Maintaining Market Focus

The small-business operator can start out as or evolve to be a hustler, mainly because he is usually more informal in his decision-making and can do things more quickly. The expectation of being nimble or flexible can divert attention from his main focus and create confusion in the minds of everyone, including the customer.

As said so often, the business owner needs a niche. In today’s competitive world, everyone needs to understand what business they are in.

I know someone who started business within a niche—selling agricultural chemicals and fertilizers. He soon branched out into all types of chemicals, including household bleach. He even went to household devices. He sought to satisfy every demand he heard about.

The original market was changing rapidly, and he could not cope. Soon the other items got in the way, and, eventually, he was not able to support the building he bought and it was just a matter of time before the bank stepped in and took over his assets.

The real problem is that many people see what they think is an opportunity once there is “great demand” for any item. Critically, this shifting to a different product diverts resources and the firm has to reorganize to communicate to and serve this new market. During this time, what is happening with the old market? How long is the learning curve for the new market or product?

If something is worth doing, it is worth doing well.
Here is where things get dicey. Let’s say that a firm is doing okay selling pool maintenance products. The operator comes across a good source of paints at a good price. He figures that as he is visiting homes to maintain pools, he might as well offer painting services, too. He invests in that aspect of the business, and the original people in the paint business drop their prices.

The pool customers know that the pool maintenance suppliers are good guys, but business is business and they should have competitive prices. In order to compete, the pool maintenance people are forced to shift resources to see if they can win in the painting business. Whatever the outcome there, the pool maintenance aspect of their business suffers.
Consider another small business selling maintenance chemicals. There is no middleman, and they make a high margin that allows them to pay a reasonable commission to sales reps, selling directly to end-users. Someone suggests they sell consumer items to such customers as gas stations.
Gas stations seek to sell fast-moving items (i.e., inexpensive) and want to get as much credit as possible. The maintenance chemicals business has to pay transporters to get the goods out. They do not have a relationship with the supplier (their source) of the consumer items, so they have to pre-pay for the goods and also pay up front for the customs duties, etc.

Hence, they get distracted trying to source an elusive cheap product and in the process minimize their operational margins. They consider making some investment in promotion and also offer the customary discounts and credit to the trade. Once things get going, resources are needed to keep them going. What happens to the original business?

Have these changes ever been done successfully? No doubt they have been.

Should you do it? Think carefully about that.

This is not to say that a business should not seek opportunities. Rather, it should assess and understand whether there is indeed an opportunity and learn to say no.