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It may appear counter-intuitive, but learning why and when to say ‘No’ to a new client or new revenue is an important skill for growing your business.Running a start-up involves constant revenue anxiety and frequently requires adroit cash flow management. The pressure is always on to find the next client or the next revenue generating activity. However, not all revenue is equal. Some clients or projects, while providing short-term cash-flow fixes, may set your business on the path towards long-term pain.
Here are five scenarios in which it may pay to say no to new business:
Success requires laser-like focus
As covered in previous articles, the key to success as an early-stage, entrepreneurial start-up is to identify a ‘pain’ experienced by a sizeable market for which you have a unique and compelling solution. Having identified the opportunity, it is important to focus on it tenaciously and dedicate 100 percent of your resources, time and personal capacity to securing success. If a new opportunity arises in a different market, you should not attempt to address both. This will require you to split your focus between each opportunity, which dramatically increases the risk of failure. Ask yourself whether you would have better prospects of success in the new market. If the answer is ‘yes’, then discontinue your current efforts and put all your energy behind the new opportunity.
Being all things to all people is dangerous
Trying to please all possible market segments is not only difficult, but also potentially ruinous. The wider the range of customer groups that you try to satisfy, the more products (or product variations) you must offer, and the higher the likelihood that none of your products will satisfy any particular market segment. The optimal approach is to reduce the market segments that you service, and ensure that your product excels in meeting the needs of the specific segments that you have chosen to address.
Feature-creep
We all want to make our customers happy, but some customer requests should be politely declined. In time, every business owner is faced with a request to modify their product in a way that makes it more attractive. If the modification would result in all other customers finding it similarly more attractive, then there is usually no problem. But many such requests create very narrow added value (in fact, it usually only creates added value for that single customer), and in such instances it can be dangerous to implement given the time, resources and management attention making such implementations involve.
Conflicting ideas of value
The value of something is an inherently subjective thing. As such, there is plenty of scope for disagreements as to the value of your product or service. However, you should steer well clear of potential customers who do not share your views regarding the value to them of your product. Discounting or otherwise compromising the value of your product will set a bad precedent for future clients.
Growth for growth’s sake
Many companies make the mistake of seeking growth as an end in itself, rather than a means to an end. To achieve growth, businesses often seek to recreate themselves as a ‘one-stop-shop’ for all their customers’ needs. The end result tends to be a transition away from offering a highly-differentiated, valued solution to becoming an undifferentiated vendor of multiple undifferentiated solutions. A classic example is Barbeques Galore, which started off with a highly targeted product offering, only to start chasing top line revenue growth by tapping adjacent markets, and in the process diluting its positioning in the eyes of its customers.
The benefit of crafting a strategy to drive your business’ growth, profitability and longevity lies not only in having a document to guide you as you implement your strategy, but also a sound basis for saying ‘no’ to potential opportunities. By definition, devising a strategy requires that you choose the criteria for determining which market opportunities and customers you will target, and requires you to be disciplined in designing your business operations so as to achieve those desired outcomes.
Saying no is hard. It is difficult to turn away work (and revenue) when you are starting out in business, when both customers and revenue can be hard to come by. This appears for many to be a ‘chicken and egg’ conundrum, but the harsh reality is that you cannot compromise at any stage of your business growth, and not saying ‘No’ could harm your business more than might happen should you ever let a real opportunity slip by.
Mark Neely is a lawyer, technology commercialisation consultant and author of ten books, including The Business Internet Companion. You can read his blog at www.infolution.com.au
