Do you know how to assess the value of potential business activities?
Let’s say you’re thinking about going to a conference. There are a lot of reasons why you might want to go, but how can you tell if it makes business sense to do so?
Or maybe you’re thinking about where you’re going to put your operational resources for the next quarter. Is it better to create a new product or enhance your current service offer? Is it better to go on an outreach push or to use that time, energy, and attention to work on your internal business processes?
Or perhaps you’re just sitting there wondering what you should do for the rest of the day and are tired of aimlessly hanging out on Facebook or Twitter. You’ve got the capacity to make something happen, but it’s not clear what you should do with an unfinishable ToDo list in front of you.
Assessing these opportunities on the fly can be really challenging without a framework, but it turns out there is a quick framework to help out here. To develop it, though, we’ll need to get out of the trenches of our work and think about the goals of our business activities.
Any given business activity can have at least one of these three goals:
- The activity can generate cashflow
- The activity can generate opportunities
- The activity can generate visibility
As a quick hint, if it’s not clear how an activity in your business leads to one of the goals above, it’s time to determine whether you should continue to do that activity. Doing something that isn’t worth doing comes at the cost of something worth doing.
Let’s consider each goal in turn.
When you’re thinking about cashflow, it’s always important to think about positive cashflow. All too often, people focus on revenue, but revenue isn’t necessarily positive cashflow. I’ve seen people generate thousands of dollars in revenue only to turn around and have nothing to show for it after they pay support, payroll, and logistical costs.
The additional reason I want you to focus on positive cashflow is that it keeps you looking at how to get your working capital, rather than having a bunch of IOUs and potential payments out there. Cashflow is such a powerful word because it combines two tangible facets of your business: the fact that money in the bank is what matters and the fact that it flows. If you’re not proactive about it, money will flow out and not in.
I don’t need to stress the value of cashflow-generating activities because most people in business get it already. What I do need to stress is that cashflow-generating activities aren’t the only thing you should be doing. Many people focus entirely on the activities that will generate short-term cashflow, and while this pays the bills, it sets people up for a fall later.
A growing business needs positive cashflow, but it’s not the only thing it needs. It needs opportunities and visibility, too, so you should focus on getting them at the same time that you’re focused on making short-term money.
An effective entrepreneur or executive is a master at creating opportunities where there seem to be none, rather than always waiting for the opportunity to happen. When you’re assessing an activity, using opportunity as a lens, you should ask yourself what new realities or consequences might result from your doing the activity in question.
Rather than thinking in terms of point-to-point opportunities, think in terms of opportunity chains. Remember, an opportunity chain is a set of cascading opportunities that are synergistic. For instance, I’m in the process of writing a book on entrepreneurial strategy, leadership, and success. Finishing the book will set up future speaking and service opportunities. Compare writing a book with just focusing on service opportunities; the latter has some immediate and important benefits – cashflow, primarily – but unless it’s coaxed, it doesn’t have nearly the opportunity value of writing a book.
Also keep in mind that you need to generate opportunity chains that are in alignment with your vision, values, and mission. It does you little good to generate opportunities that tilt your business in a direction that’s out of alignment with what it’s about. Pursuing those opportunities will both cost more of your resources and keep you from building on what you’ve already done – the likely result is that any success you have there will be much more terminal rather than cumulative. Your momentum depends on cumulative growth and opportunities.
It’s better to have an opportunity and not need it than not have one and need it. The more right opportunity chains you set up, the faster and more smoothly your business will grow.
Whether we like it or not, to grow our business, we have to get what we’re doing in front of people. If we’re not in front of them, we don’t exist to them unless we’ve become a character in their stories.
As visibility and momentum increase, though, you’ll need to be more selective about the venues in which you get visibility. Being seen by your ideal customers is much better than being seen by people who aren’t likely to care about what you’re doing. But being seen by somebody is better than nobody seeing you at all.
Where I’ve seen many people fall down – especially in online business – is that they go and get seen but they don’t have their homebase in order. If you don’t have something for people to hang onto once they see you, what good is being seen? There are times to be seen even when you don’t have an offer or shingle, but at a certain point, you’ll need to spend some time figuring out what the point of bringing people back to your business (site) is if it’s not setting up opportunities or cashflow.
While I’m on it, remember that the point of visibility isn’t just to get seen by people who will buy something from you later on. Even more important is being recognized as an authority and leader; you might not make a single sale or get a single person who follows you back to your business, but the fact that you’re in a league of leaders, experts, and authorities increases your business’s value.
Trade-Offs and Sweet Spots
The reality of business is that you’ll often have to trade one goal of business for another. We’re quite familiar with this when it comes to money; “it takes money to make money” is both true and useful. What we don’t often see is that sometimes we need to pull back on cashflow-generating to build opportunities and visibility.
Let’s say you’re a coach with a healthy client roster. When presented with the opportunity to be a part of someone else’s teleseminar, you might have to schedule the afternoon to do it at the cost of client sessions you could do instead. In this case, you’re exchanging cashflow (rather than cash) for opportunity and visibility. Whether it’s worth it to you depends on a lot of other factors, but it’s at least helpful to assess the true cost of these opportunities in terms of cashflow, opportunity, and visibility.
For instance, you could determine that it’s a no-brainer because the event will likely pull in more clients that would quickly offset the immediate cashflow loss. Or maybe you decide not to do the event because you need that immediate cashflow to fund some other opportunity. The point is that you have ways to work through these types of assessments.
Or perhaps you decide to do some outreach work in an audience that isn’t familiar with you. In this case, you’d be trading short-term opportunities and cashflow for visibility, banking on the fact that you’ll be able to serve the new audience once they warm up to you.
On the other hand, it’s often possible to do activities that achieve two or more of these goals at the same time. The example of writing a book that I used above is an example of this; it brings in cashflow, generates opportunities, and increases visibility. Of course, this is assuming you write a book on something that’s relevant to your values, vision, and mission.
The more of these sweet-spot activities you do, the faster your business will grow. It’s one thing to plan strategically and quite another to operate strategically. When you align both, you can get some powerful results. Thinking in terms of cashflow, opportunity, and visibility helps achieve these results precisely because it helps you do this alignment faster and more frequently.