A friend of mine recently told me about a new food hall model in New Orleans. Instead of renting space to restaurants, it offers much more. In addition to building the space, the food hall handles the permitting, the licensing and everything else that makes running a small business a hassle. It also has a centralized point-of-sale system. This makes it easy for new concepts to pop up, as well as depart without too much pain when things don’t work out. In this way, the food hall does not rely on the offshoots of larger entities that can afford the time and cost typically required to set up a restaurant but instead opens its doors to new and innovative concepts. Restaurentrepreneurs and customers alike are loving the result.
This food hall is just one example of a wave of new businesses that will revolutionize how our economy operates. Ever since Salesforce.com came on the scene nearly 20 years ago, the holy grail of startups has been the model it essentially created: software as a service (SaaS). This model allows for amazing margins at scale and predictable revenues. For customers, it lowers upfront costs and often leads to better service and product improvements over time. There is a reason this model has been so successful for years.
As more and more people try their hand at entrepreneurship, a new model is emerging. Not every business will be Google or Facebook, Uber or Airbnb. In fact, these companies only come around once or twice a decade, even as hundreds of thousands of new businesses are started each month in the U.S. Few will ever reach the scale needed to operate with the efficiency of much larger companies. But where they fall short on back-office functions, these smaller companies often excel at providing unique, distinct and, in many ways, superior products and services in their specific niche.
Before today, these companies rarely had the opportunity to create viable long-term businesses because of everything else typically required to build and run a company. Step in the new business model that is solving this problem. Let’s call it scale as a service (ScAAS). These are companies like WeWork who say: “Don’t worry about all the complexities of real estate and office management. For a monthly fee, we will take care of this for you and you can focus on running your business.” These are companies like the food hall in New Orleans that take away all of the things that have traditionally made running a sub-scale restaurant impossible and who simply take a cut of the total revenue for the service.
This is also what we do at Rented.com. Hiring a top-notch revenue manager or marketing department does not make sense for a rental manager with fewer than 500 properties, even though the impact these functions would have on the business is undoubtedly positive. Leveraging our in-house team gives rental managers access to the skills, technology and talent they would never otherwise be able to access or afford and frees them up to focus on their true competitive advantage: the unscalable and local parts of their business. Like many other ScAAS companies, we simply takes a percentage of the revenue we help the managers earn, limiting their risk and aligning our incentives.
All of this raises the question: If you are a small business owner assessing a ScAAS provider, what should you look for? Here is a guide:
1. Be clear about what you will not offload.
This is an essential first step. Greg McKeown’s book Essentialism: The Disciplined Pursuit of Less is a fantastic introduction to this concept. Strip what you should be doing down the most essential element. What is it that you and you alone do better than anyone else? Identify this, and own its execution and delivery.
2. Triage your list of nonessential work.
After identifying what you will not offload, you can create a long list of activities your business currently does or needs to do to keep the doors open. Notice that these are two very different things and need to be addressed separately. Just because you are currently doing something does not mean you should continue doing it. Distill these activities to those required to maintain your business, as well as those you will likely need to add in the near and medium term. Focus on these.
3. Research your options.
Since ScAAS companies are relatively new, there will not necessarily be a provider for every area you identify. WeWork and its competitors are obvious, but some of the more arcane areas of your particular business may not yet be serviced. Ask around. You are unlikely to be the first company to have this need. See how others have addressed the issue. Make sure to ask for references and actually check them. If you consistently hear there is a pain point and no great solution? This might be your next great business idea.
4. Start small.
Lastly, make sure that the ScAAS provider is a growth accelerator, not an inhibitor. Regardless of your research, there will be some nuances to your business. Even if it means paying a little more per month in the early part of the relationship, follow the principle of “date, don’t marry” at the start. Test them out, and only expand with them once they have proven their value to you.
These are early days for the ScAAS revolution, but the era bodes well for small businesses and consumers. Local businesses and solopreneurs are providing the unique experiences that more and more people crave. Before now, the deck was stacked against these companies and in favor of scale and the status quo. But as more ScAAS companies serve more local businesses in more geographies and industries, the opportunity for innovation and uniqueness to win goes up tremendously. Watch this space.
Author: Young Entrepreneur Council
Originally Published on December 12, 2018 at 02:16AM
Article published originally via Forbes https://www.forbes.com/sites/theyec/2018/12/11/the-scaas-revolution-how-a-new-model-is-changing-the-business-landscape/