Building an Unstoppable Business: 3 Key Steps for Long-Term Success

In the world of business, success is often elusive. Statistics show that two out of three businesses fail within 10 years. However, there are ways to make your business unstoppable and ensure its longevity. This article will explore three key steps to building a resilient and profitable business that can withstand the test of time.

Step 1: Stop Selling to Small Customers

One of the most common mistakes business owners make is targeting the wrong customer base. Many businesses fail not because of their own shortcomings, but because they serve customers who are prone to failure themselves.

The Danger of Structural Churn

Structural churn occurs when customers leave your business due to factors beyond your control, such as their own business failing. This type of churn is particularly prevalent when serving small businesses or beginners in any industry.

For example, a CRM company serving small gyms might experience high churn rates simply because a significant percentage of gyms go out of business each year. This has nothing to do with the quality of the CRM product but is inherent to the market they serve.

The Volatility of Small Businesses

Small businesses often experience significant fluctuations in revenue, which can lead to inconsistent purchasing behavior. This volatility makes it challenging for service providers to maintain stable relationships with these customers.

Consider this scenario:

1. A small business signs up for your service during a good month.
2. Your service helps them increase revenue slightly the next month.
3. The following month, their revenue drops due to normal volatility or overextension.
4. They perceive your service as no longer valuable and cancel.

This cycle repeats itself with many small business clients, leading to high churn rates and unstable revenue for your company.

The Pyramid Approach

A more effective strategy is to start at the top of the market pyramid:

1. Begin by serving larger, more stable businesses.
2. These customers have higher spending power and are more likely to stick around.
3. They understand their numbers better and can commit to longer-term contracts.
4. Use the reputation gained from serving high-end customers to attract clients from the next tier down.
5. Gradually work your way down the pyramid, maintaining profitability at each level.

Pricing and Value Proposition

When serving smaller customers or beginners, you need to consider two main approaches:

1. One-time, high-ticket sales based on emotional purchases (e.g., solar panel installations).
2. Extremely low-cost, high-value offerings that customers won't cancel even during tough times.

For the second approach, you need to create a significant price-to-value discrepancy. Think about services like Netflix or Spotify, which offer immense value for a relatively low monthly fee.

Niching Down for Higher Prices

You can often charge more for the same basic service by niching down and targeting specific, high-value segments of your market. For example:

• Time management for general consumers: $19
• Time management for sales professionals: $99
• Time management for outbound B2B sales: $500
• Time management for outbound B2B Power Tools and Gardening sales reps: $2,000

By focusing on a specific niche, you can justify higher prices without significantly changing your core offering.

Step 2: Ask, Don't Tell Your Customers

Product iteration is crucial for staying competitive in the market. However, many businesses make the mistake of telling customers what they need instead of asking and listening.

The Power of Customer Feedback

Paul Graham once said, "You can solve every business problem by simply talking to your customers." This advice is both elegant and profoundly true.

When developing products or services, it's essential to gather feedback from your target audience. This feedback can help you:

1. Identify misalignments between your offering and customer needs
2. Discover new market opportunities
3. Refine your product to better serve your ideal customers

Two Approaches to Product Iteration

1. Rank and Build Model:

   • Ask customers to vote on potential features
   • Build the most requested features each cycle
   • Can lead to feature-rich but potentially complex products

2. Elegant Solution Model:

   • Analyze all customer requests
   • Design an elegant solution that addresses core needs
   • May intentionally omit some features for a better overall experience

Both approaches can be successful, but it's important to choose one and stick with it consistently.

Key Questions for Product Iteration

When gathering customer feedback, consider asking these two critical questions:

1. "If we could only keep one component of our product/service, what would you want us to keep?"
2. "If we removed one thing from our product/service, what would you not miss at all?"

These questions help identify the most valuable aspects of your offering and potential areas for improvement or removal.

Improving Customer Results

To enhance your product or service, follow these steps:

1. Survey customers to identify those achieving the best results
2. Interview these successful customers to understand their unique behaviors
3. Analyze common actions taken by top-performing customers
4. Incorporate these actions into your onboarding process or product design
5. Measure the improvement in average customer results
6. Consider aligning your guarantees with the actions that lead to the best outcomes

This process can be applied to various aspects of your business, including marketing, product design, and sales.

Step 3: Don't Pretend to Be Something You're Not

Many business owners fall into the trap of trying to reposition their company as something it's not, often in pursuit of higher valuations or perceived prestige.

The Lipstick on a Pig Analogy

Adding superficial elements to your business doesn't change its fundamental nature. For example, sprinkling some software features into a service-based business doesn't magically transform it into a software company.

Investors and acquirers are sophisticated enough to see through such attempts. They value businesses based on their underlying economics, not the labels they use to describe themselves.

Focus on What Matters

Instead of trying to fit your business into a trendy category, focus on improving the metrics that truly matter:

• Revenue retention
• Incremental margin
• Logo retention (number of businesses staying with you)
• Ability to onboard low-value employees to provide high-value services

These factors contribute to higher gross margins, lower talent acquisition costs, and better customer retention – all of which lead to higher valuations.

The Importance of Authenticity

Embrace your business for what it is and focus on excelling within your niche. As Shane Parrish wisely stated, "Success comes down to doing the obvious thing for an extraordinary period of time without convincing yourself that you're smarter than you actually are."

Consistently improving your core business over time is often more valuable than attempting to pivot into a seemingly more attractive industry or business model.

Conclusion

Building an unstoppable business requires a clear understanding of your target market, a commitment to continuous improvement based on customer feedback, and the discipline to stay true to your core business model.

By focusing on serving the right customers, iterating your product effectively, and embracing your business's true nature, you can create a resilient and profitable company that stands the test of time. Remember, success in business often takes longer, costs more, and is harder than expected – but it's the expectation that's the problem, not your plan.

With these three key steps in place, you'll be well on your way to building a business that not only survives but thrives in the long run.

Article created from: https://www.youtube.com/watch?v=thDTmy7VGIw