Optionality is Great for Entrepreneurs, Until It Isn’t
Photo by David Travis on Unsplash
3 signs that tell you when it’s time to focus on your real story.
Maybe it’s because entrepreneurs love to build things, but this week I’ve thought of entrepreneurship as a book with three chapters that you build (writing is a form of building a story). And like a book, a business follows a certain storyline. Here’s one I’ve seen over and over again: from optionality to intentionality.
(I’m defining “optionality” as the tendency to generate more options and “intentionality” as the tendency to focus on a specific plan.)
If starting a company is like writing a book, chapter one is where you get your idea off the ground. This is where you raise money from family and friends and your personal savings. It’s when you kick around different ideas for products and, once you’ve found one that seems right, you work on getting the packaging right.
Chapter one is also when our entrepreneurial hero gets to play around with how they are going to launch their product, whether they are going to focus on bricks & mortar or online. This whole period is one great exhausting and exhilarating rush as they scramble to get their idea out there!
Chapter two is the key learning phase of starting up a company. And for this reason, it is the most hospitable place in which optionality can thrive. This is because entrepreneurs are in testing mode and learning what works and where they need additional help.
Like a kid in school who is figuring out whether he or she is good at English, math, science, social studies, art or sports, the entrepreneur is doing A/B testing to see which ads or messages work with different customers. They’re comparing product performance in different types of stores as well as against airports or Amazon — always seeking answers to what works better and to where they can be successful.
At some point, however, the entrepreneur realizes that every new option that is considered also costs money — sometimes lots of money. And the truth is that the bigger the company grows, the more it costs to generate new options for products, markets, channels etc. This is usually when the entrepreneur turns the page and opens the third chapter.
Chapter three presents a whole different story, one that is not friendly to the spirit of optionality. To the unwary entrepreneur, optionality actually becomes an Achilles heel. That’s because this is the point in the story when the entrepreneur should have nailed the brand, messaging, product or product mix, marketplace, consumer and channel. If the business was a garden hose, it would be the time to narrow the water to a focused jet rather than wide spray that gets everything a little wet but doesn’t provide much impact.
The problem with chapter three for most entrepreneurs I know is that they loved the optionality of chapters one and two and were good at it. They want to keep doing it in chapter three, even after it no longer tells a story of success that will impress would-be investors.
That’s right, most entrepreneurs I know raise the right amount of money to move into chapter three and keep them focused and accountable. Where the plot can take a twisted turn is when a lot of money is available to entrepreneurs, tempting them to cling to optionality longer than they should.
The moral of this story is that a successful entrepreneur needs tight constraints and the accountability that comes with having a limited amount of money, which in turn enforces a careful, focused deployment of resources. In the past week, an entrepreneur and I have actually chosen to put some constraints on their company, such as enforcing a monthly breakeven and placing caps on spending and burn rates.
We did this for the explicit reason of transforming optionality into intentionality, which is all about focus.
So, how do you know when it’s time to turn the hose from shower to jet and from optionality to intentionality? Here are three sure-fire signs:
You start running out of money.
You start feeling uncomfortable because every fiber of your body knows you need to focus, but you can’t seem to do it.
Fear of missing out (FOMO) seizes control of your decision making.
When this happens, you need an accountability partner to keep you focused on the most important things, which is to say your business strategy: knowing yourself, your consumer, your marketplace, and the most important things you should be doing right now.
Knowing these things cold is where you should devote your time and money. Knowing these things is what will help you sleep a little better at night, more secure in the knowledge that you’re steering your company in the right direction. If you don’t have this data, then FOMO is far more likely to take hold of your thought processes.
The best way to protect against FOMO is to lay your strategic plan out like chapters in a book. You don’t try to pack everything into one chapter or try to get everything done “by Monday.” Instead of doing this, you give yourself two or three years to evolve through each phase of your story. After all, that’s the reason that books, like businesses, are divided into chapters and phases, right?
Are you feeling the urge to start a new chapter?
Sincerely,
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All credit to my ghostwriting partner, Dave Moore, who is instrumental in getting my thoughts out in a coherent manner & into these blogs. Thanks Dave!