As I read through my morning paper (okay, I’ll be honest… it was the paper from four days ago because I have two toddlers and I only get to read three sentences at a time), I couldn’t help but find myself jotting down notes in my newspaper. I confess that I skip right to the Business section every time, and if I’m really good, I can get to Money and Investing. I feel like I can count on my fingers how many times I’ve read through the main section. Unless it’s the second page of the main section which will address economic data… but anyway, I totally digress.
There’s too many things I love in this life, but somewhere at the top is reading and learning about other businesses. So today, as I’m reading about scrap metal in India and Bayer shifting some of its focus from pharmaceuticals to pesticides, I can’t help but think: Whoa. Running a business is scary. Don’t get me wrong. It’s also very rewarding and freeing; but at the same time there’s a degree of responsibility that is downright intimidating. There’s a whole entity that is dependent on good timely decision-making and execution, and there are so many ways you can really mess it up completely unintentionally.
So today, I wanted to talk about five of my biggest fears being a small business owner. These are in no way comprehensive, but were inspired from articles on my lap this morning (and one more from several months ago that has been on my desk with a post-it note). As a follow on, perhaps I’ll do a post highlighting specific things I do to address these. Enjoy my dear friends, and never let fear stop you from doing something great 🙂
BEING SPREAD TOO THIN
This one came from an article in July about Yahoo’s sale to Verizon. The article made reference to the “Peanut Butter Manifesto”; an internal Yahoo document written by Brad Garlinghouse. There are many points in the document, but one makes me especially cringe: If you’re doing everything, you’re not really doing anything.
For my business, this means being spread too thin across job functions (product sourcing, marketing, accounting, web design, photography, etc.). As a small business, it’s imperative that people take on multiple roles, but it can also be completely jeopardizing if no one has a clear focus. Resources are typically finite. Meaning there’s only so much that can go around. Someone spending 90% of their time on product sourcing can only give 10% to marketing. There’s obviously an optimal balance here and the Holy Grail is finding it without compromising the survivability of the company while you’re doing so.
KEY MAN RISK
Consequential to the above is very high key man risk (where the loss of one key person debilitates the entire business). When one person is doing too many things, it gets very difficult to suddenly pass off his/her responsibilities to someone else without equivalent or greater human capital in the successor(s) and/or without near-perfect documentation of responsibilities; which if you’re small, you probably have a difficult time finding time for documentation.
MAKING THE “WRONG” CALL
China is the biggest producer and user of steel in the world. Over in India, there is a huge market for ship-recycling (that’s right, think cutting down a giant vessel for scrap metal). Scrapyard owners tend to price their steel at prices that track China’s steel prices. When steel shot up over 50% earlier this year, shipyard owners went haywire and bought a bunch of vessels to recycle. When steel prices suddenly fell, they were stuck with a bunch of scrap metal selling at losses. Was this necessarily a wrong decision? You see, this is the disheartening part. You see opportunity in the market over at “Y”, and you’re at “X”; but by the time you get to “Y” or close enough to it, the market suddenly goes to “Z”. Heads. Hit. Desks. The investment space calls this implementation shortfall, and it sucks.
I’m terrified of three things here: making a “wrong” strategic call for my business, not knowing when to make a strategic call for my business, and not knowing when not to make a strategic call for my business. Why? Because strategic decisions typically have a long horizon, and by the time you realize it was the wrong one, it’s usually too late and all you can do is hope you survive the storm.
RACING TOO FAST TO COMPETE
Self driving cars. There’s literally a Cold-War-style arms race of who can do it the best and soonest. Between Google, Uber, Tesla, and what seems just about anyone else with their hands in the vehicle space up and down the supply chain, everyone wants a piece. The problem? When you’re too focused on the competition that you either a) make decisions too quickly, or b) get so caught up in the race that you don’t see what’s going on around you. It’s like “Did you see the Gorilla”?! Seriously, if you haven’t seen that exercise or tried others, do it right here and be amazed about selective attention.
Car makers at the beginning of this year were liberally running ads about self-driving cars (which were more like cars with self-driving features). Then after the truly unfortunate fatal crash in May in a “self-driving” Tesla car, many of these ads were pulled to prevent confusion. My overall point is about potentially following a herd off the cliff, and it’s surprisingly very easy to do when you’re in business.
BEING TOO DIVERSIFIED
The Peanut Butter Manifesto was really intended for a higher level than what I personally took away from it above. It addressed Yahoo’s diversification into other businesses. I’m reminded of this risk as I read about Bayer (pharmaceutical company and maker of Aspirin) announcing a bid to buy agricultural biotech company Monsanto. Now in disclosure, Bayer already has their hands in pesticides and biotech, but this will still be one of the most sizeable M&A deals in 2016 if/when approved. Some investors are concerned that after the acquisition, Bayer’s agricultural division will overshadow its other divisions, namely pharmaceuticals and health.
For me, I get worried about offering too much too soon. As I admitted in my challenges post, where my head is at and where I can be practically are sometimes two different things. In business, there are many exciting opportunities at many given times, and it’s imperative to know when certain opportunities are appropriate and when some are not. It can be difficult making that call, especially when surprising opportunities come up and you don’t have the luxury of taking a long time to make a decision. It’s easy to make emotional or quick decisions before considering the holistic effects that decision may have.
So there you have it, some of my many fears about business and entrepreneurship. If you’re still reading, I applaud you. The purpose of this is certainly not to scare anyone out of entrepreneurship; it’s a very rewarding thing. But sometimes there are dark sides to things that no one ever seems to want to talk about, or admit there is; and I’ll argue that behind every success story, there was once a freaked out person crying in the corner alone wondering to himself/herself “WTF was I thinking?!” 🙂