Episode #121 Smallest Effort Biggest Payoff

June 24, 2022

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 You are listening to My Freedom Grove podcast with Gretchen Hernandez, episode 121.

Welcome to My Freedom Grove Podcast, your calm space for practical help to get your dream business up and running while being authentically you and taking care of your mental health. I'm your host, Gretchen Hernandez. I'm so glad you're here!



Hi, my strong friends. Hey, have you ever thought about how much effort you put into your business and compare it to the payoff that you're actually getting?


Some people will call this a return on investment in their business. However, when we're first starting our businesses, it's kind of hard to wrap our brains around all of the return on investment. I'm gonna take this back just a couple of steps further to put it into other contexts that are a little bit more tangible that you'll understand; you'll grab onto.


So this summer has been an interesting start for me. My son is back from college and he was looking for jobs in our area. And then as you know, my dad passed away last week. So, in both of those contexts, we had to think about for my son, what could be the biggest payoff for him with the number of hours he has available to work this summer.


And then also for me as a business owner, a death in the family is definitely not something that you plan for that you bake that into your schedule. You have to know how can you keep your business running with the smallest amount of effort, even if it's just a temporary time where you're gonna scale back.


Both of those go into what is the smallest amount of effort that you can do to get the biggest payoff?


I'm gonna start just talking about my son. He wants to create a certain dollar amount by the end of the summer so that he doesn't have to work once he goes to college. He wants to be able to go back to the dorms as a junior, still be able to just concentrate fully on his courses. So if he can earn a certain dollar amount, then he can achieve that outcome that he's looking for.


When we're looking at all of the different jobs in the area, we're looking at how much do the jobs pay per hour, and then he can assess if he wants to do that job or not. And we are also looking at personal growth opportunities. What skills would he want to learn and grow into, or is that the focus right now? Or is it just the making money thing? And it brought up an interesting topic between my husband and I on salaried positions.


I've been working salaried jobs since I was right outta college. They were great. I loved it. You get a continuous same amount of paycheck every single time, regardless of the number of hours you work. Salaried positions are always meant for you to work 40 hours with the knowledge that you could go beyond 40 hours. And the company also accepting that you might not need to do a full 40 hours. It was more about getting the job done.


So you have an idea of what your tasks are, what your goal is that you're trying to achieve. If you can get it done in a smaller amount of time, fantastic, you get those hours back to your life. There are some employers though that may exploit this and just give you more and more and more work. And you find that you're working a lot more than 40 hours. Or if you're like me, a bit of an overachiever, you want to do more than what was actually required of the job. Now, this can pay off with getting promotions and bigger raises and bonuses and stuff, but it can also really shoot you in the foot.


For example, when I had my mini-stroke back when I was 28 years old, I was a salaried employee. I was making more money at the time that I thought was even possible for my age, but yet all of those hours I was working, I finally took the amount of my paycheck and I divided it by the hours that I was working. And I was shocked to discover that I was working at a dollar an hour. What?! I just kept looking at my paycheck and my paycheck was really high. So of course I just kept going and going and going, but I didn't put it into that perspective. How much effort was I putting in for the payoff?


And I didn't want to be an hourly employee because I thought I'd get paid less. So ironically, even though my paychecks were high, I was getting paid less than if I had actually done an hourly job for it.


As you're creating your business as a so entrepreneur, or maybe you're starting a small business, you'll want to think about how many hours you're putting in, in addition to all of the money that you're investing into everything that you're doing. Is this really paying off for you? Right?


Because when we have a job where we're an employee, it's pretty easy to see what that payoff is. We get this paycheck here it is. But when you're a business owner, you are building something. And so sometimes the payoff comes later. You're putting in a ton of work and effort and investment in the first year and a half. And your paycheck is really tiny because you might not have all of your infrastructure built yet. You might not have your products and services built yet. You might not have experimented enough to find out which ones are actually going to sell that the public actually wants. And you have to develop your skill sets of course, on how to market and sell and just how to run your business in general.


So we already know that we're not gonna get that much in the beginning, but at what point do you start to look at it to go wait a minute, maybe I'm doing too much, and that's a big one.


It's quite possible that you are doing way too much in your business, way more than you need to do for the payoff that you're going to get.


I want to introduce a couple of concepts to you so that you can evaluate your business to make sure that you're not doing more than what you need to for that payoff that you're looking for.


Minimum Viable Product


The first one is a minimum viable product. We have to start our businesses with at least one product or service that people actually want to buy. Now, we may end up doing a lot of experiments with different types of products to try to find the right one, but really we only need one. And minimum viable product actually defines it even more specifically, that that first product, the minimum viable product is one that just has the bare minimum within the product or the service, just so that you can get people interested.


The early adopters, they're gonna come and try it out. It might even be at a lower cost at first, just to try to get their feedback. But it's also the one that's gonna give you some income because you can't just keep working for free in your business for a long, long time. You gotta take care of yourself financially.


But this very first minimum viable product, it might not have all of the bells and whistles that you want your final product to have. So when you're doing your customer research, before you build your product, because you want to make sure customers actually want what you're creating. You don't want to create a product and then go try to find customers. It's a lot harder that way. So when you're doing your customer research, it's important to consider all of those things that people are asking for.


Are these a “must-have,” like that feature, if it doesn't exist that the person wouldn't buy it.


Is it a “nice to have that?” Yes, they'd buy it, but it would be really nice if it had this also.


Or is it a “delighter?” Is it something way above and beyond? And they don't necessarily have to have it. They were already gonna buy it, but when you give them this, they're like, oh my gosh, this is even better. And that can sometimes be used for customer retention so that they want to keep coming back and reinvesting in some of your other products and services.


But when you're at the very beginning, just start with your minimum viable product, because you can still earn that revenue and your income that you desire just with that minimum viable product and get really good at selling that at marketing that, and then you can start to evolve it over time so that it becomes even better.


But in the very beginning, you can start with something that's a little bit smaller, not as time-intensive might take less resources to create. So that's your first one, your minimum viable product.


Minimum Viable Process


The next term I want to introduce to you is the minimum viable process. What is the bare-bones process that you can do to keep the lights on in your business?


When you were an employee, you can think back to it. Sometimes people would call in sick. So you'd have to run with a skeleton crew. A lot of that happened also during the pandemic, we couldn't send as many people into the workplace because we were trying to minimize the exposure of people. We're working with a skeleton crew. Well, when you have less people, you can't do all of your processes.


Some of your processes will have a lot of process steps cut out, or they won't be done as frequently or they won't be done at all. So when you're thinking about your business, what are all of the different processes that you need in order to keep the lights on and running full-steam ahead?


In your business, if you think about all of the processes that you use to keep your business up and running, going full steam of those, which are your critical path processes, like the very minimum ones that if you didn't do those, that the business couldn't run couldn't function, that's gonna come in really handy in case you do have those emergencies. Like I did like a death in the family, or if you're just not able to function. Maybe you got sick or you have an injury.


But it's also very eye-opening because when you can look and see here is the absolute minimum, you can start to question the other processes. Are those processes really necessary? Are all of the steps in your process really necessary because your processes are what take up all of your hands-on-time.


Your time away from life devoted to your business. Is it possible that you can shrink some of those down and still have your viable functioning business and that you have more time to go live your life yet your revenue is not impacted.


Minimum Cost to Acquire a Client


All right, next minimum concept I want to introduce to you is the minimum cost to acquire a client. As businesses, we all need to have customers coming in. Purchasing our products and services. Something that we may not think about is that there's actually a cost to acquire clients. To bring them in your front door, whether that's a brick and mortar, or if it's a virtual door, somehow we need to attract them and bring them in nurture that relationship and make a sale.


All of the aspects that go into acquiring a customer is costing your business something. So it could be your hands-on time, your actual time that you spend going out meeting people or otherwise. There might be money that you spend. Maybe you're doing advertising in some way. All of that will have a monetary expense.


You might have infrastructure expense like websites or spending money on social media marketing, or creating videos. Any of that kind of stuff. You also have the cost of your processes, all of the different ways that you're figuring out how to bring your clients in and then how to nurture them.


A couple years ago when I was a new entrepreneur and I was still trying to figure out all of the different ways to acquire a client, I was experimenting left and right. And what I hadn't done was actually map out my process or look at how many different processes. So I was feeling very overwhelmed, very stressed out, and frazzled. And I was working way too many hours and only had a couple of clients to show for it.


I decided to map out all of the different ways that I had tried to acquire a client and evaluate it on how long did it take, what were the costs were involved now? Here's the shocking thing. When I mapped it all out and I just used a Google spreadsheet. Each line with the little boxes were the different steps. I had 54 different ways that I was trying to acquire a client and not every single way resulted in a client, although several of them did.


So the great thing was when I could map it all out and I could look at it and I had some numbers associated with it, and also the number of how long did it take, right? So you have your hands-on time. Like the time that you're actually interacting or doing something, but you also have all of your calendar days. How long did it take that nurture path before they were ready?


When I had those numbers to look at, then I could have an idea of how much it cost to acquire a client. And then I could go with of all of those, which were the ones that were actually working and that had the lowest cost to acquire a client.


Again, we're looking at what is the smallest effort and the biggest payoff. Sometimes you have to make some hard decisions. There might be things that are working that you really love to do, but the cost and the effort in it is so big that it doesn't make sense for your business. And it doesn't make sense for your life. So you might have to make some of those tough decisions. Okay?


Minimum Expenses & Highest Profit Margins


Next minimum thing to consider are your expenses. I've seen a lot of new entrepreneurs and myself included buying lots of different programs to learn how to do all of the things. Now, this is really important. You need to learn how to do the things. There is going to be an investment that's involved, but the scale on which people can spend that investment is huge.


You could go from a book that you pick up for a dollar at a thrift store, all the way up to $25,000 and $50,000 masterminds. All of the ways that you can learn are all going to work for you. They're all going to just have a different experience, a different set of information that's presented. A different container. You have to decide what works for you. But, when we're thinking about the smallest effort for the biggest payoff effort can also be the money that you're investing.


Now, you want your business to be profitable, but in the first years, it's not even necessarily the profitable thing you're worried about. You're worried about keeping a roof over your head, because in most instances you have either stepped back from being an employee, or maybe you've gone to part-time employee status, or maybe you're full-time and you want to make the leap, but the amount of effort that you're putting into at the cost, you're just seeing no money coming back into your account.


Well, this is where you can start to look at how can you minimize your expenses so you can keep your profit margin as high as possible. You can keep more money actually coming back into your account.


Because let me tell you, it feels great when you can break even. And that sometimes takes a while like 18 months or more. It feels even better when not only have you broken even, but you are now in the black and you see your bank account rising every single month. It's a really, really good feeling to have absolutely possible for you. But you want to keep an eye on those profit margins and how can you minimize your expenses and still get everything that you need.


Minimum Quality


All right. Final minimum thing to consider is the quality, the minimum quality that you have to do. Now, some of us really want the highest possible quality out there. I know I'm one of those. Sometimes I am a bit of a perfectionist, but I also know that there's only one of me to go around right now and that if I try to get it as perfect as possible, I'm never gonna get it out the door.


And if the end goal of having a business is to actually generate revenue, you have to be able to get your stuff out the door so that people can see it, whether it's your marketing stuff, or if you're doing some kind of a sales process that actually gets started and people can see it. Or if you have a product and service that it's actually out there and available for people.


If your brand happens to be one where it's exquisite quality, like you've decided ahead of time, it's going to be the highest, highest, highest, possible quality. That's something different because you're also charging high premium prices. But, for the majority of business owners, we're doing more of like the medium scale for our prices.


So we have to consider the quality. And it's quite possible that as a business owner, especially if we're creating this from scratch, it's our own baby. We have a lot of pride around it that our requirement for quality is a lot higher than what our customers are actually needing. They just want to make sure that you can help them, that your product is gonna work for them or that your service is gonna work for them.


We as experts, we have an eye for the quality. We're looking at it going, oh no, that's not great. Or, you know, whatever it is, but for the customer, they are not the experts in what it is that you do. Otherwise, they'd be doing it for themselves. They may not need as much quality. It's okay to cut back a little bit. And maybe that's something that you experiment with.


If you're finding that you are someone that wants exceptional, perfect quality in everything that you do, maybe do 5% less quality and see if it impacts how your customers interact with your product or service. If there's no change, okay. Maybe try it at 10%. See how that goes. You never know you might surprise yourself.


It could be that even at 50% quality that the customers are still completely overjoyed because it's something that they've never had before. And it still works for them.


I'm very fortunate that my business training along the way included certification in Lean Six Sigma. So this was using all of the numbers and looking at processes to try to find the ways of doing businesses in the easiest, simplest ways that provided the biggest profit.


One of the things that you can use as you're designing your business, or even if you've been in business for a while, is to use a Lean Value Canvas. And you can find out more about this in my podcast, Episode 72 Design & Plan Your Business. It's gonna help you look at all of the different components of your business, and also look at your revenue streams and your expenses so that you can think about your profit margins.


But I want you to think about your hands-on time, how much effort you're actually putting into it. Have you created basically like a salaried position for yourself, where although to the outside world, it might look like you are making a ton of money, Because they're looking at your prices, but really all of the work that you're putting in behind the scenes and to deliver all of it, if you really divided it out by the hours, are you really at like a dollar an hour?


It can be pretty shocking when you look at it that way, because you could go out and you could get a minimum wage job for like 14 or $15 an hour. You don't want to shoot yourself in the foot. You want to make sure that you're actually making at least the amount that you would from a job that you would want to go apply for.


Hopefully, you're making even more than that, but evaluate what you've got going on. See how can you put in the smallest amount of effort so that you can get the biggest payoff. You're worth it! All right.


So fantastic news. I have one, one-on-one spot. That's opening up in July. I've been booked for quite a while. And so there are some people that are starting to book out for later times in the year, reserve their spots. But if you want to get started right away on either starting your business or streamlining your business, then I invite you to go and check out the Work With Me page on my website on there, you can go and learn more about a business journey and if it looks like something that is a good fit for you, go ahead and reach out.


We'll set up a free consultation call and find out what your plans are and how I can help you.


All right, my friends, I hope that you have a great week and I will talk with you soon. Bye-bye.


Thank you for listening to My Freedom Grove Podcast. When you are ready to make your dream business a reality and take care of your mental health, I invite you to join the Unshakable Business Co-Lab.   This is the mastermind membership you've been waiting for. There's no limits on your imagination, nor your timeline. We're with you every step of the way. To learn more, please visit www.myfreedomgrove.com/join. I'll see you there!

 Lean Six Sigma

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