What to Do After the “Aha” Moment: Step One is Vital to Success
Jake was taking his dog, Whiskers, for a walk one morning, just like every other morning, when…BAM! The idea that was going to change the world as we know it occurred to him. And, it was going to make Jake and Whiskers very rich. Jake’s business is doing pretty well now, but this is going to take it to the next level. So…Tally Ho!!! As soon as Jake can shower, shave and get to the office, he is going to call a meeting and get the staff cracking on making the future happen, NOW!
Just a minute there, Ole’ Jake. Isn’t there something that you should do first? The answer is: yes, first make sure that your company is ready for the effort.
Innovation IS the Key to Higher Margins
Innovation and growth is what keeps businesses profitable and what keeps entrepreneurs, like Jake, engaged and thriving. You, too may have a vision of a new product, want to enter a new market, acquire a new business, take on a partner or form a joint venture – a growth strategy that will propel your existing business to the next level, and solve some unmet need. So, now you have a great idea on how to grow your business, and you are ready to commit to it. What is the first step?
Just like an athlete about to enter a major competition, she needs to make sure that she has the necessary fitness to withstand a sustained effort. If not, there is a real risk of sustaining serious injury that will put her back for months of painful recovery.
It Just Might Be Harder Than It First Appeared
This is all too often the step that is skipped by the entrepreneur. Because there was not adequate appreciation of the extra effort required and the strains such a project puts on the organization staff and finances, the project fails to reach the end goal and damages the core health of the business in the process. It happens all too frequently. This is the dark side of the incredible power of the entrepreneurial spirit – the unshakable belief in the idea and the underestimation of the challenges. Does that sound familiar, Captain Ahab?
Drive With Caution. Unmarked Hazards Ahead.
While the risk of a misadventure is great for any company, it is doubly so for a small to medium-sized enterprise – let’s say less than $20-million of annual sales – run by an owner entrepreneur. Not only are the resources limited and the financial cushion smaller than that of a Fortune 500 company, but the control and decision making is generally concentrated among a small group, or one! While small enterprises can be incredibly nimble and reactive, they can also be driven off the road since they frequently do not have the management guardrails of institutional inertia found in large corporations.
So, yes! Jake should shower and shave and go to the office. And, sure…why not bring the staff together and get working on two things: dust off that 5-year projected financial plan for the company and its existing products. Does it still represent the team’s best estimates of sales, sales growth, margins, and expenses? If so, step two is to develop a business plan for your idea of the century and validate it with customer feedback. The business plan should have how much investment and energy will be required and what the likely return would be.
The fundamental question to answer before you risk Whisker’s kibbles are, where will invested capital return more, in the new project or to increase existing business? Are there opportunities that should be harvested first? Is there sufficient management and senior staff bandwidth to take on a new project?
An Once of Validation is Worth a Pound of False Starts
Share your ideas and get some outside opinions from your senior staff, friends or your board. When you have fully explored the risks and potential upside and there is agreement among your closest advisors, go get the opinion of a few potential buyers. Finally, if Whiskers is in…you can go forward with much more confidence.