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Many companies have made the mistake of falling into the Bankruptcy Bucket - that hole in the middle market between the brands selling on quality at one end, and those selling on price at the other. Most of the UK car industry made that mistake. Yet I still see companies that haven't really decided on their business model: they started out offering high service to win early customers, and haven't realised that this doesn't scale.  

Most markets tend to polarise into two segments: one selling low volume on quality, the other selling high volume on price. Watches, airlines, cars, restaurants, fashion; all segments trend towards polarisation. Each market has its specific pressures and viable strategies, and they are very different: lots of people, time and customer service in one, almost none in the other. The techniques you need for success in one polar market do not work in the other: in one you're chasing high margins from a few customers, and in the other the single objective is volume.

In the middle, you have the problems of both, and the advantages of neither. The service you offer doesn't scale, and you can't get the prices you need to make a profit. Yet you're working so hard that you can't really spend enough time or deliver enough service. Your sales volumes never quite get where they need to be. The costs your business has to support swallow your cash. and you never seem able to stand out in the market in ways that your potential customers really understand.

At this point, you have to take a step back and examine what's going on. Are you actually trying to win customers by giving them service that they're not really paying enough for? Are you trying to beat the competition by being nicer people, or by offering the same as they do but at a lower price?  Is your business really scalable, or is the reality that you would need unsustainable armies of experts to deliver the volumes you're hoping for?

It may be that your proposition is not clear to you or your customers. Try asking your team which brand of car most closely matches the ideals that you all have for your business. The more varied the answers, the longer they take to agree, the bigger the issue.

It's vital to understand the market you're aiming for, the proposition you're presenting to customers, and the real implications it has for your business and how it can grow. If it's unclear to you and your team, you won't understand the dynamics and the imperatives that drive your business and the propositions for customers will be hazy.

Once you have agreed on the market you're really chasing and what it depends on - low price or high value - you will know what needs to be driven, what can be reduced and what has to be increased, what kind of business you need, and which are the competitors you must beat. Most importantly, you'll stay well clear of the Bankruptcy Bucket.

(c) 2010, 2011 Peter G. Osborn