On being busy, but broke

Struggling businesses don’t always need more customers

It’s a dangerous myth that struggling businesses just need more customers. In my experience, many businesses aren’t struggling because they don’t have enough customers, they struggle because they have too many customers. Or too many of the wrong customers. They’ve become busy, but broke.

Businesses are interconnected systems, and when you adjust one lever, other levers move somewhere else. If your business is struggling, you might think to move the Price lever downward, hoping that the Customers lever moves up. Or perhaps you’ll throw the Advertising lever to the sky, hoping that Sales will respond in kind.

And they might. But the Profit lever will hit the floor. You’ll have a bustling business, but you may end up losing money on every sale—or your margins will be so thin it will feel that way.

For most businesses, it’s less about advertising and promotions, and less about simply pricing, and more about positioning. You need to figure out why someone would pay you a premium for your product or service, instead of going somewhere else that’s cheaper. That’s the essence of a great position—being the exclusive provider of something that customers actually want.

So if you’re struggling, if you’ve got customers but no profit, the lever to adjust may actually be your product or service—potentially moving it upmarket, while narrowing your focus to just what you’re best at and just what your customers can’t find anywhere else. You’ll then find that the Customers lever doesn’t even move downward, it goes up, and you’re making more money from every sale.

Of course, when you start moving the Positioning lever, your Competition lever will move upward, too—people will see your success and attempt to copy it. But dealing with people copying you because of your success is a much, much more interesting problem than trying to get people in the door in the first place—or trying to eke out a razor-thin margin off of your sales.

And then you’ll need to deal with the classic Innovator’s Dilemma–by moving upmarket you make room for a disruptive new entrant at the lower end. But again, that’s a spectacular strategic challenge to have, and one that is much more fun than running around frantically, wondering how you managed to become so busy but so broke.

This also means to watch out for advisors who merely promise you more sales or customers. And be doubly on guard against software or tools that promise to “optimize” your spend for you. They only know how to move one lever.

And the worst part is, they might actually get you a lot more customers. You just may end up realizing that wasn't what you truly wanted after all.