Are you breaking even (or worse) year after year, and finding yourself frustrated by lack of growth? You work long hours, feel like you have hired the right people and have a great product, but the results just limp along.
You are not alone. One likely reason is that you haven’t been able to articulate the ways in which your company is better than the competition well enough for your target audience to pay attention to your messages.
There is no doubt, differentiating a company in today’s commodity-filled marketplace is a tough proposition. But it can be done.
The StreetLinks Difference
At Novation Companies we scale and grow early stage businesses. One such company, StreetLinks Lender Solutions, illustrates the problem of sufficient differentiation that plagues many smaller enterprises. The company, a real estate appraisal firm based in Indianapolis, was struggling to gain market share four years ago. Even though Fannie Mae regarded its appraisals as top-notch, the competition was better known in the marketplace and doing more business.
In 2008, it had 15 employees, two customers and was operating at breakeven on annual revenue of approximately $2 million. In three years, we would book 60 times more revenue and dramatically increase the number of employees, despite limited resources.
When Novation acquired the business, we knew, given the fallout of the recent credit crisis, the marketplace was ready for a high-quality appraisal management company. Lenders were more focused on quality than they had ever been, providing the opportunity to differentiate StreetLinks. Research indicated that the competition was not delivering that quality product lenders desired.
Taking advantage of StreetLinks’ knowledge of the appraisal industry and Novation’s previous experience as a mortgage lender, it was clear that the business had to design a new and better process for delivering a better appraisal product in the market. It would also have to be delivered faster and with better service than the competition lender.
The change process began with flowcharting the current appraisal process used by the competition. This led to designing a quality control process using a combination of enhanced technology and old-fashioned manual review that would deliver a higher-quality product to lenders. We made the decision to add the manual component and sacrifice margin in order to deliver this quality, knowing that as lenders realized our appraisals were higher-quality than the competition, we stood to gain market share.
Even though our new appraisals were better, we also knew the market would be skeptical unless we could quantify the differences. But first we had to level the playing field. We embarked on a process of educating our customers on how they should be measuring the quality of appraisal management companies they were currently using or considering. We then asked them to benchmark our new product against our competition, confident in the knowledge that our scores would be the highest.
Once StreetLinks were able to quantify the difference, it developed great marketing materials, put together a strong sales team, obtained a list of all our target customers and started to tell a new story. New sales targets for StreetLinks were set and new goals were communicated to every employee.
Soon StreetLinks set new production records and put together a bonus plan for every employee in the company that rewarded them for providing great service to our customers. At the end of 2011, the company booked $120 million in revenue and had more than 500 employees and 400 customers. The growth continued in the first quarter of this year, with over $40 million in revenue.
Lessons Learned, Your Keys to Success
The key to growth can be repeated if you’re willing to ask yourself the hard questions. It starts with developing a superior product or service that can be differentiated from the competition with a better value proposition for the target customer. This is easier said than done, but if you don’t get this step right, the rest won’t matter.
Once you’ve achieved that level of insight, identify your target customer and understand their needs and their pain points. Develop your sales pitch around meeting their needs and make sure they know specifically what your company can do to help relieve that pain.
Start out by asking for a small piece of business to prove you are better than the competition. When you deliver on your value proposition, they will very quickly realize you understand their needs and you will win more business.
Lance Anderson is co-founder and CEO of Kansas City-based Novation Companies. Two of his six start-up companies went public on the NYSE. In 1996, Anderson co-founded NovaStar Financial, (now Novation) through a private capital raise of $50 million. The company traded publicly on the NYSE in just 10 months. Over the next 10 years, NovaStar grew to a market value of more than $1.7 billion and had 5,000 employees.
During the credit crisis of 2007, NovaStar was forced to shut down operations as a subprime mortgage company and lay off all but a small number of employees. Anderson led the effort to pay back all secured bank lenders and reposition other outstanding obligations, with the goal of enabling NovaStar to rebuild. In August 2008, with these efforts successfully completed, the company purchased its first operating subsidiary.
Novation has acquired three additional companies and Anderson plays an executive role at each, together with a strong CEO or COO officer who is responsible for day-to-day operations.