Scale Smart-Take Your Time- Pick Your Spots

Howard Tullman

      SCALE SMART – TAKE YOUR TIME – PICK YOUR SPOTS

I must have heard the story about the tortoise and the hare a few million times in my youth and you'd think I'd be sick of it by now. But - and this is amazing to me in today's “everything in a hurry” world - the basic lesson - that slow and steady progress wins the race in the long run - is still remarkably relevant and applicable - especially to new businesses. It sounds a little old fashioned and even a bit boring and it's rarely something that you'll hear any VC say - especially when the topic on the table is how quickly to scale the business, but it's something that the very best entrepreneurs always take to heart and keep top of mind. Rushing to roll out your business nationwide (and being a mile wide and an inch deep) may make the boys in the board room happy, but it's bad for your business if you aren't ready.

One of our recent Chicago success stories is SpotHero (www.spothero.com) which helps drivers find off-street parking spaces and owners fill their parking lots and garages.  There couldn’t be a better example of the “go slow until you get it right” approach. While competitors, copycats and other knock-offs attempted rapid geographic expansions across the country, SpotHero hunkered down and stayed in Chicago for the first two years of its existence. They figured out that you’ve got to nail it before you can scale it.

Today, 5 years later, they’re still only in about 20 cities (with 5 major cities contributing about 98% of all their revenue), while one of the few competitors who are still standing is “doing business” in more than 150 cities. I say “doing business” because SpotHero earns more parking revenue in one of its cities than those guys do in all 150 of their cities combined. SpotHero is larger and growing faster than its remaining competitors (notwithstanding having raised less capital) because they continue to focus on deeper and better connections to each of their markets and customers rather than simply trying to be everywhere at once. Doing a lot of things is not the same as getting things done and done right.

Adding marginal inventory (or any other kinds of commitments) in new markets without assuring the presence of matching demand is an easy trip to the toilet. It’s like the busted-out guy who takes an Uber to Bankruptcy Court and then invites the Uber driver into the proceedings as a creditor. Similarly, the kind of parking you’re identifying and booking for the consumers who are using your services matters as well. Events parking is relatively easy, but it’s also infrequent and a relatively small part of the overall market. SpotHero targeted the biggest and best parking concerns and locations in the country (with massive numbers of consistent- often daily – users) from the get-go and now works with 9 of the top 11 players including all 5 of the largest parking companies in the U.S.

It’s never easy going after and trying to sign all the big guys. They’re tougher and smarter and more demanding, but they’re also the best businessmen. What you can learn from them and what they can help you accomplish is priceless. (See   http://www.inc.com/howard-tullman/a-big-customer-wants-exclusivity-now-what.html .)  If you can lock these folks in and deliver the right results for them, there’s no better place to be and no easier way to scale. Let the other guys drive themselves crazy chasing Mom-and-Pop lots all over the place. What they’re missing is that every new lot they add reduces the yield to the guys who came before and that Ponzi-ish approach can’t make anyone very happy over time.

There are almost always at least two economic sides to any marketplace (regulators, legislators, etc. don’t count for these purposes). When you’re growing your new business, you need to be very careful in the process that you don't leave the early adopters and your beginning boosters behind. They were there for you when the whole thing got started and they're critical references, foundational supporters, and concrete demonstrations that your product or service is sticky. Tracking and driving improvements in same store sales are the best and easiest way to measure stickiness and the best way to keep score as well especially when those critical numbers keep ticking up year over year in your oldest markets. This is because, if the older customers lose interest or cashflow and they’re leaking out of the back door, it doesn’t matter how you're doing in terms of growing or buying new customers at the front end of the funnel. 

Good business isn't usually about beating the other guys - there will always be new and different competitors - and there will always be people pitching cheaper and even better solutions. Chasing someone else or trying to quickly copy their plans and trying to outdo them assumes that they know what they're doing and are a lot smarter than you. I don't think there's any good reason to believe that. Sustainable businesses create real, demonstrable value for their clients and customers and they keep upping the ante.

No one new gets to rest on their laurels or their past performance even if they have a track record to point to which most startups don’t. Customers' expectations are progressive. It's NOT about how fast you're going (but never slow down), it's about how fast you're getting faster and better. It's all about acceleration, not simply velocity. And it's about innovative techniques and technologies rather than tonnage as well. Precision trumps sheer volume. Your pitches, programs and proposals must be better, not just longer or louder.

It's not always a discussion or a conversation about a specific contest, feature, function or challenge. As often as not - it's about making this discipline of “always trying to be a better you” a part of your company's culture and embedding it in the ways that you do business whether you're selling products or services - widgets or wisdom - or whatever. 

Having a great product isn't enough. No one sells just a product these days. We’re all in service businesses trying to secure not a single sale, but to grab and hang on to the lifetime value of each customer. Creating a business that will last is about building long-term relationships and compounding customer trust. Connection and continuing engagement coupled with constant improvement and innovation are what keeps you in the game. I wouldn’t be surprised to see them developing some new tools soon which will let their lot owners dynamically price parking in their lots based on all the same kinds of variables that so many other services are now using for surge pricing.

Startups don't have an established following or a brand to rely upon as shorthand for their promise to deliver and/or as a way to overcome the decision fatigue that plagues all of us these days in a world of infinite choices. Startups make a future promise and then it’s directly on them to deliver on their commitments and to keep raising the bar. It’s your business’s job to earn and retain my loyalty. Loyalty today means nothing more than the absence of a better alternative.

Over-promising and under-delivering is obviously fatal over time. And even the coolest technology alone won’t get the job done. SpotHero stuck with old-fashioned paper documentation until they precisely figured out the needs, comfort levels and the concerns of their customers (for the moment) and – only then – did they build a killer mobile app that now handles more than 80% of their reservations. The other players are still using websites.

Bottom line: People don’t long remember who was first; they only know who’s best. SpotHero’s the best in the biz. 

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