The year software developer ITS Canada launched, it signed 250 clients—mostly smaller trucking companies. Its customer base doubled the next year, and again the year after that. Because the Newmarket, Ont.-based company built software that met hyper-specific needs, it brought in new business—and even raised prices—with (relative) ease. So when the client tally topped 1,000, president Raye Ackerman started thinking bigger. “We figured we were kicking ass and dominating the market we were in,” he says. “We thought we could do the same with larger customers.”
Three months into researching a new big-business offshoot, however, ITS hit the brakes. Ackerman realized the company would have had to change its entire business model—its price point, its service and sales strategies, even the product itself—to serve a new target market. After crunching the numbers, he and his team realized the potential returns didn’t justify the money they’d have to put in to the expansion. Since then, ITS has steadfastly focused on its core market, to great success: The company ranks No. 159 on the 2016 PROFIT 500 ranking of Canada’s Fastest-Growing Companies, with five-year revenue growth of 427%.
Conventional narrative holds that companies need to be constantly expanding and iterating in order to succeed. While there’s no denying diversification can help a company to hedge its bets, the “always be pivoting” mantra isn’t right for every business. Often, chasing the disparate whims of clients is more trouble than it’s worth.
Here’s how some of Canada’s Fastest-Growing Companies have grown by staying true to what they do best—even when it means turning business away.
Know your own strength
Clients ask Gino Coutu to expand the offerings of D2C Media (PROFIT 500: No. 162), a Montreal-based web agency that helps car dealerships in Quebec boost their online sales, “every day.” In particular, Coutu—the company’s president and CEO—is implored to come up with solutions for the service side of the auto business. He hasn’t gone for it. Why? Because he feels adding car-servicing work would do little to help him achieve his goal of being the industry leader in the car-selling world. “Whenever I think of adding a new service or product, I ask myself: ‘Will this help me achieve that No. 1 spot?’” he reasons. “If not, it will likely just defocus me from my top priority.”
Coutu prefers to devote energy to improving the area in which the company already excels, especially since he’s seen several rivals weaken a strong core offering by adding too many ancillary services: “We’ve been able to surpass them, technologically, because they’ve tried to be good at everything but they didn’t go deep in anything.”
Replicate, don’t reinvent
Bending over backwards to meet customer requests might seem smart to new companies eager to prove their agility, but developing something for a few customers can take just as much work as building something for many. And if resources happen to be limited, that can seriously stall a company’s progress.
In the early years of Cypress Solutions (PROFIT 500: No. 132), the Burnaby, B.C.-based provider of cellular equipment was often called on to develop custom proof-of-concept hardware and firmware for big organizations, including several major telecoms. It took up a lot of resources (in one notable case, four staffers spent 12 months building a custom offering) and it rarely translated into sales: The clients tended to award large-volume opportunities to bigger vendors. “It was very frustrating,” says Cypress president Casey O’Neill. “They relied on us for the proof-of-concept work, but some of the really easy stuff wouldn’t go our way.”
O’Neill has since shifted the company’s focus to developing fewer products with broader applications, sparking “a big change” that has helped Cypress grow 550% in the past five years. “It doesn’t matter if we sell 1,000 units or 10 to 15 units—it’s the same upfront work,” he says. “From a business perspective, getting a few 1,000 unit opportunities makes everything easier, and the payoff is much better.”
Such strategic allocation of effort is smart, says Dafne Orbach, president of NicheMktg, a Winnipeg-based consultancy that helps businesses reach core customers. “You need to consider how much resources you’d be investing in each client,” she says. “If it takes two hours to make a client happy, why not? But six months may be another story.”
Say no with confidence
Since ITS Canada’s early, aborted efforts to expand its core offering, the company has held firm on its stance. Turning away business is not something most entrepreneurs are wired to do, and Ackerman acknowledges it’s not fun. But he’s learned to appreciate the value of saying “Thanks, but no thanks” to requests.
Still, he’s been tempted. When a large U.S. company repeatedly asked him to expand the capabilities of ITS’s software program, he gave it some thought. He had a hunch that futzing with his core software would alienate—and potentially price out—his current clients by adding new, expensive features they neither needed nor wanted (“It’d be like if Kia suddenly started adding heated steering wheels and GPS systems to all its cars,” he explains), but he didn’t know for sure. So he asked a group of long-time clients their thoughts on a deluxe upgrade. Sure enough, “They weren’t giving us positive enough buy-in to justify the development.” Armed with this intel, he was able to say “No” to the giant with confidence.
But what if the client doesn’t like the answer? At D2C, Coutu finds it helpful to give clear reasons for turning down non-core work and, where possible, to provide referrals to businesses that can do what’s being asked. “It’s a service to the customers,” Coutu says, “And that’s something they typically understand.”
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