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Ask SCORE by Dean Swanson

In my experience, it is hard for a small business CEO to say no to a potential opportunity. I often see times when a business leader needs help with making this kind of decision. So when should an entrepreneurial CEO say “no”? 

To help entrepreneurs with strategic decision-making in these situations, Brett Farmloe, founder and CEO of Markitors (and one of SCORE’s content partners), asked CEOs and business leaders for their best insight. He asked “What is one sign that a business owner should probably say “no” — and pass on an opportunity?” I share several insights from small business CEOs.

When you’re overextending yourself

Sometimes, the timing just isn’t right, and you won’t have the resources to say “yes” to a new opportunity — and you’ll know it. Let’s say you just finished expanding your business premises, and someone approaches you to take part in a new venture or partnership.

The temptation may be there to dive in, but you know you’ve nearly maxed out your line of credit and also can’t spare any employees for the new project. Don’t overextend yourself. Just say “no.”

— Lily Yu, Oak Springs Realty

When long-term costs exceed short-term benefits

There are occasions when a chance offers a clear short-term benefit — a position with a good title, an investor who offers to save your cash-strapped company in exchange for a 50% ownership stake.

However, you are well aware that there will be considerable long-term costs. Perhaps the opportunity with better benefits offers few prospects for advancement and pushes you to focus on a field you don’t particularly enjoy. Alternatively, you value autonomy and control and see that being a co-owner will only cause you problems in the future.

— Randall Smalley, Cruise America

When you are splitting too much of your time

I have seen many entrepreneurs do this often, with four or five business ideas bubbling away simultaneously. One fantastic business is worth a lot more than several bad ones. Splitting your time, focus, and dedication between many projects is nearly impossible. Focus on one and make it shine

— Henry Babicheknko, Stomadent

When you don’t have the capacity

As a business owner, it’s important to know what amount of work your team can take on. You will likely have opportunities that will be difficult to pass up, but do a thorough audit of each team member’s capacity for the work they currently do before accepting more responsibility. You want to be sure that everyone has the capacity and the ability to deliver on new commitments and wow your new client.

— Nick Santora, Curricula

When the numbers don’t support the decision

You can feel great and get excited about a business opportunity, but if a spreadsheet can’t validate a worst-case scenario, a business owner should probably pass. Common examples could be around extending an employment offer for a new role or taking on a new cost at the expense of another opportunity.

Before saying “yes” or “no” to an opportunity, run the best and worst-case calculations to see what would happen to the business with either route.

— Brett Farmiloe, Markitors

When a toxic client wants to do business

It is likely that 80% or more of the external friction your business faces comes from 20% or fewer of your customers. Business owners should consider “firing” problematic customers and applying the physical and emotional energy of their team towards finding and servicing more ideal clients.

Saying “no” to continuing your toxic business relationships can pay dividends for the success of your company. Passing on toxic clients can reduce your company’s turnover, increase efficiency, and allow you to focus on what makes your company great.

— Wesley Jacobs, Apollo Medical Travel LLC

When a potential partner is out-of-state

Partnerships are one way for business owners to market their business and collaborate with like-minded companies. At times, this may require a partnership agreement.

If a partnership agreement requires the business owner to agree to the governing law outside of their state or local jurisdiction, they should probably pass on the opportunity. If a contract dispute were to occur, the business owner would be responsible for travel and expenses to attend court hearings.

— Annette Harris, Harris Financial Coaching

When a different option could lead to better returns

As a business owner, you have to take a lot of risks. Risks are a good thing; it’s hard to succeed without risking failure, and you tend to learn a lot from it. With that said, it’s important to understand the scope of the risk you’re facing when met with an opportunity.

Sometimes, risks aren’t limited to how you might fail. Instead, they pertain to how much you might win. The forgone benefit of an option not chosen is just as important to consider. In other words, you must consider whether the opportunity in front of you is the best possible opportunity available.

If a different choice could lead to better returns, then be sure to fully evaluate the scope of your options before allocating time, capital, and internal resources.

— Mike Grossman, GoodHire

Dean Swanson is a volunteer certified SCORE mentor and former SCORE chapter chair, district director and regional vice president for the northwest region.