as·TER·o·pre·NEUR (noun) A growth-focused founder who starts and operates a profitable business while mastering the key drivers and KPIs.
"Astero Group helps high-potential companies upgrade their financial information through tech-driven processes and accounting services."
Insight on Diversification
While diversification is often praised as a risk-management strategy in the investing world, in actuality, it shields your wins as much as it does your losses. It hinders significant growth.
My advice in the investing world is to be conservative with 40% of your portfolio, risker with the next 40%, and then high but thoughtful risk on the remaining 20%. Think startups, new inventions and commodities.
🙋♂️ "I got it, Jim. But how does this translate to my business?"
Well, by spreading resources and energy across multiple services or products of varying margins, you dilute profit. Marketing dollars produce less ROI. Next, struggles with EBITDA and cash flow enter the room. I've seen it.
The advice... identify your highest-margin product or service and dedicate all efforts to perfecting and scaling it. Do nothing else. Focus on it entirely!
If you're an event company and long-term rentals produce the most margin and cash-on-cash return... focus on those. Get everyone selling it. Figure out your avatar and find them. Maybe not as sexy as the next big red carpet event, but you can get those once you're fully enjoying the long-term rental cash flow.
If you're a SaaS company and your first product is the big ticket winner, hold off on launching and working on the new one. Get the team selling and perfecting the O.G. Do nothing else. Repeat, hammer and repeat.
I've included an example of this from a real Astero Group client in the last section of this email, "A Shout Out."
Prioritize your core competency while only exploring strategic opportunities that align with your primary business once the core competency has peaked. This selective approach ensures that diversification enhances, rather than detracts from, the overall business goals.
Need help figuring out which service or product of yours truly has the best margins? If your business is approaching or exceeding $2 million in annualized revenue, you need a CFO. A fractional CFO is probably the smart choice. ✅
Coming Soon 📢
No new videos or podcasts to share this month. I did guest on a podcast that releases on 12/11 and I'll include that in the December email. Until then... ⤵️
Top Articles
Here are the top three news articles from the last thirty days to help you:
💡 7 Ways to Manage Cash Flow and Financial Risks in Your Business
The U.S. Chamber of Commerce reported that 82% of small businesses fail due to cash flow problems, making
effective cash management crucial for business success. Here are seven tips to improve your cash flow process and support your business if you do it on your own.
🏆 Banks to Face Softer Regulation
✔️ SBA-Backed Financing Rises 7% to $56B in Fiscal 2024
The Small Business Administration
announced it backed $56 billion in financing to small businesses and disaster-affected areas during the fiscal year ending Sept. 30, a 7% increase from the previous year, driven mainly by smaller loans.
More on Diversification
We usually use this section to give you bonuses, such as this $500 deal from Ramp that we featured last time.
For this month, instead, I want to reiterate the importance of focusing on your highest ticket item or service. Even if that means pulling a service or product off the shelf for a period of time. (Especially if you're under $2m in revenue).
A prime example of a company that focuses on their core product is Asset. Their website sells ONE product. Their advertising sells ONE product. They found a niche and are dominating by focusing on their ONE product.
With the success of this initial product (and humorous branding) could they launch complimentary products and make a lot more revenue? Likely, yes. Will they someday? I can only guess, but likely, yes.
The key is that they are deferring distractions until they feel they have their core product running on its own and that their attention elsewhere won't detract from their core product's success. Super smart. Check them out.
We hope you and your business are genuinely stronger after reading and implementing some of this. If you have questions, I'd love to hear from you.
Your Friend and Fan,
P.S. - If your business is nearing or past that $2m revenue threshold, not having a CFO will likely slow your growth. And an experienced full-time CFO will be $300k+ per year. Instead, you can hire a fractional CFO for a fraction of the price and get the same results. I happen to know a few. Click here to explore.
