A Squirrel Trap is when some exciting new opportunity comes to your attention and you get distracted from you core mission and spend time chasing an opportunity that never really ally pans out. It is a lot like a dog seeing a squirrel… the dog finds it almost impossible to focus on anything other than the squirrel.
Squirrel Traps are especially dangerous to two types of entrepreneurs:
- Successful Entrepreneurs
- Struggling Entrepreneurs
Successful entrepreneurs find that the more successful they are the more opportunities are presented to them by other entrepreneurs hoping to leverage off of the financial or experiential success of the successful entrepreneur. Successful entrepreneurs tend to think that they can take on more new challenges…they have been successful in the past, why wouldn’t it continue? They have always been able to juggle multiple projects. It’s their super power. When this happens they often find that they divert so much time into these attractive new opportunities that they let their core business drift into a sub-optimal performance situation. It can even result in the successful business entering a period of struggle, if not caught and corrected in time.
Struggling entrepreneurs often reach a point where their faith in the core business model begins to go down and they degin casting their eye in search of a better, more lucrative opportunity. When they find one it will appear to be divine providence. And if this new venture is related to their current one, the draw will be even more pronounced. These entrepreneurs often find that their attention drifts from their core business and the lack of attention ends up creating additional struggles. And the same process weaknesses that were causing issues in the core business will not be addressed their and will also begin to taint this new opportunity as well.
To help guide you in evaluating the new opportunities you can use the following 6 step process. If carefully followed it will help you make a calculated decision as to whether or not you should try to take on the additional burden of a new opportunity.
Here are the 6 steps (curated from a Forbes.com 2018 article)
- Define the Opportunity
- Define Your Potential Customers
- Define Your Market
- Define Your Competition
- Evaluate the Financial and Process impacts
- Consider the Fit with Vision and Mission
Here is an expanded discussion of each of the above 6 steps:
1) Define the Opportunity
- Describe the Product/Service you will offer.
- How will adding this Product/Service impact your existing business.
- What Risks are attached to adding this Product/Service?
The Major Risks Are:
- Financial Risks – do you have enough money?
- Operational Risks – will the new opportunity disrupt your existing business processes?
- Personal Risks – is there a risk of damage to your brand or reputation or to your focus on your business?
2) Define Your Potential Customers
- Define your Market Segment
- Build a Customer Profile
- How is this Customer different from Current Customers?
- What Pain does this new Product/Service solve?
- What Market Research have you performed?
- How many customers have you talked to?
- What have you learned?
3) Define Your Market
- How large is the Market Segment for this new Product/Service?
- How fast is the Market Segment grown over the last 1-5 years?
- What are your growth expectations for the next 1-5 years.
- What threats and opportunities do you see for this Market Segment?
- Economic trends?
- Demographic trends?
- Technology trends?
- Potential regulatory changes?
- Where do your first 5 customers come from? The next 10? The next 50?
4) Define Your Competition
- Who are the Competitors in this Market Segment?
- What is your Competitive Advantage?
- How long will your Competitive Advantage last?
- What are the barriers to You entering this Market Segment?
- What are the barriers to Other Competitors entering this Market Segment?
5) Evaluate the Financial and Process Impacts
- How much capital will be required?
- What is your pricing strategy for market penetration?
- What are your margins and what is your break-even volume required?
- How will this be integrated into your sales, production, and support processes?
- Do you have the buy-in of your management team?
6) Consider the Fit with Vision and Mission
- What drives your motivation?
- How much time will this take to implement?
- Will this materially impact your business in a positive manner?
- Does this truly fit with your Vision and Mission?
We have a heart for the mindset of an entrepreneur. You inspire us with how you see the world. Yes, you need a CFO. You also need someone to talk to about your concerns, financial and otherwise. We will be that person for you. Feel free to contact us today.
The only thing we care more about than your business is your peace of mind.
Mari Sandifer | Director of Marketing & Business Development
Mari joined Rektio as Director of Marketing and Business Development in 2020 after spending over 25 years in corporate finance and 3 years as a business owner. She holds a BS degree in Marketing and an MBA in Finance from Indiana University’s Kelley School of Business. Her CPA license is inactive (and morbidly obese).
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