I used to own a market research firm, and we’d do just about anything for a buck. You need focus groups? No problem. You need a conjoint study? We’re your guys. Mall intercepts? Let me get out my clipboard.
I found by offering such a broad set of services, we never really got good at any one thing. We had consultants doing certain types of projects only once or twice a year, so they lacked experience and got intellectually rusty. We needed all sorts of people to offer such a broad set of services, making the business neither scalable nor sellable. Eventually we decided to change models and offer one set of research papers to all of our clients on a subscription basis.
The subscription business started off well enough, but along the way, someone asked us if we still did focus groups. It was like a recovering addict being offered a fix. We jumped at the opportunity to do the project. The problem was that people noticed the crack in our resolve and burrowed a large hole in our claim of being specialists. Clients realized we weren’t totally committed to the subscription model and started asking for customization to our reports and one-off side projects. My employees noticed we had strayed from our offering and started accepting other projects – much like a child seeing his parents say one thing and do another.
Pretty soon, we were running two businesses in parallel with our resources being spread across two completely different models. We were half-pregnant: spread thin, cash flow tightened, project quality slipped and deadlines pushed. After a while, with clients demanding custom work, we had to abandon the subscription model and go back to just doing projects.
After retreating for a few years into the misery of owning an unsellable service business, we took another run at building a subscription business. This time, we told clients we were not accepting custom projects anymore.
We had to start saying no before clients realized we were serious.
I expected good clients to balk and that sales would dip. Instead, a funny thing happened: we started having much better conversations. Clients stopped asking us to do custom work and started asking how our new model could help them achieve their goals. For every one client who said no to our new model, two new ones heard about our unique offer and wanted in. Our salespeople got good at the pitch and were able to sign up 100 enterprise customers as subscribers.
The subscription business is a build-once-sell-many-times annuity model. Our scalability, recurring revenue and focus ultimately allowed me to sell the business in 2008.
Here’s a video that describes how you can identify a scalable product or service of your own:
The point is, we would have never built a sellable subscription business had we not started to turn down the one-off project work. The irony is that saying no actually made my business more valuable, not less.