Every now and then, I need to estimate how financially attractive some future opportunity is. What if we expand to Germany? What if we launch this new product, targeted at a slightly different audience?
If those questions come from companies that make hundreds of millions in revenue, that exercise usually makes sense. At that scale, you may be starting to “run out” of your target customers in your initial markets. For instance, if you’re making premium vegan meal kits in the UK, it’s unlikely that you’ll be selling 67 million of them a day, given that’s the entire UK population. No matter how great your meal kits are, not everyone’s going to buy them.
But often, founders of companies with far smaller revenues ask these questions.
Assuming you have not yet hit any real revenue ceiling (yes, if you run a café, there are only as many customers you can serve in a day; if you have a shop on the high street, you can only serve people who walk by – in both cases, please consider online presence), there is usually one good answer to this – don’t worry about new products and expansions, just keep doing what you’re doing.
Why? Because we often make the mistake of entering new geographies and new product categories while only scratching the surface of our immediately addressable market. It’s cool to say “we’re a global company”, “we have a large product portfolio”, “we have presence in 20 countries and counting”. But pursuing those extra opportunities comes at a cost – they require extra resources, they require your attention, and they make it harder to communicate your offering to your customer.
Instead, if you already sell something that works, make it better, make it more compelling for your users, and figure out how to reach these people more easily, and at scale. In other words, double down. Your top line and bottom line will both thank you. Scratch the surface of your target market, then make a proper dent. There is a reason why Uber didn’t launch Uber Eats in its second year.
Love and cash flow,
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