Stop Systematizing, Start Analyzing

Experience is the best teacher. When you don't have the experience, it might be helpful to look to other entrepreneurs about what they've learned on their journey.

In today's video, we dig into an entrepreneur's early-stage mistakes and highlight ways for you to avoid these pitfalls.

Resources

Read the original post here: https://www.linkedin.com/posts/joel-eschenbach_entrepreneurship-productivity-timemanagement-activity-6972863020863557632-EbbW?utm_source=share&utm_medium=member_desktop

Check out Joel Eschenbach's profile here: https://www.linkedin.com/in/joel-eschenbach

Transcription

Hi, it's Xavier Chang, Principal of XC Consulting. Today we're back with another episode of Xcel with Xavier, and today I'm responding to a LinkedIn post. So LinkedIn is the social media channel that I use the most often to create content, to respond to content. And I saw a very interesting post today. The post is by Joel Eschenbach, and his description says, "Entrepreneurs have idearrhea. Focus is the cure, I can help. Business coach and StoryBrand guide. Founder of Notion Creative." So it looks like Joel is the owner of a digital agency. He does things like design and SEO, and this is kind of his wheelhouse. So I'll read the post and offer my commentary throughout.

Eschenbach: “When I started a design agency, I skipped an important step. I was focused on the wrong thing for too long. Instead of generating profit, I was obsessed with creating efficiency and systems.”

So one of the other people that I follow, he says, "revenue is vanity, profit is sanity, and cash is king." So whatever you've got in the bank account, that is cash, that is king. So your revenue could be anything. Profit is what you keep after you've paid your contractors, after the cost of goods sold, after your operational expenses. But really what you have in the bank is really important. So just wanted to comment on that.

Eschenbach: “Starting out, set up your priorities in this order: Sales (or money), stability (or profit), systems (or predictability). I was pretty good at bringing in new business (or sales). I skipped over making a profit (stability), and went right to automating everything (systems).”

So a couple things I want to say here is: I skipped over making a profit. So from what I deduce here is that he's bringing in new business every single time, but for each deal, he might be losing money, he might be breaking even, he might be making a little profit or a lot of profit. And that's really dangerous for business because if you just are looking at top line revenue and saying, okay, I made six figures or seven figures, but your profitability is terrible, [it] doesn't mean anything because probably at the end of the day, you're not going to have a lot of cash in the bank and you're going to wonder, where did my money go?

And the next point I wanted to point out is the last thing he says of, and "I went straight to automating everything (systems)." And I see this with potential clients that I talk to, that they want to go straight to automation. They want to remove the human element as much as possible. But it's really important to first understand your process, be very intentional about what your process is before you go and automate something. It's really easy to say, I just want that automated without digging in and understanding the process behind it, the people behind it, the tools behind it. So, that's just a word of caution.

So I'll continue on. This is Joel again. “Because of that, we were always running on the edge. Cash flow sucked and stress ensued, yes, going back to the profitability standpoint. We ran like a well oiled machine that was low on power.”

This is interesting imagery.

Eschenbach: “Don't be like my younger self. Be sure to work on the right thing, at the right time."

So his first X is stop stressing about SOPs if you don't have predictable sales, yes. And SOPs, automation, documentation, these things are all important if you are growing and scaling a business. If your revenue is erratic, it doesn't really make a lot of sense to think about automation and systematization because you're still figuring out what the business is. So it won't really make a lot of sense to standardize something that's always changing. So keep that in mind.

Eschenbach: “Second, don't keep selling if you're not profitable, that's vanity revenue.”

So that goes back to selling, but not being profitable. Maybe some deals he's losing money, breaking even, or making a little profit. You got to go back to the fundamentals of the business. Look at the COGs, look at what you're charging, look at your operational expenses and not just look at that top line revenue number.

So I just thought this post was very interesting from an agency standpoint and some of the challenges that they face when they're going to market. Any professional services firm is going to face challenges similar to this, especially around profitability, systematization. There is always going to be a human element there, whenever you're doing professional services. But I think what we can learn from Joel is look at your profit and then think about systematization once you have a machine that is running and you just have to understand how you can tinker with it and where you can optimize and systematize things.

So thanks for watching another Xcel with Xavier, and I will see you next time. Thanks for watching another episode of Xcel with Xavier. I've got new episodes coming out every Thursday morning. Please don't forget to like this video and subscribe to my channel to receive notifications of new content. Thanks again and I hope to see you again next time.