This week I talk about dieting, habit change, and how it relates to your business.
But first, our sponsor.
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Raising Your Financial Floor & Ceiling
Life is a series of choices.
And sometimes, it’s not about optimizing to the best choice, but about making the typical worst one a little less bad.
Let’s talk about food since everyone loves food.
Say I’m trying to lose weight. Today my default today is to eat a double cheeseburger, large fries, and large drink for lunch.
This is counterproductive to my goal of losing weight.
So, I decide I’m going to start eating more healthily. The natural reaction is to go to the extreme: lots of protein, vegetables, etc.
But we’ve all seen this movie before. You’ll stick to that diet for days, maybe weeks, then have a “relapse.” Since my previous norm was the double cheeseburger, large fries, and large drink, I go back to that.
This is the yo-yo effect and is well-known in the weight loss community.
The Yo-Yo Effect
You have gained some weight, so you set out to lose it. You eat way less food and way healthier. After months of discipline, you’ve reached your goal. Hooray! Now what? You give yourself a reward. Then, you go back to eating “normal.”
You didn’t see the change in eating habits as permanent, but temporary. Eating less food slowed your metabolism and next thing you know those previous eating habits are back and you’ve ballooned to a higher weight than you initially started.
Where the before is better than the after after.
The Alternative
But we have an alternative: taking a more sustainable, lifelong decision. What if instead, we thought about making incremental changes?
That means each day making small choices that are slightly better than the previous.
First, I reduce the larges to mediums. Next, I cut out the drink and start drinking water. Finally, I start mixing in “healthier” choices.
What I’ve done, instead of creating a yo-yo effect, is create the step effect.
I like to think about this in terms of floor and ceiling.
By slowly improving your choices, you’re raising the floor, or worst decision you could make.
All along the way you’re cutting out that large drink and saying “from this day forth I’m only doing mediums.” You continue this journey and every day look for ways to improve your decisions and raise that floor.
Next, I focus on raising the ceiling. What does that mean? This looks like:
- educating myself on health and fitness
- replacing the traditional “junk” with healthy but delicious things that I’ll crave instead
- surrounding myself with people who are in better shape
By raising the ceiling, you open up your mind to what’s possible and raise the floor again as well.
Understanding how the body is fueled and wanting to have the energy for work or family, you start choosing better foods to fuel those work and family goals.
By combining these two, we start to make significant, almost exponential, progress.
The same applies in business.
Raising your financial floor
It’s so easy for bad habits to sneak into a business. And sometimes it’s not even bad habits, but bad conditions. Things that put the business at risk because of no fault of a person but because of the nature of the business.
This is things like:
- Getting a big customer who in turns becomes bigger than the rest combined.
- Accepting payment terms from suppliers and customers without pushing back.
- Growing quickly and depleting cash.
All of these things happen without action. They’re a function of a business that’s operating well, if slightly on auto-pilot.
We can raise the floor in the business by actively asking: what are the worst “habits” or norms of the business that is actively putting the business in harms way?
Some examples of come ways to raise the floor:
- Actively manage your cash conversion cycle.
- Diversify your revenue streams, by product/service and reducing customer concentration.
- Refinance high-cost debt to lower-cost options.
- Create a barebones budget and give guidelines on spending.
- Building up your financial reserves and getting a line of credit.
Raise the financial ceiling
Similar to recession-resistant businesses focusing on offensive and defensive measures to avoid a downturn, we need to raise the ceiling as well.
But what does that mean?
It means investing in things that provide greater opportunity for the business.
From a financial perspective, this looks like:
- Expanding geographically to increase revenue and be less reliant on one region.
- Investing in new tech, products, and services, focusing on higher return opportunities.
- Improve efficiency in operations through leveraging software and consultants.
- Building brand equity through marketing and strategic initiatives.
- Building a robust KPI and financial reporting infrastructure to highlight emerging trends.
For many of these (tracking cash conversion, revenue streams, and financial reporting), software like NetSuite provides visibility into your numbers which will improve your financial outcomes.
Thanks NetSuite for sponsoring this issue.
NetSuite is the #1 Cloud ERP that gives you complete visibility and control over your business operations, including financials, inventory, HR, CRM and more. Over 37,000 organizations have turned to NetSuite to help grow their top and bottom lines.
Click here to see what the future holds for AI and Machine Learning in finance.
Just like in dieting, there is no silver bullet in business.
But, by focusing on the ends of the spectrum, you create great “habits” in the business that will result in a consistent march forward.
This consistent progress is way more powerful than any one action.
So, let’s get started today. Take 2 minutes and answer the following for yourself:
- What is one bad “habit” of your business and what’s one thing you can do to raise the floor of that habit?
- What is an easy investment you can make today to raise the ceiling?
