It is enormously important to know what you want to achieve when starting your Service Based Business and to invest the time and energy to decide what your business will not do - the essence of strategy.
This is a follow-on article to an earlier one on asking whether you are building a comfortable lifestyle business or a legacy-minded business.
Specializing is a deliberate act of omission.
Every year, two-thirds of new consulting firms are started by first-time business owners.
Drew McClelland, founder of Agency Management Institute (AMI), calls them "accidental business owners". While it sounds harsh at first, that's definitely not the intention.
He is seeking to call out the situation where exceptional people set out to provide a better service, product, or experience, yet commonly lack the business acumen or experience to build the business deliberately.
As a first-time business owner, the lack of a strategy often means you become a generalist and find difficulty attracting top talent, great clients, and capturing exceptional profits.
I need to be clear here - being a generalist is not necessarily bad or wrong. What I mean to say is that it's the default direction when your business does not yet have a strategy.
Avoid the fallacy of full-service.
The temptation to be all things to all audiences is highly compelling, yet can hurt your profit potential as well as your mission to make a significant impact.
Let's consider a quick example related to your physical wellbeing.
Typically, your primary doctor is within a short drive of your home, yet you are highly likely to travel great distances to seek out a surgeon renowned at treating a rare or complex disease.
Who likely commands the highest fees? Yep - the surgeon. That's the power of being a specialist versus a generalist. The specialist's reach is much greater due to scarcity and uniqueness.
In business, you must find your smile.
In the early 1990s, Stan Shih, the founder of Acer, a Taiwan maker of computers, established the concept of the "smiling curve."
This phenomenon depicts the value created along the value chain - from conception to maintenance - with each end adding the most value.
Acer used this discovery to transform their business from a relatively unknown manufacturer of computer components to a global brand of PC-related products and services.
According to Wikipedia, "presented in a graph with a Y-axis for value-added and an X-axis for value chain (stage of production), the resulting curve resembles a "smile".
Over the past three decades, this phenomenon has been reimagined to fit many industries. Below is a chart that seeks to capture the aspects of a Service Based Business.
Most Businesses focus on frowning instead.
Every potential client has unique challenges and they need a service provider that specifically caters to their needs.
When you attempt to offer services that span the gamut of the value chain, you are typically defined by your lowest value offering.
Said another way, implementing a solution makes it difficult to be considered for more profitable and less resource intensive strategic, conceptual services. Not impossible, just more difficult.
This is why, even though I'm not a fan of the large consulting firms, they attempt to distinctly brand their lower value services. They are protecting the high-end strategy work and its lucrative fees.
To add insult to injury, many Service Based Businesses focus their energy on securing the lower value implementation work while giving away the conceptual, strategic work.
This is why I'm a proponent of paid discovery.
Why your clients don't value your insight.
Many times over the years, I've had conversations with owners frustrated that clients don't value their insights. And, typically and coincidentally, they are not charging for this wisdom.
Simply put, we value what we pay for. It's not a difficult concept yet easily missed.
When we put skin in the game - pay for something - we instantly take the purchase seriously.
The quickest way to remedy this situation is to set expectations at the outset - when you are onboarding a new client or an existing client seeks a new engagement.
By that I mean paid discovery - charging for those early conversations when the problem or challenge is being defined. The focus should be on the value created - the new profits to be created or the costs to be eliminated.
This is important work that will shape everything to come later on.
If you don't have one now, you need to build a playbook that clearly educates clients on how you work and how they are supposed to interact with you. The act of setting expectations will have a profound and positive impact on your business.
Putting it all together.
Knowing the value of your contribution is a great start, but an even better one is making it obvious to your prospective customer that value will be created from the outset and payment is necessary to start that conversation. If you don't believe in yourself, who will?
Yes; it's easy to say and takes guts to implement. And, there will definitely be some prospects that will refuse.
That's actually a good though, because there is a high likelihood they are not a good fit, if they can't recognize the value, and would be difficult later on as well.
Setting expectations upfront will produce better customers and allow you to do better work overall in the long run.
What are you selling? Do your customers know this?