Moving upscale, part 2

Earlier today I wrote that moving upscale and focusing your services of Fortune 500-sized companies can increase profitability, essentially because you can charge more for the same stuff.I laid out a few reasons why, but each one of those reasons has a potential negative flip side:They will pay for “insurance” because they’re phenomenally risk-averseThey want robust experience and process-driven insurance. They may also want shitload of meetings and over-communication-driven insurance with a heavy dose of ass-covering in the mix for good measure.They are more used to the idea of assembling a team of specialists, some of whom may be purely advisory.They might not hire if you’re a small generalist. They’ll hire larger generalists for staff aug, but that changes your value prop vs. a specialist who might lead or advise on the project. And there’s a LOT of competition from the Accenture’s of the world on both the generalist and specialist end of things.They can be less price-sensitive.While rolling in the dough from one or two high-profit projects, you can easily and unexpectedly leave yourself open to a client concentration death-blow that kind of sneaks up on you. Whale clients are fun at first, but they can weaken your business long-term.They often have a larger “buyer surface area” – larger number of people who can make sizable discretionary spending decisions.Despite the larger buyer surface area, those buyers can still be very difficult to get in front of unless you have “door-opening” levels of credibility.None of these reasons, individually, are a reason to focus on F500’s or not focus on F500’s. But you should consider them all together when making a decision about what size company you focus on working with.

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-P