but it can help you focus. If you throw things out in the next step, make sure you keep the things that make it worth it for you. Do you care about quality, speed, design? Most special things don’t have the best scalability. But without anything special, you’re not going to appeal to your customer.
4. Think about scaling
Making coffee doesn’t scale, but Starbucks did. They focused on brand and concept and left coffee making to franchise employees. Is the Starbucks method the only way? Of course not, I’ll use a coffee example below, so you can compare.
5. Experiment to find the best scalable model
Things that scale in theory don’t all scale in practice. If you find more than one model that would work, try them all and keep the one that fits best. This depends on your core focus.
6. Defocus revenue, focus on growth
This is going to be the hardest part. If you focus too early on growing revenue, you will select the model that peaks early. In the early growth stage, this model may not turn out to work at all. But if you don’t care about revenue at all, you’re going to need a substantial investment. We’re bootstrapping with Capacitor, for example, and balancing lifeblood against growth is a struggle.
In 2006 I was working with an Accenture team in Amsterdam. At the client’s office, there was free coffee, but office coffee in the Netherlands is pretty bad. So the French and Italian team members would take us out to get proper coffee. That’s when I got hooked. One block away there was a coffee shop selling real Italian espresso on par with what you can buy in Rome. Back then there were only a handful of places selling proper coffee in Amsterdam.
The owner of the Coffee Gallery is a Sicilian gentleman. Described as “a rude, horrible person that should be in jail” by some, but I found him rather likable. I like people the way I like my coffee: lots of character, no sugar. This is a good start for branding.
The shop is small, with a small terrace where brewed coffee and lunch is served. The shop sells beans, brewed coffee, and ice cream among other things.
How do we scale this up? Let’s look at the brand first. Straight up quality is the key. The owner is uncompromising and determined to serve the best coffee no matter what. I love places where I have little choice, but all the choices are great. Let’s keep that.
Now for the team. The owner will have to accept that he’s an inept marketeer. We need a smile or two onboard. There are two obvious main directions this thing could scale: online, or franchise. Finding someone with experience in both fields would help.
What scales and what doesn’t? Serving lunch on the terrace isn’t important for the brand, nor does it scale. Time to stop it. Making coffee is the brand, so even though it doesn’t scale, it has to stay. Selling beans scales, so we’re going to put an online sale option on the site on day one. There are additional things that can scale. Perhaps the concept can apply in other shops as a franchise.
With a couple of ideas on the table, it’s time to experiment. We could build landing pages for the different concepts and generate some traction. The ideas that work best with the audience and the brand can then expand into products.
In general, growing a community of followers is most important. Much more important than the revenue per user. The coffee gallery now has only an audience of people that have been into the shop. I’m buying most of my coffee online, but not from the Coffee Gallery. Using a Facebook group, or another type of community, this could expand. Then getting the community to spend money online isn’t so hard.
We’d love to talk to small business owners wanting to scale up. If you would like some help in pre-growth hacking, connect to one of our teams. There are some smart unconventional marketers there.