Published Work

Hocus and Focus: Don't Hone Your Business Too Early

When I started my first business, I thought the hard part was going to be focusing my energy on what I was doing in order to build what I envisioned.

I wanted to offer so much to our prospective customers and be good at handling each one of them that where to start became a hard decision. Though a singular focus can be a critical element in the initial stages of any company, it can also be premature.

In this early stage, Matt McCall of Northfield, Ill.-based Portage Venture Partners says there must be a balance between "experimentation with business models and focusing on specific market segments and customer needs." Early on, he believes most firms "throw spaghetti up on the wall" to define what customers and products have the most potential.

"Focusing too early can lead to ill-chosen or missed opportunities. Companies need to experiment and fail flawed business models and product offerings quickly," McCall said. "The sooner a firm can define its value proposition in the appropriate market segments with an effective go-to-market strategy, the sooner it can begin scaling its business and moving beyond the inflection point."

Until these elements align, he says, it is nearly impossible to focus and drive a business because a clear target doesn't exist. McCall sees a typical Catch-22 since "until you begin to focus on a clear set of customer needs with an appropriate offering, you do not have a viable business."

For many entrepreneurs, the most difficult time to focus is after your company has had a lot of success. After you have been profitable building your business at an early stage, you start to feel like you can do anything. You may even want to change your name to King Midas because you may feel you have that magical business touch.

At this point, you think you can do anything. As a result, you expand your business aggressively and can even "grow yourself broke" at this stage by investing too much money in expanding your company.

I believe this is what we did in the early 1990s when I was at Whittman-Hart and we added too many branches around the country prematurely. Although the company had a lot of success in Chicago and Indianapolis, opening up offices in California, Virginia and Alabama proved to be challenging. We found establishing these new offices very tough in those years despite our success in the Midwest.

I made the same mistake of thinking I had the magic business touch in all three of my own businesses. With my first business, we expanded too rapidly outside our geography. In the second and third, we sold additional products we knew nothing about but thought the customer "ought to have." In all cases, it proved to be a disaster.

"As a rule of thumb, most firms live or die based on their first product that's targeted at their core market segment," McCall said. "Few have the management attention span or resources to do more than this. By focusing repeatedly on a given segment, you begin to gain critical mass in terms of referenceable accounts, institutional learnings and reputation within a segment."

He added: "You are also able to continually refine your product or service specifically for the needs of that market and to more effectively meet customer needs. In this business, you do not want to be a jack of all trades and master of none."

While the businessperson needs to be focused, he or she also needs to be flexible enough to listen to new ideas inside and outside a company.

"As your business grows, "focus" becomes related to "flexibility" and "scaling the business"," observes Frank Ballantine, corporate group head of Chicago law firm Sachnoff & Weaver. "If you have successfully focused on meeting a serious need of a substantial number of customers, choices have to be made such as "what's next" with your product or services and "where next" in your market coverage."

Every great business is always ready to evolve itself within the ever-changing marketplace. You need to be able to listen to your customers to see what they want in new products or services. At the same time, you can't take every customer suggestion unless you have such dire cash flow problems that require you to do whatever you have to do to stay alive.

In my last business, 25 percent of our revenue came from a source we had not contemplated until customers asked us if they could pay for a particular service. Thus, a new service line was born.

How do you decide which new ideas to turn down and which to pursue? First, make sure you focus on your bread-and-butter line of business (the one that's feeding your business cash flow). If you can sell a new service or product to the same customer base, this may be a good match.

Bob Okabe of Illinois Partners suggests that the successful entrepreneur needs to be a combination of dedication, experience, ambition and fear. He added: "Practically and focus is maintenance of a balance--whether of work and life, the advice of insiders (employees) and outsiders (consultants, advisors and customers) and when to keep the pressure on and when to back off."