Here’s a quick story about our two favourite business partners – Starsky and Hutch.
Starsky and Hutch were running a successful business which was growing consistently.
So consistently it started to create some stress, the business had started to outgrow itself.
They found themselves stuck dealing with day to day issues and weren’t getting around to strategic things like spending quality time with key clients, marketing etc.
Starsky wanted to hire an assistant to help whilst Hutch was worried about keeping costs down.
Starsky regarded the extra resource as a cost of doing biz, Hutch thought it would be a cost to the business.
A ‘cost of’ doing Business is investment for growth eg building a factory, developing a website.
A ‘cost to’ the Business is an expense that does not drive a return eg tax.
Essentially, Starsky and Hutch had different contexts.
Starsky wanted to grow, Hutch wanted to protect profit.
So who’s right and who’s wrong?
At some level both are right…so how do you get to the best decision?
The difficulty with these decisions is that it’s emotional, it carries a lot of fear. The way to remove emotion is to think contextually..
Think about a cup – this cup represents the capacity of a business at maximum efficiency, ie what it can potentially turn over.
The water level in the cup represents the ‘run rate’, ie what it is actually turning over.
Starsky and Hutch realised their cup was approximately 90% full.
When thinking about their Business more contextually and without emotion they realised to keep going they either needed a bigger cup (invest in an assistant to grow capacity) or reduce the water level (sack low-value clients). If you want to know how it feels to run a Business at 90% capacity, try filling a cup and running round! Each spill represents an error, a client being let down, something being missed.
If you’re at a similar cross roads the cup analogy may help you to get a better feel for the risks you are facing and the choices available.