How To Scale Your Business By Getting Back To The Basics
by Stephen Steinberg (@SL_Steinberg on Twitter)
Trying to keep up with the newest business strategies and trends — “growth hacking”, search engine optimization, conversion rate optimization, lean startup — can easily induce vertigo. So much to remember, so much to think about. But is it necessary? Or are we just overcomplicating the core concepts of business?
If you’re about to start a business and are becoming quickly overwhelmed with things you “need” to do, or are already eyeballs deep into your current venture, listen up — this is basically my plea for all of us to take a deep breath and return to these core fundamentals of what makes a business successful before we worry about the more advanced tactics.
Arbitrage
Taking advantage in differences in price is a powerful concept. It can be applied to sales, i.e. buying something in bulk and selling it in pieces. It can be applied to marketing, i.e. buying marketing assets in bulk to lower the cost of each individual purchase. It can apply to hiring, i.e. coming together with a few other businesses and hiring an intern or part-time help and splitting their time amongst yourselves.
I recently heard of two interesting stories of entrepreneurs taking advantage of arbitrage —
The first was from a local guy that goes around buying up things at estate sales as a hobby. He came across a massive collection of comic books and although he didn’t have much knowledge in the category, after doing some quick research on eBay and Craigslist to see what other comparably-sized collections went for, he decided it was worth the gamble. Instead of selling them off one-by-one, which probably would’ve netted him even more profit, he decided to turn around and sell the entire collection to Sparkle City Comics, a large comics broker that buys whole collections, basically taking advantage of geographic arbitrage — this one broker couldn’t be in every place at once, so there’s room to buy collections locally and sell to them.
The other story was of someone who purchased full-page ads in a large magazine, and then resold portions of that ad for a profit. This is genius, because obviously there’s small businesses that can’t afford the exposure in a large magazine but would love the opportunity. This is simply taking advantage of volume arbitrage — buying in bulk and reselling the pieces.
Scalable Marketing
With the rise of digital marketing and in-depth ecommerce analytics, it’s so easy to know exactly how much return you see on every penny of advertising and marketing spending. A lot of people over-complicate the formula on determining if a particular inbound marketing method is “worth it” or not with concepts like LTV (life time value) of a buyer. While this is a good metric to know, it really comes down to a guess for most businesses.
The holy grail of marketing is to find a source of inbound marketing that is cash-flow positive. Forget the concept of LTV for a second and think about it from a cash-flow perspective, since cash is king. If you put $1 into an ad campaign, will you net more than $1 in profit? And is this campaign scalable, as in, there’s enough capacity and availability to pour money into it if you wanted to? If so, then you’ve found the holy grail of marketing — pour as much cash into it as you can and watch your business grow in a cash-flow positive fashion while not having to worry about if your LTV calculation was correct or not.
Valuing Your Time
One of the toughest parts of scaling a business is bringing on team-members to help out. You can only do so many things at once. And whether it’s tasks that you’re just not the best at, or tasks in which can be easily taught to someone else, there are plenty of areas in your business’ operation to scale.
But valuing your time is not just about scaling your team. It can be applied to anything that can save you time. Is it more expensive to Uber as opposed to taking public transportation? Yes, but is that extra 30 minutes of free time to work worth the extra $3? Yes, probably. Same goes with household cleaning, cooking meals and things like laundry and dry-cleaning. Your business is only operating when you’re working on it, so if you can pay a little more to free up your time, then it’s something you should consider.
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