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For many entrepreneurs, there’s a point between starting and growing where you face the tough question of whether to invest more. With both of my businesses, I asked myself, “Is this a winning business?” From my previous experience in venture capital, I knew there were certain criteria I’d look for in a winning business. See if your business passes these tests.
Do you know your customer?
Think about your business: Are you selling to other businesses or consumers? The sales pitch will be different depending on who your customer is. “It’s important to monitor your audiences’ behavior,” says Michelle Madhok, founder of SheFinds.com. “We know that our readers buy a lot of Spanx and Tory Burch, so we endeavor to bring special deals on those brands to our audience.”
Once you know your customers, you’ll know how to satisfy them properly. At Send the Trend, we often create names and profiles for our customers, like this: “Stacy lives in Long Island. She’s pregnant with her second child and she’s a working mom. She’s shifting her spend from herself to her kids. Stacy’s not buying clothes and shoes, because her body is changing with her pregnancy. She’s buying accessories instead.”
We think about where Stacy shops, what TV shows she watches, what magazines she reads. We think about all of the ways to reach her. Stacy is just one of several customer profiles, and there are thousands of customers like her. Knowing your customer is the start of marketing to her.
What is the market you’re pursuing?
You should be going after a large market that’s growing. This may seem like common sense, but I’ve seen too many businesses fumble here. Avoid small markets or businesses that are too niche.
“Ideally, you want a massive potential market that can be broken down into bite-size segments,” said Jordy Leiser, co-founder and CEO of STELLAService, a company that rates the performance of online stores. “For STELLAService, the overall market size includes over one million businesses in nearly every online category. However, in order to successfully launch and attain rapid adoption, it’s important to focus on one segment at a time, which for us was online retail. In the same way Facebook began its quest for global connectedness by initially focusing on college kids at top-tier universities, each high-growth business should nail down an early adoption strategy that positions it to become a market leader in a subgroup first, which then allows it to legitimately go after that larger, multi-billion dollar opportunity.”
Focus on one market, capturing market share and establishing a leadership position. Are you aiming at a large enough market? Think it over. If it turns out you’re not, see if you can tweak your business model to include a more substantial market.
How many revenue streams are you going after?
Chances are, if you have a bunch of revenue streams, you’re not executing your vision properly. If revenue is coming from businesses, consumers, wholesale and retail, you’re probably not focused at all. It’s time to start fresh. Just like you picked one market, pick one revenue stream and execute on it well. Focus on growing your main revenue stream before jumping into others. This is not only simple business savvy, it’s cost-efficient.
As your business grows, you’ll iterate on your model and test different customer groups and markets. “Gilt Groupe initially targeted women who loved designer fashion, and over time the business evolved to include many more categories for both men and women,” says Alexandra Wilkis Wilson, chief merchandising officer of Gilt Groupe. “Today it has become a lifestyle platform for its millions of members.”
Gilt started with one market, women’s fashion, and catered to an urban professional woman. As the company grew and iterated its model, it expanded its offerings. Start simple. Gather traction for your business, and then move into expansion mode.
Are you innovating?
The crux of building a long and lasting business is innovation. Focus on being new and being better. If you try to mimic, you’ll always be playing catch-up and never lead the pack. Steve Jobs at Apple has always focused on creativity, design and usability. His focus on features and functions allows him to create market-disrupting devices. Don’t try to recreate the wheel (or in this case the iPhone) when it has already been done. Be a leader, not a follower.
So, did you pass the tests? Yes? That’s great. You have the makings of a winning business.
OPEN Cardmember Divya Gugnani is the CEO of Send the Trend, on online destination for fashion accessories, and is also the CEO of the culinary media brand Behind the Burner.
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