“Difficulty seeing the value”

A good question from my post opt-in survey:

What’s your #1 question about specialization, positioning, lead generation, or moving into advisory work?

The lack of a signature service or package. I’m checking around this but need to refine and clarify and develop the right tiers. I haven’t figured out a profitable way to work with small and medium sized creative firms (who I am most passionate about helping). Creative firms have difficulty seeing the value in things like strategy and positioning for their own businesses.

Thank you for this question.

I have three bizbuddies with businesses that generate a bit north of $1 million US dollars per year in revenue. Their target market? Small and medium-sized creative firms 🙂

I don’t have all the context and details here, but I don’t think your target market, dear questioner, is the major constraint on your business’s profitability.

It might be worth exploring the meaning behind “small”, because if you equate “small” with “1-employee business”, then that might change things.

Here is some data: https://data.census.gov/cedsci/table?q=541810%20&tid=CBP2018.CB1800CBP&hidePreview=false It contains something useful to us, which is US government data on how many different Advertising firms there are at various size points. I use Advertising because there is a NAICS code that matches right up with that sector, even though Advertising is just a subset of the market (creative firms) you’ve targeted.

Here’s what we find (column A is employee headcount, column B is number of establishments):

- Experiential marketing learning for independent consultants

(Peruse the source: https://docs.google.com/spreadsheets/d/1gAAU_LNdD4YK8U5zQcq94v3FrjU-RfRzjKAeFHdZtvQ/edit?usp=sharing)

Let’s say that you draw the line between small and large at 50 employees. That means there are 13,030 small Advertising agencies and 707 large ones. That’s not a too-small market, even with strong competition from several of my bizbuddies already killing it with their focus on this market (to be clear, we’re using Advertising as an easily-measured proxy for the somewhat less-easily-measured creative firms market; your actual market is larger).

Next question: is there something different about these companies willingness to spend? I don’t have great data at my fingertips, so let’s use the payroll of these firms as a proxy. That data is easily available via the above Census Bureau download.

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There is something different about willingness or ability to compensate employees. Generally, the bigger the firm, the bigger the per/employee payroll, and there’s a substantial jump when you get to the <5 employee size.

This might be a reason to avoid those tiny creative firms; ones with less that 5 employees. Working with them could be less profitable, though there a lots of assumptions baked in there. Avoiding those tiny firms would substantially reduce your market size, but again, we’re looking at a subset of your defined market of creative firms, so I doubt this would be a problematic reduction. In fact, it might be helpful in differentiating.

Anyway, dear questioner, I hope you see the point. I would encourage you to exhaust every profitability-boosting option before you start thinking that the market is the cause of low profitability. Maybe you’ve already done this, in which case I apologize for my flawed assumption, but maybe you haven’t.

I don’t know how much “hands” vs. advisory work you do, but if you find it hard to get away from the hands work, then I think that’s your first place to start increasing profitability. And if any of what you do is already commoditized (or will be soon), then that’s a source of relatively lower profitability that has nothing to do with how large or small your clients are; simply nobody wants to over-pay for a commodity and so the profit potential of a business in a commoditized market comes from efficiency, and this is often incompatible with the kind of 1-person businesses we run. Innovation work tends to be more profitable for us.

Thanks again for your question!

Keep building; keep taking risks y’all,