We all love shiny things, but in business, it can sometimes be hard to tell what truly holds value for your company and what doesn’t. A couple of years ago, I encountered just this problem with an entrepreneur, “Kyle,” who owned two sports leagues (kickball and basketball). When he came to me with an idea to start a new company selling portable scoreboards, I saw a potential entrepreneurial mistake about to bounce off the rim.
Is Your Company a Business or a Job?
Kyle’s idea addressed a problem that he spotted while running his sports league. Most of the parks that his amateur leagues played at did not have a scoreboard at all. He devised a portable scoreboard to solve the problem. What Kyle then came to me for was advice on how to build a company around that product that would have equity value and could be sold someday – unlike, he thought, his sports league. I was curious as to why Kyle thought his league couldn’t hold equity value or be sold, so much so that he wanted to divide his attention and start up a whole new company rather than build on the successful one he already had. His response was that the park permits required for play were all in his name. That didn’t seem like a big hurdle to me, but Kyle also didn’t have a good idea of his company’s balance sheet. That’s when I could see the real problem.
“It was obvious from his responses [..] that he wasn’t running his company like a business. If he were, he would have been able to rattle off his revenue and costs and had some idea of the company’s potential value. As it was, it was serving simply as a source of income.”
I see this entrepreneurial mistake fairly often, especially with new entrepreneurs. It reminds me of a saying that my father told me growing up.
Wise Words From a Wise Man
“There’s a million dollars under your shoe,” my father used to tell me. “You just have to find it.”
When I was a kid, I didn’t know what he was talking about. It made a lot more sense to me as an adult and an entrepreneur. Opportunities for growth and success are all around you. You just have to find them, and take action on them. After a few tough lessons, though, I was able to add onto that idea.
“You have to learn how to recognize the million dollars when you see it. To do that, you first have to understand the difference between getting income from a business and creating value.”
It seemed to me that Kyle’s portable scoreboard idea might just be false gold – a shiny idea that could pull his concentration away from his existing business that still had that million dollars under it. I advised Kyle not to count out his sports league as a viable business that could certainly have equity value and be attractive to buyers down the road. It was clear that Kyle didn’t believe me.
“My fear is he’ll fall into the same trap that hundreds of other young entrepreneurs have–chasing after new opportunities rather than focusing on growing the business you have. I’ve seen it happen over and over again. There is no surer way to miss the million dollars under your shoe.”
Entrepreneurs are a restless crew. I know, being one myself. But you’ll never take a company to the stratosphere if you divide your attention. My best advice to most entrepreneurs with a successful company is to put your focus on growing that company as much as you can before moving on to another idea. Don’t miss your million dollars by forgetting to look under your shoe.
You can read my article in its original form at Inc. Magazine’s website.