Making Tradeoffs is the Price of Growth | Ep 896

know that when you have hard decisions in front of you, there's nothing wrong with that. It means, if anything, you've picked all the easy paths. You've already cut the low-hanging fruit off. You've already made the easy ones that have almost no trade-off. But what happens later is you get to real difficult to reverse decisions. And so at that point,

you have to put your big boy pants on and say, I got to make a trade. Greetings, Earthlings. I wanted to make this live, this broadcast, if you will. Because I had a really good conversation last week with an entrepreneur and it was something, something came up that I know affects all of us. And so.

The entrepreneur was dealing with a rock and a hard place decision, right? There's two paths you could do, and apparently there's a cost on either side. And so I thought this was such an interesting thing because most of the biggest decisions in life are scary. Because you've already made all the easy decisions that you can make, right? And so like most of us, when there's an easy and obvious decision that has...

almost no downside and all upside, we make those as fast as we can. And so most of our lives are spent with only hard decisions left. And so the only way to make a hard decision, an easy decision, is to let life make it for you, which is what the vast majority of people do.

But letting life make the decision for you is typically not a very good way to live life. Or at least you're not going to get what you want. You're going to get what the roll of the dice gives you. And so the things that are obvious and not risky, you have already done. And so what's left are the things that are obvious.

and risky. And so it's because these types of decisions involve trade-offs. And I'll say this again, like you almost never get something for free. And obviously it's not always trading time. Sometimes it's trading risk. It's trading money. It's trading... decrease in performance. It's trading something for something else. And the thing is, is that if you've been stuck for a long period of time, then what you're trading is being stuck for either...

getting better or getting worse, right? But you're making a trade and you're hoping that obviously it gets better. And so I'll tell you the specific example of the individual I was talking to. So this guy was relatively new to business. He'd been doing business for...

called 18 Months and was doing really well. So he'd just done a million dollars in revenue. And to be clear, I'm not saying that's an expectation anybody should have that if their first 18 months, they're going to make a million dollars in revenue. But obviously, he was doing a good job. One of the things that was a real issue for him is that he was attracted... a lot of beginners for his products and services. And so it became clear that he both wanted to attract higher level customers.

and those customers were better. So he enjoyed it more, and it was better for the business. Now, sometimes it's like, I enjoy these people more, but they're not better for the business, or vice versa. But in this instance, it's like, clearly this is what he wanted and was better. The problem was...

80% of his revenue was coming from a different set of customers that he didn't like as much that wasn't as good for the business. And so what is the apparent conflict, right? What is the apparent trade-off that he has to make here? It's like, well...

If we want to get these customers, it means we have to start saying no to these other ones. But if I say no to these other ones, my revenue is going to go down. So what do I do? What most people do is they just stay there forever and that's it. Like they just stay stuck and they just do this and look back six years later and nothing has changed in their life.

because they changed nothing. And so with this individual, I said, hey, we'll probably need to add, like there's a number of things we have to do. One of them is like we have to change your ads so that we start messaging the right type of prospect. Like if you can't say, hey,

tired of your job, it's like that's going to attract people with jobs who are tired of their jobs. If you're frustrated with your business, then you're going to have different concerns. And so he wanted to be going after business owners, not consumers. And so it's like, all right, we have to talk in that language. Now, the second thing is he had a book about how he quit his job, right?

I was like, well, if you're going to write a book, it should be about your business, not your job, because then you will get people with businesses, right? So you had to change the lead magnet. Now, the third thing is like, okay, well, you can't also just sell your existing price point because it won't make sense because the cost of getting a business owner compared to get a cost of end consumer.

might be 5X or 10 times more than that. So we have to make sure the economics of the business work. Now, if you're thinking about this, you're like, wow, that's a lot of changes. It's like, yeah. But he said he didn't want to keep scaling the existing business. And so he's got to make the trade. Now, the alternative to that trade is that he's just...

dissatisfied and so for me when I actually spell out both sides I'm like well shoot how can I make today feel worse so that tomorrow feels better and that's what ultimately gets me to make those jumps and I would love to tell you that the big decisions in my life

I made because I had this big passion pool, this massive vision in front of me. But the reality is most of the time is because my present became so painful for me that I was like, anything is better than this. And so even if all of us rewind the clock and think about when we started entrepreneurship.

You take the leap because you want more freedom and to make more money. But neither of those happen right away. And so it's kind of one of those like, in order to have an investment pay off, your bank account must go down before it comes up.

Like the number you're banking out goes down when you make the investment. And then over time, it comes back higher than it was. When you lift weights, your muscles don't get bigger. They get smaller and then bigger, right? You super compensate. And so there's usually a step back that must be taken in order to take.

steps forward. The only guaranteed thing is that if you never take that step back, you will never get the outsized return of taking the steps forward, right? And so I think about this because there's so many hard decisions in business. Of course, advertise more. Yeah, duh, we'll do that. not super high risk, right? But where do these risky decisions come up? It's when you've made all the easy choices. So if you're like, okay, well, I need to get better people. Okay, well.

We can't just wish for it, right? So we need to start adding friction into our process, right? We need to start disqualifying customers, right? And we still have to start qualifying our avatar to the same degree. If we want to raise price because we're like, you know what? I don't have enough good people in my business.

it might be a pricing issue. So real quick, guys, I have a special, special gift for you for being loyal listeners of the podcast. Layla and I spent probably an entire quarter putting together our scaling roadmap. It's breaking scaling into 10 stages.

and across all eight functions of the business. So you've got marketing, you've got sales, you've got product, you've got customer success, you've got IT, you've got recruiting, you've got HR, you've got finance. And we show the problems that emerge at every level of scale and how to graduate to the next level. It's all free.

and you can get it personalized to you so it's about 30-ish pages for each of the stages once you answer the questions it will tell you exactly where you're at and what you need to do to grow it's about 14 hours of stuff but it's narrowed down so that you only have to watch

the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com forward slash roadmap. R-O-A-D map. Roadmap. Hear me out. Let's say that you have more demand than you can handle. And you've got a team that's spread thin. And you're thinking, okay, well, I need to increase my team because I have this demand. But I can't increase my team because I don't have the money to do it. What's the problem? Well, you've got to...

Step one, raise your price if you're supplied. Supply constrained. You've got more than you can handle. Then we can decrease how much is coming in by raising price. By raising price, what's the next thing that happens? Well, now we have more cash flow because we raised the price. We're making more for the same thing that we were doing before. That cash flow does what? It allows you to pay.

and advertise higher compensation so you can attract the talent you need to get people in so that you can no longer be supply constrained, right? And so usually there's two or three order consequences that have to happen. Now, each of those have quote risk, but the alternative is what? You stay there. You stay stuck, right? And so you're basically, you're going to spend money knowing that the ROI will go down.

And you'll make more money. So I'll give you an example. A lot of business owners, especially on the smaller side when they're starting out, maybe there's $100 a day, $1,000 a day, $5,000 a day. They get to this arbitrary price point of what they're spending on advertising. And they're like, I can't spend beyond that.

that, right? And the reality is that usually the return goes down in terms of relative return, but their absolute return goes up, all right? So let me say it differently. If someone said, hey, If you give me $10,000, I can give you $100,000. I'd be like, well, that's a great deal. I'm like, can I give you a million dollars with that? And they're like, oh, no, no, no, no. If you give me a million dollars, I can only make you an extra million. And I'm like, wait a second.

So if I give you a million, you give me two million. So I make one million in profit. If I give you 10 grand, you make me 100 grand. Which would you rather do? Don't think about this too long. You want to give the million so you get two million. Why? Because you made a million dollars in profit versus $90,000 in profit. Of course it makes more sense to do that. But the thing is the relative return will be lower.

And so this is really like that, that little note that is especially common in smaller businesses. I used to work with, I mean, obviously with gyms, right? And so what would happen a lot of times is a gym owner would cap their spend. So I'll give you how this would work. So let's say that in order for them to cover all the costs in the gym, they need to sign up X number of members per month. What they would do...

is spend as little as possible to get those X members and then be like, okay, I broke even, but I can't spend more money because I'm breaking even. It's like, dude, you have to spend more money because you're getting to break even on that spend. Everything above that is the gravy. But people, because they down-regulate their goals based on the difficulty of achieving them.

And so you will actively, you have to hear your own thoughts as you're going through this. And if you start qualifying your own goals and decreasing them and padding them, it's because of...

Whatever hard decision, whatever trade-off, you haven't actually spelled out. And so from a very tactical perspective, something that has given me such outsized returns in my life is actually spelling out the trade. Spell out the trade, right? I talked to a lady last week who had a bunch of businesses, right? And so she had five different businesses she was running and she was doing like a million or $2 million a year, whatever.

And so when I talked to her about it, she's like, you know, the problem is like I can grow things, but I get really bored really quickly. And I was like, okay, well, first off, there's nothing wrong with that.

And I super mean this because I'm not the should guy. I'm not that you should do this, you should do that. Do whatever the hell you want. There are certain paths that are better for optimizing for specific outcomes. And so a lot of people don't even know what outcome they're optimizing towards. And so if you just have make more.

money is the goal guess what very hard to focus with that because everything makes more money and so you get super spread thin because everything you can make a logical argument makes more money but it won't make you the most money Because the most money is going to come from focus. Now, when I spelled out the trade-off for this lady, I said, listen, option A, you keep doing what you're doing. And you say, I prefer more novelty in my life. And I'd be like, that's amazing.

Just understand that the trade is you're not going to build something super big. And that's okay. You have to really want to build something really big. And if you really want to build something big, the trade-off is you don't get the novelty in your life. So which one would you prefer?

And that's what it comes down to. And if you're like, you know what? I would rather have this big outcome than the novelty. Then great. Then you know what you're paying for. You know when you have those moments of boredom. what you're getting for it. You know the trade you're making. Now, part of the difficulty of these trade-offs is that what do you think she gets immediately? Novelty. What do you think she gets at a delay? The price she pays is that she doesn't get the big business today.

But in both instances, she doesn't get the big business. But in one of them, she gets the benefit of the ADD, of the squirrel brain, right? Of monkey mind, of trying all these different things, tasting all this different stuff. And again, I want to be clear, do whatever you want. But I only say this from my own experience of...

You will limit yourself by spreading yourself too thin. And here's the real kicker, and this one's nasty. The better you are, in general, the more capable, the more able, the more potent you are as a human being. the more things you can multitask and do decently well at. But the thing is, is that you're still giving up the aggregate upside, which is almost always 10 times bigger than your current...

spread thin version. And that sounds like a crazy number, but like I went from a couple million bucks a year. Again, this is rough numbers. I don't remember the exact ones of when I had, you know, nine different things that were going on. I'm a launch business.

Agency one, agency two, one for chiropractors, one for dentists. Then I have my six locations, right? A lot of different businesses. One CEO. And I'm like, I'm a big CEO. As soon as I just consolidated all of that into one, I basically 10xed how much I was making. Roughly. All right. And the thing is, I've seen this pattern. The problem is people aren't willing to try to say this in a PG way. Prune the garden. There we go.

prune the tree, right? They're not willing to cut the branches off to let the whole thing grow, right? Back to the original owner that I was talking about at the very beginning, right? When I have my conversation with him, it became clear that this is what he ultimately wanted to have. And so when I've been able to kind of convince business owners to do the thing they ultimately want to do, it's just spelling out what my trade is. And so...

know that when you have hard decisions in front of you, there's nothing wrong with that. It means, if anything, you've picked all the easy paths. You've already cut the low-hanging fruit off. You've already made the easy ones that have almost no trade-off, or the trade-offs are so obvious or benign that you're like, obviously, I'll make the trade.

happens later is you get to real irreversible decisions or rather difficult to reverse decisions. And so at that point, you have to put your big boy pants on and say, I got to make a trade because the only thing that is guaranteed is that if you want everything from life, you will get nothing.

And so that is my little message of the day. The hard choices that you have are hard because you've used up all your easy decisions already. And wishing that they were easier does not make them easier. And you've got to pick. And you've got to live with the consequences. And I will say this, the more irreversible decisions you make, the better you get at making them. But you've got to start.