Wednesday, August 28, 2013

Consulting Malpractice.....
Business schools and marketing consultants are great at helping their students/clients develop a strategy to turn that great idea into a huge success with a huge exit strategy.  Sometimes that ends up being terrible advice.  I watched student at Fuqua a few years ago who had started a high end custom jewelry design business and had seen demand grow so fast she hardly had time to breathe. She was getting a lot of advice on how to scale her business to get to that desirable run rate in the tens of millions a year that all B-school students wanted.

The problem was that this would require that she compromise the artistic element of her personal design work and take her brand into the mass market.   A key part of her value was a custom design.  Every time someone talked about the idea she looked like she was going to be sick.  They never considered the  possibility that perhaps for her a better path would be to stay at the high end / low volume world and keep doing the design work that made her happy. That concept seemed foreign to most of the B-school world around here.

I encouraged her to pursue a different path.   One way to expand revenue was to generate more repeat business from each high end customer leveraging common design across multiple products.  She did not really need my expertise as she was already on that path.  She did need me to point out to her that any time you cannot keep up with demand you are almost certainly not charging enough.  She mostly needed a voice to balance the others screaming at her not to choose a path that would lead to failure.  By failure they meant having to "settle" for a business where she did what she loved, generated a few million a year in revenue,  and had to learn to survive on a half million to a million a year in net personal income.

Don't get me wrong.  I more often encounter the struggling business owner who hangs on to his or her dream as the company goes down in flames. I'm not talking about refusing to adjust to market reality.  I'm talking about the ability to make conscious choices between profitable paths where the trade-off is between success at different scales and other personal and life objectives.    

Most of my life I have dealt with venture funded companies where it was understood from day one that the objective was high growth and a very large exit.  I am very comfortable in that environment;  it seems normal to me.  However, those of us in the business of teaching and giving advice need to be careful when dealing with small business owners, especially sole proprietors.   Try to discover not only where they want their business to go, but also what they want their lives to look like 5 to 10 years in the future.  

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