Authority businesses deliver a wide variety of products and services to their customers. Consulting, memberships, software and services all have their role within product offerings for authority businesses.
However all authority businesses reach a saturation point with their offerings. At some point, they can’t get any more golden eggs out of the goose.
I want to talk about the 6 early warning signs that your authority business needs to scale.
Authority businesses make their living by offering their expertise, insight and industry knowledge to customers and members. Customers benefit from the years of wisdom you’ve accumulated and all the exercises and processes that you have to make their lives easier.
But we often see scale and growth as expensive and risky. So when we see that we need to serve more people and have closer connections with them, it can be easy to rationalize: “We’re good with the stage we’re at. We don’t need to grow now.”
Thinking like that for authority businesses is dangerous. Eventually, your customers and members will look elsewhere for help.
Scale isn’t the problem, it’s the solution. If your authority business doesn’t scale and grow it’ll shrink and die.
Here’s a reality check – see if you recognize these 6 early warning signs. If you do, you need to start scaling your authority-based business!
1. User retention is down
Are current members leaving you? This is the most obvious and common symptom of a lack of scale. When your current members start to leave you, it’s because you’re not scaling.
You haven’t scaled your offerings to them, the connection with them as a member or the ways they can benefit from knowing you.
Think about a chef who can teach people to cook. The chef has 3 people approach them and ask about recipes, ingredients and cooking skills.
At first, the chef could meet the 3 customers at the grocery store to collect the ingredients. Then, go back to a kitchen and learn one-on-three about what and how to cook.
As the chef’s popularity grows, the audience interest grows. So the chef wants to scale the offering. If the chef just stuck with keeping it the same model (meet at the store, go to a kitchen, cook), they can’t ever reach new audiences. Soon enough, their current customers would leave to.
If you’re struggling to keep new members, the answer might sound counter-intuitive, but you need to scale. Experience proves – you must grow your offerings and members in order to keep current members.
2. User consumption is down
Another common trait of authority businesses is that their consumption falls over time. Gyms are a classic example of a membership style authority business where consumption can collapse over time – even though membership levels might remain roughly the same.
Over time, new and current members start going to the gym less. But they keep their membership (but don’t use it)…which over time will lead to them leaving.
One of our customers, prior to our working with them, noticed that fewer and fewer current members were attending their live workshops.
Initially, the customer’s idea was to introduce more and more content. They released 5 courses in a year and got more people to sign up. But the same “attention half-life” phenomenon occurred. In fact, they noticed a REDUCTION in both retention and consumption, even though they were adding content.
It didn’t make sense. Adding offerings, or scaling their offerings didn’t help with consumption. So what would?
Have you noticed a drop in your current user consumption? Imagine if people started watching fewer hours of Netflix. Netflix would do something about it.
The solution lies in scaling your community and designing a community that supports growth. Don’t confuse content quantity increase with scaling!
3. Sales costs are going up
Niche markets eventually become crowded and that drive sales & marketing costs go up. Simple as that.
Over time there are always going to be more and more companies competing for your customer’s dollars. More importantly, there are more and more distractions competing for your customer’s attention.
Do not fool yourself into thinking that your only competitors are businesses in a similar industry. In fact, other businesses in the same industry are way down the list of distractions taking attention away from you.
Authority businesses rely on information, insight and helping customers. It’s only a matter of time before that information or insight becomes commoditized.
This all affects cost of sales. Without scaling your outreach, it becomes more expensive to earn attention from your audience.
Think about that, scale reduced the cost of sales. By staying the same size, your costs of sale increase. This is the biggest trap authority businesses fall into. If they refuse to scale their outreach, their current outreach costs increase. By sticking with tried and true formulas for advertising, traffic, sales and conversions, your business costs rise.
4. There are communities talking about you, but you don’t have your own
The most reliable indicator of whether your business should scale is external communities.
Community would be loosely defined at a collection of people who meet in the same place, to share similar ideas.
Authority-based businesses should be setting up forums, Slack channels, Facebook groups and LinkedIn groups to encourage their customers to talk to each other.
Instead, what most authorities do is act fearful of their customers and members and do their best to splinter communications. Many authority-based businesses don’t want their customers in one place, lest they share the worst parts of their experiences.
Guess what – customers will go elsewhere to talk to others (and they do!). Facebook has thousands of unofficial groups for businesses, companies and memberships. All talking about the same products and offerings from one business, while not officially being a community managed by the authority business in question.
CRM systems. Software. SaaS businesses. Banks. Memberships. The list goes on.
If there are communities out there, talking about you but not with you, you need to scale. You need to scale now and scale fast. Grow your own community and really focus on encouraging other members to talk to each other.
Don’t shy away from them, offer to help them and lead them. Otherwise they’ll go rogue and start talking about you without any barriers.
5. Customer support costs and time are going up
Authority-based businesses often start their business model with the idea that they can scale faster than traditional models.
For example, a car garage and showroom can only sell so many cars and service so many customers in a day. But an authority model might offer support, insurance, a community and other insight.
At MeBox, we estimate roughly 10% of your audience to require support at any one time. So for 1000 members, approximately 100 of those will require and be looking for assistance and support.
At lower levels, that’s a perfectly reasonable number to work with. Most will just require sign posting or pointing to a resource. Some will require more in depth assistance.
Remember that this isn’t inclusive of sales and marketing communications.
When more and more customers require support, that’s a warning that you must scale. You might need to change your delivery model and outreach model.
6. New acquisitions are slowing down
Fewer sales and new members than last year? Here’s a hint. That might be a scale problem.
New customers and members must be found from new areas. We can’t just fish in the same pond for years on end.
When we see a slow down in new acquisitions and sales, is that a problem with the message, product offering or brand? It might be none of those. It might be a problem of scale.
Let’s go back to our chef example above. At first, Chef is teaching 3 people a night how to cook. Eventually, even if they keep that number the same for a few years, they will run out of people to educate. It’s as simple as that.
If your acquisitions are slowing down, then you need to start looking at scaling your business.