For years I have proudly proclaimed the strategy of sitting underneath the table of feasting giants and eating the scraps and crumbs that fall from the table. A bootstrapper’s dream is to get into that little market segment that isn’t being addressed by several large players, exactly.
In Bootstrap Business I go so far as to outline a landscape matrix that actually shows how to very deliberately get between several large companies and make sure you don’t infringe on their territory, while still eking out that little crack of opportunity.
I have deployed this countless times. There is; however, one danger. When the market starts to mature, sometimes the giants reaches down and pick up the scrap, and in the process–squish you like an ant.
Indeed, this happened to my team this week. Google released a new algorithm update and indeed it dramatically changed our channel. Simultaneously, another giant that we work with got up from the table. When the two big fat giant bellies hit each other we got squished in between. Needless to say, it’s very painful when that occurs, and it can actually be life threatening to the business.
In this situation, I believe we will recover, but it’s caused me to outline three distinct things that you need to do when deploying this type of opportunistic strategy.
1. Understand the giants eating patterns. How long do they eat? When is it time for them to move? In the case of Google, they release algorithm updates every so often. So, when you see the signs of movement you better get out from underneath their feet as they get up from the table.
2. Give yourself cushion either to the left or to the right. This means, have the ability to either push to your supply side or push to the customer side. If you get squished right between two giants with no place to move, you end up getting your margin squeezed, squeezed, squeezed.
Transactional businesses are wonderful, because they provide a repetitive income flow, but if you are not careful you can end up getting squeezed right to death. Either own the customer and control it, or make sure that you can control the supply cycle. I have discussed this principle many times and I have always stated:
- Never maintain only one supplier.
- Never rely on only one customer.
Well now I need to kick myself in the pants, because in the businesses currently getting squished, we basically have one supplier and one customer. That is always a precarious situation to be in.
3. Move from the table as quickly as you can. Once you get profitable, make sure you can then quickly move and transition to a place or a pocket where the giants aren’t quite as likely to rumble over the top of you. Once you’ve filled your belly, look for the exit door as quickly as you can.
I still contend that finding a really hot sector that is on a wave, where there are giants pounding the table, and where money and scraps are falling onto the floor–is a great strategy. Just beware there is a downside. I’m personally committed to using these opportunistic businesses to leverage and become viable quickly. Then I rapidly move in to more value transactional, longer-term engagement types of businesses. I encourage you to try it too.
The moral of the story is…keep your head up and your eyes open when you are sitting next to giants.