When your business starts to take off, new opportunities start to present themselves. The temptation to try to replicate the success of your current company with a new venture or two can be hard to resist.
But when you’re weighing your options, it’s crucial to figure out whether the opportunity your contemplating is conducive to sustainability and steady growth. It’s better to hit one thing out of the park than be just okay at many things.
Here are three things you should consider before you open the door to new opportunities.
1. The best ideas aren’t always sexy
At a time when many young entrepreneurs were focused on making flashy apps and trying to become the next Mark Zuckerberg, I chose one of the oldest, most boring businesses in history: lending money. Providing funding on credit card cash flow to small businesses wasn’t the flashiest of models, but it was based on good fundamentals.
At the time, bank credit to small businesses was tightening, and the alternative lending industry for small businesses in the U.S. had seen notable early success. Trying to do what everyone else was doing would have by definition made it that much harder for me to have a reasonable chance of success. I thought it more efficient to look in places others were ignoring. It turned out to be a solid strategy—Merchant Advance Capital was profitable from the outset and soon we were inundated with new opportunities.
2. If it sounds too good to be true, it probably is
In our fourth year of operation, our company had an opportunity to expand our business into the U.S. For reasons unrelated to its fundamentals, an SMB lending platform with a strong track record had lost funding. We had the opportunity to take over this organization for virtually no cost—if we were willing to pay its operational costs, we could start deploying our own funds into the U.S. market through this existing platform.
It seemed like a no-brainer. But after looking hard at it, we demurred. The U.S. was a different market with its own set of challenges, we concluded. By splitting our focus between the two geographies, we would run the risk of dropping the ball with our Canadian clients. One of my favourite Warren Buffett sayings is: “You should never gamble what you have and need to try to get what you don’t have and don’t need.”
3. Make sure it really aligns with your business model
In 2012, a friend approached me about starting an unsecured consumer lending company. Major international banks had recently pulled out of Canada, providing what appeared to be a huge market opportunity. “Wow, this is a large market—larger than the market for the SMB lending my company does, and it’s not all that different from what we already do,” I thought to myself. “Maybe we should try it.”
I was excited by the possibility, but the chairman of my board pointed out some factors I hadn’t considered. The customer acquisition channels were completely different; the loans were serviced differently; the risks and underwriting—you guessed it—totally different. I didn’t want to discount the possibility entirely, so I parked the idea. About a year later, I pitched the consumer lending idea to another friend, and he ran with it. Together with the friend who had first approached me, we became co-founders of what is now Progressa. I continue to be a shareholder and board member today, and the company recently closed an $11.4 million Series A financing.
My chairman gave me some sage advice—I would have spread myself too thin had I tried to tackle this other market on my own. After seeing Progressa take off, I realized what an undertaking it would have been to try to do both.
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Doing something well takes your undivided focus. The time to start exploring new ventures isn’t when you get your first taste of success, but when you get to the point where your business is flourishing, you’ve got a strong team in place that you trust with its day-to-day operations, and an opportunity comes along that aligns with your expertise and your proven model.
David Gens is the founder and CEO of Merchant Advance Capital, a fintech small business lender that’s helping business owners get financed faster. He was named one of BC Business’ 30 Under 30 in 2015.
MORE ON OPPORTUNITY EVALUATION:
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- Why You Need to Stop Innovating Like a Startup »
- The Biggest Cost of Bad Ideas »
- Where You Can Find the Best Business Opportunities »
What’s your process for evaluation new opportunities? Share your system by commenting below.