Starting A Business Requires Lowering The Stakes
Higher or lower stakes are not inherently better. If you ask the average person or a self-help guru, they will always tell you to raise the stakes, to make things more important in your life. This can be useful, but it can also paralyze us.
A mini habit reduces the stakes of a beneficial behavior that you want to master. It’s been crucial to my success because I am weaker than average when it comes to discipline. I've gotten better at it, but in recent years, I've mostly relied on lowering the stakes to unfreeze myself, and I've accomplished far more than when I used high stakes.
To begin, a recap/overview of the Optimist business model:
- Operate as a "collective" of professional/full-time freelancers.
- Everyone else is a contractor.
- Team that is entirely remote/distributed
- Each freelancer makes between $65-85 per hour (Recently raised and reset our pay rates)
- Clients pay a set monthly cost for comprehensive content marketing services (which include research/strategy, writing, design, and content promotion/outreach).
- Packages range in price from $7k to $20k per month (we have increased our prices and are now offering a minimum package of $10k per month).
- Profit sharing to all members of core staff as a means to instill a sense of ownership in everyone.
Second, a numerical breakdown of Optimist as it now stands:
- Total revenue of $4,539,659 as of December 2021
- 15 retainer clients
- MRR of $140,000
- 27 "core" team members (contract/freelance)
- In 2020, $68,869 will be paid in profit sharing.
- 30% gross profit margin
- Net profit margin of 20%
When you first start, everything feels like a disaster and you have to act quickly.
Every small problem feels like a huge one.When you lose a dollar, it feels like your last.Every piece of criticism hurts as if it were a death sentence.
Many things could go wrong.
What would happen if our most important customer left?
Suppose we lose three clients next month.
The most important team member could leave.
What will happen if clients don't pay their bills?
What will happen if we don't meet this client's needs?
It's important to remember when you're going through the worst.In the past, others have felt this way, and they are still feeling this way right now.As well, it's normal to have this kind of thing happen.
All of the things I'm afraid will happen.
Most of them have happened to Optimist at some point in the last five years. They have all happened.
Almost always, there's a fire going somewhere or a fire that's about to start.
The stress and anxiety of trying to put out all the fires will make you tired. You'll burn out if you let that happen.There is no reason to make fun of this.
You'll break down under the stress.
To the extent that you can, you want to think ahead and avoid problems.You need to be able to put those possible problems into perspective, but that's just as important.Focus on the work that needs to be done right now, not on the newest little problem that comes up.To solve the problem you were having, come back and think about it before you act.
In this case, the stakes are too high.
Some of your eggs are spread too far apart. You need to build a stable business.And this puts you in a constant state of reacting, where you bounce from problem to problem, trying to figure out how to fix each one.But it should not be a long-term thing.
Instead, imagine that you already had a lot of money.To keep you busy, you run this business for fun.In that case, the stakes would be very low, or even meaningless.
When the stakes are low, you can make better decisions and act more quickly.You don't have to hurry or be stressed.
But you don't have to win the lottery to make things less risky for you.
Combination of business strategy and personal mental models to help to reframe the business.
Here are some things that have worked for the company.
If you've had any kind of formal business training or education, this should come as no surprise.Entrepreneurs come from all walks of life, but they also come from all walks of life.
You should set goals for yourself and your business.
In the next step, write down your goals and make a plan for how to reach them.A reasonable question to ask yourself is: Is it possible for me to meet this expectation? If not, what should I do to make it possible?
To be able to look at yourself objectively and put problems into perspective, do this.
Were you sad because you lost a big deal today?You can go back to your goals and forecasts to remember the big picture, look at the damage, or change your plan if you need to.
You might find that you're already ahead of your goal and this isn't a big deal.It worked out.
Or, you might realize that you're not even close to your goal and that you need to change your whole strategy.So this is bad? That's not a surprise.But it's better to make changes now rather than wait for things to go wrong and only look back at what went wrong after the fact.
One of the best things you can do for both your business and your own mental health is to build more "runway," which means more time.
It's the amount of time your business could last if you didn't reach your goal or bring in new money.Your emergency fund is like that. It looks at how much money you spend and how much money you make to figure out how much money you have.
Is there enough time to get things back on track before you have to close your business?
This means that the longer your runway, the more time and power that you have to deal with bad situations. The lower the stakes will feel on a day-to-day level if you have more runway.
For Optimist, having money in the bank isn't enough. They also need to think about how they'll be able to deal with bad things, like having a customer leave.
It has been easier to get to and stay on the ground because I've done a few things.
- Keep enough money in the bank to cover your fixed costs for months or years.
- Make sure you have a business credit card to pay for things (before you need it)
- Get a line of credit (before you need it)
- Expand and improve your contracts (if applicable)We ask for 30 days' notice if we want to end a deal.A small request, but it gives us time to respond if we have a customer who's moving around a lot and needs help.
- This way, even if the company's revenue drops, there will be enough future business to cover it. It will also give you more confidence about how the company is going to grow.
- It is better to invest in growth and marketing before you need it. There is nothing worse than bad news and a dry funnel, so invest now.
Taking some money off the table is an old rule in gambling. If you want to win, you have to do this.
Take some of your money and save it.In this way, you can only lose the money you've still bet.
The goal is to have a "fallback" in case things go wrong. This is a soft place to land if things go wrong.
A rich family or trust fund isn't going to help out.If your business doesn't work out, that'll be hurt.If things go wrong, make sure you have something to get me through. So always try to hedge your bets.
Do this in a few ways:
- Save money for yourself. If you have to cut your own salary or income, be ready to do so.
- If you had to cut back on expenses, what would you do?Plan for that possibility before it's a fact, so you can deal with it.
- Moving fixed costs to variable costs will make your business more flexible and allow you to change things up more quickly.
- If one market turns against you, you might have to move in another direction (e.g., wholesale vs retail or white-label vs direct client sales)
- It's a good idea to invest some of the money you make from your main business in other businesses. This way, you can build a strong foundation that isn't tied to the risks of your main business.
-We haven't done this yet, but it's also an option. We could look for investors, partners, or even buy the company.
- If you really want to "take your chips off the table," you might think about giving away some of the company's equity to an outsider or team member in exchange for a cash payment that will help you keep your personal finances stable.
Another thing you need to do to make smarter, better, less-emotional decisions about your business is change your mindset from short-term to long-term.
A speed bump is better than a mountain.
Everything that could go wrong is likely to go wrong at some point or another.
Imagine that one of your most important team members is leaving tomorrow.In the short term, this feels like a huge loss (and it might be).if you look at your business over time, not just a few short days or weeks, you'll see that this will happen many times.
People on your team will likely leave every few years.Then, or more often!
You don't have to be in a hurry when you realize this.It's going to happen.Because of this, you can and should plan for it.If you run a business, your main goal should not be to deal with problems right away, but to do the things that will make them go away.
Second, you can see that these problems aren't very big in the grand scheme of things.if it's something that will happen a lot during the life of your business, then is it really an emergency?
You need to look at things from a different point of view.
If you don't treat every hiccup as a life or death moment for your business, you can see it as just another problem to solve.
Work-life balance, mental health, and other "soft" parts of being an entrepreneur are talked about a lot.
Having hobbies, going on vacation, and just taking a break from work can help you stay strong when things get tough.There's a tax on every extra hour you work, every hour you don't sleep, and every experience you miss out on because you're "grinding" all the time.
That tax bill will have to be paid at some point.
Stepping away even for an hour can help you become a better leader.
A difficult situation or complicated problem can make your brain think more clearly if you step away from it for a while. This helps you come up with better and more creative ideas.Those things are true in the real world.
When you need to rest, do so.
Before you need it, rest.
Some days it may feel like you are everything.But the truth is that we all have a lot of things that make us who we are.The people in this group are kids and their families and friends and cousins and gamers and bikers and runners and pet owners and many other things.
The value of a person doesn't depend on how well they do at work.
In spite of how bad this one thing went, you are still all of these other things.
You are still good enough.
Let this one piece of who you are not be the whole of who you are.
There are problems, but don't see them as a threat to your business or life.Instead, see them as just like all the other problems you've had to deal with over the years.
This is a different point of view.
Not sure if this is something that you can get with a few years of work.But it helps other entrepreneurs to know that when it's all said and done, the hard and heart-wrenching parts of running a business may seem like small things.
Chances are that the worst-case scenario will seem like a small thing when all is said and done.