Big Deal Small Business: Eyes on the Horizon
November 6, 2022 | Issue #74
Before getting into today’s post, a quick plug:
I volunteer for a independent girls high school in Seattle that is on a mission to empower young women through stellar education & high expectations, combined with strong support systems & community.
The school just launched a couple months ago with its inaugural batch of five 9th graders! Next year we will add more 10th graders and a second batch of 9th graders.
My personal fundraising goal this year is $34,000, the approx. cost of tuition & fees for one student. If 170 readers donate $200, we’re there (only 68 at $500!).
I don’t monetize this newsletter, so instead I’m asking that you please consider supporting the school by donating here.
Many in the search/ETA community have supported the school in the past, so a big thank you to all of you & hopefully you’ll consider supporting again this year!
On to the post!
Eisenhower Matrix
You may have heard of this 2x2 matrix that balances Urgent / Non-Urgent versus Important / Non-Important (image below):
Here are some examples for the left-hand Urgent column:
Truck breaks down, need a rental before tomorrow & mechanic to fix our truck
Crewmember calls out, need a fill-in
Client calls with a complaint
Invoices need to be sent & A/R work needs to be done
How do you split that column into Important vs Non-Important? After all, most things feel important if they're urgent.
My dividing line is "Do I, the owner, need to make a decision / provide input?"
A common rule of thumb is your team should be able to do tasks roughly 70-80% as well as you could have done them. If 70-80% of your work quality is sufficient for the task, then it's "Non-Important" and I can delegate.
Note that the 70-80% quality achievement also has to do with the maturity of your business and the stability of your systems.
For example, this is the state of my business roughly:
Truck breaks down: We don't have an operations manager or fleet manager to handle this, so this is Important. In a more mature business, this is probably Non-Important.
Crewmember calls out: We don't have a dispatcher / staffer, so this is Important.
Client calls with a complaint: I have empowered our office team to handle complaints and only elevate serious issues. So these start as Non-Important and can become Important. If you have no one else in the office with you, this is probably always Important.
Invoices need to be sent & A/R work needs to be done: We have a clear processes for tackling these that our office team can handle. Needs to be done in a timely manner (Urgent), but not by me (Non-Important). That said, accuracy of invoices ARE important, and I don't accept 70-80% accuracy on that front. So I do one quick review before each invoice gets sent out, turning that element into Important.
Hopefully the Non-Urgent Non-Important box is clear. These are just tasks that don't need to get done until they become either important or urgent.
But finally, Non-Urgent Important -- this is the crucial box to long-term, structural growth. If everything in the Urgent column is "working in the business", the Non-Urgent Important box is "working on the business".
This includes tasks & initiatives like:
Recruiting & hiring a growth-oriented hire -- writing the job description for a role that doesn't exist in your business today, then recruiting, interviewing & hiring for that role.
Writing down standard operating procedures
Making changes/improvements to your processes, such as new software, new communication patterns, etc.
Researching a new product or service offering
Making Time for Non-Urgent Important
I think most operators understand why we need to tackle these tasks to grow our business. And yet, in my experience during the search process, this was the #1 reason small businesses hadn't grown to the next level.
Time and time again I saw extremely intelligent, hard-working owners that had maxed out their ability to grow their business. They had hit a sheer "hours in the week" limit to have the time for the Non-Urgent Important initiatives.
So when we buy these small businesses, how do we break that pattern? We need to make two structural changes: 1) Investments in Team & Systems; 2) Schedule It.
Investments in Team & Systems
Consider this permission to be lazier operators.
The reality is many weeks will require 100% of your time working in the business on Urgent tasks.
If you can structurally change your business to only require 75% of your time on Urgent, you can fundamentally change your business trajectory.
But how do you go from 100% to 75%? It's not rocket science, it's people & processes (read: new costs).
Most successful search deals have EBITDA decline in the first couple years (I have seen data, but struggling to find it now to provide a source). For example, my business was operating at 35-40% EBITDA margins historically - this was too high! This was a function of a hard-working owner who had hit the absolute max size of business at his involvement level.
My business needs investment in more staff & systems - that will bring our margins down to 30%, but will create the core infrastructure required to grow.
More (or more highly-trained) staff allow more Urgent Important tasks to be delegated from the owner, making them Non-Important.
Better, more resilient systems reduce the # of Urgent tasks in general as more errors are handled within a working system.
Said differently, I could either have a no-growth business at 40% margins, or a steadily growing business at 30% margins - it will take time to win back that profitability with revenue growth, but then I'll have a business designed to grow.
Schedule It
Most entrepreneurs or risk-takers are very comfortable white-knuckling the steering wheel no matter how wild the ride gets.
To make things worse, hustle culture / startup culture espouses a constant grind mentality.
But if you're always working, you never have time or space to figure out WHAT to work on.
One of my mentors (successful CEO who doubled EBITDA over 6 years) advised me to take 1-2 hours on Monday to write down a few weekly priorities. Then take another hour on Friday to review how I did on those.
It's not rocket science - it's just the act of writing down what my Non-Urgent Important goals for the week are.
I still spend most of the week in the trenches handling Urgent Important tasks. But whenever there's a break in the action, I revert back to those Non-Urgent Important tasks. Without that prioritization, our natural tendency would be to go to Urgent Non-Important tasks.
Conclusion
That's all, no magic, no secrets, etc. Finding time to work on the business is function of 1) investing in people & processes and 2) scheduling time to work on the business.
To be clear, there are plenty of weeks where I make no progress on those weekly initiatives. Next week I re-decide what 1-3 initiatives I focus on - I don't automatically roll last week's misses into next week.
But I know I've made WAY more progress on the business than if I weren't writing them down, so hopefully this is helpful for those of you feeling like there's no time for this.
Hope you enjoyed this post! One last plug to consider donating to the non-profit school I work with.
As always, you can reach me by replying to this email or finding me on Twitter.
Best,
Guesswork Investing