This post originally appeared on HBS Working Knowledge.
Many companies get stuck on a plateau, unable to grow and burning through cash at a frightening rate. Frank V. Cespedes discusses how focusing on the right customers can generate growth again.
Starting a successful business is often considered the hardest thing entrepreneurs do—but growing an existing venture may be even more difficult. Many companies get stuck on a plateau that inhibits their ability to grow: a scale stopper.
Call this barrier the “Devil’s Triangle”: the place where a company seems weighted down by the bounds of its original start-up business model, a lack of experience by its founder(s), and an accelerating, expense-fueled burn rate through working capital and investor patience.
“Once a venture reaches a critical size, its complexity greatly increases,” write the authors of How to Identify the Best Customers for Your Business, published in the Winter 2013 issue of the MIT Sloan Management Review.
“Ineffective opportunity management eventually leads to loss of money, time, and positioning with customers.”
At this point, it’s time to identify your core customers and build a scalable platform for growth around them. That’s the message from Frank V. Cespedes, the MBA Class of 1973 Senior Lecturer of Business Administration at Harvard Business School; James P. Dougherty, cofounder of the health-care IT start-up Madaket; and Ben S. Skinner III, head of the Atlanta-based consultancy LCS Partners.
The article discusses the importance of understanding your ideal customers; the implications for selling, cost management, growth strategy, and organizational relationships; and a process for putting it all together.
We asked Cespedes to expand on how firms can break free from the grip of what he refers to as the Devil’s Triangle.
Read the full article.