205: The lie of profits

"We make a 50% profit margin." - Sometimes you will hear entrepreneurs touting numbers like this.

This makes most other entrepreneurs feel like crap.

But what you have to realize is that those numbers are most likely distorted.

Are they telling you the Gross margin? (The amount of money they make after paying direct costs)

Or are they telling you the Net business margin? (The amount of money leftover after direct costs AND overhead)

Even if they are telling you their Net Margin, they could still be distorting the facts.

Are they factoring in a "salary" that they pay themselves for all of the work they do? Or do they pretend that they work for free and all of that money is profit?

This is the big lie that most business owners don't even realize they tell themselves.

About a year ago, I thought Lead Cookie had ~50% margins...

But here is the thing...

I was doing account management.
I was doing sales.
I was doing marketing.

Once I replaced myself in those roles, it became clear that we had nowhere close to a 50% margin.

Don't compare your margins to others. They most likely are inflating their numbers, even if they don't realize it.

204: Profits vs Salary

Profitability is something that most entrepreneurs fail to understand. I know because I failed to understand it for years.

For a long time, I would say things like, "We have a 50% margin."
And while in some ways that was true... it was also a lie.

It was a lie because what that margin failed to consider was that I was working as an employee within my own business.

I was closing the sale.
I was managing the client relationships.

Even though we may have only spent 50% margin servicing that customer, the truth is, we were spending more. I just didn't see it because I was paying myself for those roles.

It was hard for me to grasp this fully until I replaced myself in sales and client management.

Once I had two more people hired and in those roles, it became clear.

"Oh... we definitely don't have a 50% margin."

Instead, we had a much lower margin now that the full business cycle was being completed by someone other than myself.

The profitability of your business is different than your salary.

Ask yourself what it would cost to hire someone to replace each role you fill.
Subtract those numbers, and then you can see what your real profits are.

203: The map is not the terrain

You can spend all day planning and writing your ideas down on paper.
That is all good and nice... but at some point, you need to start the work.

Your plans on paper are just plans.
And it is not until you start trying to implement those plans that you will really see the obstacles in front of you.

And while the plan can provide a roadmap for your overall trajectory, it can't warn you of every obstacle in the road.
It can't give you the answers when a road is shut down.
It can't fix things when you realize the original route just won't work.

You can only learn that in the field.

So build your initial plan, but then get to work.
Dive in and get your hands dirty.
You will move 10x faster with a rough plan and actual movement than you will by overplanning.

202: Give yourself a break

Whenever you find yourself facing a mental challenge at work, it's tempting to lean in and work more.

We struggle to solve the problem, and so our mind just keeps wanting to think about the problem.

Yet when we find ourselves in a state of obsessive thoughts of trying to answer something that we cannot solve, or finish something that needs more time... this is what we must watch out for.

In these moments where our work moves from a natural pace, to one where we are pushing forward, despite deep resistance... in this place you must be careful.

Sometimes you really are overcoming "the resistance."

But other times, you are pushing against a natural pace.
You are overworking yourself, and you are about to start making bad decisions.

When you hit these moments of "pushing," instead of having work feel "natural," then I encourage you to take a break.

Enjoy your weekend.
Read some fiction.
Go for a walk.
Spend time with family.

Getting your head totally away from the work for a few days is often the best thing you can do to clarify the work in your mind.

201: Work less, do more

Early in my career, I was addicted to work. I poured in 60-70 hour weeks on the regular and took pride in the amount of time that I spent working.

And today, I still see others who take pride in how much they work.

But here is something that I have learned... working more hours doesn't help you get more done.

While you may end up completing more tasks, working so many hours blinds you from making decent decisions.

You may do task, after task, after task...

But then when it comes time to make a strategic decision, you make a less than optimal decision that will end up creating a ton more tasks!

By bogging yourself down with the detail work, you fail to see the big picture.

It's kind of like that old jungle analogy.

Your tasks are all the weeds you're cutting through... but who says you are even going in the right direction?

Today, I work fewer hours than I ever have before, yet my businesses are achieving new levels greater than they ever have before.

It's not because I am working harder.
It's because I am working less and making smarter decisions.

If you want to get more done, cut back how many hours you work.

200: Do it right the first time

"Don't half-ass it. Do it right the first time." This is a motto that my dad repeated to me over and over and over again through life.

He would say, "Fix it now or you are just going to be tripping and fumbling over it for weeks to come."

As a teenager, my rebellious self didn't like to listen much, but over time, I began to see the value in this simple life lesson.

Whenever you do something in business, it's easy to just fly through it to try to get the work done.
Or to see a small problem but leave it to be fixed later.

It may feel more productive to move on to new things, but it will come back to bite you.

In Jeff Sutherland's book on Scrum, he cites research they actually did on this.

They ran two separate efficiency tests.

For one group, software developers had to test their code daily and fix any bugs that were created that same day. On average, developers spent 1 hour per day fixing their code.

For the second group, software developers would test their code in batches every 3 weeks and ignored bugs until then. On average, it took developers 24 WORKING HOURS PER BUG when they went back to fix it.

They didn't do it right the first time, and as a result, they had to interrupt their workflow to go back and get in the flow. And since they didn't fix it early, the problem often created compound effects that they had to fix.

Don't half-ass it.
Do it right the first time.

199: One job complete is better than 5 half-way done

Too many half-finished marketing projects... this is the story I hear over and over again from consulting firms and agencies who talk with me.

They dabble a little bit in all of their marketing channels, but struggle to ever get anything out the door.

As a result, they have 5 marketing projects started, but nothing actually launched and producing results.

Think about the madness of this...

They are working like crazy on so many projects, yet they are seeing zero results in their business because nothing sees the light of day.

So whats the better path?

Tackle one project at a time.
Get it out the door.
Ship it.

You will be amazed at what you can get done in a week if you just focus on one thing at a time.

Build a backlog of future ideas, but commit yourself to working on just one project at a given time. If you do that, you will be amazed at how you can spring 10x faster and get more done than switching back and forth between different channels.

198: The cost of multitasking

In the early 1990s, a scientist, named Harold Pashler, did a study on multitasking and his findings were incredible.

When someone is focused on a singular task, they have 0% waste because their brain is not switching between two different tasks. So stacking one item after another was the fastest way to get something done.

When he added in two tasks at the same time, it took the subject 20% longer to complete the two tasks due to the time lost in mental context switching between tasks.

When he added a 3rd task, it took the subject 40% longer to complete the three tasks.

Yet in today's day and age, this is how we all operate. We jump around and hop from project to project, full of distraction.

Turn your pings off.
Stop checking your email.
Stop trying to run 5 projects at once.

Instead, do one thing at a time.

If you can do that, your output will be significantly greater than trying to juggle too many things at one time.

197: What kind of CEO are you?

Greg Crabtree is one of the leading financial minds among small businesses today, and recently his firm did a study where they analyzed all of their clients to evaluate who was profitable and who wasn't.

What they found was quite interesting...

90% of companies that are profitable and achieve at least a 5% year-over-year growth are run by a sales-focused CEO. This means the individual who runs the company enjoys sales and thrives in that role.

Even though these CEOs were not operations-focused, they were able to learn these skills or hire this out more easily than the second group.

On the flip side, the opposite proved true.

90% of companies that were stagnant and not achieving growth were run by operations-focused CEOs. These individuals often tried to hire out a leadership sales role, time and time again, and yet failed over and over.

The operations-focused CEOs who did succeed were the ones who took their operational mindset and applied it to building marketing and sales systems that delivered their desired results.

They took their strength and turned it into a weakness.

What kind of CEO are you?
Does sales get you excited?
Or have you failed to hire someone to take over sales and marketing for your company multiple times?

196: Lessons from Scrum

At the moment, I'm diving deep on studying and learning Scrum so that I can better manage software teams in the future when I begin building out projects.

One concept that I love from Scrum is their format for a daily stand-up. In this stand-up, they ask 3 questions:

What did you do yesterday to move us toward our objective?
What are you going to do today to move us toward our objective?
What obstacles are in your way?

Instead of micromanaging and telling everyone what to do, this framework allows smart and talented people to make their own decisions.

It forces them to think critically about what they are going to say and to evaluate their past work. But it doesn't just delegate tasks.

This helps harness the creative power and initiative of your team, instead of bottlenecking everything at you, the manager.

195: Plan, Do, Check, Act

When was the last time you really stopped to evaluate "how" you do the work that you do?

When you kick off a project with your team… Or roll out a new marketing initiative.

For most of us, we just dive in and do the work. But rarely do we think about the structure on how we do the work.

Recently, I started studying the management practice of Scrum as a way to manage software projects, as well as the overall initiatives for my companies.

Scrum operates on a simple concept.

Plan - Gather as a team and build a plan for the work you are going to do.
Do - Put your head down and do the work.
Check - Evaluate what went well and what didn't with the work.
Act - Re-enter the cycle based upon the new information gathered.

For myself, I know for years I just lived in "Plan" and "Do.” Sometimes I would check the work and evaluate, but it was on an as-needed basis and not as a standard practice when I initiated a new process.

But the simple idea of checking how you are doing once it is going, and then iterating and improving in ongoing cycles, is a simple mindset shift that is guaranteed to improve the quality of your work.

Plan, Do, Check, Act.

It's simple.

194: Between order and chaos

Your entire life and entrepreneurial career operates between two poles: order & chaos.

On one side, you have order. This is when everything is lined up in perfect rows, is predictable, and runs smoothly.

On the other side, you have chaos. This is when thrashing, urgent fires, and changing plans live.

Too much order, you grow stale and bored.
Too much chaos, you will go crazy with burnout.

The key is to straddle the line-

To introduce periods of chaos which is the source of evolution.
But then to pull the chaos and bring it back into order.

For example, when your business reaches a stable predictable place of order, that is great.

But then it may be time to look at adding a new marketing channel, or a new service, or product line.

How can you strategically add a small amount of chaos back in that leads to growth without throwing the whole organization into madness?

Strategically balancing the line between order and chaos-
This is how you evolve as an entrepreneur, but keep your sanity at the same time.

193: Hindsight bias

Looking backwards, it's easy to try and draw trends to our success. To look for patterns or proven things that worked.

We all do it when we look at ourselves.
Or when we look at others.

Because the truth is that most success does come from following patterns that have been proven to work before and applying them in new ways.

But hindsight bias gets dangerous when we start applying everything to it...

"I succeeded because of this."
"This was my approach and this is why it worked."
"Here's my proven 7-step framework to becoming a millionaire..."

Hindsight bias is a core problem with why the video course industry is bullshit.

People have some success and then they try to teach others.
But they fail to realize that it's more than what they teach that led to their success.

It could be their unique situations and a bit of luck that led to success.

Sure, patterns may help.
But patterns aren't everything.

So keep your eyes peeled for hindsight bias... it's everywhere.

192: Distance from the work creates stability

After nearly two years of working inside of my company, I've finally gotten myself to a place where I am only working 4-5 hours per week, and that time is spent coaching my team and appearing on weekly meetings.

And an interesting thing happens when you finally get yourself out of the weeds...

The business stabilizes...

You see, as a creative entrepreneur, I would constantly throw wrenches in our system all the time.
I was also a horrible team member of my own company as I would fail to hit our own deadlines and do the work.

And so as long as I was working in the company, my own creative chaos overflowed to the team.

Yet as I stepped back, I started to see things flow.
I started to see work/life balance scores on my team go up.
And everything was honestly going smoothly.

When problems arose, I coached my team on how to fix them, instead of fixing them myself.

At first, this was hard because I just wanted to dive in, but over time, I realized that empowering my team to fix the hard problems was great because it gave them a sense of ownership and autonomy.

Most entrepreneurs fear stepping away from the business.
Yet it's actually one of the best things you can ever do for the business.

191: Understanding distribution

For years, I have heard experienced entrepreneurs say, "If you have a good offer, good operations, and good distribution, then you are set."

That "distribution" piece never really made sense to me though... it seemed analogous to marketing.

But as I've matured in my entrepreneurial career, I've learned to understand it.

Distribution is essentially strategic partnerships at the max.

It's the idea that instead of selling hundreds of new customers individually, you build a few key relationships that enable you to get your product in front of hundreds or thousands of customers at once.

Lead Cookie was built by selling our way up customer by customer, with a few small strategic partners along the way.

My new venture, Content Allies, is a bit different. I'm first focused on building a strong and sound operational model.

This is because at the same time, I am in the works on a few "distribution" deals that will immediately get our offer in front of thousands of prospects at once.

If you want to build and grow faster, start thinking about "distribution" instead of just marketing.

190: Your team needs stability

Over the past few months, as I have been building up Content Allies, I've run into the challenge of managing creatives.

We now have a team of writers, instead of a team of doers, which was most of our Lead Cookie organization.

And through this experience, it has become apparent to me that leading teams of creatives is far different than leading teams of doers.

For doers, if there is any chaos or instability that may hit their day, they immediately seek to turn that into order. It's in their nature to take anything unpredictable, and make it predictable.

For creatives, their days have historically been unpredictable.
They bring emotion to their work every day and already operate in the chaos of creative demands.

As a result, if you don't provide your team complete stability in their work environment, they will struggle.

This may lead to chaos within your organization, poorly managed projects, and weak expectations.

Every time you let these creep in, they pull from the creative quality of the work your team puts out.

If you want the most out of your creative team, it is on you to make their work days stable and predictable. This lets them focus on their work at hand.

189: Challenge your team

"What I want is to push my skills and grow into new and more challenging roles than I have been in before."

"I've always worked as a part of a team, but never really led one before. I want to become a leader."

These are actual quotes and comments from team members who I manage, and in these quotes you see a trend that is common among creatives.

The desire to be challenged...

If you do a good job hiring quality candidates, then your team member is going to desire to be challenged. They are going to want to grow and evolve.

But you must balance this without putting them into complete chaos or situations where they fail.

Your job as a leader is to balance the chaos and order of your team.

With too much order, they will leave due to lack of challenge and advancement.
With too much chaos, they will leave because they can't actually succeed or keep a decent balance in their life.

As the entrepreneur, you control the throttle of your company.
You control the chaos and order in the workplace.

Challenge your team to grow, but protect them from chaos.

188: Set your team up for success

"I'm beginning to doubt if it was a good idea to bring them on..."
This is what I told my operations director one week during our time together.

I had brought on a new team member, and I was starting to get concerned whether it was a good decision or not.
Our costs went up with the hire, but we weren't seeing any business results from it.

After journaling and contemplating on the matter, I came to a simple reason why they weren't working out...

They just didn't know how to succeed in their role.

I had brought on this new team member and left them sitting for almost 2 months without clarity on their role.
They were incredibly intelligent, but I had failed as a leader to define what success was for them.

The key to making your team effective is simple.

Give them a clear vision of how to succeed and win in their role.
Give them metrics to follow, targets to hit, and defined responsibilities.

When you make this crystal clear for someone, they now have something to work toward.
They turn from a floundering individual, to a well-aligned and effective team member.

You must let them know how to succeed in their role.

187: Attack your weaknesses

As an entrepreneur, there are a lot of skills you need to master-

Finances, marketing, leadership, writing, sales, project management, technology, systems...

And the hard truth is that you can't be amazing at all of these.

You will be weak in some areas, no matter what.

Entrepreneurs are forced into this "jack of all trades" role where they need to be competent in all areas of their business.

Yet most entrepreneurs just accept areas of weakness... They say:

"I'm not a systems person, I'm more creative."
"I'm not good at sales, I'm more operational."
"I'm a big picture thinker, I'm not detail-oriented."

While you may have certain strengths that are inherent to who you are, you can't just ignore those weaknesses.

Instead, you can strategically choose to level yourself up in each of those areas.

You don't need to become a master in your areas of weakness, but you should consider reading a book or two to level-up your mindset in this area.

Even if you don't take over the work in this area of weakness, spending time to study and learn more about it will help you better manage others you hire into these roles.

Attack your weaknesses and fill those education gaps.
Otherwise you will leave massive blind spots open that stunt the growth of your entrepreneurial pursuits.

186: Evolutions of a leader

As an entrepreneur, most of us start off by doing everything ourselves.
Then we begin to delegate tasks to others, but everything still comes back to us.

Over time, we begin to assign responsibilities. We let people determine and mange their own set of tasks.

Eventually, we empower others to own the outcomes. They are responsible for making creative decisions to achieve business targets.

With each level of this evolution, you must evolve as a leader.

You must acknowledge the differing challenges that come with each level and do what you can to prepare yourself.

This is because a lack of growing as a leader, as your organization evolves, will put a glass-ceiling on your company's growth.

Leadership is hard.
And it gets harder as you evolve in your role as a leader.

The key to succeeding is to ensure you keep evolving as an individual.
When you stop growing, so will your company.