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Difference Between Indigo and Chapter, Growth Strategy, Customers You Want To Fire
Difference Between Indigo and Chapter, Growth Strategy, Customers You Want To Fire
Growth Strategy
ii) Growth by
acquisition
Growth through acquisition is a very viable option for small and medium-size businesses.
Should you buy a business?
We routinely hear on the news about huge companies merging with and acquiring other huge
companies in deals measured in the tens of billions. But just a few minutes of research will show
even novice entrepreneurs that growth through acquisition is a very viable option for small and
medium-size businesses as well.
The question is, is it the right growth strategy for your company? Or are you better off expanding
in more organic ways - by opening up satellite locations, franchising, or focusing exclusively on
aggressive sales and marketing tactics?
There’s an interesting conversation to be had around this topic for every unique business
situation, and there’s truly no “right” answer that fits every circumstance. Let’s look into some of
the pros and cons of growth through acquisition versus more organic business growth so you’re
in a better position to make that decision yourself.
Growing your business organically - in the most natural, progressive way possible - offers the
most control over how that growth occurs. That doesn’t mean you’re going to completely avoid
unexpected setbacks or even the stress of “too much success” at times. But, generally speaking,
if you’re focused on continually improving your marketing efforts, improving your product or
service, and identifying new or more profitable markets you can successfully enter, you’re going
to find that growth is more predictable and controllable over the long term.
There’s also a real sense of pride and accomplishment that comes with growing a business from
the ground up with your own (and your team’s) efforts to account for its success. Many
entrepreneurs couldn’t imagine doing it any other way.
The biggest potential negative aspect of relying on strictly organic growth is that it’s usually very
slow. It may take years for the market to evolve enough - and for your business to be able to
afford - to justify a second location or expansion into a new geographic area. Getting to the point
of opening a third location will probably take less time than the second one did, but it could still
require years of planning and effort to get there.
This isn’t a hard-and-fast rule, of course. There are plenty of examples out there of restaurants,
clothing stores, and specialty service businesses that seemed to appear out of the blue and
suddenly explode across the map as they took over the market. But oftentimes, apparently
explosive expansion - when it’s sustainable - is actually far more controlled and organic than it
appears from the outside. And there are plenty of other stories of companies that went after
aggressive organic growth and ended up biting off more than they could chew, collapsing before
they could realize the rewards of the strategy.
Unlike slow and steady organic growth, growth through acquisition or merger is generally much
faster and - if done right - can yield a number of other almost instant benefits that can help make
that rapid growth sustainable.
David Annis and Gary Schine, authors of the book, “Strategic Acquisition: A Smarter Way to
Grow a Company,” explain the benefits of acquisition this way:
“Growth through acquisition is a quicker, cheaper, and far less risky proposition than the tried
and true methods of expanded marketing and sales efforts. Further, acquisition offers a myriad of
other advantages such as easier financing and instant economies of scale. The competitive
advantages are also formidable, ranging from catching one's competition off guard, to instant
market penetration even in areas where you may currently be weak, to the elimination of a
competitor(s) through its acquisition.”
So this method of growth offers a two-fold growth process:
Grow your company’s market, brand reach, audience, sphere of influence, and supply chain
while also eliminating or overtaking your biggest competitor, either by acquiring them directly or
by acquiring one or more smaller competitors until your company is the largest in your
competitive market.
Growth through acquisition is rapid and can yield quick results. But the internal atmosphere that
develops in the time immediately preceding and following an acquisition or merger can present a
number of management challenges that could hinder that rapid growth or plant the seeds of
future failure.
If the merger or acquisition requires reorganizing of the workforce and/or management team in
one or both companies, you may have a significant amount of stress and hard feelings to work
through in the minds of those who stay. There can also be a latent sense of betrayal or
disappointment on the part of employees, partners or owners of a company that has been
acquired, especially if they agree to the arrangement because they’re facing a do-or-die situation.
Merging two distinct company cultures and methods will always present challenges, but a
successful acquisition needs to get through these and other potential problems quickly and
effectively if it’s going to successfully grow and evolve from the process.
The question of whether to buy your competitor or open up a satellite location - to grow
organically or inorganically - must be answered individually by each business owner based on
their own unique circumstances.
In both cases, thorough, strategic planning is required to ensure growth is both attainable and
sustainable over a long enough period to achieve the company’s goals and justify the expense
and effort required.
It’s usually best to explore both options thoroughly before heading too far down either path.
Discuss your options with your lawyer, business broker and other trusted advisors to make sure
you’re considering all the pertinent details.
Then research businesses for sale in and around the areas you’re considering for expansion and
determine whether buying one or more of these businesses will help or hinder progress toward
your growth goals. Keep a sharp eye on your competition - both large and small - and look for
where synergies can be identified or created so that a merger or acquisition creates added value
for everyone involved.
Once you’ve done your due diligence and you’ve settled on the best path, move ahead
decisively. “Luck favors the bold,” as they say, and business growth certainly follows that
axiom.
It’s widely known that there are no immediate shortcuts to success. The best way to expand your
business is through devotion and hard work. Although Marketing has proven itself as the most
immediate route to growth, you could never claim that hard work isn’t the most productive way
to drive profit, but for increased and more prolonged growth there are certainly ways to
accelerate and create shortcuts to success.
But what is the best way to achieve this coveted acceleration? A business growth report from
Avondale, a specialist mergers and acquisitions service provider, recently highlighted that whilst
increased marketing and new product development were still prominent methods for driving
growth for businesses with over £1m turnover, acquisitions and strategic alliances have become
more commonplace, 25 per cent of companies with a turnover between £1-5m said they currently
make acquisitions and a further 50 per cent with a turnover of £5-10M+ said acquisitions were a
preferred route to growth.
Growth through acquisition can be seen as a ‘shortcut’ to growth, yet it is often considered to be
an exclusive method reserved for larger companies, is it appropriate for small and midsize
companies looking to achieve rapid expansion? or should they stick to more traditional expanded
marketing methods?
The benefits of an acquisition
There are many benefits of an acquisition with the large majority of business leaders claiming
growth procured through an acquisition is faster and more prolonged. An acquisition can also
carry less risks than an expanded marketing and sales plan, it can be less expensive to buy an
existing business than to expand internally if you’re struggling with regional and national
growth.
If you are concerned that an acquisition will cause a spike in profits that will quickly plateau and
sink, a business merger can actually lead to organic growth further down the road. Businesses in
the same sector or location can combine resources to reduce costs, eliminate duplicated facilities
or departments and increase revenue in the long term.
Of course one of the problems with investment in an acquisition is the immediate cost. It’s easier
for a larger corporation, as they have more resources and staff to facilitate it. At a recent
roundtable hosted by Avondale, Dominic field, Director of Temple Field property, pointed out
diversity between large and small businesses and their rate of growth “There are particular
hurdles that all businesses of all sizes face. The more money a company has means more staff
you can hire which means more productivity and in turn this all means faster growth.”
Organic growth and marketing
The report also revealed that 67 per cent of those in growth mode have launched a new product
or service in the past year.
Marketing is always a useful area to invest in, as it not only drives growth it also promotes your
company at the same time. Organic growth gives you a much more realistic perspective of how
your company is performing.
Like all business investments expanded marketing plans can carry great risks, and there are
downsides. Reaping the results of organic growth are often much slower than external growth
and there can be issues, especially if you’re pushing your products into a new market, as you
start to push up against larger companies they are more likely to push back. consider
outsourcing, bringing in temporary executive experts in expansion, training your staff in new
technology/methodology or starting a new company with new equity, rather than existing cash
flow.
Can an acquisition benefit a small business?
The Avondale growth survey revealed that only 11 per cent of companies with less than £1m
turnover said they used acquisitions to grow.
Large publicly traded companies regularly buy other companies. Most SME’s associate mergers
and acquisitions with these larger enterprises and small business owners tend to generally
assume that an acquisition is above their means.
Some of the workings do differ, for instance there can be no hostile takeovers of privately held
companies, and your acquisition probably won’t be reported by top tier press, but the benefits are
just as real for a small privately held company as for a large publicly held firm.
So which route is best for my business?
There’s no reason, if you have the budget, why you can’t incorporate both techniques into your
business model. Marketing will always be relevant, as well as one of the fastest routes to growth.
If you have found your business floundering of late an acquisition can give it a much needed
boost, as well as offering the potential to promote increased organic growth in the long term, or
alternatively if your business is flourishing it can further excel your growth in the short and long
term. Using both techniques together could potentially see your company quickly expand status.
1. Low volume
2. Low profile margin
3. Hard to deal with
4. Low opinion leadership
5. Inconsistent
You may know Inc.com as I do: It's a veritable treasure trove of best practices when it comes
to attracting and retaining key customers. Important stuff--no question. But, to be honest, in
the 18 years of running my own business, I've found it's equally important to know when it
makes more sense to turn the tables and fire a client.
Here are five types of clients whose behavior caused us to exercise the 30-day termination
clause in our contracts. If one or more sound familiar, I recommend you do the same:
These are typically first- or second-stage start-ups that expect their vendors to share in their
risk. So, they'll not only ask you to lower your fee and accept the difference in options, but
they'll also expect your team to work 24/7 just like their minions. We've learned over the
years that these relationships almost never work and, indeed, often turn ugly when grandiose
expectations aren't met. We fired one of these "I expect you to be available to me at all
hours" clients after only two months. And, I'm glad we did. Life's too short.
We walked away from one very-high-profile client because, frankly, they used fear to
motivate their agency partners. Our account team was told at the start-up meeting it had
only one chance to fail. So, the client warned, our recommendations had better be spot on
or we'd be fired. Needless to say, this sword of Damocles scenario frayed everyone's
nerves. The team was afraid to suggest out-of-the-box ideas in case the client might not
like them. And, in turn, the client began complaining that we weren't being edgy enough.
So, when a competitor approached us, we fired the fear-factor customer and began a
healthy relationship with another blue-chip organization that continues to this day.
We ended up firing one very prestigious client because they were decimating both our
cash flow and profitability. Our accountants and lawyers still use it as a case study with
their other clients.
The CEO of one white-hot client company swore like a longshoreman. We let it slide in the
first few meetings, but, after the third incident, I told him it had to stop. He said he
understood and publicly apologized to the account team. Then, sure enough, in the very next
meeting, he dropped more f-bombs on Peppercomm than the Allies dropped bombs during
World War II.
I sent the CEO a note terminating the relationship, to which he e-mailed back: "This is
complete and utter bullshit!" That line has now become part of agency lore and is often
trotted out as a joke in internal meetings.
I believe that success and failure should be a shared experience between client and
agency. When the agency scores a major victory, it should be celebrated as a team effort.
And, when something goes awry, there shouldn't be any finger-pointing on either side.
We fired one client who continually merchandised our successes as her personal
achievements yet was always the first to point the finger at us if something didn't happen
as planned (i.e., the client's product was omitted in an industry roundup story, etc.). One
frustrated employee after another asked off the account.
So, rather than risk losing our talent, we terminated the prima donna client. And, I must
admit, I enjoyed doing the deed.
The best thing about firing abusive clients is the morale boost it provides to employees.
They know their paychecks are tied to the firm's billings, and that every client dollar is
precious. So, when you step up and fire a bad customer, you win the troops' trust, loyalty,
and respect.
Firing a client may mean a short-term hit to the organization's profits, but it's critical for
the long-term emotional health of the organization. Try it. I have a feeling you'll like it.
In 2007, Sprint Nextel had a dilemma. Some of its customers contacted customer service on a
regular basis. In the company’s opinion, they contacted customer service on too regular a
basis. They became unprofitable to the company because of it.
Sprint’s decision essentially was to "fire" them as customers. The company sent these high-
cost customers a letter that stated, in part: “The number of inquiries you have made to us
during this time has led us to determine that we are unable to meet your current wireless
needs. Therefore after careful consideration, the decision has been made to terminate your
wireless service agreement.”
The Sprint example is one of several that authors Jiwoong Shin and K. Sudhir, both of Yale
School of Management, examine in their article "Should You Punish or Reward Current
Customers?" in the Fall 2013 issue of MIT Sloan Management Review. The article details the
ways to determine which customers are most valuable.
Not surprisingly, Sprint's action created a wave of bad publicity for the company. But was it
the wrong thing for Sprint to do?
“We recognize the mix of concerns, both ethical and practical, that swirl around firing
customers,” write Shin and Sudhir. “Ethically, there may be issues about the fairness of
focusing retention on the most profitable customers. Practically, there are a number of
problems immediately associated with this tactic: negative opinions passed on to prospective
customers, bad publicity, a social media firestorm and so forth. As a result, we advocate
firing customers only as a last resort.”
There are, however, steps companies can take before making such a drastic move. Here are
three suggestions from Shin and Sudhir’s article:
Reduce services to unprofitable customers. For example, the authors report that Royal
Bank of Canada would prioritize and expedite a check trace for profitable customers in one
day, while for unprofitable customers, it would conduct a less expensive three- to five-day
trace.
Charge fees for costly services. This is a strategy, Shin and Sudhir write, “to rein in the
undesirable behavior and convert the customer into a profitable one.” Some banks, for
instance, now charge for paper statements while offering the less expensive e-statements for
free.
Educate customers to use less costly service channels. Fidelity Investments did this,
pushing customers to use its website instead of calling customer service reps. “If an explicit
conversation can illustrate that both parties could save money with more economical
behavior, then this is the easiest and best solution,” the authors observe. “For example, a
customer who often cancels orders, requests expedited delivery or orders in very small
batches can be extremely costly to the supplier. Highlighting how these types of customer
behavior increase supplier costs and encouraging the customer to avoid such behavior can
often lead to desired and profitable behavior.”
Shin and Sudhir note that one study found that, for business-to-business companies, the top 20%
of customers are generally responsible for 150%–300% of total profits, while the company
breaks even on the middle 70% of customers and has losses on the bottom 10%. Another multi-
industry study by McKinsey & Co. found that bad customers can account for as much as 30%-
40% of a typical company’s revenue. Bottom line: coming up with strategies for handling
expensive customers is an issue for nearly every company.
Firing people isn’t the nicest part of being the boss but sometimes it’s necessary -- and
that goes for customers too. Whether the cost is emotional or financial, some clients
simply demand more from you than their worth. (Here’s a field guide to different types).
Problem is, no one likes getting fired, and informing your problem customers in no
uncertain terms that their business is no longer wanted nor accepted at your company is
bound to generate ill will, and perhaps even bad publicity. The question of when to fire a
client is important, but so is the question of how to do it.
Luckily, there’s some new guidance on the subject from Yale School of Management
professors Jiwoong Shin and K. Sudhir based on their recent research and published in
the latest edition of the MIT Sloan Management Review (free registration required). The
in-depth article looks at not just when to fire (and also when to reward) customers, taking
into account profitability and the ease of switching suppliers in your specific industry, but
also offers ideas on how to gently get rid of those who need to go. The authors offer three
stealth strategies for easing these problem clients out the door.
The Downgrade
Rather than abruptly inform customers you’d no longer like to do business with them,
Shin and Sudhit suggest offering them reduced services. It’s a tactic that worked for one
Canadian Bank, they note. "Royal Bank of Canada simply reduced services to
unprofitable customers. A check trace for profitable customers would be prioritized and
expedited in one day, for example, while for unprofitable customers, the bank would
conduct a less expensive three- to five-day trace," the authors write. Presumably, many of
these customers soon opted for a different bank -- thinking it was their decision to go all
the while.
What behavior on the part of your customer makes them unprofitable to you? Slap a
charge on that. Again, Shin and Sudhit draw an example from the banking industry: "For
instance, some banks have started charging for paper statements while offering e-
statements for free -; a pricing enticement toward more profitable behavior among all
customers." Clever problem customers may actually transform themselves into profitable
ones under this price pressure. Or they may take their business elsewhere. Either way it’s
a win for you.
#Fire everyone:
- Fire your customer B2C(Business to Consumer)
What is Business-to-Consumer (B2C)?
Business-to-consumer – “B2C” – refers to commerce between a business and an
individual consumer.
1. Direct Sellers
This is the type most people are familiar with – they are the online retail sites where
consumers buy products. They can be manufacturers such as Gap or Dell or small
businesses that create and sell products, but they can also be online versions of
department stores selling products from a wide range of brands and manufacturers.
Examples include Target.com, Macys.com, and Zappos.com.
2. Online Intermediaries
These “go-betweens” put buyers and sellers together without owning the product or
service. Examples include online travel sites such as Expedia and Trivago and arts
and crafts retailer Etsy.
3. Advertising-Based
This approach leverages high volumes of web traffic to sell advertising which, in
turn, sells products or services to the consumer. This model uses high-quality free
content to attract site visitors, who then encounter online ads. Media outlets that have
no paid subscription component, such as the Huffington Post and Observer.com, are
examples.
4. Community-Based
This model uses online communities built around shared interests to help advertisers
market their products directly to site users. It could be an online forum for
photography buffs, people with diabetes, or marching band members. The best-
known example is Facebook, which helps marketers target ads to people according to
very specific demographics.
5. Fee-Based
These direct-to-consumer sites charge a subscription fee for access to their content.
They typically include publications that offer a limited amount of content for free but
charge for most of it – such as The Wall Street Journal – or entertainment services
such as Netflix or Hulu.
Businesses selling directly to consumers should take into account how their target
customers like to shop and buy products like theirs as they explore various business-
to-consumer options, whether those possibilities involve in-person or online
transactions.
- Fire your partners B2B(Business to Business)
B2B companies are supportive enterprises that offer the things other businesses need
to operate and grow. These include businesses like payroll processors, for example, or
industrial suppliers. This is in contrast to business-to-consumer (B2C) models, which
sell directly to individual customers, and consumer-to-business (C2B) models, in
which an end user creates a product or service for a business. Instead, B2B companies
offer the raw materials, finished parts, services or consultation that other businesses
need to operate, grow and profit.
Examples of real-world B2B activity are plentiful and more visible than you might
guess. For example, the cloud-based document storage company Dropbox services
businesses as well as individuals. General Electric makes plenty of consumer goods,
but also provides parts for other enterprises. Perhaps you've worked at a company
where the paychecks were stamped by ADP, a company that provides payroll and
financial services for businesses. Xerox is a household name but makes billions on
providing paper and print services to businesses.
Like any other company, a B2B model requires some careful planning, said Brent
Walker, vice president and chief marketing officer at healthcare marketing firm C2B
Solutions.
"B2B typically relies on its sales function and account management team to establish
and strengthen customer/client relationships," Walker said. "Marketing may include
advertising in trade journals, having a presence at conventions and trade conferences,
digital marketing (online presence, SEO, email outreach), and other traditional
awareness efforts."
Case Study:
I am a business owner in Florida with a 1/3 stake in the company. Two of the three
partners (myself included) want to fire the third partner (who holds the title of CEO)
for neglect / abandonment, misappropriation of company funds and not contributing a
"dime" towards out of pocket company expenses when our revenue does not cover
our bills. ...