Business owners are being forced to re-invent their business in one way or another. Some markets such as business exhibitions have stopped, whilst others like IT support and employment law are super busy. I work with a business that supplies into the art gallery and exhibition sector and its sales suddenly stopped as events were cancelled. The owner is now busy considering a change to his business model whilst increasing his communication with prospective future customers.
As a business owner maybe you feel the worst is upon us right now and that you need to restructure and rethink your business. It could be jettisoning what’s no longer working for you.
How Will You Re-Invent Your Business?
This article is number 3 of a series that I am writing over the coming weeks to suggest different ways of re-inventing your business if Covid-19 is forcing you to have a rethink. In each article I will refer to businesses I personally know plus I will refer to the ultimate outcome of a business re-invention: a successful sale of the business.
The story of those business sales will be told by John Warrillow, the founder of the Value Builder system, through his podcast series, Built to Sell Radio. John has consolidated 8 of his ‘re-inventing’ podcasts into an eBook, 8 Ways To Re-Invent Yourself In A Crisis.
I have done some re-inventing in my business. Switching my peer group from a monthly half-day meeting with breakfast butties to bi-weekly 2 hour virtual meetings supplemented by a tea, coffee and biscuit gift pack sent in the post! I have also set up a Free Virtual Peer group to support business owners for the period during lockdown. Check it out for a taster session.
So, what is the third way of re-inventing yourself?
This re-invention is a variation on the first way, focusing on what you are good at. This time it’s about cutting back on a product range and focusing on a niche product for a niche sector. Being good at that product means a business can get closer to a sense of monopoly control. It becomes the go-to business and can demand better margins and hence grow quickly. Importantly for the owner of such a business, that ‘monopoly control’ is really attractive to prospective business buyers.
So the third way to re-invent yourself is…
Strategically prune: focus on what you are good at and avoid peripheral products
You will be thinking, ‘how can I prune my product range, I need every sale I can get. You must be mad!’
Yet that is exactly what Joshua Dick did when he took over his family business.
An Niche In A Niche
The business was primarily a textile business supplying into the restaurant trade, although it had added several different offerings over the years. You know how that goes. A big client asks you if you can supply a different product or service. You think it’s another income stream, even if you don’t know much about the product. Over time a few of these different product offerings turn into product divisions.
Joshua took over the business from his father and reviewed which of the seven product divisions were worth keeping. He decided to close six divisions and focus on Urnex, a business that supplied cleaning materials for coffee machines – a real niche in a niche. It employed 12 people and had sales of less than $1 million. As Joshua says, ‘And really my focus what I built the business on was one theme of helping people make better tasting coffee.’
So, Joshua really focused his business on what it was good at. The business conveyed its excellence and expertise – it educated its customers, mostly coffee shop owners. It differentiated itself from the competition. Growth over the next 15 years got the business up to 460 employees and a breadth of products all speciality cleaning focused.
Joshua eventually sold the business when it had a $5 million EBITDA.
Focusing On What The Business Is Good At
A local example of strategically pruning and focusing on a niche in a niche is Chris Shaw, MD of Overview Studios in Castleford. Chris is a photographer and his business started producing quality images for the Kitchen, Bedroom, Bathroom (KBB) sector. His images appeared in brochures, magazines and eventually websites. Technology, in terms of CGI, came along and Chris employed CGI artists to replace the photography work. When I met Chris, he was investing in print equipment to produce brochures and exploring web design as routes for business expansion. Chris and his team produce top quality phot-realistic CGI images, so he decided to prune those additional services and focus on what the business is really good at. The business has since doubled in size and Overview works for some of the biggest names in the KBB sector.
Grow Like A Lobster
Listen to Joshua Dick talk about his story. But, also listen to his advice to every business owner:
The “molt” is on: Dick, who is also the author of the book “Grow Like A Lobster” uses the analogy of a lobster’s lifecycle as a way to describe a business’s evolution. Its hard shell protects a lobster, but once it grows to a specific size, it must shed its shell and develop a new, larger protective layer. During this “molting” process, it lays itself vulnerable on the ocean floor while a new hard protective layer forms. Many owners feel unprotected right now, which is why — just like the lobster — now is the time to retool and build a more durable business.
A valuable business is more than a profit multiple: Joshua had a very loyal customer base, He marketed to his customer’s goal. Instead of saying, “we have better cleaning supplies,” Joshua marketed his cleaning supplies as enabling them to make their customers happy, by making better tasting coffee — not more sanitary machines—a subtle, but an essential twist. He also had no customer above 10% total sales so the business wasn’t ‘addicted’ to one dominant customer. Finally he built a strong management team around him that had skin in the game through an incentive plan.
Joshua was interviewed by John Warrillow, author of Built to Sell: Creating a business that can thrive without you. John is also the host of Built to Sell Radio, a regular podcast revealing the stories and advice of business owners who have sold their businesses. Listen to the full interview with Joshua.
In my next article I will be introducing John Moore, who created a digital product after a recession put a halt on his business that created 3 dimensional models of the human body and imagery for the medical textbook industry. Moore’s story will chime with many business owners at the moment – pivoting to a digital version of a physical product or service.
In the meantime if you want to see what our peer group is all about register here.