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How to Be an Effective Business Owner (or Investor)

Andrew is a self-educated business owner and entrepreneur with plenty of free advice (which is worth exactly what you pay for it!).

how-to-be-an-effective-business-owner-or-investor

Conditioning (Not the Good Kind)

If you've ever worked a job where you're paid by the hour, you know exactly what brings you a reward: how many hours you've worked this week. Having been an employee at an hourly rate for more than a decade of my life, I have enough experience to understand the mentality: the more time you spend at work, the more you get paid. Similarly, a salaried position pays you for a year's worth of work according to a previously agreed amount of money. While not all salaried jobs operate in the same way, most of them value and reward you for putting in your time. Both the amount of time you spend at the office per week (or on the job) and the amount of years you've been with the same company (tenure) matter as primary measures of success and progress. What's the end result? Clearly, it means that some of us tend to think that the more time we spend doing a job, the more value we bring to the table.

Your conditioning doesn't begin with your job, either. From a very early age, you're told that you need to go to school and attend every class from 8 AM until 3 PM (or thereabouts). Sure, there are tests to make sure you're jumping through certain hoops, just like you might have a performance review at an hourly or salaried job. But the overwhelming message is that you have to put in the time in order to get the desired results. While there's a great deal of value in teaching kids diligence and consistency, there's an unfortunate destructive message that sometimes dwarfs this lesson: the idea that the amount of time you spend on something is the most important way to measure whether you've done a good job.

This Isn't the Way

As a business owner, you're ultimately responsible for everything that happens at your business. Since we've been conditioned to think that hours = success, we tend to go on hyperdrive, working 80 hour weeks to make sure that our business functions as well as we hope. This leads to an insanely high burnout rate for owners, and we've all heard the statistics suggesting that the overwhelming majority of businesses close down in less than five years. Saying, 'but I worked so many hours this week" is meaningless for your bank account, and it's probably worth even less as a measure for your success. Imagine that you're unable to serve your customers in any meaningful way, but you tell them everything's fine and not to worry, since you worked 80 hours this week. It seems unlikely that your customers are going to value the number of hours you're putting in higher than they value what they're giving you money in exchange for.

What, Then?

What's the solution, then? It starts with what you're measuring. A common quote you'll hear, often misattributed to Peter Drucker, is that "what gets measured, gets managed" or "what gets measured, gets improved." Clearly, the goal when you start a business isn't to work as many hours as possible. In fact, it's probably the opposite, at least given enough time. Most of us would prefer to be able to set our own schedules to a degree, not to have to spend 16 hours a day working in the business (although loving what you do clearly helps you get through phases when you do need to put in long hours).

Remember this any time you find yourself tallying how many hours you're putting in every week in your business. Remember that the goal isn't for you to work more hours, but instead to fulfill the promise the business makes to each and every customer: to give them an even better experience than they expect with every transaction. This means that your primary measure, then, needs to be driven by effectiveness, not the time you're putting in.

how-to-be-an-effective-business-owner-or-investor

Effectiveness

If I'm doing something for a customer and can get the job done in one hour, and what I do for the customer blows them away in terms of the quality they get, why on earth would I spend 10 hours giving them something worse? When I state it this way, this sounds absurd. Of course you wouldn't spend an order of magnitude more time on something, only to have the results come out worse... but that's what many of us do to varying degrees when we equate the amount of time we're spending on something with success. If you catch yourself being proud of the number of hours you're spending working per week, remember to pause and ask yourself why you're measuring this metric.

Instead, you've got to be two people when you own a business: the person who plans, and the person who executes the plan. Sometimes you'll have a large staff of people who will help you execute the plan, and you can tell them what you want to get done this week, and sometimes you're going to be the person who both plans and executes. If a part of you is pushing back on this and wondering where on earth you're going to get the time to be two people, remember: the goal is to spend less time working in the business, and the measure of success is not even how much you get done (quantity), but instead what you get done (quality). Plan your weeks out in advance by setting SMART goals, and determine those weekly goals in terms of what you'd like to get done this month, and so on, all the way up to what you'd like to get done over the next several years with your business. Start measuring what you're getting done, not how many hours you spent doing the things.

One Last Example

Imagine being an investor, and measuring your portfolio's success not by how much it grows relative to the S&P 500, or the compound annual growth rate as compared to another benchmark; but by how many hours you spent trading stocks. I think that if you told people you did this, they'd look at you like you had insects crawling out of your nostrils. Yet this is exactly how many of us measure success within our businesses. It's time we all stopped measuring what we were conditioned to measure, and instead start measuring what puts us closer toward achieving our goals. Define success by what you're getting done, and how important it is for your business, and maybe you can even start feeling better about spending less time in your business (and start directing that energy on the business).

This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.

© 2021 Andrew Smith

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