How to make more money down the road.

Stop trying to be efficient.

Companies tied to Industrial Age mindsets are addicted to something called “efficiency”. But being efficient is a terrible principle on which to run and grow a business. Efficiency is more likely to drive you to bankruptcy than to success.

The business owner’s main game should be this:

How do I make MORE money in LESS time? If a business owner isn’t playing this game, but is playing the “I’m going to work harder” game, they aren’t acting like a business owner. “More money in less time” sounds like an efficiency game. It is not. It’s an effectiveness game.

Effficiency is about the short-term
Efficiency is focused on figuring out how to spend less time and less money doing something, which again seems like the right thing to do. But the problem is that efficiency always focuses on the present. It is about short-term decisions that save us time or money NOW.

Saving time and money now is not the way to build a business. We can almost never save our way to growing a successful business. I worked for one company in the late 90’s that was addicted to saving money, taking short cuts on everything from equipment to employee benefits. They were focused intensely on being more efficient every day, and the main game was always how do we do things in less time for less money? They went bankrupt in 2008, after years of shrinking sales and ongoing atrophy of the business model.

Effectiveness is about the long-term
A focus on effectiveness is quite different. Effectiveness is most concerned with the long-term health of the company. As a result, it makes long-term decisions that may actually cost us more time and money right now in order to make more money in less time down the road. went in the hole $400+ million a year for a number of years by investing time and money in building a company that could handle a very high percentage of the market.

This should be the mindset of even the smallest plumbing shop or realtor – being willing to invest MORE time and money now to get a bigger return in both time and money later. When I talk with small business owners and especially those with no or just one part-time employee, one of the most debilitating mindsets I run across is short-term decision-making, and it’s almost always explained away by “I’m being efficient.” The conversation goes like this:

Me: “Is there a better way to do stapling than for you to do it?”
Owner: “No. It costs $18 an hour to hire someone to do it, and I am saving $18 an hour doing it myself.”

or this conversation:

Me: “Should your sales person invest more time in building relationship with potential bigger clients?”
Owner: “No, we need money now and their time is better used closing smaller, easier accounts until we get enough revenue to go after the bigger ones.”

These are “efficiency” mindsets – making short-term decisions without proper regard for the long-term impact. They will more likely drive you out of business.

Here’s how the conversations should go:

Me: “Is there a better way to do stapling than for you to do it?”
Owner: “Yes, I’m hiring a virtual admin tomorrow because my time is more effectively used building relationships with key clients (or potential clients).”


Me: “Should your sales person invest more time in building relationship with potential bigger clients?”
Owner” “Yes, we’re carving out a part of their schedule to invest in these relationships because a few bigger clients down the road will solve all the revenue issues we’re facing right now.”

The Efficiency vs. Effectiveness Mindset
The Efficiency Mindset makes decisions based on where they are right now, “We have x amount of money and x amount of time right now, so we can only do x right now.

The Effectiveness Mindset makes decisions an entirely different way, “Even though we only have x amount of time and money right now, we are going to forego some revenue or production time right now in order to invest in things that have the potential of making us more money in less time down the road.”

To decide whether you are being efficient or effective, the key question to ask yourself is this:

Are you making decisions based on where you are, or where you want to be?

Business owners who make decisions based on where they are, can be very efficient, but will always remain where they are. Business owners who make decisions on where they want to be are willing to invest time and money in the future, even sacrificing some present efficiency to do so.

Are you stuck on the treadmill doing the same things you did last year and making the same revenue? A likely big factor is that you are making decisions based on where you are, which will keep you where you are as long as you run your business on that “efficiency” mindset.

Be effective, not efficient – Make decisions based on where you want to be, not on where you are. If you do, you might lose some short-term opportunities or have to work a little longer each day right now, but next year your business will have moved in the direction of where you want to be.

Make more money in less time down the road, by investing more money and more time right now. That’s being effective, not efficient.