The Surprising Key to Entrepreneurial Success: Saying No to New Business
Entrepreneurs are a special breed. They seek risk when others turn back. They confidently move forward when even their closest friends and family members tell them their idea will never work. Entrepreneurs are responsible for much, if not all, of the growth of wealth and technological advancement of the past century. But, most entrepreneurs fail. Many are serial failures. What is the biggest difference between the successful businesses and the failures? The biggest difference is understanding when to say “no” to new business. Entrepreneurs love new challenges, and often they try to do too much or be too much. This creates a lack of focus that kills many promising enterprises.
Specialists are in Demand
One problem with having multiple unrelated businesses or having products or services designed to appeal to everyone is that everybody thinks they are special. Think about what would happen if you had an eye disease. Would you rather see a general practice doctor or an eye specialist? Everyone would choose to see the specialist. Why? Because you have a special problem. Your customers feel the same way. They have a specific need or problem. They want someone who specializes in helping them. They don’t want to do business with someone who thinks they can help everyone.
The reality is when you try to appeal to everyone you appeal to no one. It is not enough to be a mechanic or a software company. You need to, for example, be a truck mechanic or a financial services software company or focus on some other equally specific aspect of your industry. Without a specialty you not only won’t attract business, but you repel business.
In most cases, saying no to being a generalist and saying no to most of the market means saying yes to loyal customers and greater profits.
So Much to Know to be Good at Everything
There is a reason that professionals from banker to lawyers to doctors are becoming increasing specialized. There is more information to master than ever. 100 years ago a professional could be competent in almost all areas of his or her profession. But, now it is very challenging to be competent in more than two or three areas at time. This applies equally in both consumer and business to business ventures.
Customers and clients want to know their hard earned money is being spent on the best they can afford. You cannot create good products or services for everybody. Without a narrow focus your offerings will be diluted. Nobody is willing to pay for an inferior product or service more than once.
But, when you narrow the area of knowledge to focus on, you can truly master it. You are stop being just good at what you do and become great. Great companies make a difference in people’s lives. Great companies generate large profits and remain at the top of their industry year after year. When changes in the market occur, narrowly focused companies are agile and able to adapt.
When companies go into bankruptcy the reorganization process never requires they take on more market segments or create new lines of business. The way out of corporate bankruptcy is always retrenchment and a more narrow business focus.
Would you feel comfortable going to see the same professional about your teeth and your taxes? Even if someone were licensed to do provide both services you would be skeptical that they had truly mastered either field.
You Can’t Drink From a Fire Hose
The web has made finding the right niche or specialty more urgent than ever. If you make any general search you will get millions of results. Nobody can process that much information. New companies have no chance to get on the front page of Google in a broad general category.
But, most businesses can get attention on the web in a niche. It is much easier to be the number one electric harmonica maker in a search engine than the number one musical instrument manufacturer. The best news is that your best customers are waiting for you. They don’t want a company that does everything; they just want a company that does what they need. They want you to solve their problem. There may not be millions of them, but you can make a fortune with a few thousand or even a few hundred loyal customers.
The difference between being a generalist and specialist on the web is the difference between drinking out of a fire hose and a garden hose. With a fire hose the there is too much water coming too fast to get anything to drink. But the nice easy flow of the garden hose will quickly quench your thirst.
The Busy Waitress
Have you ever been to a restaurant where there just wasn’t enough staff? Watching a waitress run from table to table is exhausting and frustrating. You are left waiting for your drinks or your food, and you are growing more agitated. Even if you have some sympathy for the wait staff, you aren’t likely to leave a big tip. Any experienced waitress knows that she will make more money in tips from fewer tables than she will from too many tables.
Often, entrepreneurs have delusions of grandeur. They want to be like the busy waitress. They stack so many unrelated businesses in their portfolio figuring that more businesses means more profits. But, there is a sweet spot. If you have too many different businesses going you get diminishing returns and all of the businesses underperform.
Just like in the restaurant, the path to more money lies not in more businesses, but in being able to focus on and cater to a small number of projects.
The most successful entrepreneurs understand that what they say “no” to is more important to their long-term success than what they say “yes” to. It’s important to take risks, but only manageable risks. Trying to build multiple businesses or focus on every segment of a market is not a manageable risk. The web makes it easier and more important to specialize. For most people, the choice is no longer be good at a lot of things or great at one thing, the choice is now to be mediocre at everything or great at one thing. Choose to be great.