Ready To Scale Your B2B Service? 5 Signs You’ve Nailed Your Business Model

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We often hear about how we need to first nail our products and services before we attempt to scale or expand our business (Nail It Then Scale It by Furr and Ahlstrom). But how can we know when we have sufficiently nailed our business model? Here are five factors that can help position your company for expanded future sales.

  1. Ease of application. Many companies have been formed around great ideas that are just too difficult for customers to implement. Your job as an entrepreneur is to remove as much friction as possible, and make the customer experience simple and enjoyable.
    1. Substantial ROI. Your B2B customers are, by definition, businesses. They need to make a profit to survive, and that means your value proposition must include an enticing return on their investment. As an example, a substantial ROI would be a financial benefit five times the amount you are charging them. Another important consideration is the payback time frame—how long it takes to recoup the initial investment paid for your offering. A payback of one to two years makes the decision to buy your offering much easier than a payback of five years.
  1. Customer retention rate. Once you convert prospects to customers, how long will you keep them? A retention rate of 90% is desirable. It is more profitable (a far easier) to keep an existing customer than to find a new one. If you can do both, your efforts to scale will bear more fruit, faster.
  1. Fanatical referrals. Word-of-mouth is your strongest marketing tool. Are your customers talking you up with their peers, friends, relatives and neighbors? This type of advertising is strong and effective mainly because it is free of the normal sales resistance that is an inevitable by-product of standard sales efforts. One raving fan is a potential gold mine for your business. What could 100 passionate evangelists do?
  1. Replicable business model. How seamlessly could your company double sales next year? Would it require a complete overhaul or your infrastructure, or could you ramp up immediately and with relatively little added cost? Growth eats cash, unless you plan for it ahead of time and your business structure is set up for growth.

Use these five Growth Readiness Factors to create a scorecard for your own growth plan. Following is a real-life example of how these indicators can reveal a company’s readiness to grow.

Business case

I recently interviewed the leadership team of Leading2Lean, a B2B SaaS company that helps manufacturers quickly see and solve hidden production problems and process breakdowns. This company is newsworthy for a few reasons. Since establishment in 2010, growth has exceeded 50% each year. They have no debt, no investors, and all growth to date has been organic. I was curious to see how Leading2Lean would score on each of the five Growth Readiness Factors. Here’s how I scored this company (1-100 scale).

  1. Ease of Application (score=85). Leading2Lean’s SaaS application takes 3 to 4 weeks to configure and install. Training takes place on site. One customer reported that users are initially skeptical about the system, but quickly come on board and begin saving time and solving problems.
  1. Customer ROI (score=98). The average customer reports 5 to 7 times ROI, with a payback of one year or less. Typical customer results include a reduction in maintenance costs of 10%, with a reduction in operating costs of 10%. Chad Williams, Corporate Maintenance Manager for West Liberty Foods in Mount Pleasant, Iowa, said Leading2Lean has saved $2 million in maintenance costs because it can better track materials, employee time and maintenance activities.
  1. Customer Retention (score=100). Admittedly, this score is an anomaly. But, as reported by Leading2Lean, customer retention is at 100% because they have never lost a customer. Most companies would not hit this retention mark. A score of 90 to 95 would normally be extremely strong.
  1. Customer Referrals (score=87). As reported by Leading2Lean, the most common referrals come from satisfied customers who change jobs. When they start working for a new company, the first thing they do is bring in Leading2Lean. This phenomenon works in the company’s favor, but is not predictable enough to build a growth strategy around. If the company could pair its routine sales practices with passionate customer testimonials, this score would improve.
  1. Replicable Business Model (score=94). Leading2Lean provides a SaaS product that is easily extended to a large number of future clients without modifying the underlying software. The only issue keeping the score below 100 is the implementation time and need for on-site training.

Overall Score=92.8

Legend: A score of 79 or less would indicate that a company would run into serious impediments when attempting to grow quickly. A score of 80 to 89 shows that a company is close to being ready to scale, but needs to work on the areas that would create obvious barriers. A score of 90 and above indicates a confirmed readiness to scale.

As a final thought, be sure that when you look at your own company’s readiness to scale, you ask your customers to respond to each of these five factors. You know you have nailed your business model when and only when your customers tell you so.

Source:  forbes.com

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