SBM #7 - Anonymous business at $1 million

‘Small Business Black Holes’ exists to tell insightful, interesting stories about initially successful small businesses who found themselves in black holes, and through whatever means necessary, climbed out of them. 

Last time, we looked at how Elf on a Shelf became a worldwide household name, thanks to the valuable insights of a good mentor, planning and taking a risk. 

📓 The Overview

• Business: Anonymous

• Revenue Barrier: $1 Million

• Learning: Doing something is better than doing nothing

📓 The Story

This week, I will tell you about a company that we will call CBT Solutions. 

This isn’t the real name of the company but we need to protect the lives of the innocent. 

Trust me, I know these guys. 

I’ve been working with the two partners/owners for a few weeks.

CBT Solutions is a business that I think has a massive market opportunity but they are facing a choice which very few small businesses are confronted with; how do I take advantage of a once-in-lifetime opportunity? 

Led by two partners, CBT Solutions has a proven solution to a medical condition that affects over 30-40 million Americans using just cognitive behavioural therapy or CBT. 

No drugs. 

No surgery. 

The treatment plan can be administered remotely through sessions with a trained psychologist, all backed by several decades or so of clinical studies. 

All doctors currently have to offer these patients are drugs and surgeries that are almost always ineffective and come with other side effects.

The success rate of the procedure is off the charts and, crazily enough, very few people know this option exists.  

This is what I mean by “they are sitting on a rocket ship”. I think this is potentially a $100m business.

There are a couple of issues. Most businesses traditionally work on a repeat-customer model but these guys are usually one-and-done.

Offering a cure = no reliance on patients returning for treatment. 

But this is where CBT Solutions has managed to figure something pretty smart…

Instead of just relying on returning customers, they focus on repeat referrals from doctors. 

When doctors find out about CBT’s offering and its success rate they are thrilled to have something to offer patients. They become regular referrers. 

Sounds amazing, right? 

There’s also the issue that this treatment is out in the literature although few have turned the literature into practice. 

What if they grow slowly, proving the model, only to get overwhelmed by some well-funded rival who sees what they are doing?

The partners are facing some exciting but scary decisions: It’s clear they need to get the word out but how and how much will it cost? 

Remember this is a sub $1m revenue business. 

Should they make a major investment in marketing and if so what kind? 

SEO sounds great but that attracts individual patients. 

They want doctors. 

They can go to conferences and do direct outreach but how do they make enough time to do these things and how much will it cost?

Marketing is also difficult and can be an easy way to spend a lot of capital. 

Increasing the marketing spend and finding success would also mean they need to scale operations quickly. 

It takes time to identify qualified practitioners and train them in their methodology. 

How many new providers should they hire and how long can they keep them on if some of their marketing efforts don’t pay off?

I mentioned it at the start; this idea is a rocket ship.

And that rocket ship is gonna take off, whether the partners are the ones at the helm or not. 

With the right cash: they could invest in marketing to target the doctors who could refer the patients and hire the practitioners.

But does that mean they should take on investors? 

This has been a great business run by two practitioners dedicated to helping patients not managing sharky investors. 

If they do take on investors, what kind?

PE? VC? Angel Funding? 

If they go this route, they would have to risk losing control of the business and have to deal with investors who can be more trouble than they are worth or they could waste the money of their friends and family.

What about debt?

Maybe they could do a small SBA loan but would it be enough money most SBA loans are for the purchase of a company or working capital. 

These are speculative investments. Is a working capital loan appropriate? 

Most traditional term bank loans are going to be hard to get for such a small business with no tangible property.

You could easily drive yourself around in circles of indecision.

What do you think? 

What would you tell the partners? 

Do you take the risk and go for it? 

Or do you wait to be steamrolled by another company that has more capital? 

What happens next? 

We don’t know yet.

This is a developing story, after all.

But we’ll check back in with the partners as their journey continues.

The rocket is launching 🚀

If they get this right, they could build a company that provides millions of people with critical medical care and provides them with life-changing wealth.

🧑‍🎓 The Lessons: 

1. Business is full of tough choices. How much risk are you willing to take?  

2. Scaling quickly is a daunting prospect, but so is doing nothing.
   

3. Ideas like this are rare. If you are lucky enough to have something like that, you must strike while the iron is hot. 

📅 Next Week:

Next week, I will take you on another small business journey where we learn about the importance of utilizing the experts around you and bringing in the right people to do the job. 

Keep growing,

Alan

P.S.

Do you have a small business growth story and want to be featured? If yes, please submit it here: http://www.fame.so/sbp-story