Emotional Versus Rational Decision Making Causes Businesses To Get Stuck – Here’s a Fresh Approach To Getting Unstuck
There are times in every entrepreneur’s journey when they feel stuck and are not sure what is necessary to push their business to the next level.
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It is often difficult to move beyond feeling "stuck" in your business. This scenario was especially apparent to me recently when I heard the following entrepreneur's predicament.
Said entrepreneur runs a web development firm that brings in about a million annually in revenue, with the owner taking home $100,000. The business is stable, and the owner is living comfortably enough, but he's also stuck because he claims not to know how to take things to the next level.
The shop is running at just 50 percent capacity, and the owner says he needs to hire salespeople to increase the incoming business. The problem is, each salesperson hired is a $50,000 annual investment -- money that, as it now stands, would come from the owner's take-home pay.
The owner's especially worried because hiring salespeople is risky. The attrition rate is high, and there are associated costs for both scaling up and training the new employees.
He is struggling with the decision to hire one salesperson. And yet if he wants to double his revenues (his real goal), it'll probably take six salespeople.
Looking at the numbers
While the entrepreneur is afraid to hire one salesperson, the reality is that if he builds a cash flow model and chooses to hire six, he would be in a hole of $80,000 to $90,000 within a couple of months
How can he afford that?
There almost always are options, particularly for entrepreneurs who aren't in a crisis.
For example, a simple $100,000 loan from a Small Business Administration-backed (SBA) lender could solve a lot of problems -- and the monthly payment would only be in the range of $1,150. That would be enough to expand the sales team.
Even if the salespeople turn out to be complete duds, never make a single sale and are quickly fired, a cost of $1,150 a month is peanuts in the grand scheme of things.
If it works, the business is well on its way to significantly increasing the bottom line and making it possible to pay off the debt. If need be, another loan might be appropriate to expand the business further.
Emotional vs. rational
Too often, entrepreneurs are fearful of debt, as they see the significant loan number and not the relatively small monthly payments involved -- payments that could be eliminated when the expansion efforts bear fruit.
Aside from the fact that you nearly always have more options than you believe, a rational approach is still going to help you more than an emotional one.
If you believe your heart is interfering with your head, it's a sound idea to obtain some outside counsel that can examine the situation from a neutral perspective and shed light on reasonable options you may be overlooking.
I'm not generally a fan of decisions made by committee, but advice from a trusted confidante or two certainly can't hurt.