Small Business Mindsets For Success

As a small business owner, I didn't start out to change the way I thought about everything.

But that's what mindsets do.

The more I research and look at different ideas, the more I realize that mindsets are the key to making my business more successful, to adding more value to customers, and getting employees who love what they do.

The Power of Mindsets

Let's start with what a mindset is.

It's actually a type of filter that changes the way we process information.

Our body sends far more information to our brain than our conscious mind can process, so it uses mindsets to control what we notice.

For each mindset, we'll talk about two different filters, and how they impact the way we think about the world.

Growth vs Fixed Mindset

Let's start with a mindset made famous by Carol Dweck in her book Mindset.

Dweck grew up with what she refers to as a fixed mindset, which was focused on getting the right answer.

The idea was that either you were smart, or you were not.

If you were smart, you just new how to get the answer. If you weren't smart, then you failed.

The problem with that mindset is that it's built on an inability to fail, which makes it very hard to learn anything new.

You live in a constant state of fear, knowing that you aren't perfect, so you're not smart, and sooner or later, the world is going to realize what a failure you really are.

A growth mindset is focused more on the journey than the destination.

The idea is that failure is part of the process. Nobody just sat down at a piano and played every note perfectly the first time.

They played awful, made mistakes, didn't count, put wrong notes in all kinds of places, but they kept going till the song got better.

There's a huge difference in the two mindsets.

Fixed is afraid to try anything new because they might fail, and therefore be a failure.

Growth wants to constantly try new things, because they will definitely fail, but in the process they will learn something they didn't know and become a better person.

While fixed lives in fear of being found out, growth lives with curiosity and joy, constantly learning and growing.

You can quickly see how this little change in how you see the world completely changes the way you interpret everything.

Expert vs System Mindset

This one I see in a lot of entrepreneurs and it's focusing on systems vs people.

It revolves around how do you grow a great company.

When most entrepreneurs I've seen start to grow, they know they aren't experts on everything so they look to hire people who are.

That works with your first hire, but the problem is that whomever you hire brings their own system with you.

As soon as you hire the second person, you have two different systems competing with each other.

And this gets worse with each person you hire.

Not only that, but who knows which of the systems work best for your company.

That's why you're better off early defining best practices, writing them down, and using them as a system.

It makes sure you don't have competing systems. Everyone who comes in gets trained on yours.

It means everyone does things the same way, so it's easy to maintain consistency.

It also means it's cheaper to hire. You can hire lower experience knowing what you need, and what you already have built into the system.

Most people get worried about building systems, but it's fairly simple. You sit down and just start writing down steps.

Keep it high level to start with and add details when you find you need them.

The key is to have one way of doing things that everyone gets trained on, everyone follows, and everyone can update when you find things that need changed.

System vs Behavior Mindset

This one is a question of what we do when things go wrong.

Often as leaders, we pull out the blame game and go looking for who made the mistake.

Don't get me wrong, often someone made a mistake, but a better question is why did the system let them.

Which is where system's thinking comes in. System's thinking starts with the premise that every system is perfectly designed to get the results it is currently getting.

By focusing on the system, you find deeper reasons about why things are happening and how to prevent them going forward.

The secret here is to ask more questions to dig deeper into the problem.

For example, if an employee didn't provide the customer experience we expect:

• Do we have a clear process that explains each critical step that need to happen to deliver the product correctly, including how to handle exceptions?
• Have all employees been trained on the process and have a clear understanding of expectations?
• Do we have checks in place to make sure employees are following the process each time?
• Do we understand the key skills needed and build a hiring process that focuses on those skills?
• Do we have the right steps in place to correct employees who aren't following the process, including write ups or termination if needed?

Strong systems have a number of advantages:

• You rely less on finding the perfect person, instead using training and monitoring to help any employee perform well
• You spend less time worrying. Good checks and balances makes sure you get the same result every time.
• It's actually a lot easier for employees to do their job since their is clear training and expectations in place.

Abundance vs Scarcity Mindset

I first ran into the mindset working with McKinsey on a $15M project for the company I was working for.

I thought it's easy for you to talk about abundance when you're charging us $600 an hour for brand new college grads.

But in 6 months that project generated $60M in recurring revenue for the company.

What McKinsey was trying to teach was the difference between a fixed and abundance mindset, and they did it with their results.

A fixed mindset is simple, there is only so much in the pie. Whatever you get, I don't. If you win, I lose.

The abundance mindset is focused on making the pie bigger for everyone (which is what McKinsey did).

They asked for $15M but gave back far more in the long run (which is why they can charge so much!)

The biggest question is how do you make the pie bigger, and the answer is often technology and innovation.

But it often is just changing how we look at the problem. Instead of asking how do we get one OR the other, we need to ask how can we BOTH.

As small business owners, there are all kinds of uses for this.

When an employee asks for a raise, you can ask the employee, "How could we change your job so that you're bringing more value?"

Now instead of reducing profits by paying an employee more, you're encouraging an employee to find more value, so you may end up paying them more and making more profits.

When a customer asks for a discount, you can asks for a discount you can ask "How do I provide the same service, but both of us get more?"

The answer could be referrals, it could be trade, or it could be some other answer you haven't thought of yet.

It also works to ask "How can we work with vendors to reduce our costs while still providing them with more value?"

You'll find it a powerful tool whenever you hit a tough problem. They key is that you don't have to settle.

You just have to find the right idea.

Agile vs Traditional Mindset

Hopefully by now you've heard about Agile, but most people don't understand the mindset.

Starting with the problem can help. When IT started managing software projects they used the same project management tools engineers use to build bridges or houses.

Turns out they were widely different. We build millions of houses so it's easy to know what's needed.

But every software project is new, and often dramatically different. IT projects were taking years to complete, and by the time they were done, things had changed so much they were solving the wrong problem.

Agile approaches were created to solve this problem. They are focused on how do you deliver the best value in the shortest time when you are working with the unknown. (If you already know the answer, traditional approaches are better at just increasing efficiency.)

Besides software, they also works well for marketing, org development, process improvement, and innovation.

Key elements of the mindset are:

• The best solutions don't come from an architect or leader, they come from technical and business teams working together to create new ideas. A leader's job is to set the right goals, create the right environment, and give teams the right tools, not command and control.
• We don't know the best solution, so we need to experiment. Instead of waiting till the end of the project, we need to get feedback as quickly as possible so we can pivot.
• The best way to experiment is to get a solution in front of people as quickly as possible (think pilot or minimal usable product). This allows us to get value faster, since the users get a tool as they test. It also shortens the planning cycle, since teams get to work quickly to get feedback that is likely to change the plan anyway.
• The best way to measure teams is by the amount of customer value created (not features or projects delivered).
• The easiest way to manage scope creep is with a timebox. You give teams a certain amount of time and resources, and tell them to work on the most important things first. The junk naturally floats to the bottom.
• Smaller projects leave less time to procrastinate. It's better to break projects up into 1-4 weeks with something delivered at the end.

Coming from Agile, I find myself asking:

• How can we start sooner?
• How can we make projects smaller?
• How can we get this in front of someone to get feedback faster?

Every organization has to deal with change. Whether you realize it or not, every time you change something, you're managing a project.

Agile gives you the tools to do it far more effectively, getting a better sense of what your customers will really need before you spend all the money creating it.

Data vs Gut

The key question for this mindset is – do you trust what your gut is telling you without looking at the numbers, or do you spend the time to find out the facts?

It sounds like a simple question, but I’ve been in way too many meetings where we spend an hour arguing about what a number is, when an analyst could have found the actual number in ten minutes. I think this mindset exists for two reasons. The first is it’s a leftover from the 20th century when numbers were harder to find. And even today, you may be harder to find the data you need.

However, it’s important to realize that data and analytics has completely changed what we do and how we do it. It allows ups to focus our companies on numbers not opinions. If you have a question about which product is selling better, which marketing campaign is working, how long it’s taking to deliver to customers, or why customers are complaining, stop arguing about the facts.

Find a way to go get the numbers, real numbers, that will tell you where your company is, not where people think it is. What you will find is that you were really wrong. You think you know which ad is working better, or why customers are buying, or what customers are buying. I’ve never looked at the numbers and not found something surprising.

But that surprising part is what makes it hard to invest in analytics. It’s a faith based investment. You don’t know what you’re find or how it will change your company until you do it. You can hear about what others have found, but if you already knew what was going on in your own company that needs fixed, you wouldn’t need analytics.

The good news is that it doesn’t have to be a big investment. If you’re small, you might not have the right skillsets. That’s the beauty of our post Covid world – you can find what you need for the right price. Sites like Upwork or Fiverr will let you find someone who can get the data for you and get it into a structure that makes sense.

Many will want to start with some big analytics project. Don’t do it. Start with throwing something into Excel or Google Sheets, getting some graphs, and seeing what the data shows you. You don’t even know what reports you need until you start by exploring the data.

What you will find is related to one of my favorite quotes is from the Bible. It’s from John 8:32 – “You will know the truth, and the truth will set you free.”

That’s what analytics offers, the truth. Marketing will come and tell you that numbers are up, or numbers are down. There is too much noise in the marketplace, too much competition, customers aren’t looking at ads anymore, or a million other excuses about why numbers are up or down.

Honestly, they are guessing, they probably don’t know. They aren’t taking the time to find out. Because when you do, you find great answers.

As an example, I worked with a company that refurbished computers. There was one person on the floor that was responsible for refurbishing iPads. That one person could do 200 units a day, those units sold for $66 each, so that one person was producing $13k worth of sales each day all by themselves. The company had 60 employees and was averaging $25k worth of sales each day. That one employee was half the sales.

There were other steps in the process, but they were the key step that needed done. At the end of the month, if they had a bad day and only produced 50, or if they were sick and didn’t produce any, numbers would be way off. And the managers would have a variety of different excuses why, because at the end of the day, they didn’t know. Once they did, they could make sure that position had backup, was never empty, and they never had iPads waiting to get processed.

But they hadn’t done that because they didn’t know. If you’re not running a data driven organization, you don’t know either.

One of the problems is that there are so many numbers that it can be overwhelming. To start:

·         Always start at the top and work your way down.

·         Focus on the numbers that will make the most difference.

The first number you should always start with is overall profitability. Good profitability will determine if you survive or not. Cash flow is another important one. If you’ve read Phill Knight’s book Shoe Dog, it’s an incredible story of a company that was doubling in size every year, and constantly on the brink of bankruptcy until they went public because they didn’t have the cashflow to survive and nobody would give them a loan.

From here, you want to start with the core numbers that drive profitability. Mike Michalowicz defines them in his book Clockwork as AC/DC - Acquire, Close, Deliver, Collect (🎸and you can rock out as you focus on them 🎸)

Acquire - Marketing. #1 metric is qualified leads. Cost per lead is another good one to watch

Close - Sales. #1 metric is new customers. Percentage of leads closed is another to watch. Just know sales and marketing will fight over why (are they really qualified or does sales need to do better).

Deliver - Operations. #1 metric is customer satisfaction. Time to deliver and product quality will both contribute.

Collect - AR. #1 metric is how much money is past due. It doesn't matter how good you are if you don't get paid.

Start with finding a way to get the basic numbers every week. From there, follow the ones that are making the most impact.

For example, if sales are low, how many qualified leads are you getting? If leads are low, what are you spending on marketing? Which channels are you spending it on? What channels have been the most successful in the past? If you’re not tracking what channels are working, how could you start to do so today?

As you move to a data driven mindset:

·         Start with the most important numbers

·         Use them to tell you what numbers you need to know more about

·         Get everyone in the company to focus on this mindset.

Instead of arguing about what they think the problem is, get them talking about what numbers would tell them what the real problem is and where they can find them. You'll be amazed at the difference it makes!