Operating defensibly

Three partners, facing each other around a table, ask this question:

Where, how should they spend the next $50,000 to ‘grow’ their business?

How do they make this choice in a way that balances their desires for:

  1. growth
  2. profit
  3. safety

Each partner shares these three desires unequally. But they’ve worked alongside each other long enough to respect each other’s point of view.

Their attempt to answer the question reveals a dilemma in 2020:

How to operate defensibly, sustainably given our dependence on a few tech and ad platforms?

First the partners discussed an analysis of spending to promote products on Amazon.com. Sales for the recent period showed a return over 5x ad spend.

OK. Increase the ad spend and grow.

Curiously, none wanted to spend the next additional dollar on the Amazon opportunity, on that channel.  Why?

They’re seeking more than growth

  • One partner described the opportunity to grow in a B2B market that is similar to their retail B2C store. The next $50k could go towards accelerating a new, different customer base on a sister website.
     
  • A second partner suggested an experiment for the B2B opportunity. Unleash a salesperson to make a regional tour with meetings and hand-shakes and samples.
     
  • The third partner wanted to focus on the B2C ecommerce site. Double down on building an email optin list. Get a
    direct line to the customer.

What’s a common thread across their distinct ideas?

They’re seeking a balance between growth and safety.  Profit need be there, and some investment choices yield it sooner than others. But safety is an equally important, underlying need.

Rather than ‘safety’ maybe you prefer another word: risk mitigation.

Above I called it operating defensibly. If not overused, I might call it operating sustainably. For the sake of this example, it means less dependence on a few big middlemen for your next order.

Business owners I talk with feel anxious about their reliance on one or another big tech / ad / marketplace platform. It’s well-founded.

Amazon is not just a marketplace that takes a commission. You’re also giving it a share of your ad budget. While particulars differ between Facebook and Google, broadly they’re like Amazon. All these platforms are ready to collect, in just a few clicks, the next $X you can invest in “growing your business.”

A thought experiment:

If you spend the next $X with your platform of choice, let’s assume there will be profit. There must be some, assuming competence.

Let’s also assume growth. Top line sales grew, too, right?

OK. Will there be more safety in your business afterwards?

Will there be a greater likelihood that the source of your next order will be different from the prior? One source of safety is variety in sources of customers.

Big platforms sit between you and your customer. Their every innovation cements that intent. Meanwhile, your relationships with them, by design, are impersonal.

As you grow with a platform, so also does your dependence upon it. What you depend upon will change because platforms evolve. Will their evolution sustain you and your employees?

If safety is among the mix of needs that are important to you, alongside growth and profit, then a question:

What might you do with that next $50k to build a direct, personal relationship with your customer?

if I don’t have cake soon,

I might die.