ProfitLayer with Timothy Dick - Business building explored layer by layer.
Business:Entrepreneurship
“We assume that regular functioning at regular times is enough to scale. But it’s not.”
Nic Peterson (5:40-5:46)
When it comes to failure, entrepreneurs need to understand the complexities involved in growing and scaling their businesses. Your business can achieve a 5X return on investment (ROI) and still be running out of money. This keeps business owners running on a hamster wheel that never gets them where they want to be.
Businesses are complex systems, and thinking the results you achieve are linear is one of the biggest mistakes you can make. If you double the stimulus, you won’t necessarily double the response. Think of a busy highway. Increasing the number of cars by 10 percent might increase the time it takes to get to your destination by 60 percent or more.
“A non-linear response means if you double the stimulus...you’re not necessarily going to get double the response.” - Nic Peterson (1:38-1:47)
You can’t rely on a linear model when scaling your business. Things happen in business that make linear growth nearly impossible. Your marketing costs may go up or your market might become saturated. So doubling your marketing spending won’t mean that your profit doubles, too. Responses aren’t linear, and averages don’t matter as much as you think they do.
Use Science of Hindsight to Prevent Business Failure
Any errors in your business will only increase the time it takes to achieve a result. It will never cause you to get there faster. So entrepreneurs need to pay attention to what actually happens instead of relying on their assumptions. This is where the science of hindsight comes in. You need to measure, manage, and adjust when scaling your business. Hindsight lets you understand the responses more clearly.
One of the biggest mistakes entrepreneurs make is assuming that normal function is enough to scale. But it only takes one error to show you how wrong that assumption can be. You can build a larger movie theater that fits more and more people. But if the size of the exit door stays the same, all it takes is for one person to yell, “Fire!” for you to see that it’s not equipped to serve all those people. So, as your business grows, you need to grow its “doors” before you encounter any of the endless issues that can catch you by surprise.
“Errors can only increase a length in time. Errors will never cause you to arrive early.” - Nic Peterson (3:21-3:38)
Don’t Just Optimize for the Good Times
It’s easy to optimize based on the good times when everything is efficient and working smoothly. But when Facebook goes down or YouTube bans your ad account, you have to look at what happened so you can take the right steps to protect your revenue, scale your business for the long term, and achieve a positive ROI.
Today’s entrepreneurs need to make business decisions that account for the asymmetry of errors and non-linear responses. When you understand this hard truth, you develop a profitable growth model that helps you get the returns you need to achieve lasting success.
How to get involved
If you would like more information about Timothy Dick, and the success businesses have gained through work with him, please visit his website.
If you liked this episode, be sure to subscribe and leave a quick review on iTunes. It would mean the world to hear your feedback and we’d love for you to help us spread the word!
EP24: Sales with Temple Naylor
EP23: Scaling and Culture with Taylor Welch
ProfitLayer Podcast Season 2 Preview
EP22: Maximum Achievability and Maximum Maintainability
EP21: Social Proof and Testimonial Sequencing
EP20: The Power and Importance of Messaging
EP19: Two Types of People
EP18: Your Marketing Budget
EP17: The Trichotomy of Returns with Nic Peterson
EP16: Exclusions and Negative Targeting
EP15: Mental Health in Business
EP14: What is Broken in My Business?
EP13: Why Systematizing Usually Fails
EP12: Complete Criteria
EP10: Facebook and Retargeting with Seth Pennington and Glen Hoddinott
EP9: Forcing Business Growth
EP8: Accounting for Entrepreneurs with Dan Nicholson
EP7: Social Proof as a System in Your Business With Michelle and Justin Demers
EP6: Mindset and Mental Blocks with Malorie Nicole
Create your
podcast in
minutes
It is Free
The Commercial Edge: Unleash the Power of People
The emPOWERed Half Hour
Organic Marketing Simplified: Master podcast marketing, fuel podcast growth, and make money podcasting!
THE GO BIZ GUY
The Sigma Femme Podcast
The Prof G Pod with Scott Galloway
The Tim Ferriss Show