The guest on Indie Business Radio yesterday was Marc Kramer, author of "The Small Business Turnaround." In our discussion, Marc reminded us that sometimes we need to scale down in order to scale up. That is, there are times when a business needs to minimize the options offered to customers in order to position itself for maximum growth in the coming years.
As a general rule, no matter what business you're in, about 80% of your sales come from about 20% of your customers. This makes it easy to analyze where the vast majority of your sales come from. When you do that, you can quickly and easily view the habits of your frequent buyers, and then tailor your future actions to focus on those customers.
For example, if you are a candle manufacturer offering different shapes and sizes of candles in 600 fragrances, but your most frequent buyers tend to purchase 50 of the same scents over and over again, you can quickly see that some fragrance oils are just sitting in a bottle waiting for the occasional customer to ask for a candle in that scent. By scaling back to 100 stock fragrances and perhaps offering the others in limited edition candles or in special kits, you beef up your ability to sell to your most profitable customer base and create a new reason for them and everyone to buy the scents that don't typically sell as well. Scaling down to scale up is a sensible option to consider on a regular basis to keep your offerings fresh and your inventory moving.
Question: How are you scaling down to scale up?