Archive for the ‘Entrepreneurism’ Category

Depth and Breadth

Monday, July 25th, 2011 by AdvisorCatalyst

I once worked in a distribution business where the customer was the end consumer. Leaders in that business often said, “Depth equals profitability and breadth equals stability.”

By “depth equals profitability,” they meant that more volume delivered to an existing customer directly led to greater profitability. This makes sense, of course. Delivery efficiencies increase and selling costs are lower than when securing new customers.

If the saying had stopped there, however, the business would have been very vulnerable. If you focus entirely on selling more to existing customers, what happens if one of those customers suddenly stops doing business with you? Lack of diversification in revenue stream is a glaring risk for any business – particularly small ones. That is why “breadth equals stability.” Customer attrition will happen, so broadening your customer base is extremely important to improve your ability to survive it.

In short, the long-term health and stability of your business depends on a balance between depth (share of customer) and breadth (share of market).

This principle applies just as well for advisory businesses as anything else.

  • Depth = Profitability: The deeper your relationship with a client (the more you do for them), the more fees you can generate. Referrals are also more likely. Furthermore, greater knowledge of the client makes you more valuable to them, leading to efficiencies in delivery.
  • Breadth = Stability: The more clients you serve at one time, the more stable your revenue stream will be. A certain percentage of your clients will disengage at some point for one reason or another. The larger your client base, the less you will feel the consequences of losing a client.

There is definitely a trade-off between depth and breadth. The more time you invest in a client (depth), the fewer clients you are able to serve (breadth), and vice versa. Over time, you will want to increase both depth and breadth in order to build a vibrant advisory business.


Nothing New

Wednesday, July 21st, 2010 by AdvisorCatalyst

During the 1930s, 1940s, and early 1950s, my grandpa and his brother built and exited a number of different business ventures. They began by helping their dad with his cattle business and launched into a full-scale dairy operation. (I have a photo circa 1930s of a delivery van with “Schrock Dairy” and “Natural Milk & Cream” written in fancy lettering across the sides and back.) From there, they launched a full-scale apple orchard business. Then, with the full-gut commitment unique to entrepreneurs, they tore down all of their orchards and started a hybrid seed corn growing business. They later added a fertilizer (anhydrous ammonia) business with multiple plants and distribution facilities across Illinois, Indiana, and Ohio. This business was eventually sold to Standard Oil of Indiana. (I guess anhydrous ammonia was the rage those days.)

Today, we are more than a half-century removed from these entrepreneurs, so naturally, we have different business concerns than they did, right? My dad was recently reading through their correspondence and found two consistent themes:

1. Get the right people in the right positions.
2. Cash flow! Cash, Cash, Cash. It was never far from their minds.

OK, so maybe business really isn’t much different today! The key issues facing entrepreneurs 75 years ago are the same for entrepreneurs today, and they will still be the same 75 years from now.


Think Like An Entrepreneur To Succeed Going Solo

Tuesday, April 13th, 2010 by AdvisorCatalyst

A recent Wall Street Journal article (“How to Succeed in the Age of Going Solo”) further confirms an emerging trend that Peter Drucker noted years ago: we are entering the Age of the Advisor. More companies are looking to freelancers in lieu of full-time employees, but the more things change, the more they remain the same. The form of service delivery may be changing, but the essence of what is being offered has not.

All of us are hired for the services we provide and the value we create – whether that comes in the form of full-time employment, part-time work, or project-based consulting. In that sense, we are all entrepreneurs. The most productive workers are those who realize it.

As people lose their jobs in this economy, we see more and more “consultants” who approach their work as a temporary bridge to their next “real” job. This is a mistake. What is a “fake” job anyway? The person who reports to an office each morning to get orders from his supervisor is really not very different from the independent consultant looking for his next project. Both are individuals trading their skills for income. They are entrepreneurs. The more people think that way, the easier any work transition will be.

Business professionals – particularly those who have served in an executive role – possess tremendous ability in areas that can benefit a wide variety of organizations. They need to think more like entrepreneurs when looking for ways to share their expertise. In doing so, they will find that advising can be much more than a temporary step; it can be a very successful career!

Read “11 Steps to Effective Client Delivery” to learn more about how you can thrive in the Age of the Advisor.


Entrepreneurs: The Process Builders

Friday, December 18th, 2009 by AdvisorCatalyst

After spending a lifetime building a wisdom base, you don’t need to spin that wisdom as something new or revolutionary in order for it to sell. Organizations simply want access to the wisdom – the timeless principles of success that you have learned. The key is to develop a way to deliver that wisdom. You need a process.

In a 2009 interview with Inc. magazine, Jim Collins said:

There has been a big shift away from seeing the essence of entrepreneurship as the creation of a better mousetrap to viewing it as the development of a better process. Did Starbucks have a better mousetrap? Did Home Depot have a better mousetrap? …There are lots of really great mousetraps and very few really great processes. …Isn’t it much more important to create a better process that will produce many mousetraps over time?

Your wisdom already has inherent value, so pour your creative energy into developing a way to deliver it.


The Real Creative Class

Thursday, December 3rd, 2009 by AdvisorCatalyst

Who is more likely to start a business: A college student or a worker with a few decades of experience?

This question was asked by BusinessWeek in its October 12, 2009 issue. The article was titled “America’s Best Young Entrepreneurs 2009,” which probably reflects the answer that most would give to the question. So many readers will probably be surprised to know that the answer is…the experienced worker.

(Click here for the article.)

The article noted that over the past decade, “the highest rate of entrepreneurial activity belongs to the 55-64 age group.” The lowest rate was in the 20-34 age group.

This is good news. I have nothing against anyone starting a business, regardless of age, but with the way our society celebrates youth in everything, I’m delighted to see boomers getting some attention for continuing their years of productivity rather than disappearing into retirement. They have experience. They have wisdom. They have ideas. Consequently, they have more to offer to our economy than their younger peers. It’s time that more of them realized that, and it’s time our society starts lauding them for it and encouraging their entrepreneurial dreams.

Economies thrive when value is created. How encouraging it is to know that those most capable of creating value are doing just that.