In the previous post we highlighted that the most difficult decisions you will ever make are the ones where you decide NOT to move forward. By focusing your resources and energy on narrowly you can achieve number of benefits and get higher return on your investment of time, money or effort. We mentioned how Apple has succeeded to become the most valuable company in the U.S. by applying this principle, while GM had floundered by spreading resources over multiple brands with lot of overlaps.
You should use this approach in decision making every step of the way. If you take a step back and think about the decision in terms of cost vs. benefit of the current choice and evaluate it against alternatives you can improve the odds of making the right choice. You can use this principle in number of different areas as shown below.
- Products – As a manufacturer you have budget to develop only few products. Similarly, the retailer has only limited shelf space to stock the products. You have to look at customer preferences and product margin before making decision to manufacture or sell only certain products. Look at the number of products Apple sells and you will understand the power of focusing on few products.
- Customers – We mentioned in earlier posts that every business has “best” customers who provide majority of the profits and there are “bad” customers who drain energy from your resources and still not provide sufficient returns. Your job is to identify the “bad” customers and treat them accordingly , while at the same time pamper your “best” customers.
- Activities – Let’s face it! There are only 24 hours in a day and as a Chief Everything Officer of your small business there is only so much you can pursue in the given amount of time. You have to use appropriate time management techniques and decide not to pursue everything.
- Employees – A good employee is worth lot more than average employees. That is why it is very important to say NO to hiring average employees and hire the best of the best, even if it means you have to pay premium. Look at these suggestions for hiring best employees we provided earlier.
- Marketing – Every small business has limited marketing budget. At the same time they are approached by salesmen looking to get your marketing business from everywhere. In this constantly changing marketing landscape you have to be very selective about how and where you spend your marketing budget. Look at this list of questions you should ask before spending money on advertising for guidelines.
- Suppliers – By limiting the number of suppliers you can achieve economies of scale and get better price from the limited number of suppliers by giving them more business.
- Ideas – Finally, the fundamental question you have to ask yourself is if you are in the right business that utilizes your skills and interest well. Entrepreneurs’ minds are constantly buzzing with new ideas. There is no way you can pursue them all.
Where else can you apply this framework in the context of small business? Let us know in the comments section below.
