There are four kinds of business: stars, cash cows, dogs and question marks.
That’s according to Richard Koch – who’s made $300m from investing in what he calls “Star” businesses.
So, what are star businesses? Why are they so successful? And what happens if your business isn’t one?
Let’s take these questions one by one…
What is a “Star” business
According to Richard, a “Star” business has these two qualities:
#1: It’s the biggest company in its niche. (By revenue.)
#2: The niche is growing at 10% p.a. or faster
If your business meets those two criteria, you have a star.
And if it doesn’t?
Cash cows, dogs and question marks
If it’s not a star business, it must be a cash cow, a dog or a question mark.
A cash cow is a market leader in a low growth market.
A dog is a non-leader in a low growth market.
And a question mark is a follower in a high-growth market.
And it’s question marks that I’m going to focus on.
You see, most SaaS businesses – especially those with VC funding – are question marks. They’re in fast-growing markets and they’re trying to play catch up to the market leader.
So what can you do with a question mark?
Richard says the best thing to do with a question mark is either drive for leadership or sell.
The latter might be impossible – there might not be any buyers… at least not any that are willing to pay a fair price for your company.
And, if you go for the former – market supremacy – it could take a lot of cash. Cash that, if you fail, you might never see again.
But, fortunately, there’s a way to grow quickly without burning too much money.
How to grow rapidly while keeping your burn under control
The SaaS Multiplier Method was designed for companies that want to grow quickly – without burning through cash.
You see, if you just buy more and more traffic, your ad costs will likely grow at a faster rate than your monthly revenue. (MRR.)
#1: You’re either bidding higher in your existing marketing channels.
#2: You’re diversifying into less profitable marketing channels.
But, because it optimises your whole funnel, the SaaS Multiplier Method reduces your cost per trialist and your cost per customer. Which means each customer that comes in is coming in at a lower cost.
This reduces the time it takes to recover the money you invested to get that customer. And that reduces your burn.
So, if you want to make your business a star business – but you don’t have unlimited cash – check out my new report, The SaaS Multiplier Method.
You can get your free copy here:
All the best,
PS If you want to know more about “star” businesses, check out Richard’s book, The Star Principle.