How I sacrificed revenue to improve my products

I’m guessing this is just something that happened over time.

Lisa: It was almost like an evolution in that, when we do non-core work, you end up spending a lot more time doing it. What we saw was that while these parts of the business were growing, they were declining in profitability because we’re doing things in many cases for the first time.

Whereas when we stuck to our core business, we were much more profitable and the client satisfaction rate was higher as well.

So why exactly did your revenue go down so much then?

Andrea: It would be higher, except we’ve done a lot of spending on marketing. In theory, yes, if it hadn’t been for the additional marketing spend, it went down a lot. We’ve significantly upgraded our offices as well.

We’ve got our facilities looking really great; we’ve got our marketing engine working; and we’ve built ourselves for a lot of scale.

How did you feel personally about doing this? Was it stressful?

Lisa: When you think about small business hunger, we live and breathe off what we go out and sell ourselves. To actually turn away work is very nerve wracking, and in some ways courageous as well.

I mean, we have a staff here who we love, and we’ve put everything at risk. We’re putting their jobs at risk as well. And watching revenue decline, it’s hard to come around to that.

But you have to question yourself and what you do, and we’ve just found that when we stick to our core, we win more business and we do it well.

Talk about your clients. How did they respond to this new approach?

Andrea: Where it did happen, they absolutely supported our decision and they understood. There are so many more other research marketing companies out there doing generic research products, and they’re probably much bigger than we are. It’s a competitive environment, and we all know it’s better to work in an area that’s less competitive.

With the downturn in the economy, people are looking to outsource these types of services, so for us it actually represents a growing market.

Do you think you’ll ever expand into those other areas again?

I don’t think we’ll ever increase into new products or new services, but what we may do is expand what we already do into new areas. Our core business is benchmarking, but we may create more niches around that.

So for other businesses in this same situation, what would you recommend they do to get back on track?

I think the key is that businesses really need to understand profitability by product line. As long as you focus on your products and their individual profitability, then you can focus on what’s making you money. Focus on that, and what you’re good at it, and keep that focus key.