Trust Your Gut or Listen to Reason? Two Moments as a Business Owner When You Should Disregard Your Own Instincts
As an entrepreneur, you probably got where you are based on a combination of hard work, passion, and trusting yourself. You had to rely on your gut and your instincts to make brilliant choices.
But there are two moments in your entrepreneurial journey where those very things can be your downfall, and they both have to do with keeping the right key performers on your team.
The Myth of the Purely Rational Human
I can still remember learning about so-called “Homo Economicus” in my first economics class as a senior in high school. Homo Economicus is a theoretical human who is perfectly rational in pursuit of his own self-interest. This mythical human is the basic framework for modern economic theory.
It’s a cute story, right? A rational human being making perfect decisions. But is it your reality?
You’re a business owner. You’re an economic actor in our market economy. You are an empowered individual with the ability to use your faculties to seek your own destiny.
But are you perfectly rational in pursuit of your own self-interest?
How do you make decisions? Do you judiciously study the facts and objectively select the best course of action, or do you sometimes make decisions driven by less rational forces… just like every human ever?
In this article, we want to talk about two places where you might benefit from being a little more like Homo Economicus, a little less irrational.
Highly Compensated Employees
When you started your company, perhaps you hired your family and friends to pull into the business. As you grew, you found yourself doing whatever you could to attract talented people to join you in your quest. One of the key areas for many companies is the sales department. As a business owner, you know that revenue is the lifeblood of any business. With revenue and good management, you can have a successful business enterprise. Without revenue, you have an unrealized dream.
As a result of this fact, many small businesses have a key sales employee that is critical to your success. It’s commonplace for this key employee to have been with you from the beginning. They may even be the external face of the company to many of your key customers or partners. You probably hired this employee on a “handshake” deal or a commission plan that made sense at the time. Year-after-year, they delivered for you; more customers, better customers, and lots of growth.
Everything was going great … Then one morning, you woke up and realized that your sales rep is making more money than you pay yourself. Whoa! What? You own the place and you have an employee doing better than you are?
Now is a critical moment. Are you going to be driven by your bruised ego, or are you going to think this through?
If you decide to look at this critically, you may realize that your employee is actually worth every penny. They are the reason you can head south for the winter. They are the reason you don’t have to take customer calls on Saturday. They are the best decision you ever made. And they are the reason that when you one day sell your business for many multiples of your annual earnings, you will overachieve all of your wildest lifetime wealth goals.
A clear, critical look at the situation will yield you a better result than making a rash, knee-jerk move. While it may feel wrong to pay an employee more than you, it could actually be the smartest move you’ll ever make.
Recommended Read: Investor or Employee? Changing Your Mindset About Your Role in Your Business
2. Outside Professionals
When you started your company, nobody took you seriously.
You built your company yourself with the help of those you employed. You didn’t have a grand council of wise advisers with fancy degrees helping you chart your course.
You were a small client, even for the small-time advisers who helped you get your limited liability company registered with the state and file your first business tax return.
Oh, how things have changed. You’re now a titan in your industry, well-known in your local market. You’re a success and everyone is trying to sell you something. A friend of yours says he wants to introduce you to someone who he thinks can help you.
Everything in you is telling you not to take the meeting. You got this far on your own–so what can a fancy professional adviser offer you now?
These are the same people who refused to help you years ago before you were successful. And you’ve heard what they get paid for their work and you’ve never paid anyone that kind of money before.
Once again, you’ve reached a critical moment. Are you going to be driven by the chip on your shoulder, or are you going to look at the big picture?
Let’s say they are from one of those firms with a fancy name, they’ve got a fancy degree, and a fancy title. Do you take the meeting, or do you allow your bias to shut them out?
If you decide to take the meeting with an open mind, you may find that professional adviser to be the perfect fit for what you need right now. Yes, they haven’t been alongside you for your entire journey, but they could be exactly who you need at this moment. More importantly, they might be exactly who you need to take your business to the next level.
Recommended Read: We've Got It Handled: The Value of an Outside Perspective
Conclusion
I don’t have a lot of original quotes, but one I do attribute to myself is this:
“There’s no price low enough for the wrong person and almost no price too high for the right person.”
This is the way I think about the above scenarios. Whether it’s a high performer or the perfect professional for your needs today.
When you wake up to realize you’ve got an employee making what you consider “too much” money, you need to tread lightly. You need to consider things from their perspective and think creatively about finding a mutually beneficial solution. Maybe it’s time to consider aligning incentives through an equity incentive plan, while making changes to the commission plan. It’s time to get creative, and resist the temptation to do something rash you’ll soon regret.
The same goes for talking to professionals. Rather than writing off an entire category of capable people who want to help you (for a fee), meet them, learn from them, and figure out who you can trust. (Pro tip: Nobody should charge you for a first meeting.)
You’re a self-made business owner and the right professionals will never take that away from you.
They will honor what you’ve built while bringing their expertise to helping you benefit as much as possible from what you’ve built.
You’ve gotten to where you are by your instincts. But we humans have our animal instinct moments, it’s what makes us interesting, but it isn’t always the best.
Let’s try to be a little more Homo Economicus when we want to act out of pure emotion and avoid creating problems for ourselves by pushing the right people away or refusing to let the right people in.
