Lessons From COVID Coaching Calls - Part Two

I’m currently coaching a wide range of entrepreneurs, all of whom have been affected by COVID-19 in a variety of ways.
In these Zoom and WhatsApp calls, we dig into whatever is on their mind - the good, bad and ugly.
Here are more of the themes and recurring conversations I’m hearing from business owners around the world…

Technicians, Managers and Entrepreneurs
A common question amongst entrepreneurs is how to hire their first (or next) team member.
I am yet to encounter a good “rule of thumb” that applies to all industries, but the book The E-Myth Revisited might be helpful.
In it, Michael Gerber describes the three main roles within a business:
The Technician – who does the work either on the front lines or by making the products and services that you sell.
The Manager – who makes all the pieces of the business work together to create stability and satisfied customers.
The Entrepreneur – who sets the vision for the company and explores new options for growth.

When you started your business, you held all three positions.
As you get busier, the question becomes which role would benefit from more support?
Could it be an extra technician, to help increase your production?
Could it be a manager, either to help with client management or build better systems?
Could it be a co-founder or advisor to help you expand the business faster?

Perhaps the answer should be influenced by what you enjoy, and by what roles are easiest to replace.
For example, a common trap in sales is when the top salesperson gets promoted to sales manager – a role that doesn’t match their strengths and leads to poor results.
This is the entire premise of The Office; Dunder Mifflin made their top salesman the regional manager, despite constant evidence that he’s woefully unfit for the job.

Or perhaps you hold a unique position – e.g. a respected Indigenous Elder.
In this case, trying to find someone exactly like you will be tough or downright inappropriate.
Recruiting an administrator or an assistant would free up your time, enabling you to take on more of the meaningful work you’re already doing.
A good starting point might be to think about each of these roles in more detail – could you write a draft position description for each of them before making a decision?

Who do we bring on and when? Managing cash and clients
Once you have an idea of the roles you’re recruiting for, the question becomes “when should I bring them on?”.
Three more considerations should make this a little clearer:
1. What is the lead time for recruiting someone in this role – two weeks, two months or six months?
2. Is this role generating cash, or adding to my overheads?
3. How long will it take for the new hire to start increasing our capacity?

In almost every case (including our own), the answer is “I don’t know but I’ll find out”.
It will be hard to make a call without having a sense of how deep the talent pool is, or without a clear understanding of your sales cycle and cashflow.
If you feel like it takes three months to recruit and three months to get a new person up to speed, then it might be time to start advertising and arranging coffees.
If you feel like you can hire a veteran contributor within weeks, then you can start selling more work and recruit once the contracts are signed.

Loss Aversion vs The Next Level
“Loss Aversion” is a cognitive bias, a skewed trick our brains play that leads us into weird decisions.
We tend to find losing a stronger emotion than winning; finding $100 in the street is not as strong of a good feeling as losing $100 in the street is a bad feeling.
In fact, research shows it’s roughly a 2:1 ratio, we’d need to win $200 to offset losing $100.
Since we find loss so painful, we go to great lengths to prevent it.
It feels justified, but the maths are unfavourable.
e.g. is it easier to prevent $1,000 worth of loss, or to add $4,000 worth of sales?
Which takes more energy?
Should you spend an hour on the phone to remove a $10 charge from your phone bill?
Should you run down the street to chase after someone who steals a chocolate bar, or should you serve the next five customers in line?

I remember being hit with this question as a teenager, I wanted to stop anyone from stealing our canteen stock at high school, when my Dad asked:
How much energy does it take to prevent theft, and how much energy does it take to double your sales?
This threw me, for two reasons:
1. I hadn’t realised that I was about to change our opening hours to prevent $4 a week worth of loss – I was more motivated by a sense of injustice rather than money.
2. I hadn’t ever considered that doubling my sales was an option within my control.
I remember feeling frustrated at first, but then the decision was clear.

Anyway, COVID is bringing out a similar choice for a lot of business owners.
What will take more energy:
Restoring everything you’ve lost over the last two months, or taking your business to the next level?
Restoring your old house brick by brick, or building a bigger, better house in its place?

Is there liberation in resetting the purpose and direction of your business?
Continuing the burnt house analogy; how happy were you with the old layout?
Was it fit-for-purpose?
Were you doing things because “we’ve always done it this way”?
Were your outputs and outcomes making a meaningful contribution towards your vision?
For me, the past two months have crystallised a lot of dissatisfactions with how I have been working.
Corners I’d cut, services I offered, how I communicate with clients, the way we measure success, how we structure our travel, how I use technology, etc.
These aren’t new thoughts, but the shutdown has brought them to the surface.
I feel like I grieve with people over the loss of “normal”, but also want to acknowledge that “normal” wasn’t close to perfect.
Rebuilding is going to be draining, but it also gives us the chance to reset.
Resetting our mission, our impact model, our business model, our financial model, our testing, our communication, our outlook and disposition.

Grief vs Blame
There is a lot to grieve for right now.
I have friends who have lost their parents, whose plans have been cancelled, who are immune compromised and can’t see anybody, who live alone or who can’t see their family members who live alone.
All I can offer is support and a listening ear.

I talk to people whose businesses have closed and are unlikely to re-open.
They’re experiencing failure, but they themselves are not a failure.
The only time I disagree with them is when I hear them blame themselves.
For businesses who have seen a 70-100% drop in sales, there is nothing you could have done to prevent this.
Raising prices, cutting costs etc are good ideas, but they wouldn’t have made big difference.
If that’s the case, perhaps it’s worth starting the process of forgiving yourself – you’ve taken a hit that you didn’t deserve, and the loss you’ve experienced is not a representation of your worth or your talents as an entrepreneur as a person.

Taking stock of the assets you’ve accumulated
For business owners who have experienced the 70-100% decline, it’s worth spending some time in reviewing the assets you’ve accumulated.
Broadly speaking, we can break these into Tangible (inventory, machinery, equipment) and Intangible (reputation, brand, intellectual property).
The important one here is to recognize your own value as an asset – so much of what made your business valuable is you.
e.g. if all your equipment was washed away in a flood but you were safe, it’s possible to rebuild a new and improved business within a year.
However, if your equipment remained but you stepped away, could a graduate take over your role and run an improved business?
Taking stock is important, because if you’re the asset then you have options for what you build next. 

If you don’t know how to break goals down into small bites, this next season is likely to overwhelm you
Wholesale change is very hard to process.
We’ve seen entire industries change overnight – places like Cairns changed the moment the Australian government restricted flights from China, affecting almost everyone in the city.
In the conversations, webinars and articles from March and April, entrepreneurs were given a series of ideas for making wholesale changes of their own.
Things like “pivoting” or “being agile” or “moving online” or “serving a new market”.
They might be good moves but they’re not something that can be done in a single day.
You’re thinking “Yeah Isaac I knew that, of course it takes time”, but the question is: do you know how to break the change down into small bites?
Managing change during COVID is different; you’ve got nagging fears and uncertainty rattling around in your head, kids to homeschool, staff to look after, news updating six times a day with grim forecasts from around the world.
There is unlikely to be a full day for you to dedicate to kicking off these new changes.
That means you’re going to be doing it in pieces, perhaps not always in a great headspace.
Small bites make these new initiatives easier to process, and more gratifying to tick off.
Customer interviews are scary, until you break the process down into thirty little tasks.
Building a website is hard, until you identify the forty small components you need to assemble.
Creating a new business model is daunting, until you see it as a series of low-pressure drafts mixed in with some straightforward tests. 

Seth Godin www.sethgodin.com

Entrepreneurs and boards are taking a good hard look at “The Dip”
Perseverance is not always a virtue, and quitting is not always a sign of weakness.
Startup mythology celebrates the entrepreneur who stuck to their idea at all costs, until they finally turned it into a billion dollar company.
These stories are true, but they’re also rare.
Most businesses don’t work, and that’s ok, because the entrepreneur moves from idea to idea, testing them until they find one that does.
If they don’t fold the ideas that don’t work, they won’t discover the ideas that delight customers, create lasting impact and make a substantial amount of money.

Seth Godin has a great book called The Dip that outlines the decision we face when our work gets hard.
Most projects start out optimistically – if they sounded grim we’d be unlikely to begin in the first place – but the mood soon crashes back to reality.
e.g. learning a new language, taking up a musical instrument, writing a book, opening a shop, etc.
When these work, they can become sources of joy and satisfaction, but that point is still a fair way away.

So you have two questions:
1. How long until things get good?
2. Am I willing to go through The Dip in order to get to the good bit?

If the answer is yes, great!
If the answer is no, great!
You save yourself a great deal of anguish either way, because you’ve accurately assessed the situation and your own appetite for difficulty.

COVID has changed the above curve for a lot of businesses.
Perhaps they feel like they’ve gone backwards, the valleys have deepened, the peaks flattened, or the journey to success has been pushed out by several years.
Blind optimism isn’t helpful, we need to reassess and make a new decision based on today’s reality.
This goes for founders, funders and boards.
Yesterday’s time and money has been spent and we can’t get it back.
We’re making a new decision based on new circumstances, and the most important thing is that we’re honest.
What does this diagram look like for you now?
Are you willing to go through the new dip?
Can you gather more information in order to make a better decision?

As I mentioned previously, the decision to pivot or persevere should start with the phrase “we can if…”, and involve some sort of validation metric.
e.g. we can proceed if we can find new initial customers within a month.

Pricing, margins and the need to “prove yourself”
One entrepreneur is in the middle of a complete rebuild, with COVID closing off all her 2019 revenue streams.
She’s now conducting customer interviews to test a range of new products, and is gauging local and interstate interest.
The challenge here is in pricing and margins; not all customers are equal, not all jobs are equal, and trying to keep everyone happy is a recipe for trouble.
Pleasing everybody means lowering your prices to suit the smallest budgets, as well as trying to persuade the most sceptical clients.
I see business owners use “The Nervousness Discount” to win early sales; they have no reputation, so they offer reduced rates to sweeten the deal and prove themselves.
The problems come when you’ve proven yourself to most customers, but still have a few detractors in the market.
Business owners have the choice of either retaining their margins or their popularity; and there will always be someone who thinks you’re too expensive.
We use a process called Facts vs Fake News to separate the lies we tell ourselves from the objective truth.
More often than not, our insecurities around prices come from relationships with other people, rather than us fearing that we’ve misread the market.

Are good customers made or found?
The vast majority of businesses are currently looking for more customers in order to stay afloat.
More specifically, they’re looking for more good customers; ones with a genuine need, and a willingness and ability to pay for a solution.
If you get an influx of bad customers, they’ll eat up your time, refuse to buy or they’ll become a pain in the butt after the sale.
We’ve previously explored the different types of buyers in the market, and seen you can either find good customers or create good customers, or both.

If your aim is to find good customers, where are they today?
Who are they shopping with?
What are they typing into Google?
Whose opinions do they trust?
How might you get in front of them?
If you have 15 seconds together in an elevator, what would you say to them?

If your aim is to create good customers, what are they looking for today?
Do they know that they have a problem?
Do they understand that solutions exist?
Are they open to the idea of paying for a solution?
Can you provide them with an enjoyable education about their options?

You’ve probably met a few good customers already, but it’s worth determining where they come from and where they naturally congregate.
As David Ogilvy said: “even a blind pig can sometimes find truffles, but it helps to know that they grow in oak forests”.

Sales strategy – are you measuring success by exposure, revenue or margin?
There is a temptation to build a sales strategy around busy-ness: to hustle non-stop.
Ernest Hemingway encouraged us to “never confuse movement with action”, and the same principle applies here.
Making lots of calls and meetings is movement, but the action we’re looking for is a profitable transaction.
Actually, is that true for you?
How are you measuring the success of your sales strategy?
You can measure exposure, the number of people who will have heard of your brand.
You can measure revenue, the amount of money that enters your business.
Or you can measure margin, the amount of money that your business retains.
There is a time and place for each of the above, but in most cases when I hear an business owner looking for exposure it’s with the assumption that it will soon lead to a margin.
Would you be willing to take on fewer customers in order to pursue a few high-margin deals?
You’d lose the “movement” of hustling, but instead get the “action” of making a surplus.

Discounts: Tactic vs Reputation
A discount can be a great stimulus; an incentive for a fence-sitting customer to take action.
It’s the principle behind Boxing Day, Black Friday, promo codes and supermarket specials.
A discount can clear out your old inventory, drag new customers through your doors or make your brand feel relevant and exciting.
For a while.
If you develop a reputation for discounts, you can’t persuade customers to return to paying the full price.
They’ve grown to expect a deal, and that deal comes at the expense of your margins.
This is why you see a lot of retailers come up with a justification or excuse for their discounts, like “Spooky Halloween Deals” or “Due to a shipping error, we’ve got too many…” – they allow the business to offer a limited time discount to nudge behaviour without setting a precedent.
If someone won’t shop with you without a heavy discount, they probably aren’t your customer, or at least not your customer for 99% of the year. 

Relevance versus strength in Value Propositions
In times of panic, it’s easy to lose perspective about which companies are strong and which are obsolete, and our brains are notoriously bad at overvaluing recent information.
It would be very easy to now overrate the value of toilet paper, or underrate the companies that have stood down their staff.
Having a highly relevant Value Proposition can be great in a crisis, but it’s not a great measure of what businesses have merit.
I love reading stories about companies that pivoted, they’re clever examples of Value Propositions that have sudden appeal to a brand new market.
That said, I also know there will always be a need for a great travel agency, exclusive restaurants, breathtaking tourist experiences, magical live music venues, heart-stopping live sports and effective international aid programs.
It may not be the same companies who were the favourites in 2019, but someone will do a good job and be well compensated for making people happy.
Flavour of the month is great in the short term, but there’s always going to be a place for the proven staples and crowd favourites.

You can find Part One of this series here.