When deciding to go into a business or launch a new product, service, or business area there’s essentially 4 things to ask:
Is there demand and if so how much?
Can I buy it for substantially below the market value and how much?
How much and easily does it scale?
How much durability does it have?
It’s usually easy to find things for which there is a market demand and you can buy for below market price. Virtually any reasonable business has a marketing budget that is sufficient to earn a profitable income. However, for the most part these are difficult to get big with because there’s a lot of competition and effort unless you catch a short term wave. These businesses are what we call “grinders” meaning to grow them you’ve got to grind it out day after day.
The grind is required in any business but a business that’s a grinder won’t have rapid organic growth. The #1 thing that’s required to make a grinder business successful, the differentiator is marketing. You can 100% grow these businesses large and successful but it’s usually a fairly long path. In the right industries you can sometimes accelerate this path through aggressive acquisitions but then you get into playing a different game, which is applying the above criteria to buying companies rather than just products.
The reverse type of business are growers. Growers are defined by compelling differentiation. Because they are differentiated they have low competition and if they are compelling can benefit from rapid organic growth as word spreads about them and inbound customers are very substantial as compared with grinders that tend to benefit most from a lot more outbound marketing relative to growers.
This is in the DNA of the company if you’ve got a grinder your fate is to grind, these can be great companies but you need to be aware of the importance of the constant push. If you’ve got a grower you’ll still have to grind, you’ll face other challenges but the push for the market will be less intense making it easier to scale faster provided all other variables hold true. Essentially, Silicon Valley is largely an environment where entrepreneurs are constantly starting new companies in search for growers and VC firms are investing little bits looking for one that will take off and they can run with it to make all the other work worthwhile. This in contrast to the general business formation environment where most people create grinders to provide them with a living and a lifestyle but without the intention of scaling rapidly into something huge.
If you’d like assistance in evaluating an opportunity please contact us. Click “ask a question” in the lower right corner of the screen and we’ll be happy to assist however we can.
https://richucation.com/wp-content/uploads/2015/11/gearsgrinders.jpg6001000Michael B Rosmerhttps://richucation.com/wp-content/uploads/2016/01/richucation-1.pngMichael B Rosmer2015-10-25 19:18:102016-01-16 12:27:38Grinders and Growers