Focus. That is what I find myself saying to entrepreneurs time and time again.
The most important tool to help get focused is a mission statement. A good mission is a short statement that clearly defines what we do (our product or service), whom we do it for (our market) and how we do it (our business model, such as retail, manufacturing, Web-based etc.).
Certainly, a mission statement is an important tool when first communicating about the business with outsiders, such as customers, prospective employees, investors and bankers. However, the main reason I have entrepreneurs write and memorize a mission statement is to help them keep their own focus.
So why do entrepreneurs lose focus? It has to do with opportunity. While opportunity in the market is what launches entrepreneurs into business, it can just as quickly become their undoing.
What happens is this: Once entrepreneurs enter the market, they start to observe many other opportunities in the marketplace. Entrepreneurs, especially less experienced ones, start to see new business opportunities everywhere.
They feel compelled to pursue those opportunities even if it is not wise to do so. They feel a desire, even a compulsion, to start additional new businesses even while the first one is still in the startup phase.
Sometimes the opportunity relates to expanding into new markets. The entrepreneur sees opportunities to move into new markets that are not part of their current operations. The problem arises when the business or the entrepreneur is not yet prepared for expansion.
Risk increasesFor example, a former student of mine had started a franchised business that provides in-home care for the elderly. During his first year in business, and even before his business had positive cash flow, he was approached about buying a distressed franchise operation of the same business in a nearby town.
When he asked my opinion, I urged him to keep his attention focused on the first business he had started. He did not need two businesses that were operating at a loss.
But he could not resist what he perceived as an opportunity worth a risk and he bought the second franchise. About a year later he called and admitted that it was a huge mistake. He managed to get both businesses on the road to profitability, but he was working 80- to 100-hour weeks and going much further into debt than he had ever intended.
Even more disruptive is an entrepreneur who pursues opportunities in entirely new businesses before their initial startup venture is profitable. I recently met with one entrepreneur who had five distinct businesses operating, but not a single one of them had reached profitability.
Luckily, we were able to develop a plan to shut down most of them so he could focus his efforts on his initial startup business and build it to the point of positive cash flow.
The best way to avoid pursuing too many opportunities too quickly is to write down a mission statement and always remember one word: focus.
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