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How to make more money down the road.

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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. Amazon.com 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).”

and

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.

 

You never run out of money.

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Perception is not reality.

We experience running out of money all the time. But that experience is not reality. Nobody runs out of money, we just think we do.

What is the real issue? We experience running out of money but what we really run out of is time.

Money can be printed and you can always figure out how to get more of it yourself. There are almost endless ways to increase your income.

You Can’t Manage Time
But you only have 168 hours in every week. No matter what you do, you can’t print or accumulate any more of it. However, “Time Management” is not even possible. If someone is selling you a Time Management seminar – run.

The only thing you can manage is your priorities. There are no excuses, there aren’t even reasons, there are just priorities. You eat, sleep, breathe and go to the bathroom because they are priorities. Time can’t be managed, but you can decide what is most important to do with the 168 hours you have each week.

More Money In Less Time
The business owner’s game (and really everyone’s game in business) is “How do I make MORE money in LESS time?” If we are playing the “More money in MORE time” game that we were all taught to play – “just work really hard and you’ll be successful” – you’re going to wear yourself out and not ever make the kind of money you want.

If you could create another 168 hours in your week, you could easily double your income. But again, you can’t manage time, only your priorities. What are you doing to make MORE money in LESS time? To do that, you’re going to need to figure out how to make money come in while you’re sleeping or on vacation. There are a few dozen ways to do that (outlined in my first book, Making Money Is Killing Your Business) – only one of them includes hiring employees.

Stop Playing Office
Stop trying to manage your time. Successful people figure out how to make more money in less time by changing their priorities and deciding the money-making part of their business is more important than the “playing office” part of their business.

Almost all of us waste at least 50% of our time playing office – doing things that will never make us more money, and doing things that are not the highest and best use of our time. But we “feel” productive doing them.

Manage Your Priorities
Stop trying to manage time. Manage your priorities. You’re likely to make a lot more money that way.

What is one way you are playing office right now? What other priority could you focus on to make MORE money in LESS time? Answering that question is a great way to start making money while you’re sleeping or on vacation.

Don’t experience running out of money. Figure out the few priorities for the 168 hours you have each week that will make you more money in less time.

The Business Owner’s Primary Game

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More in Less.

Every business owner should have a big vision for where they are going and a clear mission statement for building a great result for their clients. Behind both of these is a single game that every business owner should be playing to accomplish them. It’s called “More Money in Less Time.” It’s the central game we need to play to build a successful business.

It’s a very serious game and it will transform your business and your lifestyle. Everything we do should be filtered through this one question, “How do I make more money in less time?”

Most of us started out as employees, who make more money in more time. We then transferred that bad habit to owning our business. Stop it. An employee thinks that way, but a stakeholder won’t (employees are obsolete – I’ll suggest in a future post why this is a bad habit for staff and stakeholders, not just owners). If you as a business owner want to build a successful business, you can’t afford to employ this old Industrial Age habit, either.

So the central game you play to realize your vision and accomplish your mission (and to get a life) is:
a) continually increasing the revenue of your company while
b) continually reducing the time you have to spend on bringing in that revenue.

Every successful business owner at every size of company, small to large, plays this as their main game.

All of us probably put together a spreadsheet at the beginning of every year that shows how you intend to make more money that year. It shows a graph with a line going up. How many of you also put together a similar spreadsheet with a line going down that shows how much less time you intend to invest in your business in those 12 months? See my recent post about two partners THE URL HERE who, after 20 years in a $40 million business decided to do this, and ended up getting five and a half months a year off.

There are two questions you need to ask regularly in order to play the game of “More Money in Less Time”:

1) “Is this (whatever I’m doing right now), the highest and best use of my time?” The answer to 75-90% of what we’re doing will be no. It’s rarely the highest and best us of our time – we’ve just been doing it since starting the business and haven’t bothered to get it off our plate.

If the answer is no, then the second question is:

2) “How do I do this for the last time?” If you are serious about getting things off your plate, you’ll come up with 1-10 ways to get things off your plate that don’t belong there. You only need one. If you’re afraid, distracted, have a big ego (nobody is as good as me at this), or dozen other excuses, you will find 1,000 ways to not get this off your plate. There is always a way to get it off our plate, but if you’re looking for ways to not do it, you’ll find them.

This is the most important game a business owner (and their management staff) can play. We waste more time and money doing things others should be doing than just about any other way. And if you want to get off the treadmill, this is THE game you must play above all others.

If you apply these two simple questions to everything you do for one month, it will change your business and begin to give you the answers that will allow you to make more money in less time, get off the treadmill and get a life.

If you think your situation is unique and you can’t do this, please share it below and we’ll help you see you can do it, too.

The business owners in my post from last week are going to take five and half months off every year now. I take every Friday off, every other Monday, the last week of every month, and one month a year, which allows me to work in Africa to solve poverty. Our (not my) business grew by 41% last year and is projected to grow by 50%+ this year.

You can do this – just play the game, “How do I make more money in less time?”

Seven Decision-Making Principles Leading us to Profitability

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Guiding Principles of a business are necessary (honesty, integrity, customer service, etc.), but there is another set of principles that help the Business Owner in particular: decision-making principles.

How we make decisions effects everything we do. Problem – we make decisions subjectively, even when we think we’re being objective. All the research shows this – even at the major company level – we even buy subjectively.

As a result, we react badly to shiny objects, short-term victories and defeats, and strategic planning. So the question becomes, do you guide your biz or does it rule you? Who’s really in charge?

Want to make more money and stop recovering from bad decisions? Get some simple decision-making principles on which you run your business.

Like rails that guide a train, your decision-making principles are a core strategy to having a business that knows where it is going and how it is going to get there.

Here’s my seven decision-making principles. What are yours?

The 7 Decision-Making Principles of TeamNimbusWest Crankset Group:

  1. Business Maturity Date – Know Where I’m going & when I want to be there. (Seriously, you plan your vacation destination and time to be there, why in the world don’t you plan the destination and time to be there for your business. Which one is more important? Duh…)
  2. Make more money in less time. – Why do what others can and will do, when there’s so much to be done that others can’t or won’t do? Yield Per Hour. Distributive Management. Your NOT saving money by doing things below your pay grade. If you want to make $200 per hour, every time you do a $20 per hour job, you just lost $180.
  3. Focus on my lifetime goals, not just on growing my business – A BHAG (big, hairy, audacious goal) will keep us going, but “grow the business” is a lifeless idea. So is retirement. Get a reason to have a business, then watch how much more money you make, and in less time.
  4. Get off the treadmill, own the business instead of the business owning me. – The purpose of our business is to create a lifestyle for ourselves and our family. Stop making money, stop making a living, and start building a business that makes money while you’re on vacation.
  5. Work ON my business, not just IN it. Highest and best use of my time. – The key to growth – perfecting as we go by strategic planning, not just production. Know where you’re going, and regularly adjust. I revisit my Strategic Plan every Monday. Keep steering all the time.
  6. Make decisions on where I want to be, not where I am. – Clarity of Purpose leads to Hope which leads to Risk. Know where you’re going (clarity), which will give you something to believe in (Hope), which will allow you to risk moving forward. Take good risks to grow.
  7. Bad plans carried out violently many times yield good results. Do something. Stop planning. Implement now and perfect as you go. Speed of Execution rules. It’s a both/and thing. Move NOW (stop thinking), then as soon as you start moving, start perfecting. If you just move, you’re going to get clobbered. If you just perfect, you’ll never start moving. Implement now, perfect as you go.

What are the decision-making principles of your business?

You’ve got decision-making principles that are running the show. You might as well write them down and see if you agree with who/what is actually in charge. If not, change them and take control of your business future.

Learn objectivity in decision-making processes. Know where you’re going, delegate, make decisions based on your strategic plan, and not based on where you are right now. And stop thinking about it so long. It’s not how good the plan is, but how committed you are to the bad (incomplete) plan you have. And how good you make decisions as you go.

Revenue is Not Your Friend – Pricing For Profit

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The Sausage Vendor said he bought his sausages for a buck, and sells them for $.95. When challenged as to how he would make money, he said, “No problem, I’ll make it up in volume.”

Business owners focus on Revenue when they should be focused on Profit. If they focused on Profit, they would raise their prices more often.

(This is Part One – The Mind Games of Pricing. Next week we’ll do Part Two – The Mechanics of Pricing)

The old saw is wrong – “If you worrying about sales, profits will take care of themselves”.
Neither Revenue nor Sales are a good place to focus financially – we need to focus on profit (actually cash flow, but that’s another blog.)

What barriers do you encounter in communicating your pricing to potential clients?
Competition, market conditions, aging industry, complex service, fear, not understanding how to price? Probably a little of most of the above.

When we aren’t sold on our pricing, what does that communicate to the potential client? It communicates that all of the above (competition, market, fear, etc.) are all good reasons not to buy my product or service from me. The best way to create pricing problems is to not believe in our own pricing.

A caterer friend gave his “best, lowest” price to a potential client, skimmed of any “excess” profit, and the client’s response was “Is there any way you can go lower?”. When we aren’t confident in our prices, we mentally set up shop in a place that attracts bottom-feeders like the guy above. Getting a lot of pushback on your prices? It’s possible its because your prices are too low!

Joel Spolsky is the co-founder and CEO of Fog Creek Software, said “I often meet people at parties and conferences who are starting companies, and they will invariably ask me, “Say, Joel, do you have any advice for start-ups? Since I know next to nothing about these people or their businesses, or even their industries, I usually just say, “Yes! You should raise all your prices!”

And we both have a good laugh, bwa ha ha, then the founder ignores me. But my advice was most likely right. That’s because almost every start-up I have ever seen has set its prices too low.

Of the three business owner Profiles – Market Focused, Systems Focused, and Product Focused, the Market Focused entrepreneur is most likely to have good pricing, and the Product Focused craftsperson will have the worst. The problem – the overwhelming number of businesses are started by Product Focused craftspeople. (The Systems Focused manager loves accounting-driven pricing that ignores all market conditions; they also start the fewest businesses.)

What makes for the most profitable company? One that focuses on providing VALUE, not COST! Lower prices is not value, it is simply lower prices (and may communicate less value).

FIND VALUE OUTSIDE OF PRICE!

If relationships are equal, there are only two other buying questions – 1) How much does it cost? (price question), or 2) Can you do it? (value question). If you’re getting the “How uch does it cost?” question too often, you’re not focused on adding value or you’re not confident in the extra value you’re delivering. Either one will lose you clients much more than your pricing itself.

What does having slightly higher prices communicate to the customer? We are confident in how our product performs.

How do we get confidence?

  1. Understand the value to your clients. Ask them – why do you buy from me? What are you buying that you don’t think I even know I’m selling? It’s the best question you’ll ever ask them.
  2. Stop thinking about how YOU think you perform (internal/craftsmen view), start pricing based on how you benefit them (see #1 above.)
  3. Get some support – have somebody hold your feet to the fire on WHEN you will raise your prices.

Raising your prices is usually the fastest way to create new PROFIT. If you’re already covering all your costs, then every penny of higher prices falls directly to the bottom line. Want to make more money in less time? This is one of the best ways to do it.

Next week we’ll cover the actual mechanics of how to set and stick with a good price.