Oversubscribed: Creating More Demand Than Supply
I recently read Daniel Priestley’s 2020 book, Oversubscribed: How to Get People Lining Up to Do Business with You. Priestley’s premise is very counterintuitive.
For many of us who have been in business for a while, our primary focus is on getting more clients or customers. There never seem to be enough.
Priestley describes three possible situations:
Oversubscribed: Demand exceeds supply, allowing a business to generate healthy profits in addition to paying normal wages.
Balanced: Demand and supply are relatively even, allowing the business to pay normal wages but leaving little room for profit.
Undersubscribed: Supply exceeds demand, resulting in losses.
When presented with those three choices, we would all say we want to be oversubscribed. But is that really how we think and behave?
Priestley challenged me to transform my thinking. He suggests that a lucrative lifestyle business may need only a few loyal customers—a relatively small, dedicated group of people who truly value what you do.
He tells the story of an executive coach who built such a strong reputation that he works with only eight clients at a time and charges each one $80,000 per year. He also has a waiting list of CEOs eager to work with him.
His fees are certainly attractive. But with only eight clients, his overhead is limited, and the complications involved in serving a large client base are also significantly reduced.
As I read the book, it occurred to me that I had personally experienced what Priestley was describing.
At my former firm, one of our partners decided to specialize in working with a type of organization the accounting profession had traditionally viewed as “filler” work. Much of the work could be performed outside the traditional tax-season spike, and for decades, these organizations had paid substantially discounted fees to their accounting firms.
With the support of the firm, this partner began developing a specialized practice. His vision was not simply to perform the required annual audit. He wanted to provide these organizations with concrete recommendations for improving their operations.
Because he was allowed to specialize, he and his team became extremely knowledgeable about the best practices for this particular type of organization.
He provided tangible suggestions that could improve a client’s financial results. He could often calculate the financial impact of those recommendations and explain the potential savings to the client.
This advice created additional value beyond the required annual audit.
Over time, clients began contacting our firm whenever they encountered an issue. They knew we understood their industry and could provide useful guidance.
Those conversations generated additional consulting fees because they were separate from the annual audit. Our expertise also allowed us to increase our audit fees because we were delivering value that other firms could not easily duplicate.
I was part of this partner’s team during the early years of the initiative. He regularly reminded us that we needed to think as though we were the CEOs of these organizations.
That mindset caused us to become more curious. Our professional reading changed, and we attended seminars to deepen our knowledge of the operational issues these organizations faced.
As we worked with more clients in the niche, we identified additional best practices and shared them throughout the client base. We routinely generated new ideas, and our clients became comfortable asking us almost anything.
As the practice gained momentum, we attended industry trade association events and were often invited to participate as content experts. That visibility created additional opportunities to attract new clients.
Over time, we transformed the niche from undersubscribed to oversubscribed.
We also increased the fees we charged. Over a period of ten to twenty years, we substantially improved the profitability of the practice. Our clients were happy to pay the higher fees because they understood the value they were receiving, and they regularly referred us to others.
Related Read: How Should You Pay Professional Adviser Fees? Hourly, Project-Based, or Milestone-Based?
Some organizations continued to prefer the historically low fees associated with this type of work. We simply chose not to pursue those clients.
Perhaps they had stronger internal capabilities and did not need the additional advice. Or perhaps they were primarily interested in receiving the required service at the lowest possible price.
Either way, they were not the right clients for the specialized practice we had built.
Throughout Oversubscribed, Priestley shares examples from several types of businesses that adopted this approach. In each case, the goal was not simply to attract as many customers as possible. It was to become highly valuable to the right customers.
The result can be stronger profits, fewer clients, deeper relationships, and a more focused business.
As my mentor would say, “It’s not about revenue. It’s about profits.”
