Thursday, July 04, 2013

The Mile Wide Trap – A Value Killer

If your revenue starts to plateau after a period of rapid growth, you may have fallen into The Mile Wide Trap - not a good situation if you are looking to maximize the value of your business.
To illustrate, consider a public relations (PR) firm started by an entrepreneur who originally spent ten years learning a variety of marketing disciplines (e.g. PR, advertising, direct marketing, social media, etc.) as an employee at a big advertising agency.
Given her experience and connections, she quickly landed General Motors (GM) as a client and was asked to handle certain regional dealer events.  Her business began to grow and she hired employees to assist her.  After doing a great job with the dealer events, GM asked her to handle their annual sales conference.  Again she delivered with style and creativity.
Impressed with her innovative approach, GM asked her to assist with their next advertising campaign.  She started the company to do PR, not advertising, but GM was a great client so she agreed to help with the ads.
Then GM asked her to take a look at their website.  Her employees had no experience with web design, but she had done some website jobs back at the ad agency.  Not wanting to disappoint GM, she started to personally handle projects that her employees didn’t have the ability to execute.  She also neglected new business development because the more GM asked her to do, the busier and more profitable her firm became.
Then one day the owner looked at her P&L statement and realized that sales for the month were flat compared to the prior month.  The next month it happened again and then again.  Sales had leveled off, the business was economically dependent on one customer, the business owner was spending all her time on client work and she had no time left to sell – she had inadvertently fallen into The Mile Wide Trap.
The Mile Wide Trap
The Mile Wide Trap occurs when you do an excellent job serving a small number of customers and they ask you to handle more of their business.  You keep delivering, and they keep broadening the list of products and services they want you to supply.
Your company is wildly profitable serving the expanding needs of this small list of "great customers" so you keep falling deeper and deeper into the trap.
Pretty soon, you’re an inch deep and a mile wide in offerings and the only person in your company with the depth of industry experience to deliver all of the services is you.  At this point, you’re trapped because your expenses have crept up as your revenue has exploded – leaving you dependent on the sales you get from a small group of demanding customers.
With no more hours in the day, your company stalls as you focus on trying to keep your "great customers" happy. This is a true value killer.
The Solution: Sell less stuff to more people.
Instead of selling more things to a few customers, concentrate on selling a few things to more customers.
Ethos3 is a successful design firm that avoided The Mile Wide Trap by focusing on one very small corner of the design business: PowerPoint presentations.  Rather than offering a broad range of design services (e.g. brochures, websites, signage, advertising, etc.) to a handful of clients, the founder decided to focus on providing a specific product to a number of clients.
This focus allowed him to train his employees to follow his system for designing presentations.  Everything from the proposal to project management to the final invoice was standardized so employees could follow a system that didn’t require the owner.  Ethos3 has scaled up nicely and counts Microsoft, Google and Cisco among its 300+ customers. is a video production studio that also avoided The Mile Wide Trap by focusing exclusively on two-minute animated "explainer" videos that explain a company’s value proposition simply and effectively.  Instead of making different kinds of videos, the owner decided to focus on creating one specific type.  This allowed them to standardize their pricing and provide employees a step-by-step guide to making great explainer videos.  Flikli has scaled up to 22 employees and their work has been featured in everything from Wired Magazine to The Washington Post.
You can fall into The Mile Wide Trap innocently enough: you do great work and a customer wants more of you.  But it’s a trap that will eventually choke off your growth and the value of your business.  The way out is to follow Ethos3 and’s lead and focus on selling less stuff to more people.
If you’re curious about your company’s growth potential and the other seven factors that drive value and salability, take the Sellability Score questionnaire here:

1 comment:

  1. Great story and perspective Jason. Strategy is all about sacrifice - deciding what not to do, or to offer. You offer good advice for building a strong sustainable organization - we find the same is true for building strong brands.