Olympian and coach Dr Jeff Spencer’s number-one piece of advice for elite athletes is “The keyword in the champion’s vocabulary is restraint.” There’s a reason this is his number-one piece of advice for business leaders as well. He explains that “we have our best day, our best week, or our best month, and at that point, we are at the highest risk of pushing just a little too far and blowing ourselves up.”
When starting or growing a business, we often think that doing more will yield better results. The default reaction of the human mindset is not satisfaction, but instead a craving for more. We assume having more is the solution to everything. This leads us down some dark roads. We spend more as we make more. We make more and then take on more risk. The consequence of more risk is that then we have all this volatility (e.g., sleepless nights, upset employees, upset vendors, and failed investments).
It’s time to get comfortable with the idea that doing less can actually get you closer to what you want. Here are four ways to achieve more by actually doing less.
1. Define your destination
Instead of focusing on more, you need to get clear on what you want. Not what someone else wants. The winning formula is to project the least amount of effort, the least amount of risk, and the greatest number of options. And this is customizable to your specific goals and desires.
This isn’t always easy. Getting clear on what you truly “want” can be anxiety-inducing. You will have to wrangle with your desire to default to do more. That shows up in the desire to have everything NOW. It also shows up in the fallacy that there is a right and wrong to what you want.
You will also have to confront the reality that when you define what success looks like to you, you’re also defining failure. That is, if you don’t reach your definition of success, you may deem yourself a failure. Because of loss aversion, most are unwilling to define failure.
To compound matters, when we do attempt to define what we want it often creates even more anxiety. That’s because what we’ve defined is a multi-variable equation.
Allow me to put this concept in terms of a trip with Google Maps.
We all know how Maps works: You input where you are and where you want to go, and Google gets you there using real-time data on factors like traffic, closures, and accidents on your route.
Here’s the problem with the way business owners approach this idea: They aren’t really clear on where they are. Nor do they have much more clarity about where they want to be. But they’re trying to go somewhere, right? Here’s a recent example of why this is so important:
A client recently came to me and said, “I need to make enough to pay someone else to do these tasks so I can get ten hours a week back to think and spend with my family.”
So, we did a quick exercise to figure out how much more they would need: I asked a ton of questions and found out that this person was willing to pay $10,000 a month to hire this person to achieve their objective of more time with the family.
I kept asking questions and discovered that this person was driving 55 minutes each way, six days a week to the office. This may seem unimportant, but watch how we turn this into a “closer” problem instead of a “more” problem:
I told them, “Alright, an office space five minutes from your house is $2,500 a month. There are 10 hours in just drive time. So now you have your time back and only $2,500 a month in costs.”
Next, I suggested he go through his business bank statements and cancel every single recurring payment that wasn’t core to the business (i.e., required) and he couldn’t demonstrate a return on the monthly cost. I told him he could add them back in later if necessary.
And, guess what? We found more than $2,500 a month in savings. He funded his priority and doesn’t have to hire someone that, oh by the way, will have to be trained, managed, and mentored.
When wants aren’t clearly defined, we can’t solve our own equation. With the necessary variables, we can solve for how much we actually need to fund our priorities. And, then, we must reckon with ourselves.
2. Every action has a reaction
When we make the effort to choose “closer” over “more,” it is important to understand the different rhythms that impact our business decisions. Every action we take needs to get us closer to our defined destination. And often, it’s the little things that can get in our own way.
A few years back, I was self-reflecting on how I gained 10 pounds. What I realized is that after moving to a new house, I started raiding my wife’s snack cabinet. That amounted to me adding on average two Oreos a day to my diet. See, day-to-day, I didn’t think much of eating two Oreos. I mean, it’s only two. However, each Double Stuff Oreo has 70 calories. And if you eat two a day for a year, that’s 51,100 calories or 14.6 pounds. There was the weight.
Our financials are littered with these Two Oreo’s: small transactions that on the surface don’t seem like much but over a longer time add up to a lot. So, the Two Oreo Principle is just a fun way to describe compound interest.
I encourage my clients to at least quarterly do a review and look for the Two Oreos.
This is the difference between focusing on “more” being the answer and focusing on getting “closer” to what actually matters to you. It opens up far more efficient options and, frankly, if they continued to focus on more, their expenses would have expanded as their revenue grew, and they would likely have not ever achieved the goal of getting their time back.
Unless you happen to run a massive corporation, your resources are limited, and driving around in circles is a waste of time, money, energy, bandwidth, and just about everything else.
Your business exists to serve you. Not the opposite. That’s why it’s so important we constantly reflect on whether our decisions are truly getting us closer. And, if not, we reserve the right to change our mind, reverse course and reallocate the resources to something that is getting us closer.
3. Understand the loss that comes with profit
A few months ago, a client of mine scheduled a call to celebrate their highest revenue year ever — about $60 million — and wanted to discuss their next move. Much to their chagrin, it took about 45 minutes to discover that even though they had a record year and growing revenue, they were in the worst cash position they had EVER been in. You can imagine their surprise. Though they were shocked, I wasn’t. This is actually what I have come to expect.
As businesses grow, the periods of time that feel like prosperity can actually take you farther away from your priorities.
This is a concept I call the “High Month Paradigm.” This concept has to do with businesses that are growing as planned. Revenues are climbing, owners are happy, and the business crests at its highest month, financially speaking. Unfortunately, in the midst of the joy at how well the organization is growing, the risk of bad things happening is also increasing. And those “bad things” often show up in sleepless nights for you, constant metaphorical fire drills, and a slew of other issues that begin to pull you away from the goals you want to reach. All this is because you haven’t yet identified the risks that exist in your business.
And to get a bit more specific about the way risk tends to materialize in your business, my experience has shown me that, three months after their highest-revenue month, businesses tend to take on a significant amount of new expenses, putting them in a worse position and carrying more risk.
This is because, as revenues go up, a business typically makes assumptions about the trend line, acquires more fixed expenses, and oftentimes, their cash flow goes down, taking the business owner in question farther and farther away from the goals they’ve set, or, in this case, priorities they’ve identified. This situation is an excellent example of problems expanding even as revenue goes up, a version of Parkinson’s Law.
Parkinson’s Law may have started out as a joke by Cyril Northcote Parkinson in a 1955 essay he wrote for The Economist (later expanded into a book), but that doesn’t make it any less true, or any less important for our understanding of how time and effort interact with one another.
Put simply, Parkinson’s Law states that work expands to fill the time allotted for it. If you set aside four hours for a particular task, you will get that task done within its set four-hour slot. However, if you were to decide that you have eight hours in which to do the same task, you’ll most often find that the task now takes the full eight hours to complete.
And this law also applies to your finances; without a system in place, your expenses will expand to fill the revenue amount allotted for them, too. As we make more, we spend more… which can take us farther from our set goals, because we’re still fixated on “more” instead of “closer” to what matters to us.
That’s why I recommend that whenever you hit your highest month or a key milestone, take a pause. Understand the human desire to chase more. And, to counteract it, review your expenses to see what you can cut out first knowing that others will be pushing you to add more.
4. Learn how to reduce risk
The biggest risk in life, outside of death, is that you don’t live the life that you want. We tend to think that more is the solution to getting us what we want but that’s not necessarily the case. As an example, when we want more time freed up in our business, we think the solution is “hire more people.” What we don’t account for is the time we need to spend with our employees which might actually be more effort than the work we’re doing currently.
There’s an excellent introduction to this concept in Andy Grove’s book High Output Management, which basically boils down to this:
You hire a new employee based on the idea that the extra manpower will save you time in the long run. But inevitably, the new reports coming from that new employee will require more management time each week—on average, four hours more.
Now you’ve actually cost yourself a lot of the time you were hoping to save. In the same way that more revenue does not necessarily mean more progress toward your priorities, more staff does not usually equal time saved. You’ve just added more risk and, in the short term, gotten farther away from what actually matters.
In terms of reducing risk, I like to think in terms of readiness. Readiness, in this context describes your ability to take on more of something. This could mean more clients, more staff, more revenue, or what have you.
What I can tell you from years of looking at the data, after their highest revenue month, most companies have a low readiness score. In other words, they are not ready to take on more until they normalize the new level, they’re at and get enough data for a new trendline. At a high level, the readiness score can be broken down into a few components: Industry Rhythm, Business Decision Rhythm, and Personal Rhythm.
In trying to find a way through whatever problems you’re facing, consider that you may be trying to solve issues that can’t be solved. More accurately, you may be trying to outspend or outsell something that can’t be solved with either of those approaches or indeed with any approach that values adding more of anything.
Part of why this happens is that you could be in a situation where you find yourself fighting against rhythms or trends trying to gather more and more of whatever resource when you should be trying to get closer to your priorities instead.
Before taking on any kind of risk, you need to understand your business rhythms. These are the three most common that business owners run up against:
Industry rhythm: Any industry rhythm is the ebb and flow that comes with the territory of a specific industry. For example, in my accounting firm, the end of the year and tax deadlines will be busy no matter what. In other words, there are natural peaks and valleys specific to your industry.
Business decision rhythm: These are business decisions that we’ve made. They include the decisions we make about setting up our business, including billing cycles, billing structure, etc. For example, a gym may decide to collect a year of membership in January when interest in fitness spikes. This will create a revenue spike that isn’t necessarily indicative of what future months will look like.
Personal/Individual rhythm: We have our own personal business rhythm. Remember my example in the previous section about not making decisions in January? This is a ME thing, and it’s a unique, individual rhythm.
Industry rhythms, for the most part, we can’t do anything about. I can’t change the tax deadline or control the new tax laws. The business decisions and individual rhythm, however, I do have control over. The way we want to change these decisions is to change them in a way that actually gets me closer to the things that I want.
Although some of these rhythms may be correlated or have some overlap as we see in the gym example above, we are often ignorant to the fact that they are separate and they have different natures, which results in us spending time and energy on things we have no control over and neglecting the things we do have control over.
If we focus on “more” instead of “closer” to what we want, we run the risk of ignoring our business rhythms and getting farther away from what we want, which is largely preference-based.
The throughline of each item above is YOU. What do YOU want? Your businesses and assets exist to serve you in getting you closer to what YOU want. What you want will evolve over time. That is to be expected. What you want is an infinite game. When we fail to recognize that we are at the center of every decision, we default to more and the consequences can be dire. That’s why I ask: if your decisions aren’t getting you closer to what you want, what’s the point?
Dan Nicholson, author of Rigging the Game: How to Achieve Financial Certainty, Navigate Risk and Make Money on Your Terms,A serial entrepreneur since birth, he is the founder of multiple companies across finance, accounting, and software, but his real passion is teaching entrepreneurs and small business owners, including CertaintyU and creator of a 20-week entrepreneurial education course and certification, Certified Certainty Advisor. The course teaches the concepts, principles and action steps to becoming an extraordinary leader and reach the top 1% of your industry. He is also the host of the popular podcast, Rigging the Game, and lives in Seattle with his wife and two daughters. Connect with Dan on: LinkedIn Instagram Twitter Facebook. For more information, please visit www.riggingthegame.com and www.certaintyu.com