Dave Heywood, MD & Growth Partner at OX7 Partners (00:00)
Some businesses spend years building a reputation, developing a sharp proposition

and working out how to win clients. Then, just as they’ve got a good thing going, they decide it’s time to move up market.

But have they really made the most out of a market they’re already in? This is Scale, an OX7 Partners podcast, and I’m Dave Heywood. And this week I’m getting into our tendency to chase bigger and more sophisticated customers as we grow, and whether we’re perhaps a little bit too quick to move on from the markets that we’ve spent years learning how to serve and serve well.

Now, a few years ago, I came across a couple of businesses that were in the process of merging. One had a relatively small number of large, quite prestigious clients. The other had a much broader base of smaller, let’s call them less sophisticated clients. And there was a little bit of an attitude here towards that second group. A sense they were perhaps somehow lesser clients. Not quite the sort of accounts that an ambitious business should be pursuing and retaining

Except the numbers told quite a different story here. the business with the larger concentration of smaller clients actually ended up with far more predictable, resilient revenue, and was less exposed to the whims of a handful of major accounts. It was quite a useful reminder to me

that the standing of your clients and the strength of your business aren’t necessarily the same thing. And that’s not the only place I’ve seen this mindset crop up.

I’ve seen plenty of businesses here start growing, building a really, really decent reputation and establishing themselves well in a particular market or niche. And then somewhere along the way, that conversation changes a little bit here. We need bigger accounts, larger contracts, more sophisticated buyers. And that whole sense of moving up market becomes almost synonymous with the idea of progress.

And there are some instances where that can be the right call,

but I do ponder how often we’ve properly established that that opportunity is better, rather than simply assuming that bigger clients means a better business.

Because there’s something we tend to overlook in all of this. That getting established in a market takes an enormous amount of work.

You spend a lot of time here really understanding your clients. What matters most to them, and why they might choose you over the alternatives. you’ve put a lot of energy into developing your proposition and positioning around those needs. You’ve taken that out to market and built a solid reputation, worked out which channels and

methods reach those customers best and started to develop a sales approach that helps you win them.

So before we decide it’s time to move on to bigger and better things, surely it’s time well spent here to ask how much more can we get out of everything that we’ve already built?

contrary to popular belief here, moving up market is it’s not as simple and straightforward as just finding bigger versions of your existing customers. They may well buy differently, have completely different priorities, expect completely different things from their suppliers and partners, and they will definitely compare you to a completely different set of competitors.

So your existing positioning probably won’t resonate in exactly the same way. the channels and approaches that have worked brilliantly for you up to now may well be less effective.

Your sales process needs to accommodate larger buying groups, elongated decision time frames, and just a completely different level of scrutiny.

And you may well find that you need capabilities that just weren’t particularly important in the market that you’re serving right now.

so what might start out as a bit of a no brainer

Will probably result in you having to rebuild quite a lot of the commercial machinery that you may well have spent years developing.

And meanwhile, there’s still a market out there. So do ask yourself, have you caught all the fish?

So I really do think here that we can be a little bit too quick to move on.

We talk a really good game about expanding our market and moving upstream,

But I’m not sure we always properly understand how much opportunity remains of a market that we’re already serving.

And if your reputation here is getting stronger and your sales and marketing efforts are starting to become far more effective, wouldn’t it be worth seeing how much further that could take you?

there’s a world of difference here between identifying you’re in a market that’s genuinely running out of opportunity and a business that’s just deciding that it ought to be

Pursuing bigger and better clients.

And reality is, winning some of those larger, more sophisticated clients

can take months, or in a lot of cases, I’ve seen it even take years. You’ve got to invest considerably more in the sales process, understand and be able to navigate some far more complex procurement requirements

And adapt your offering and delivery in order to meet those expectations, because they will be different.

whereas chalking up more clients in markets that you already know really, really well, with a proposition that’s already proven and really easily understood, is going to be considerably more straightforward.

Our objective at the end of the day is to build a commercially successful and sustainable business.

And quite often the best route to that can be making more out of what we’ve already established, rather than starting the process of having to build.

Something new.

and make no mistake, there are some risks here around chasing bigger and bigger accounts. I’ve worked in businesses generating millions in revenue and from the outside in are on a fantastic growth trajectory and it’s not until you get into the guts of the customer makeup

That you start to notice a bit of an uncomfortable reality.

a handful of major accounts accounting for a disproportionate proportion of revenue. And when you’re in that position, those customers really, really start to rule the roost. they definitely know how important they are to you

and their demands can start to consume an enormous amount of time and energy here. and it’s not that we don’t recognise that risk, but recognising the risk and being able to do something about it in the immediate term are very, very different things here. Now you’re hardly going to turn down the revenue. You’d be daft not to. But diversifying that customer base

can take a really long time.

And so we can find ourselves in that really perverse position where the clients that we’re most dependent on are also consuming a lot of the resources that we need to reduce that dependency.

Which often causes me to ponder whether pursuing more of the same is always the best answer,

particularly where you’ve got access to a broader market of smaller clients.

Where you already know that you can compete and win effectively.

And there’s another angle to consider here as well.

When we direct that attention towards winning prestigious new clients, what’s happening to the clients that we’ve already got?

Now, I’ve come across very few businesses in my time that aren’t adept at recognising the importance of their largest clients. they get everything thrown at them: dedicated relationship managers, strategic account planning, and loads and loads of attention. but there’s a risk here that the rest of the client base becomes a little bit of an afterthought. And there’s a real risk of a sort of death by a thousand.

Cuts here.

If one smaller client leaves, no one’s particularly worried. But then what happens if another goes? And another and another.

And it’s not just about customers who leave here, it’s also taking our eye off the opportunities with the ones who stay. so you might you might have a smaller client here whose business has grown but don’t have the closest relationship with you. The client who’s been buying the same service for years, despite having some clear needs for.

We could also meet elsewhere.

Or what about those who would happily spend more time and money with you but only if someone actually took the time to understand what they’re trying to achieve?

And I get that it does become harder here to maintain relationships, particularly as your volume of clients grow. It it’s not practical to give everyone exactly the same attention. That’s a fast track to an unprofitable nightmare here. But it still seems rather odd to invest so much time and energy in winning more customers only to overlook the opportunity to develop the ones that have already in and through the door.

And especially so where at the same time we’re fixated on spending enormous amounts of effort

To win clients in areas where perhaps we’re less established

So really this is all about making the most of what we’ve built.

There are plenty of good reasons to move upstream here. I get it.

But I’d want to be really, really confident before committing substantial resources into chasing that.

and I’d start by deeply understanding the opportunity that’s already right in front of you. How much of your existing market have you actually captured? Is it growing? Is it shrinking? Are there plenty of customers out there who look very much like the ones you’re already successful with?

But just haven’t bought from you yet.

and then take a look at all the machinery that you’ve built around that. So by that I mean your positioning, your proposition, your marketing, your sales approach, and all the tools that support and underpin that.

Are they working well? Could they work a little bit harder? And actually how much more growth could they support before you need to make any significant changes?

And the last thing I’d really consider is is the opportunity cost here of moving up market. What would you need to invest to compete effectively? How long might it take for you to see a return?

Is that realistic? And what opportunities might you be sacrificing in the meantime?

Because actually we might find that the most growth here is about making the most of what we’ve already worked really, really hard to create.

I totally get the appeal here about this idea of a moving up market.

Bigger clients, punchier contracts, and that sense that we’re all moving on and up and progressing to that next level.

But I would just challenge this idea and notion that progress is always about moving on. Sometimes it may well be about getting considerably better at what we’re already doing and wringing that for all it’s worth.

and so before you make the decision that you’ve outgrown the market that you’re in,

Ask yourself have you caught all the fish in the pond? I hope you found that useful. This is Scale, an OX7 Partners podcast. I’m Dave Heywood, and we’ll see you next time.