Key Takeaways
- Growth without discipline turns small compromises into expensive, long-term mistakes.
- A clear plan only works if you actually follow it under pressure.
- If your gut says no, forcing growth will usually make things worse.
When you are an entrepreneur, you want nothing more than to see ‘your baby’ grow up into a successful business, especially with all the headwinds that are sure to come your way. That often means that those same entrepreneurs are willing to make sacrifices, veering off on tangents away from their stated business plan.
I am not talking about business pivots in a new direction, which would ultimately require an update to the business plan. I am talking about keeping the same business plan, but making exceptions to the stated goals, just to make some progress with the business. That is when you can get into a lot of trouble.
This article will help you learn how to avoid getting trapped in those rabbit holes.
A case study
I recently met an entrepreneur building a restaurant chain. She had opened four locations in North Carolina. The first location was a home run, built exactly to plan and was generating a lot of revenues and cash flow. That encouraged her to start rolling out new locations. But she was having a hard time finding locations with the same rental costs or prime locations as the first location.
So, she started making sacrifices to keep the business growing. And that is when she started to get into a lot of trouble.
The second location did not have an optimal floor plan. In fact, it was a two-story location, with half the seating on the first floor and the other half of seating on the second floor. Instead of having a wide open fun environment, the space was too chopped up and had a completely different vibe.
As you can imagine, people did not like the experience and did not return, creating the stress of having to make a profit on her long-term lease with limited revenues to work with.
The third location was put in a suburban location, as opposed to the city center. But the target demographic was young people in their twenties, and the suburban location appealed more to families. Even though the rent was half of the price of the downtown location, it just wasn’t attracting the right audience and was struggling to make a profit.
The fourth location was opened in Raleigh, after the first three locations were opened in Charlotte. She was excited to be expanding her business into new markets. But Raleigh isn’t like Charlotte in terms of population density downtown.
And even though the location felt pretty similar to her first location in Charlotte, it only had about half of the revenue, with the same costs. And to make matters worse, the entrepreneur didn’t have any economies of scale with a single location in the market, and she was now forced to drive 2.5 hours between the two cities, trying to figure out how to improve the Raleigh location’s results. Her enthusiasm for growth had suddenly turned to frustration and desperation.
When I asked the entrepreneur how she ended up in this position, I got a very interesting response — she said she was following the advice of her investors, who wanted her to test a second market and her friends, who wanted her to open up new locations near where they lived. She said her “gut” was telling her these locations were not right, but she opened them anyway, racing to grow. Now she is stuck with three long-term leases choking her cash flow like a noose around her neck.
The key learnings
1. Set a Clear Plan/Do Your Homework First. The entrepreneur had never created a clear site location strategy. That was like a home builder trying to build a house without a blueprint. She should have laid out clear “rules of engagement” before opening any new location.
That could have included a certain population size within three miles, a certain demographic target nearby, a maximum of 2,500 square feet on a single floor, located on a busy intersection, with a minimum number of locations per market, etc.
So, when she went to find new locations, she had to check all of these boxes to give it the best odds of success.
2. Stick to the Plan. Desire for growth should never trump common business sense in terms of her site locations. The sacrifices she made, in the spirit of growth, ultimately ended up creating terrible financial strains for her business.
In this case study, she made sacrifices in floor plan, location and market, and each time it ended up costing her. Now, instead of spending her time celebrating her successes and profitable growth, she is spending all of her time cleaning up her old messes made, which wears on a person psychologically and puts the financials in a negative light, making it difficult to attract new capital needed to open up the next locations.
It is perfectly fine to say “no” and wait for the perfect opportunity to present itself; don’t just jump on the first thing you see for growth’s sake.
I am not saying you should never make sacrifices; sometimes you have no choice (e.g., think about how different store layouts are in Manhattan due to the lack of space, compared to those chains’ other locations in other cities). But you can’t always be making sacrifices, or you are going to end up in the same mess as this entrepreneur.
3. Always Listen to Your Gut. As a CEO, you are the person with your hands on the “steering wheel”. Only you can make the business turn one direction or another. Don’t let the desires of others lead you in a direction you would never have driven on your own.
By not listening to her “gut”, that was like handing the steering wheel to the person in the passenger seat and letting them drive the business right off a cliff.
Closing thoughts
Your actions as a CEO have consequences. Don’t be in such a race to grow that you throw out your proven playbook and common sense in the process.
For if you repeatedly stray too far from “ground zero” in your business plan, don’t be surprised when it results in growing losses, an inability to attract additional growth capital and a material increase in your general anxiety level. Growing is hard enough as it is; don’t self-inflict any wounds that makes it any harder than it needs to be.
Key Takeaways
- Growth without discipline turns small compromises into expensive, long-term mistakes.
- A clear plan only works if you actually follow it under pressure.
- If your gut says no, forcing growth will usually make things worse.
When you are an entrepreneur, you want nothing more than to see ‘your baby’ grow up into a successful business, especially with all the headwinds that are sure to come your way. That often means that those same entrepreneurs are willing to make sacrifices, veering off on tangents away from their stated business plan.
I am not talking about business pivots in a new direction, which would ultimately require an update to the business plan. I am talking about keeping the same business plan, but making exceptions to the stated goals, just to make some progress with the business. That is when you can get into a lot of trouble.
This article will help you learn how to avoid getting trapped in those rabbit holes.
Read the full article here
