Hunter? Gatherer? Both.
I’ve been pondering the application of the hunter/gatherer dichotomy to business.
On the one hand, we have “Don’t put all of your eggs in one basket.” Common advice to reduce risk through diversification.
On the other hand, when a tiger hunts, it sneaks up to its favorite watering hole where it has many deer to choose from. But only with laser focus on one deer can the tiger hope to be successful.
In our world of building scalable and saleable expertise-based businesses, we must be both hunter and gatherer.
You increase the value of your business through (i) exclusivity, and (ii) predictability. “Exclusivity” means you own assets that are exclusive to you and you have a unique market position, which together create barriers to competition. “Predictability” means you have a business that can scale, has predictable revenue, and can operate without you.
Your Exclusivity is enhanced by a laser focused position in the form of a niche, a specialization, or, even better, a combination of both which results in deep expertise. Doing all things for all people sounds like a smart diversification play, but is actually a tiger dashing around wildly after every deer in the watering hole. If your effort is scattered, your effort is unfocused. You will not catch any deer, and you will exhaust yourself in the effort. In the words of Blair Enns in The Win Without Pitching Manifesto:
As you deepen your expertise for your chosen market, you’ll begin to spot trends. Trends become a model or framework. You’ll know how to create value for your ideal clients. And voila — processes for replicating this kind of success start to develop.
Once focused, we will work to add to and deepen the skills, capabilities and processes from which we derive our expertise.
Repeated observation and problem solving is bound to improve our quality and efficiency.
Your Predictability is endangered by revenue concentration. Revenue concentration refers to the amount of your total revenue that is generated by your highest paying client or a set of your top paying clients. Rule of thumb is that you have a revenue concentration problem if a single client accounts for 10% or more of your revenue or when your five largest clients account for 25% or more of your revenue.
That whale client is the equivalent of having all of your eggs in one basket. There is no denying the comfort a whale client provides; we’ve all had them and loved them. But it is risky for you. Let’s say you operate with a healthy a 35% profit margin but one client is responsible for 35% of your profits. The loss of a whale client can instantly make your profitable business unprofitable. Businesses with a revenue concentration problem are unpredictable and generally unsaleable (with one exception--being purchased by your whale client!).
The moral of this newsletter: Be a laser focused hunter in pursuit of your ideal client. But keep going back to that watering hole so that your ideal client doesn’t become your only client. (So many tortured metaphors, so little time 😊.)