J’s Amazing Early Success With Her Little Business: Will She Move Her Business Into Stage Two?

August 11, 2017 in Blog,Essays

I asked J how her business was doing.

“Very well, actually,” she said. “I’ve got all the customers I can handle now and I’m still getting inquiries even though I’ve stopped advertising.

J is a “nail technician” – i.e., she does manicures and pedicures. But she’s also the mother of three children, one of whom is still a toddler. When the third was born, she quit her job at a resort salon and went out on her own. But rather than risk a lot of money and time in a shop, she meets her clients at their offices and homes.

I’m one of those clients. I pay her about three times what I’d pay for the same service at a salon, but the time she saves me by coming to my office is worth a hundred times that difference.

Apparently, I’m not the only one. There are more than enough customers within a half-hour of her home to keep her working full-time. She doesn’t work full-time. Not even close to it. But she makes more money than she did working 40+ hours a week at the resort.

J’s first few clients were former customers that jumped at the opportunity to have her come to them. But she built her business by advertising on Google. And guess what? She did it with $5 ads!

I’ve written about low-cost start-ups before, but this may take the cake. For every five-dollar ad she placed, she got hundreds – maybe even thousands – of fees in return.

She’s happy with her success. She has the time and the freedom she was hoping for. And her income, as I said, is better than it was when she was working full-time.

But the elephant in the room is the untouched potential of those Google ads. The return on her investment is enormous. That means, if she wanted to, she could bring in five or 10 times as many customers easily and without risk.

She understands that. But she can’t service many more clients and she doesn’t want to.

I suggested that she could increase her income by gradually increasing her fees. “You’ll lose some clients for sure,” I admitted. “But you’ll replace them with others willing to pay more. You’ll be working the same hours and making more.”

She didn’t like that idea. She felt it “wasn’t fair” to her existing clients. Speaking as one of those clients, I told her that I wouldn’t object.

“No,” she said. “I wouldn’t feel comfortable with that.”

“The other option is to move your business to the next stage,” I said.

In Ready, Fire, Aim, I talk about the four stages of building an entrepreneurial business. In Stage One, the entrepreneur’s primary job is to figure out the optimum selling strategy (OSS) – i.e., how to bring in new customers at an allowable acquisition rate.

Stage Two is not necessarily about working more. It’s about increasing the production capacity of your business by (a) multiplying the OSS and (b) hiring people to handle the extra customers.

In J’s case, that would mean hiring nail technicians and spending her time managing them and the business.

This is always a problem with growing a personal service business: What’s to stop your employees from befriending and then stealing your customers?

We talked about that. But since I have no personal experience in her kind of business, I couldn’t pretend that my suggestions were anything other than ideas.

J has three choices: She can leave things as they are and be happy that she is working less and making more. She can get over her doubts about the fairness of raising her prices and make more by raising her fees. Or she can ratchet up her advertising, hire freelancers to meet the extra demand, and figure out a way to make the “stealing” problem insignificant.

I’m pretty sure she won’t take option two, and that’s fine with me. I’d be happy if she took option one, but I’d rather see her take option three.

I’m sure she’ll be thinking about that while my nails are growing. Next time she comes in to trim them, I’m guessing we’ll both have some ideas about getting her safely to Stage Two.

(More to come…)

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