In “the before times,” I met with a business owner who wanted help to sell his business.
On the surface, his business looked like a highly commodified local business. The kind of business that is mainly undifferentiated from dozens of firms in any large city, and therefore, is pretty hard to sell.
But when he showed me his financials and how he did business, another story emerged. A story that made him one of my business heroes!
- His business is remarkably profitable. He has margins that any business would call outstanding! Unheard of for a local company that has dozens of direct competitors.
- He built a robust system for how work got done. Each stage of the process is defined, and there were clear responsibilities for who does what and had an ass-kicker to make sure that the process is followed.
- Every one of his jobs is profitable. There wasn’t a clunker in the mix.
- His only areas of responsibility are lead generation and pricing. Everything else was delegated.
When I asked him how he had made this transformation, he told me he had one rule.
“Every year, I make it a goal to send fewer proposals than I did the year before while still growing my sales and profits.”
That was it. He sends fewer proposals every year.
What does that one constraint do for him?
- He narrowed his market to the largest and most profitable niche in his area, and he owned it. He goes after every piece of business in that niche.
- Because he understood what those clients needed, he built a process to give that to them. (And enforced compliance.)
- That enables him to delegate more. There are fewer exceptions, fewer things he alone can handle.
- All of the above means that he can earn stunning margins.
What’s a constraint that you could put on your business that would give you a similar effect?
Other examples I’ve seen:
- I raise my prices for each new client.
- I never want to have more than ten employees.
- If a task can’t quickly get done on my iPad, I outsource or delegate it.
What is it for you and your business?