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How to Build a $1M Small Business

Abstract from http://www.newpathconsulting.com/2016

In a 2014 blog post, Christoph Janz, SaaS investor and co-founder of Point Nine Capital, wrote that there are five ways to build a $100 million business. You need either: How Build $1M Small Business

  • 1,000 customers that pay $100,000 per year (These are called elephants.)
  • 10,000 customers that pay $10,000 per year (called deer)
  • 100,000 customers that pay $1,000 per year (called rabbits)
  • 1,000,000 customers that pay $100 per year (called mice) OR
  • 10 million customers that pay $10 per year (called flies)

Janz builds on a popular hunting analogy used by salespeople, as a creative way to describe how businesses need to lure each of the five types of animal.

If you know your target customer and how much they are able pay, Janz asserts, you can align your marketing and sales and marketing effort to reflect attracting kinds of customers.

How many animals does your business need?

Let’s look at a small business who is striving to build a $1 million business, which might break down like this:

40 elephants at $25,000/year = $1M
100 deer at $10,000/year =  $1M
200 rabbits at $5,000/year = $1M

The idea is that to build a $1M small business, you need to understand the average price point for different kind of customers, and then you need to set specific goals as to how many of each type you need.

To grow to 50-100 customers you will need to understand the cost involved to scale to this level and how you will serve them all simultaneously.

For small business, one way is to build strong partnerships with the vendors you work with. That way you can cross-promote each other’s businesses and services, and provide trusted referrals to each other.

Hunting clients for a small business takes a clear understanding of the specific types of clients you want to attract to your business, and what it takes to land them. You can’t use the same tools to attract an elephant as you would to attract a fly.

For example, Hunting elephants requires the strongest relationships, along with recognition in the marketplace. And this happens after you land a lot of deer and rabbits. That’s why very small service businesses should focus mostly on attracting rabbits and deer. When you land an elephant, a lot of attention has to go towards a small number of clients, and you cannot pay as much attention to landing more deer and rabbits.

More details at – http://www.newpathconsulting.com/2016

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