This is the third in a series of Posts on scaling a hypergrowth enterprise. I was the co-founder and CEO of CyberRep, a CRM and call center company which grew revenues nearly 160x (16,000%) to over $80 million over a 9 year period. In Part 1 of this series, I talked about People as the first of 5 key elements for scaling a hypergrowth company, the other four being Culture, Scalable Customers, Process, and Capital. I examined Culture in Part 2 of this series, and today we will discuss the 3rd element, Scalable Customers.
SCALABE CUSTOMERS
All customers are NOT equal. Some are much better fits for your company than others, in terms of how they treat you, their level of dependency on your services, and the degree of difficulty in servicing them. You want to serve customers who are growing fast and who will have more and more needs as they themselves grow. A “scalable customer” is one which grows and takes you along for the ride.
Partner Mentality – The best kinds of customers take a partnership approach to your relationship (as opposed to a vendor-vendee mentality). They rely on you for true “value add” solutions that go beyond just providing the bare minimum of what they need. They rely on you and have a high degree of dependency. These kinds of customers will continue expanding their scope of business with you, as they grow. Note: An added benefit of a customer with a partner mentality is that when things get rocky (and they inevitably will from time to time), they will be more apt to work through the issues with you, since you are a valued “partner” and not just another vendor.
Customers who grow fast – Try and find customers who are in hypergrowth mode themselves. Whether they are in hot market segments or expanding via acquisition, these customers need you the most because they have challenges supporting their growth. For example, my company supported Nextel and Microsoft (MSN) in the early 2000s when both companies’ user bases were exploding. The more customers they added, the more customer service they needed, and the better we performed, the more business they gave us. They expanded astronomically with us.
Know when to say “No” to revenue – It hurts to turn away revenue, BUT it’s required if you want to build a hypergrowth company. Saying “no” is really tough. It is tempting to want to do any kind of work and take on more than you can handle, or to take on a client that is not “scalable,” but you have to stay disciplined in your business acceptance. By pursuing the revenue YOU want, and focusing only on clients who will grow with your company, you can marshal your scarce delivery and other resources on becoming an expert at your craft and improving your service offerings with these scalable customers.
Thanks very much for reading. I’d love your feedback and thoughts, so please Comment below…and please sign up for my Blog too! (See the Signup box on the sidebar of my Home Page)
WINNING IDEAS - Tien Wong's Blog 
lol – As I was reading the comments, I noticed the post by “Masoud,” and said to myself, damn I don’t remember writing that! Alas, it was a different Masoud! 🙂
Very interesting article from a banking consultant that relates to, as I see it, exactly what you’re saying about Partnering with your clients:
http://www.ababj.com/briefing/the-community-bank-of-the-future-what-s-it-going-to-look-like.html
Clients should see you as a valuable resource they are willing to consult during times of prosperity and difficulty and furthermore, pay for your service. A person with your business acumen can run circles around other larger, boring and stoic market players.
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Thanks, Masoud. For sure the best and really the ONLY way to build lasting customer relationships in a service business is to get to really know the client, and deliver on their needs. Sounds so simple, but it’s very difficult to achieve, for any number of reasons (time, effort, energy, competition, etc.).
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Tien
Great post. I would say that “Partner” mentality cuts both ways, meaning that the company itself also has to treat its customers as partners and not as mere sources of short term revenue. In every instance when we had a long term highly profitable customer that had happened because we had learned their business in depth, and kept finding ways to offer them solutions that delivered short term and long term value. On the other hand every time we lost a high value customer it was because we lost our focus on treating the customer as a partner.
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Thanks Masoud. Your experience makes total sense to me. I try and get my team to try and understand the client’s needs and hot buttons as well as they themselves do. By inserting themselves into the fabric of the strategies, goals, and thought leadership of the client company AS WELL AS that of the individual players there, we can offer better service, and creative, proactive solutions for them, making us an invaluable asset for them.
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I look forward to following this discussion. I’ve only had a chance to read the 3rd installment so far, but I found it to be concise yet powerful. One thought I have regarding value of customers with partnering mentality: they represent an opportunity to build long term relationships that result in lower customer turnover as well as higher revenue per client, and this is important for achieving hypergrowth. Moreover, we have found taht in many industries, especially in B2B services, customers that are larger enterprises or are themselves growing rapidly tend to want to reduce the number of supplier relationships and to work closely with those that provide comprehensive solutions to their problems rather than individual services. It is the company that is able to think strategically about how to serve their customers that succeeds in retaining relationships with these customers. Best Regards, John Colwell
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Thanks, John. We found the same thing regarding larger clients wanting consolidate service partners from many to fewer. Great point! Being a valued partner of a customer is very key to getting into hypergrowth mode
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Tien,
I agree 100% with the partner mentality. I look and treat every client with the partner approach and this is so important in today’s economy. Thanks for sharing this amazing experience. Look forward to future posts.
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Thanks for the Comment, Chris. Yes, you are right. In today’s tough economic environment especially, it’s of paramount importance to figure out creative ways to become true “partners” with your clients. Clients have choice, and competitors are as hungry as ever. In addition, being a true partner keeps you on the high end of the value chain and insulates you against the commodity/price game.
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I would be interested to read of some specific examples of customers you said “no” to and why. Did that then help people identify other customers you said “yes” to?
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We built a business acceptance model which factored in about a dozen aspects and characteristics of the client and the services we rendered. Some of the factors included length of contract, size of client (Fortune 1000, public, PE or VC backed private, etc.), amount of annual billings, bill rate, recoupment of various costs (training, recruiting, re-training), set up costs, upside potential, complexity of service, program management required, etc. Each factor was weighted, and we scored all existing customers and all new prospects. All prospects we would pursue had to score above the median score of our existing client pool. It was a detailed and complex exercise, but proved to be very valuable. We said “no” to a number of “Dot Com” companies and prospects who were price sensitive. We also terminated a number of clients who were not as profitable or who did not fit our model as we grew. This was easy to do since all employees did detailed timesheets which allowed us to job cost every account.
As for your question about identifying “yes” clients, in our case yes. By saying no to prospects we didn’t want, we freed up sales resources to try and find better opportunities. Hope this is helpful.
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Tien – I couldn’t agree more with you. The operative phrase (which applies to every aspect of running a business) is “disciplined approach”. While a shotgun can “lay down a pattern” that might hit a few intended targets along the way, the really big game is best attacked with laser sight accuracy.
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Yes Mike, you are right! Discipline and focus are vital!! Thanks for the comment!
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