Do you expand or narrow?

Growth is the mantra of leadership. Grow or die. “Have lunch or be lunch.” 

For most leaders, size does matter. If you’re not adding more markets, more customers, or more products, you are losing. 

That’s certainly true when it comes to your business valuation, too. How big should your business be before you try to sell it? How many more customers do you need? And how do you get them–organically or through an acquisition? 

But expansion isn’t the only way to grow — especially if doing so causes you to become less valuable to your most important markets. Many companies seeking to grow have prematurely stepped into new markets or launched new products that distracted them from building even deeper roots in their most important markets.

You might call that the “grass is always greener” bias. Moving into a new market has to be easier than the one you’re currently in, right? But it may only appear that way simply because you don’t yet understand what it takes to win. 

As the leader of your business, you have to decide if you need to expand or narrow your focus as you position yourself for growth and eventual sale. 

Don’t be afraid to go narrow. 

I once worked with a leader of an IT consulting company who had a superb team of consultants serving a very specific market. The problem was this CEO was an exceptional salesperson — the kind that could sell refrigerators to Eskimos. I say it was a problem because he didn’t care where the business came from. One project was in healthcare. Another in education. Another in manufacturing. And so on.

Serving each of those disparate industries meant hiring a team of consultants with the necessary industry knowledge to execute on the project deliverables. He soon discovered that his opportunistic approach to expanding his business was not sustainable. When there were no replacement projects in each of the industries, he had to lay off most of his workforce. And his core market suffered too.

He suffered from the “grass is always greener,” expand-at-all-costs bias. 

Perhaps you’ve suffered from a “grass is greener” style expansion, too. Perhaps you’ve become distracted by the possibilities of expansion and now realize that it’s time to narrow your organization’s focus. Perhaps your business needs less: less places to focus, less places to invest, less places to test and reiterate. 

In his book Essentialism: The Disciplined Pursuit of Less, Greg McKeown describes essentialism as “making the wisest possible investment of your time and energy in order to operate at our highest point of contribution by doing only what is essential.”

What is essential for your business? Is it expanding into new markets to be more attractive to a buyer? Or is it doing what you do really, really well to offer proof-of-concept and as sure of a bet as possible? 

Narrowing your focus may mean that you choose to double-down on investing in your original brand promise, finding new ways to serve your customers and create more value for them. To serve those customers in the best way possible, you may have to make the painful decision to pull out of a market or product segment that is draining resources. 

Those resources could be better spent adding value to the markets you already serve, creating a higher value overall for your company as you prepare for sale. 

Narrow in on what matters. 

Here are some questions you can ask to help you decide if narrow is the way to go: 

• Do you have difficulty identifying how to prioritize the investments in the markets you serve? 
• If you were to redirect investments from one area of your organization to another, would you be able to create more perceived market value for your offering?
• Do the investments you make outside of your core market contribute to your capabilities to deliver more value to your core market?
• Is the mission/vision of your organization becoming more difficult to articulate?
• Is it becoming more difficult to acquire or keep customers in your core markets?
• If you were evaluating your own company in order to buy it, would you want to see more or less markets in the portfolio? 

Choosing to exit a market or product is not an easy decision. There are a lot of factors to consider, but fear of narrowing in on what is essential to your business shouldn’t be one of them.

Which is best for your business right now? 

Do you need to hunker down and focus resources on a specific path, or do you need to step back and evaluate the landscape of what might be available to you? Both are appropriate at different times, and it takes a discerning leader to sort out which path will create the high-growth valuation you desire for your business. 

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‍This article is adapted from a post by the author that appeared on the Strategic CEO Substack.
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