MBA COURSES Tuesday 29th Jan 2019

Between two chairs

  1. I meet presentations by startups who want to "develop two directions". For example, they offer to invest in the coffee business: a chain of dark coffee shops delivering coffee in 15 minutes to the neighboring offices and street coffee shops. From a start-up point of view, this is a double plus. That is, you can do the same thing, but earn money twice as much.
  2. But from the investor's point of view, this is a fat disadvantage, because they are two different businesses. From a startup's point of view, coffee and croissants are the same business, whether you sell them on the street or deliver them. And from an investor's point of view the main divider between businesses - the funnel attracting customers, which street coffee shops and coffee with delivery are completely different.
  3. Even, moreover, if you sell coffee delivery in 15 minutes and office supplies delivery in 15 minutes - it could be the same business. Because the audience, the funnel of its attraction and the logistics are the same: office workers from nearby offices, order pickup, delivery. That is, it doesn't matter what to sell. What matters is who and how. And then it will be one and the same business.
  4. And in the case of coffee delivery and street coffee shops - immediately questions. If the coffee delivery market is small - then why bother with it? If it's big - then why divert brains, money and resources to create two businesses simultaneously under one roof? At the level of a startup - it's completely unnecessary hassle. On the level of a large company when the main business is already built to the ceiling, continuing to increase revenues is only possible, really, by opening another business allowing to share part of resources and competence. But that is much later.
  5. In general, while you are still a startup - do not get into creating several directions, it is better to focus on one, but which is visible to a large market. And don't forget that "the same business" is not "the same thing" that you sell, but what you sell "in the same way to the same people".