Many a small businessman, empowered by the success of his small operation, expands himself into failure because he didn’t understand the dynamics of his success. Many of us have seen a successful restaurant expand their facility, staff and services, only to see their business dry up and disappear. Writing in Inc. Magazine a number of years ago, business consultant Norm Brodsky wrote, “If you don’t really understand what’s driving your success, you have to be careful about the strategy you adopt. There’s a risk, after all, that you may accidentally undermine whatever made your company successful in the first place.” Brodsky cited an example of a client-friend who wanted to expand his very successful retail store, but when encouraged to evaluate his business, he realized that the increased costs would require another million dollars in sales to break even . . . and his current customers had not turned away because of his crowded shop.

 

A fitness center where I trained was doing quite well in cramped quarters in a strip mall. Their clientele were serious “iron-pumpers” and workout addicts. The business was sold to a couple of neophyte contractors who moved the business into a larger location, bought all new equipment to replace the battered-but-functional weights and machines in the old club. They used their contracting skills to create a beautiful, high-end fitness palace. Within six months they had gone bankrupt and the club location and assets were sold to a group who operated a number of high quality fitness centers that catered to the “in crowd” of young, high-income professionals. The two contractors did not understand the business dynamics of the club they bought and had continued to market in the manner that the old club owner had used to achieve some level of success. They had moved from the club from a manageable overhead to a huge burden and the marketing techniques they had taken over from the previous owner could not fill the pipeline with their new business requirements.

 

When my late father-in-law died unexpectedly, his other son-in-law took over his retail shoe business. He had worked for the business for about twenty-four years and thought he knew everything the old man knew . . . and more. Within a year, this business that had made a millionaire out of the founder, was failing and had to be sold by our mother-in-law for a fraction of the value of a year before. My brother-in-law did not understand what made the business successful. He was a dynamite shoe salesman, but didn’t know why his father-in-law had been so successful, in fact, he often derided him for being such an “old fogey” in his business practices. The changes he had made after taking over had led to the demise of a highly successful retail outlet.

 

Writing in his newsletter, Michael Masterson, refers to the “optimal selling strategy” of a business as the heartbeat that makes it work. Many successful small businessmen take years to learn exactly why they are succeeding, but after that “aha” moment, they know how their business works and are able to better manage, grow and control the company. No more lying awake at night with the sweats. Simply put, the optimal selling strategy is the knowledge of how to acquire customers at the lowest possible cost, while understanding your business’ dynamics . . . the formula that makes it work.

 

Smart, successful business owners do not take on added overhead and financial burden without a careful evaluation of the pros and cons of the growth. Even smarter businessmen today often opt to increase their business without growing their physical plant or staff. They do this by outsourcing many of the routine functions of their business to specialists and then they focus their attention on the areas of business where they have the most expertise; purchasing, sales, customer service and manufacturing. In this manner they make more efficient use of their resources and have contract specialists perform many of the routine, time-consuming functions like sales lead development, database management, inbound call centers and the like.