Making Tradeoffs for Business Growth

Growth necessitates making hard decisions and trade-offs.

Most significant life and business decisions are difficult because all easy, low-risk options have already been exhausted. Avoiding these hard choices by letting life decide for you typically leads to undesirable outcomes.

Why: You almost never get something for free; progress requires trading something (time, risk, money, performance, current comfort) for something else. If you've been stuck, the trade is between staying stuck and potentially getting better or worse.

"Most of the biggest decisions in life are scary because you've already made all the easy decisions that you can make."

Align customer acquisition with desired business outcomes, even if it means a temporary revenue dip.

To attract higher-level, more desirable customers, a business must be willing to change its messaging, lead magnets, and pricing, which often means saying no to existing, less ideal revenue sources. This can lead to an initial decrease in revenue.

Why: Continuing to serve undesirable customers prevents the business from evolving and attracting the ideal clientele, hindering long-term satisfaction and growth. The trade-off is short-term revenue stability for long-term business health and enjoyment.

"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."

Making irreversible decisions builds competence and leads to better future choices.

Once all easy decisions are made, one must confront difficult, often irreversible choices. Wishing for easier options is futile; commitment to a decision and living with its consequences is essential.

Why: Experience in making high-stakes decisions hones one's judgment and courage. The pursuit of having 'everything' without making hard choices inevitably leads to having 'nothing' of significance.

"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 gotta make a trade."

Present pain is a powerful catalyst for significant change and growth.

Often, major life and business leaps are not driven by grand visions or passion, but by the current situation becoming so painful that any alternative seems better. This 'step back' is a necessary precursor to moving forward.

Why: Just as an investment account goes down before it comes up, or muscles get smaller before they grow bigger, there's usually a temporary regression required for outsized future returns. Staying in a painful but familiar state guarantees no progress.

"How can I make today feel worse so that tomorrow feels better?"

Intentionally add friction and disqualify unsuitable prospects to attract better customers.

Wishing for better customers is insufficient; active measures must be taken. This involves adding friction to the sales process, disqualifying customers who don't fit the ideal profile, and rigorously qualifying the target avatar.

Why: By making it harder for the wrong customers to enter and easier for the right ones to be identified, you filter out the undesired audience, allowing resources to be focused on attracting and serving the most valuable clients.

"We need to start adding friction into our process, right? We need to start disqualifying customers, right? And we have to start qualifying our avatar to the same degree."

Raise prices to resolve supply constraints and fund growth.

If demand outstrips supply and the business lacks funds to hire more staff, raising prices is a strategic solution. This increases cash flow, which can then be reinvested into higher compensation to attract the necessary talent, thereby alleviating supply constraints.

Why: This creates a positive feedback loop: increased prices lead to more cash, which funds better talent, which increases capacity, ultimately leading to more growth. The alternative is remaining stuck in a state of limited capacity.

"If 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 a supply constraint."

Prioritize absolute profit over relative return when scaling advertising spend.

Many small business owners cap advertising spend when the relative return (ROI percentage) begins to decrease. However, a lower relative return at a higher spend can still yield a significantly greater absolute profit.

Why: The ultimate goal of advertising is to maximize total profit, not just the efficiency percentage of each dollar spent. Downregulating goals based on perceived difficulty or a focus on relative metrics prevents businesses from achieving their full profit potential.

"Usually the return goes down in terms of relative return, but their absolute return goes up."

Explicitly spell out both sides of a trade-off to gain clarity and facilitate hard decisions.

A tactical approach to making difficult choices is to clearly articulate what is gained and what is given up for each option. This makes the 'cost' of a decision, or inaction, explicit.

Why: Clarity around the consequences of each path removes ambiguity and emotional bias, making it easier to commit to the choice that aligns with long-term goals, even if it involves short-term discomfort.

"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?"