9 Great Ways To Build Wealth As A Business Owner – Series (7 of 9)
This series of articles follows on from an article we published recently, titled “9 Great Ways To Build Wealth As A Business Owner”, where we mentioned that business owners who focus on building company value over company size, generally get to sell their businesses for a premium when the time comes to exit, allowing them to cash out the maximum with no regrets.
This article looks at Jill Nelson’s story about Ruby Receptionists and covers the 7th way – Sell a few things to many.
If there was a party at the University of Oregon in the late 1980s, chances are Jill Nelson was somewhere close by. Nelson loved to have a good time and take care of people, which was one reason she admits that she only just graduated in 1988.
Nelson started her career after college as a receptionist and used her effervescent personality to greet callers. Eventually, Nelson moved into a sales career but never forgot her time taking phone calls. As a sales professional, she interacted with a lot of receptionists, and most left Nelson with a diminished view of the companies she was calling on.
Nelson reasoned that if a company were to answer phones in the same chipper, positive tone she did, it would give a much better first impression. In 2003 Nelson founded Worksource Inc (later rebranded as Ruby Receptionists), a telephone answering service for small businesses that strive to give their customers a great first impression.
Small companies hire Ruby Receptionists to offer their customers a friendly voice when nobody in the company is available to take a call. Nelson’s receptionists work from home thanks to the routing software Nelson’s team built that enables her to direct calls to an available receptionist. This technology ensures all of her customers will have their calls answered by a friendly voice no matter how busy anyone receptionist may be.
Most telephone answering services grow by winning contracts with large enterprise companies looking to outsource their call center. Not wanting to become too dependent on a single customer, Nelson grew the hard way, signing up small customers that paid a few hundred dollars a month each.
Between 2012 and 2014, Ruby Receptionists grew to 6,000 customers and doubled its revenue to $11 million in the process. Nelson, who had become something of a minor celebrity in Portland entrepreneurial circles, started talking with Jon Seeber of Updata Partners, an investment firm focused on technology companies. Seeber was impressed with the software Nelson had built to handle thousands of customers and millions of calls a year. On January 6, 2015, Updata announced it had bought a majority stake in Ruby Receptions for $38.8 million.
Sell A Few Things To Many
As the story of Ruby Receptionists reveals, Value Builders are careful not to become too reliant on a single customer. Their goal is to sell a few things to a lot of customers rather than the other way around.
One of the most overused rules in business is the Pareto principle which, among other things, suggests an owner should focus on 20% of her customers generating 80% of her revenue. While this may be true if one’s goal is to build a larger or more profitable business, it can make a business less valuable in the long run.
This story shows how — in stark contrast to most small businesses — Value Builders diversify their risk across a large number of customers while concentrating their bets on a small number of products and services. This means they are not dependent on a single customer and have the resources to invest in further differentiating their products and services.
Try to ensure your business is independent of any one customer, employee, or supplier.
To start, take a look at your employees. Try stack ranking them from most difficult to replace to least difficult. Then make a list of the things you are doing to minimize your dependence on the most difficult to replace employees.
If you found this article of value, then feel free to read through two other series we’ve published recently:
- 8 Key Drivers Of Company Value That Every Business Owner Should Know
- Unpacking The Subscription Economy
If you want to see how your business scores in “8 Key Drivers of Company Value” right now, take 15-minutes to complete this survey and you’ll get a comprehensive 25+ page report benchmarking your business against its peers, plus 49 tips on how to improve those 8 key areas.