IN THIS EPISODE:
Sometimes either personally or in business, you focus on saving money rather than making money. This may also mean that you are so focused on being efficient, that you lose the opportunity for growth.
Spending time saving money might make you feel better about reducing waste, but if instead you spent that time making money, it could in fact produce ten or one-hundred times the impact.
This week Brad and Kevin talk about the true cost to people who try to save their way to success, and the compounding effect of being focused on growth rather than saving.
SUBSCRIBE TO THE GROWTH WHISPERERS:
Please note that this episode was transcribed using an AI application and may not be 100% grammatically correct – but it will still allow you to scan the episode for key content.
Brad Giles 00:12
Welcome to the Growth Whisperers where everything that we talk about is building enduring great companies. I’m Brad Giles, and as always joined today, by my co host, Kevin Lawrence. Kevin, Hello, and how are you today?
Kevin Lawrence 00:26
I’m doing great, Brad. I’m happy to be in September, getting things kind of going for what’s like the start of the new year or the or the third round of this year for us. I’m excited. Excited to be doing the show today.
Brad Giles 00:39
Yeah, me too. Yeah, me too. We’ve got a good show lined up. And, yeah, yeah, things are good. In my part of the world. It’s spring, starting to warm up. We’ve had a very wet winter. So yeah, I’m excited. So as always, we’d like to begin with a word or phrase of the day. And what about yourself, Kevin, how would you open the meeting with a word or phrase,
Kevin Lawrence 01:05
My word is freedom. And it’s a very important word to me. And because I’m going to the United States of America, tomorrow, I got, I went and got my COVID tests, I got both styles, a COVID desk today, the one where they just tickle your nostril and the one where they you know, go for your brain. Actually, it wasn’t as bad as I thought. But I got my test done. And I’m off to fly to Chicago in the morning for a meeting, coming back just under the wire, so I don’t have to get tested a second time. And I guess I’m a freedom. I have not been in the United States America. Well, since March, it was March of 2019. And a year and a half longest I’ve never been in there. As a child. We went down almost every weekend, every second weekend, like and I see the US like I look at my window I see. Right into the US. It’s right where I’m like, you know, 10 minutes from the border. So I’m excited to be traveling down to I love the state. So a freedom is my word. I get to experience that again. How would you read? You know, I
Brad Giles 02:07
laughed when you said that because my word is slash was very close to freedom as well. And the reason is, I saw this absolutely amazing video, American college football has started up again. And there’s this song called into Sandman by a band called teleca. You may have and it’s got this amazing, start to it. And I encourage you if you’re listening to look it up. So it’s the first game back after all of the COVID shutdowns for like a year or two for and then they pan across the stands, there must be 30,000 people all wearing exactly the same red jumper. And then there’s that song, it’s kind of got a bit of a gradual build up, then more and more build up. And all of the 30,000 people in stand a jumping up and down. Okay. And then it’s just the players are in the dugout, and they’re waiting as the music builds until it gets to a certain point. And then they sprint out for the first time since COVID. onto the pitch. And it just it can’t help you mean you mean the field? Yes, the field. Okay, got it. Yeah.
Brad Giles 03:23
And, yeah, and it is just, it just that sense of freedom of we’re back out like we’re back out watching the crowd. Yeah, absolutely. It was in just like a one minute video. I encourage you to look that up. So yeah, freedom as well.
Brad Giles 03:39
Awesome. Well, great minds think alike. Well, let’s, let’s dig in. what’s the show today, Brad? What’s about success, isn’t it? It’s about, you know, what is the mindset for success. And the title is why you can’t save your way to success. And then the subtitle kind of is stepping over dollars to pick up nickels and some people, some people will think that they can achieve success by focusing on the dollar that they save here are the dollar that they saved there. Now this is I guess this is a personal as episode as well as a team or leader based episode relative to your business. But it’s the same principle. And so we see people sometimes who was so focused on saving $1 here or saving $1 there and it can be a little bit consuming and they think that that’s how they’re going to succeed. When sometimes, in fact, most of the time the often is the opposite is often true.
Kevin Lawrence 04:48
Yeah. And it’s people have great intentions, but they get distracted. I remember one executive team we worked with and you know, it was a bit of a tougher time in the business and I made the decisions, too. Get rid of the disposable coffee cups in the kitchen where all of the executives and leadership team would go when it was a good size company. So they would, they would save money by not having to purchase paper coffee cups. I did a little bit of math, and it took me all of about 1.362 seconds to do. It’s called the value of an executive or leaders time having to wash their own coffee cup. And if you take them the time of the week, you know, two cups of coffee a day, five days a week, 1012 cups of coffee, when you start adding up the time or the costs to wash the darn cup. It just you know, and maybe it was sending a message. And there’s things about saving costs, they can send messages and things like that. But at some point, you know, it gets a little bit silly and people with beautiful intentions are saving money, but it’s not worth the time it takes to save it. And they’re not they’re not balancing out time and money to look at true cost, not just currency in the equation. But again, good intentions. Sometimes go a little bit too far. And as you know, you and I’ve talked about Brad, the worst part is, is that they’re there. It’s not the ones that are saving on the wrong costs. Is that potentially in their business, they shouldn’t be saving worried about saving costs, they should be worried about doing something else that might help grow the company. Yeah.
Kevin Lawrence 06:25
Yeah. And it’s easy, it’s easy to get caught up in that. And that’s why there’s this kind of joke we have sometimes we’re saying and I love accountants make it very clear. I love accountants. I’m just about to stick them I I love them. But there’s a saying is that, you know, if you really want to screw up the company, you’ll let the accountants run the business. Because you can’t cut your way to success. I’ve said, and I know some accountants who are great, by the way, great CEOs. And also that’s a bit of a joke. I know some accountants that are great CEOs, but just clipping costs, doesn’t create growth or create a better injury. Yeah,
Brad Giles 07:01
but the accountant has a role, a very important role. And the leader or the CEO has another very important role. I wrote a book about that CEO role called made to thrive. But I had a friend who owned a, he owned a few businesses. And he as they do, he grew one. And then he started another one and he grew that one. But the initial family owned business, they decided several years ago to appoint their accountant to run the business. Then after about five years, he rang me up and he said bread.
Brad Giles 07:40
I’m an E, I’ve got a pause, because this guy swears a lot. So I’m trying to think about what he said, and tailor it to the episode or the language. So you know, he said, this account that he’s been there and he said, we’re making more money than we ever have, like the profits are outstanding. He said, but every year the revenue has gone backwards. Right? Right. And that’s good. You can handle that for a year, which
Kevin Lawrence 08:08
is you can better squeeze the existing revenue, but then you energy’s not on growing the revenue.
Brad Giles 08:14
Yeah. But then after about five years, it becomes alarming, because he’s like, yes, this, this equation isn’t working. And so it’s important to focus on the little things to make sure that you’re maximizing the profit. But if you look at it, without the lens of we need to continue to focus on growing the top line and the gap as well. You know, there can be some challenges in that.
Kevin Lawrence 08:41
Yeah. So the first thing to really be looking at is based on what your business needs, what does it need more, creating more value for existing customers or new customers? So you can grow the revenues and grow the margin? I suspect that all businesses need some of that. But you know, or do you have an overflow of juicy demand? That’s healthy margin business? Do you have all of that that you need? Right? If you have all of that, that you need? You’re probably not as worried about costs, you’re probably worried about systems and optimizing quality of service delivery or something like that. So do you need more good business? Is that thing? Or are you getting a good business but you’re not getting profitability, ie the if there’s not efficiency in the system? You know, we’ve chatted before about Lean and lean process, which can really help if you’ve got an abundance of business and you just need to run more efficiently and generate more profit for every dollar that flows through the system. But normally, when people go to cut costs, they’re actually looking the wrong way. They’re actually it’s not that you shouldn’t cut costs, you often need to, but it’s there. If you only do that they’re missing the opportunities for more revenue and value creation and the challenges of reducing cost, I would say is not a high skill. tivity it’s not cognitively demanding to go and find cost because it’s always there. There’s always inefficiency in the system.
Brad Giles 10:08
And people can get frustrated by waste. And yeah, then that frustration can translate into an emotion. And that emotion can lead them to make decisions that are not the best use of their time.
Yeah, exactly. And emotions. And that’s why I’ve got great advisors. I was talking to one of my advisors recently about a project I’m working on. He said, okay, Kevin, you know, what is the value? in dollars of this issue you want to sort out? as we went through it, he’s
Kevin Lawrence 10:44
like, why are we talking about this? Because there’s not enough dollars in that problem for you to even be worth talking to me about it. Yeah. So it goes delegated. Let it go. Just do something, just don’t think about it. Because it’s not worth enough. You know, and based on the scale of businesses, you know, I had one, one amazing leader I worked with, unless the value of an issue was about 10 million, he wouldn’t pay attention. And based on the scale of his business, that was about the right number, it took me a while to get it.
Kevin Lawrence 11:18
Yep. You know, but there’s a lot of people were there, their minimum thought, should be on something that’s probably a couple 100 grand. But they get stuck in a couple of grand.
Brad Giles 11:32
And so it makes me think about Peter Drucker, who we’ve spoken about before on this podcast. And he’s saying, on the effective executive, his book, page number one, right? The job of an executive is to be effective, the job of a manager is to be efficient. And so if you’re viewing this, this podcast only through a personal lens, then you aren’t the executive of your own household or your own balance sheet. If you are in a business, then you are the executive of your own business. But remember, for managers, their job is to be efficient and for executive is to be effective.
Kevin Lawrence 12:16
Yeah. And so I heard a great case study on something called serious they’re an aircraft manufacturer. I was interested in it, I mentioned to someone that I tried to get my pilot’s license, I went on a test flight, hated it. And he asked me what airplane it was in, I said, a certain Cessna model. He goes, Well, that was probably your issue. He goes, you need to fly a serious and I’m like, okay, he goes because it’s, it’s almost like flying an iPhone. It’s a modern airplane. And the great thing about Sirius is that if you mess up this little handle, you pull, and then a parachute pops out and then sets you on the ground. So it’s made for recreational people like us that often screw up because we don’t have enough experience. You just pull the thing. The plane drops to the ground probably breaks the landing gear cost you 25 grand and you’re good to go. And hopefully it doesn’t hit a house. Exactly. Yeah, exactly. So anyways, he so I went, I went and test drove on these planes, it was beautiful, all that stuff. But as I studied the company, I found this great article about them and efficiency. And when they started, they started the planes, they sell about a million dollars. And they started the planes. And they started only fixing the problems that were $6,000 a plane or greater, only, because there’s less of the there was money falling all over the floor. But they started at 6000 the plane, and then they went after they fixed all those they went to 5000 the plane, and then four. And you know, by the time of this article, they were still at $500 a plane, they were leaving waste of it was a very smart way interesting. Their manufacturing facility. I think they 5x or 7x volume in the same facility, because they just built efficiency. But again, they have great demand, they have a strong brand. But they prioritized and only focused on the big ticket stuff. Instead of wasting their time cleaning up 75 cents when it just doesn’t matter.
Brad Giles 14:10
It doesn’t it doesn’t matter. I good analogy that I like is about a daily coffee. So most people would drink coffee. And many people would go and let’s say that you spent $5 each word each week day on coffee. People might think I need to save my way to success. I need to stop having coffee. And then over a year that’d be $25 a week that’d be 13 $100 a year 1300. And the love we’re going with this. So then suddenly, after two years, you’ve got 2600 but you need you know you’re a sentient being and you need to find these small points of reward to keep you focused. there on the flip side of that How what would you need to do to make another $5 a day? And would it be possible? Yeah.
Brad Giles 15:09
So is it possible that you could actually, if you rather than focused on these smaller things that give you personal reward that matter what it is focused on the upside? And, you know, would it be possible to make $10 a day or $50 a week? it’s certainly possible.
Kevin Lawrence 15:30
Yeah. So instead of trying to save you’re not buy a coffee every day, think of how you could make five times what that coffee is worth every day. Exactly. Just look at it. And that’s the way we think about business, instead of trying to put too much in and redirect the whole organization, to saving five bucks, redirect the whole organization to making 5000 bucks a person on different things, ie, changing our focus and not getting lost in it. I’ve seen it in lots of different companies where we’ve done this even to the point, one of our companies, we did a theme over a quarter, or every employee, and they were in business services for small businesses, right, like small mom and pop type businesses. And every employee was thinking about potential clients for the company. Yeah, so they had 350 people, every day, and there was a contest on a weekly and a monthly basis, we made it a theme generating leads for the company. Now, they had done things around saving some money here and there, but they were growing the business, and they got a lot of mediocre leads, but they landed. So the people like one of the frontline employees, brought in an amazing, amazing piece of business. And so instead, they just put the energy on growth. And I’ll never forget a great CEO worked with his name is Brent parent, we call them BP. He’s built and sold a number of businesses, just brilliant, brilliant CEO with this. And and and he always says to his people, you know, are you in the big circle? Or are you in the little circle? And he called it 95. Five. And you know, and you know, I’ll keep this with me for the rest of my life. And what it really is, is the 95 is awkward 95% in the big circle is opportunities, and the 5% in little circles problems.
Kevin Lawrence 17:28
And really what he would say is, Hey, why don’t you just go sell something? Yes, like, literally, there’s
Kevin Lawrence 17:35
like, you know, go go sold, go solve a problem for a customer and sell something. That’s the opportunities and people get worried about the problems. And I remember that organization, as we scaled it and had did a very amazing job with it, they did amazing job. Um, we ran it at probably two points less of EBITDA than we could have. But we ran it fast and a little bit loose. But we’re growing like crazy and built making profits like crazy. If we tried to squeeze all the dollars out of the business, we would have slowed down the growth engine, and it probably wouldn’t have been a fun place to work either. Right, because it was an entrepreneurial, had an awesome entrepreneurial spirit, lots of autonomy, all kinds of good stuff, but 95 595 on the opportunities 5% of the problems. And we did try to save money, but it wasn’t really a major focus. The biggest was creating more more more gross profit by taking care of a customer.
Brad Giles 18:30
And that’s the mindset that we’re really talking about today. Which is if you know, if you have one single constraint, which is time, then how do you use that time most effectively, you can use five hours, let’s say hypothetically five hours per week, trying to figure out how to save $100 over there. Or you could find you could spend five hours a week trying to make $100 over right in that direction.
Kevin Lawrence 19:04
Or you could spend five hours a week trying to analyze a spreadsheet. Or you could pick up the phone and talk to five customers. Yes, go and visit five stores or visit your frontline staff. You know, it’s the root of all of this is that we have great intentions, but often our energy goes the wrong places. And it’s it’s even why in our quarterly planning sessions I do to the best of my abilities depending on who the company is and what they’re like. But to get them to try and apply $1 value to each of their goals. And because the same thing we’ve seen things where no people are all fired up about this, this objective which we would call like a rock on a coordinate base I we’ve got to do this. Can we calculate the impact of the business? Yeah, it’s about $5,000 and then the other three each have an impact of a million to two So if you’ve got a million, you know, 1,000,003 million, one and a half million, and then the other one was, it was it was a million dollars every year, like, forever. And then you got one, it’s five grand.
Brad Giles 20:13
I love that. I love that. And I know you’ve said that before. It’s Yeah, I put it a tribute a cost to your rocks to the priorities for the company. And then suddenly, you can say, well, what’s good actually, is it actually worth doing, because sometimes they sound cool, or you feel like you’re solving a big problem. But you know, an executive job is to be effective.
Kevin Lawrence 20:38
It is. And this applies to so many things. It’s about, you know, dealing with certain types of, you know, some companies have an expense report. And if it’s under a certain amount, you don’t need to submit your receipts, there’s all these things that waste a lot of so the key the message here is, is that there’s lots of great things that we can think about saving money and saving money is a good thing, it should be considered when you’re negotiating big contracts, you should negotiate it and try and get something better if you can. It’s crazy to you know, negotiate and not get coffee cups for the whole leaders in a company. But then you renew your IT services contract and not try to get better terms, you should pay attention to those. But there’s danger in getting too caught up into chasing pennies nickels around on the floor and missing the big stuff.
Brad Giles 21:26
Because you can’t save your way to success going back to that $5 sorry, that five hours per week example, if you spent five hours a week trying to save money in the company, or five hours a week trying to grow trying to, to build to bring in new opportunities, then compound that over a week, a month, a year or even five years. After five years, the compounding effect of that five hours per week will be outstanding.
Kevin Lawrence 21:59
It absolutely. And that’s Yeah, and there’s many, many examples I’m thinking about as we go through this, the key is generally doing something to create value for our customer is a high value activity, because you’re going to retain them, you’re going to grow the business, you’re going to get new additional customers, and you need to save so the ultimate is you have a culture of saving money and being smart with money. For sure. Yeah. And we’re not saying to be silly about it. It’s just you know, and having a good discipline around it. But also to make sure that you don’t get lost and putting up energy on strategy. You know, there isn’t, there’s one more thing around cost. And I do remember, and this is a restaurant here that I worked with, and I remember being with him at one of his restaurants. And he wanted to take a bottle home, a bottle of wine home that night, for dinner parties have it in his restaurant had the one he wanted. So he bought it and he went to the bar and he bought it, he paid full price. And I said to him, his name is Bob. And he said, bud, so tell me why you’re paying full price in your own restaurant. He goes Kevin, do you notice how many people are watching me right now? Yeah.
Kevin Lawrence 23:09
Well, if I’m sitting here, I’m pulling out my own credit card to pay for a bottle of wine. I’m setting an example. You know, and and and I’m setting an example with my behaviors. Right? And I set an example with the questions I asked in the comments I said, but it’s he said basically, it’s it’s he’s setting the behavior of the you know, if the owner pays their own way, maybe more should probably pay their own way, and especially those losses of restaurants. So there’s that there’s the there’s the you know, there’s the discipline around it. But and again, to go back to BP grandparent, you know, he’s talking about how, you know, he role models focusing on the big circle opportunities, and not really paying attention, but he’s also not stupid with money. He wasn’t stupid with money when he was a CEO with it.
Brad Giles 23:55
Yeah, yeah, some parts of the business, you need to focus on the cost constraints you need to but it’s the broad issue here that as a, as a the leader of your house, let’s say or one of the ladies of your house, or one of the leaders of your business. It’s a bad, it’s a problematic mindset that you can get into where you think that you can save your way to success. Instead, just accept that there is a cost of doing business. But the compounding effect of focusing on growing rather than saving can pay immense dividends.
Kevin Lawrence 24:39
So when you’re thinking about where you and your team are focused, think about that. Are we overly focused on the wrong cost savings or maybe you need to do some more. But make sure it’s the big picture like serious, the airplane company, you’re focused on the relevance scale of cost savings and and and At least at the level, you’re working out with executives and leaders at the front lines, they might focus on some of the smaller things. And that’s okay, too. But then really is there enough energy going to the other things that create growth. And as Brad’s examples of the compounding of growth, imagine if something would add a new customer or add a new service to a new customer, whatever it happens to be, your reporting doesn’t need nothing needs to be perfect. It needs to be good to very good, and then perfectly take care of the customers. Awesome. Anything else you got there? Brad?
Brad Giles 25:29
Not really. Just know that it’s a mindset. It’s a trap that you can fall into. And if you can shift your mindset, yeah, it can compound and it can be really, really effective. So I’ll just share one last
Kevin Lawrence 25:44
story before we close you know, I was just talking to someone today. And they were talking about some of my personal life and how, you know, they’ve been overcharged by $10 at a store, they’re at the other day, and how they went back to get it because that was a waste of $10. And I just sort of chuckled and I didn’t in this situation. I didn’t want to say anything particular about it. I didn’t want to be rude, but I did the math in my head. It cost them more than $10 to go get their $10 Yep. Right, it probably took an hour of time.
Kevin Lawrence 26:16
then there’d be some gas or petrol to go in the car, you know, and wear and tear on a car like we add all that up it out. If you add any you add minimum wage value to their time, it costs them money to go get their $10 Yep, that’s a hard thing for some humans to do personally. And even more so in business I can some kind of times it’s just not worth it.
Kevin Lawrence 26:40
So this has been the growth whispers thanks for listening. This is Kevin Lawrence and I’m here with Brad Giles and if you want the video version, go to youtube.com look for the growth whispers and to reach Brad evolution partners.com.au Kevin is Lawrence and co.com. So keep an eye on your pennies. But ideally start chasing the dollars or keep chasing the dollars or the 10s of 1000s of dollars or the millions of dollars and doing good work. Alright, have a great week.