GUEST AUTHOR BLOG: by Mike Michalowicz author of, "The Pumpkin Plan: A Simple Strategy to Grow a Remarkable Business in Any Field."
A few years into building my first business I realized our moderate success was a lie.
It doesn’t matter how much revenue you bring in if you have to keep killing yourself to make it and your receptionist still takes home more than you do.
It was right before my breaking point that I read an article about how farmers grow half-ton, alien-like pumpkins, and realized their growth strategy could also be applied to growing a monumentally successful business.
At the core of this strategy is the belief that it’s better to have fewer, more promising clients than many clients who, for whatever reason, just aren’t the right fit. Eighty percent of new businesses fail within the first five years of operation, and I believe this is because they drain their resources trying to keep unworthy clients and customers happy, and recruit more just like them.
It seems counterintuitive to let go of clients who could bring in much needed revenue, but it works. Within just a few years of implementing this approach, I sold my first business for millions.
I share the exact “Pumpkin Plan” method, and other proven, rule-breaking growth strategies I used to grow not one but two multi-million dollar businesses by age 35 in my new book, "The Pumpkin Plan." Here is a brief breakdown of the “kill-nurture” strategy I reveal in the book:
1. Assess the Vine: Identify Your Best and Worst Clients
Rate each client based on the revenue they generate, their potential for generating more revenue, their payment policies (do they pay in advance, slow pay, or owe you their first born), their respect for you and your company, and their willingness to work with you when problems arise. Add your own parameters specific to your business, and then add it all up. You might be surprised who comes out on top, especially when many entrepreneurs devote so much time and energy to serving those clients who end up on the bottom.
2. Remove Blight and Disease: Fire Your “Rotten” Clients
Now that you know which clients are dragging you down, let them go. You can do this any number of ways, including raising your prices, discontinuing a product or service, or by simply telling them you are unable to serve them any longer, and refer them to your competition. Then, cut any expenses related to serving these “rotten” clients. Very quickly you will notice you have extra time and resources to focus on your most promising clients, and to recruit other clients just like them.
"It seems counterintuitive to let go of clients who could bring in much needed revenue, but it works."
3. Water, Water, Water: Nurture Your Top Clients
That old playground rule of treating everyone the same does not apply in business. You’ve got VIP clients, and you’re going to treat them as such. With a maniacal focus, attend to the needs, challenges, and deepest wishes of your top clients. Rather than ask them to rate “how we’re doing” (which you must never, ever do), interview them about your industry as a whole. Find out what frustrates them most, what “impossible” product or service they wish they could have, the biggest problem they just can’t seem to solve. Then, figure out how to systematize giving them exactly what they want, and do it!
4. Prune and Weed: Avoid Distractions Disguised as Opportunities
Just because it sounds like a good money-making idea, doesn’t mean it is, and not all expansion projects are worth pursuing. After you identify your top clients, remove the “rotten” clients, and start wowing your VIPs with your stellar nurturing skills, you must begin the ongoing process of weeding out prospects and opportunities that do not fit your requirements or serve the needs and lofty desires of your top clients.
Success in business is not a quantity game. To grow a truly remarkable, highly profitable business, the key is a narrow focus across the board – including your client roster and prospect list.
Mike Michalowicz launched and sold two multimillion-dollar companies and currently operates his third, Obsidian Launch, a consulting firm that ignites explosive growth in companies that have reached a plateau. He is the author of The Toilet Paper Entrepreneur and "The Pumpkin Plan," and is a small business columnist for The Wall Street Journal.