the problem you don't know you have yet

Summary

the problem you don’t know you have yet. maybe you do. let’s get into it.

1. every entrepreneur I work with eventually does what I call entrepreneurial scale math. fictitious but mathematically correct math. “I sold this thing for $1,000. if I sell 10 a month, that’s $120,000 a year. if I sell 20 a month, that’s $240,000.” just multiplication on a single product times whatever quantity you want, with zero consideration for the rest of the business.

2. the math isn’t wrong. the problem is what’s missing from it. not even fulfillment quality or whether your product is good. the missing thing is leadership. that’s the ceiling.

3. unless you’re a solo software developer who can scale through code, you’re going to hit the leadership wall the moment you try to grow past where you are. it shows up in three places. hiring the right people. firing the wrong people. and retaining the ones you really need.

4. early on you’ll hire cheap because cheap is what you can afford. you’ll learn fast that cheap doesn’t always work. you’ll also learn that paying a lot doesn’t guarantee great either. and getting rid of the wrong person, even when everyone agrees they’re wrong, is one of the hardest things you’ll do.

5. retention is its own game. money only buys so much loyalty from a high performer. they want fulfillment, impact, sometimes equity, sometimes ownership of a piece. what stops them from going to do exactly what you’re doing for themselves with 100% of the profit. and you can’t lead them all the same way. crappy leaders say “this is how I am, get used to it.” good leaders cater the leadership to the person.

6. so when the brick and mortar version of you imagines five locations and the online version of you imagines a global team, ask the same question. can I actually lead five locations or fifteen contractors or a team of thirty. if not, you’re stuck at one location until that changes.

7. start with leading yourself. doesn’t matter if you have zero employees or twenty. wake up every day and tell yourself out loud, “I’m a leader.” remind yourself of the people who need you to be one, your family, your team, your partners, yourself. lead yourself by holding the standards you’d want someone else to hold you to. then play the game daily, read on leadership, work at it, and stop assuming you have it figured out. you don’t. you never will. if you’re not playing the game, try harder.

Transcript

entrepreneurial scale math

The most impactful business is the business that genuinely improves another human, a better human business. And to grow a business like this, you have to continually improve yourself. This podcast is a documentation of that thesis, scaling businesses and also personal growth. My goal is for you to shortcut this journey.

So if you’re ready to try hard, subscribe, if you like what you’re hearing, please share and enjoy. Welcome to the better human business podcast. This is Jerred Moon. And today I’m talking about the problem that you don’t know you have yet, or maybe you do know it. So let’s dive into it a little bit more.

So I work with a lot of entrepreneurs, consult with them, talk with them. I’ve helped a lot of entrepreneurs grow their businesses, both brick and mortar businesses and online businesses. And what’s funny is anytime I’m talking to any entrepreneur, at some point you’ll get to see an entrepreneur do what I like to call entrepreneurial scale math.

And what the entrepreneurial scale math is, is it’s fictitious, yet mathematically correct math. That’s all it is. It’s fictitious, but correct math. And what it is when you’ve probably done this yourself, if you’re an entrepreneur, you’re like, Hey, I sell this, I sold this thing for $1,000. Now if I can just sell 10 of these things every month at $1,000, I’ll make $10,000 a month.

If I make $10,000 a month, I’ll make $120,000 a year. And then we just keep going with this linear entrepreneurial scale math. Oh, if I can sell this $1,000 thing and I sell 20 of these in a month, I’ll be making $20,000 a month. And if I make $20,000 a month, I’ll make $240,000 a year. This is just the ridiculous mathematics entrepreneurs get into is they just take a number, whatever they’ve sold, something they sell, and then they multiply it by how many they need to sell or how many they could sell.

But it’s not taking into account literally anything else in business, nothing else. And I’m not even talking about the fulfillment, the fact whether or not your product or service is good, whether or not you actually can sell, whether or not you can actually find that many customers to continue to scale.

leadership is the real ceiling

I’m not even talking about any of those things today. The problem you don’t know you have and what will prevent you from being able to scale and realize, like the reason you won’t be able to realize the entrepreneurial scale math you can do in your head is typically for one reason, and that reason is leadership.

This is what I see so many entrepreneurs run into. Unless you are a software developer listening to this, so you can code and write software and you make this amazing application that you can scale to hundreds of people, you might not need leadership. You might be able to have a business of one and you can crush it, but I highly doubt that’s anybody listening to this podcast.

So if you’re listening to this podcast and you have a business, I can tell you right now the problem that you’re going to run into when you try to scale your business beyond where it’s at right now is going to be leadership. It’s going to be picking the right people, so you need to make the right hires.

Sometimes, especially early on, you want to hire somebody who’s cheap just because you can afford them. You’ll find out real fast, cheap doesn’t always work out, and on the contrary, the opposite side of that, just because you pay more doesn’t mean that person’s awesome. You have to actually be able to vet them and understand because you can offer a crappy person a really high salary and they’ll take it.

They won’t say anything. They won’t say, I’m not worth that. So picking the right people is huge, and getting rid of the right people when they’re not a part of your team is another really big part of the equation. Very hard things to do right there, like those two things alone. Being able to hire the right people and then being able to fire the wrong people, so hard to do.

Needless to say, very hard to do. And then another thing that you’re going to run into is keeping the right people around. So say you do have an amazing staff, an amazing team member, somebody on the team who’s just crushing it, really helping you with your business and the growth of your business.

hire, fire, retain

They can really help you pull some of those scale levers. How are you going to keep that person around? What are you actually going to do to keep them around? Because money only goes so far, especially with really talented people. There’s no such thing as just, oh, I pay you for your services and that’s it.

You should be happy. There’s always more factors than that. There’s the fact that they need to be fulfilled in the work that they’re doing. They have to feel like they’re making an impact. They may even want, if they’re really good, a piece of the pie. They might be a little bit entrepreneurial. What’s to stop this person that you hire from going and doing the exact same thing that you’re doing but somewhere else?

So they get 100% of the profit as opposed to a portion of their, or just their paycheck, a portion of the profits that you’re getting, right? So being able to keep the right people around is also very challenging. Takes a lot of leadership. You have to know how to lead a person individually. You have to know how to treat person A versus how to treat person B because everyone responds differently.

You have to cater your leadership towards the person, not the other way around. A lot of crappy leaders think that, hey, I’m the boss, I’m this way, so everyone needs to get used to this way. That’s not good leadership. Good leadership is, you’re this way, you’re that way, you’re the other way, I’m the boss, I’m going to make sure, especially in our one-on-one conversations and interactions, I’m going to change my style of leadership to match what you need.

And then also being able to provide opportunities for them to want to stick around, making them realize that they’re part of a bigger mission and that they’re actually making an impact. And if you do need to compensate them better or talk about equity or any of those kind of things, you’re prepared to have those conversations with people who are really talented and can bring a lot of business to you.

What do you do if basically what I’m saying is the scale map that you’re going to run into is leadership because if you’re a brick-and-mortar business, you could say, okay, I’m going to open this location, then I’ll have five more locations, and I’ll have all these people, right? Doesn’t really work out that way.

cater leadership to the person

And trust me, I’ve worked with a lot of people who’ve tried to do this. Everyone runs into the person problem. It’s okay, crap. Mathematically and logically, it makes sense. I have all these different locations. They’re all producing the same amount of revenue, and boom, I have this massive business.

But you forgot that you suck at leadership and you can’t actually run five different locations because that’s too many different personalities and you’re not that good at leadership. So you’re going to realistically be stuck at your one location until you figure out how to lead people and compensate them to what matters to them.

Same with online business. You might think one thing that’s really easy to do in online businesses is hire super cheap people, contractors or people who just put in a little bit of effort, whatever, because they want to work from home. Those aren’t the right people. Those aren’t the right people on your team.

It’s going to be, they’re really hard to lead because they’re just not motivated to do much. And then leadership in and of itself in an online business is very difficult just because you only have the interactions that you have when you’re online, when you have decided to meet. There is no hanging out around the office and getting to know somebody a little bit more.

You have to force those interactions. Those are leadership struggles. It doesn’t matter what type of business you’re running. So what do you do? I tell this to everyone. You have to start with yourself. You have to start now. You have to start right now and you do have to start with yourself. I don’t care if you’re a seasoned business owner with a team of 20 people listening to this right now or you have one employee.

You have to lead yourself. You have to be a leader to yourself. That means leading yourself and holding yourself to a standard that you respect and that you would want someone else to hold you to. You have to lead yourself. If you’re not, if you don’t lead yourself, you’re missing out on the respect anyone else is going to give you if you don’t respect yourself.

lead yourself first, every morning

So you have to lead yourself. If that’s waking up early to work out, taking care of your personal life, getting everything done in the business that you say you’re going to get done, just leading yourself. Okay. That’s step one. Step two is you need to wake up every day and tell yourself or say out loud, like I’m a leader.

You have to remind yourself every day that you are a leader. If it’s just you, like you have no, you’re not even, you don’t have any employees. It’s just, you’re just by yourself. Wake up in the morning, remind yourself that you’re a leader and today you’re leading yourself and you’re going to prove that you’re a good leader and you can lead yourself to accomplish things and do the things that you maybe don’t want to do.

You can do the hard things. If you only have one employee, you need to remind yourself that you’re a leader today. What are you going to do to foster that relationship, help that person out and be a good leader? And then it just compounds from there. I need to wake up in the morning. I need to remind myself, Hey, you’ve got a wife, you’ve got three kids.

They all need your leadership. And look, you have business partners, you have 25 people across multiple teams that need your leadership, that need you to step up. You need to be a leader today. You can’t just chill in the background. You can’t just do what you want to today. You need to lead. So reminding yourself every single day that you’re a leader is a big part of starting down this path of leadership and leading yourself.

There are a lot of nuances in leadership. You’ll never figure it out. It’s always, it’s never black and white. It’s always gray in leadership. You’ll never have it figured out. You’ll never have it mastered ever, ever. If you think you’re good at leadership right now, you’re probably bad at it. You’ll never have it mastered.

Okay? So just know that, but go into every single day saying, I’m going to play the game. I’m going to play the leadership game. I’m going to try to be a better leader today. I’m actually going to give it some effort. I’m going to think about what leadership looks like to me. I’m going to read some books on it, and I’m going to try and lead the people who are in my life.

If you’re at least giving an effort to lead and you remind yourself every day that you’re a leader, you’re playing the game, and if you’re playing the game, you’re getting better at it. If you’re not playing the game, try harder.