I saw a talk by Peter Keller, the founder of Fringe Sport, a functional fitness equipment provider, at a conference two weeks ago. Peter’s talk covered some of the major mistakes he’d made and what he had learned from running Fringe Sport for the last 3 years.
One of them revolved around the concept of what he called table selection.
Table selection is a better and more descriptive term for the cat furniture problem. It’s the idea that the game you’re playing (or the table you’re sitting at) is often more important than how good you are at the game.
In Peter’s case, he’s riding the functional fitness and Crossfit wave, which is a rising tide right now and generally a good table to be at. However, the products he’s selling aren’t particularly high margin and have some other logistical issues like shipping costs – he’s literally selling weights – so that aspect of the table isn’t as attractive.
In retrospect, almost everyone wishes they had picked a better table or a better game. It’s true that most people spend way too much time on lower level thinking and tasks (playing the game) and not enough time and energy on the higher level ones like picking the right table.
As technology improves, I believe that higher level thinking will become increasingly more valuable as we’re able to better leverage technology and an increasingly large pool of knowledge workers around the world to execute on creative ideas, so table selection is only becoming more important.
However, there is definitely a bell curve at work here.
While most people need to shift farther towards the higher level thinking on the bell curve, you can go too far off of that end and wind up firmly in mental masturbation land.
As a frequent visitor, it’s a lovely place, but not terribly useful in helping you move towards desired outcomes. It can be really easy to spend too much time there convincing yourself you’re doing the important work instead of taking actual actions towards your desired outcomes.
I’m really good at sitting down and doing tasks like “mapping out the sales process.” While it makes sense to be strategic and deliberate, at a certain point, you need to pick up the phone and make some sales calls. You need to sit down and play a few hands.
Sitting Down at the Table
Two things happen when you start playing instead of just looking for the right table:
The first one is that you start getting better at that specific game and your platform in general gets larger.
No matter how good the table you select is, you still need to become the best player at the table. When you first sit down, you don’t understand the rules or how the table really works.
So the first few hands you play are likely to go pretty poorly. It takes a while for you to catch on to the rules and the game and see how the skills you’ve brought to that table are best leveraged.
In the context of business and entrepreneurship, the capital – skills, infrastructure, employees, etc – that you build in one business can be carried over to your next businesses.
The second thing that happens is that you start to see all the ways in which you could have picked a better table.
In the act of playing an individual game, you get better at the skill of choosing which games are the best to play. While it was obvious to Peter in retrospect that choosing a business model with higher margins would have put him in a better position, that’s only clear because he sat down at a table where the margins weren’t so hot.
But they’re still alright and his company has grown pretty quickly for having only been in business for three years. His 10- years of prior experience in e-Commerce and manufacturing were the reason he was able to pick as good of a table as he did.
In the end, there’s always a better game or a more profitable table. There’s always someone smarter or better than you at any given thing.
It’s hard to know when it’s time to eat your sunk costs, get up and pick a better table versus when you just need to keep your ass in the seat and keep playing the game.
You have to know when you’re playing a good, though less than perfect, game and just keep playing since there’s a clear point of diminishing returns in searching for a better game.
So, as you play a game longer and longer:
- you become better at that particular game
- you’re more experience and are able to choose a better table the next time around, and
- you develop capital in all forms – skills and expertise, infrastructure, cash, employees, processes, etc. – that you can use to expand to other (potentially higher stakes) tables
From Cat Furniture to Portable Bars and Valet Software: How To Find A Niche Market.
Looking back over the history of my company Two Tree, this seems to be the pattern.
We seem to be getting better and better at figuring out how to find a niche market.
The First Table
The first business was upscale cat furniture and is probably the worst table we’re sitting at. It doesn’t allow us to leverage a lot of the manufacturing and customer service strengths of our company, the margins aren’t fantastic, the average value of a sale isn’t that high, and the internet is a really competitive marketing channel in that niche so it’s harder to get visibility for the products.
The Second Table
The next table we sat down at, valet podiums, was better. We’d gotten better at picking tables and we’d developed expertise that we could take to the next table.
At the valet business, we get more repeat customers which lets us leverage our customer service. The average order value is higher. It’s not as competitive online as cat furniture so our web marketing is more effective.
However, there’s always a better table. It’s not that big of a pond to play in. Even if we were to own the valet equipment market, it’s just not that big of a market.
So we took that knowledge and we picked another table.
The Third Table
The Portable Bar Company lets us leverage parts of the valet business. We can use use our existing manufacturing and distribution infrastructure systems.
It’s a bigger pond to play since it gives us an ‘in’ to the hospitality industry at large, which is much larger than just valet equipment.
However, we’ve learned some things with at The Portable Bar Company that will influence the next table we sit at.
Because it’s B2B, we expected to see good ROI on customer service, which doesn’t currently seem to be the case. There aren’t a lot of repeat buyers so far, but that might be just because we haven’t tapped into the meat of the market yet, or haven’t brought the right product to market. We have to stay at the table a while longer to find out.
We also suspected that we could get a lot of traction by having good online visibility. A lot more people are searching online for portable bars than valet equipment, however it turns out that there’s more to industry research than the Google Keyword Tool. Despite getting a decent amount of traffic, the Portable Bar Company isn’t as profitable per visitor as we expected.
The Fourth Table
We took what we learned from the Valet Spot and the Portable Bar Company to start Valet Up, a Software as a Service product for valet parking companies.
There’s some downsides to the physical product business model. The cash flow cycle is really long and there’s a lot of overhead costs that makes product iteration take a lot longer than other models business models like SaaS.
We can build off our existing knowledge and customer base in the valet industry, but using a potentially more attractive business model. We’re still just getting settled in at this table so we’ll see what we learn from it.
When to Hold ’em and When to Fold ’em?
In the end, there’s a balance to strike here. You have to make sure to take enough time and select the right table using all the experience and knowledge you have available. However, once you do, you have to have a burn-the-ships mentality at the game you’re choosing to play, all the while realizing that you can make the ships magically re-materialize in 6 months if you want to get up and take your chips to another table.
However, if you don’t commit to playing one game for long enough, you never learn enough to make a better choice the next time or develop the capital to play in higher stakes games.
My tendency is to fall too far on the table selection and mental masturbation end of the spectrum. I suspect this is due largely to the Resistance and fear of failure.
You can’t really fail at table selection. It’s far too qualitative and complex. There’s always a better table and there’s always a worse table so it’s difficult to define a fail point in table selection.
However, once you sit down to play the game, you can absolutely fail. In fact, it’s essential that you establish clear fail points so you can figure out if it makes sense to stay at that table, take some of your chips to another table, or to get up and move entirely.
The ideal situation would be that you devote enough time and energy to leverage everything you’ve learned from the previous tables you’ve played at and the capital you’ve acquired but no more.
Then, once you sit down at the table, you establish a clear fail point/deadline. You play your cards and then once you reach that deadline or fail point, you force yourself to re-evaluate whether or not it makes sense to keep sitting at that table.
The re-evaluation is critical and can be derailed on either side.
It’s easy to fall into the sunk cost fallacy. If you just spent 6 months, or a year, or 5 years pouring your heart into a certain game, it’s going to be really freaking hard to get up and pick a new game.
Jesse Lawler told me something a few months ago that’s stuck in my mind – “realize that you’re going to spend most of your 20’s working really hard on all the wrong stuff.”
Jesse spent a decade in the film industry (and has an IMDB profile to prove it) before he got up from that table and sat down at the software developer one.
It’s freakin’ tough to redefine yourself into a totally new role after a decade spent at another table.
The danger is also there in getting up from a table too soon. The grass always seems greener on the other side. As Jimmy Hayes of Minaal has reflected on with me, it’s really hard to tell early on in a business whether you picked a good table or not.
I heard a great bicycle analogy that illustrates this point really clearly.
At first, when you’re just starting out, it feels like you’re in a really high gear. You’re pedaling really fast but not getting anywhere. As the business matures , the amount of effort starts to sync up a little better with the results.
The Portable Bar Company is on pace to double, which isn’t too bad, however from the inside it feels so slow. It feels like we’re pedaling really fast, and it’s barely creeping along.
In retrospect, it’s easy to see that we could have picked a better table. But that’s only obvious because we’ve been sitting at that table and playing the cards for a couple of years now.
While learning about how to manage risk more effectively while working at the Portable Bar Company, one of the best uses of my time was spent in developing systems to mitigate downside and create scalable processes.
I believe leveraging systems effectively is an essential component of entrepreneurship.
Enter your email below to download the exact Standard Operating Procedures I developed while growing a 7-figure business here.
Last Updated on August 1, 2022 by Taylor Pearson