Updated: Aug 21, 2021
To make a million dollar startup is not easy. Most startups have no customers. It found no value proposition acceptance. It was a lost lottery ticket. For the companies who found its audience, many have no regular cash flow. Most companies are stuck with no profit. It can not make things that will sell at desired price, and it can not sell what is can already make at desired price.
It becomes a company incapable of growth.
Smart startups get into a niche market first. It then find scaling, either in this niche or by crossing into big markets. It eventually will run into a ceiling.
For a million dollar company, the market size multiplied by the profit is roughly the total profit. One can pick a small niche and profit high quality high premium items, or find a bigger market that offers chance to automation. Automation leads to higher quality and uniform quality, and lower per unit cost.
Niche: your target audience is your product is 2C - to end consumer.
Ceiling: the maximum monopolistic situation size of demand.
Scaling: pivoting from a niche market to a neighboring market.
Possible route of scaling include:
Premium to commodity product pivot: BMW cars offer affordable model;
Store items scale: as a store grows, it can handle more items and categories, for example Whole Foods including more categories;
A local business can become a national or global business (such as Starbucks)
What generally can not scale:
if the target audience is fixed by age or ethnicity;
if the company is product based, for example an electric fan factory can not pivot to radio.
A company must start in a niche - there is no money and it must focus. However, don't focus on a niche that can not pivot, if you want a million dollar company.
Successful companies all have right strategy of niche, pivot, scaling, and high ceiling.
Niche at start: Atlanta area drug store customer during the prohibition era
Scaling: during world war, moves to supply military and then the general public
Ceiling: the whole world population, multiple times da day in theory
If you don't scale a business, the business dies. Scaling takes money and people.
Four myth about scaling up your business
Scaling up service business
Scaling a business: warnings