In episode two of four in Jeff’s new project, which will culminate in a narrative episode of the podcast based on Paul Jarvis’ notions in his book, “Company of One,” Jeff and JT Smith explore the importance of growth in business—does growth not equate to success, as Paul Jarvis alluded in the last episode, or is it a key ingredient?
JT Smith is the owner of The Game Crafter, but he also holds a number of other roles. In the past 22 years, driven by his passion for creation, experimentation, and invention, JT has built 21 businesses—his most prominent being the three he still works with; The Game Crafter and Tabletop Events, which work in the board game industry, both in game creation and convention management; as well as Plain Black, a software consulting firm.
Growth and Scale
What JT calls “churn” is imperative in any business; if you don’t grow, eventually you will decline. Either you’re churning forward, pumping out new ideas and products, networking, and growing your client base—or you’re standing still—and you can only stand still for so long.
“If you’re not growing, you’re dead.”
Premium vs. Regular Clients
It would be nice if everyone’s business could supply a premium brand to a premium client base exclusively; however, in business it is hard to rely totally on premium customers. Having a comfortable mixture of both premium and regular clients with varying needs and/or products—all with varying quality and costs—is beneficial. As with the example JT supplied, you could be selling a variety of game dice; ranging from a relatively standard piece for just 20 cents to a premium at 9 dollars per die.
Sizable Client Base
“Rather than having 10 customers that pay me $10,000/month, I want to have 10,000 customers that pay me $10/month—because if four or five of them go away, you won’t even notice.”
Rather than just shooting for the “big fish,” the premium customers of which you may only find a handful, it’s best to target a broader range of customers with different quality interests and budgets. The more customers you have, the better off you are; simply because it would then be much harder for one customer to represent an exorbitant percentage of your client base—and ultimately your profit.
If you have 10 clients and 1 client decides to leave, that means you’d be losing about 1/10th of your profits (this is assuming you’re making the same profit from each client). It is for this very reason that JT advises businesses to not limit their customers, rather, to limit their price. But what does that mean?
Open Door Policy
The idea of “limiting your price” sounds a little confusing. To break it down more clearly, rather than capping off how many customers you will take on at a certain point (say, 10 or 15), you will keep your door open while also setting a price point you believe is worthy of your content. This way, you would be welcoming any customers who are willing to meet the price which you have set—ultimately finding the audience best suited for your work, and weeding out the rest.
Instead of you limiting your customers, the customers begin to limit themselves.
After setting your sights on a particular price, and ultimately an expected profit, you’ll want to build a budget with a proper cushion that can sustain a loss.
Ways to do This:
- Look for inefficiency. Are there any areas where you are letting things fall through the cracks? Make alterations to boost efficiency.
- Measure your team. How many employees do you have? How many do you actually need? Are contractors a better option?
Having started 21 different businesses in his time, JT knows what he’s talking about when it comes to building a business. However, for a business newbie, the entire process may seem totally jumbled and overwhelming. According to JT, there are three things to know for sure.
3 Pieces of the Puzzle:
- Build yourself out of the business. You are not your business. If something happens to you, you need to be sure that the business can go on without you. If you are critical, without you the business will not survive.
- Search for ways to improve. Where can you do better? Whether it be contractors vs. employees, clientele, tech, or even the product itself—what can be improved?
- Experiment. What works? What doesn’t? The best way to find out is to try it out. Failure is a key component to success.
JT seems all for growing a business and the success that can follow; however, he does acknowledge that growth can be just as dangerous as it can be beneficial.
“Success kills as many businesses as failure.”
Upscaling rapidly is dangerous and irresponsible. Premature and rapid growth can leave businesses unprepared—resulting in overwhelm. Even businesses whose original goal was “big success” may not actually know what they’re getting themselves into, leaving them likely to falter under pressure.
Rapid growth is unsustainable. If you’ve got 100 new customers, they’re going to be expecting to receive the exact quality of service that they’ve been promised. From here it’s a balancing game of maintaining quality, while simultaneously keeping up with rising quantity.
Growth is a key factor in success, especially for businesses just starting out, as well as those attempting to stay relevant. While growth can be dangerous, it can also be incredibly rewarding. Don’t stunt your growth, just grow responsibly.
Business isn’t quite as simple as passing “Go” and collecting 200 dollars—it’s less like Monopoly and more like an intense game of Risk.