Deciding Against the Slog of Custom Application Development
Post Under: Building It Beyond You, Risks & Rewards
After graduating from the 10KSB program another friend recommended a program called EO Accelerator. The EO in EO Accelerator stands for Entrepreneur’s Organization. Entrepreneur’s Organization is a world-wide organization of company founders for companies that have at least $1 million in annual revenue. There are chapters in many cities and Cleveland has one of the most active chapters – #CLERocks! But there are many many more companies that are under the $1 million mark and so EO started the Accelerator program to provide the structure, knowledge and support to help companies potentially scale to the $1 million mark, ideally in under three years.
In my Accelerator group one thing became apparent; it is way easier to scale certain types of businesses to over $1 million vs. other types. For example, there were literally no manufacturing companies in Accelerator. This is because a typical manufacturer can get to $1 million pretty quickly. Get a new machine, the right people to man it and a couple of orders and ‘bam’ – golden ticket punched. (Yes I know it’s not that easy but you get the gist).
Next down the list; companies with a specific product they are selling. The possibilities here are endless. You can have a small product in a large market or a large product in a small market. Either one can be sustainable and over $1 million with the right marketing, SEO and sales team.
And the bottom of the barrel; every other service business. And I mean every other one. Whether a HVAC company, accountant or custom software like Adatasol. Scaling these businesses is HARD. And that is why 75% of the companies in Accelerator start out as a general service business, and the non-graduation rate is relatively high.
So how does a service company succeed at scaling? One word: specialization. It’s only thru figuring out a niche, product or platform that they are able to focus their efforts on the processes needed to scale.
This was a perfect challenge for Adatasol at that time. We were a general consulting custom software “shop”. We made our money by billing for our time. Our “slog” was finding the next customer to build a new solution and bill those hours, hopefully continuing to consult with them to enhance it over time. But even in the best of scenarios, these relationships do not last forever. A great customer might last five years. And then it’s on to the next customer. And finding the next customer is also a challenge. Selling a consulting gig takes skill. These weren’t copiers or computer servers we were selling, and I found it impossible to find or train other sales people.
Clarity Through Specialization
However, when you specialize, everything becomes easier. This includes:
- Targeting your marketing and sales to a specific customer.
- When you work on the job in your specialization, you have an opportunity to improve for the next one vs. recreating the wheel every time.
- It is eminently easier to train on a specialized set of expertise vs. generalization, and you can hire others who have experience within your specialization.
I’m grateful to have had Accelerator to help us consider a specialization. We debated focusing on one market, like healthcare, commercial laboratories, law firms, or manufacturing. We even considered an entire rebrand (more than once). In the end, we saw an opportunity to ‘specialize’ thru acquisitions. I’ll focus some future posts on the pros and cons of this strategy, but it’s worked for us.