Your Business Growth Plan (How the Magic 10:1 Ratio Works)
After over twenty years of owning my own business, I will share with you the Magic 10:1 Ratio I wish I had understood when I started my business.
Your Growth Plan: 10-1 Ratio
When asked how I started my business, I joke that I started my business on faith, adrenaline, and caffeine. The beginning of anything is difficult because beginnings require so much of you. A lot of one’s effort is put into the learning curve and no matter how fast you learn, an unlearned behavior simply takes longer than a learned one. You cannot be on automatic. Everything is unfamiliar and you really don’t know the “rules of the game.” You have to allow time for mistakes and corrections of those mistakes.
In the Beginning…..
Businesses require a lot to build. In the beginning, a business owner is working endless hours and usually barely making enough money to pay the bills. Let’s choose an arbitrary ratio to demonstrate a principle. The ratio is the amount of effort expended vs. the return recouped. Let’s make that ratio about 10 to 1. In other words, there is a huge amount of investment, time, energy and effort being expended. Simultaneously, there is very little, if anything, coming back in.
If one can keep up the “good work,” income does start coming in, but slowly. As the business matures and you develop your skills as a business person, the ratio slowly starts to change. Instead of 10 parts effort to 1 part return, the ratio shifts to 9 parts effort to 2 parts return. Then 8 parts effort to 3 parts of return. Then 7-4, and then 6-5.
And then, Hurrah! The shift happens. The amount coming in actually is more than the effort expended. Somewhere, you have 5 parts of effort to 6 parts of return.
I vividly remember an incident when I had been in business for several years. The phone rang and it was from a company I didn’t know and had never done business with before. We briefly talked and they said they had heard of my work, spelled out the work they wanted, we set a date, and ended the conversation. I hung up the phone and thought, “Wow! That was easy.” In five minutes, I had scheduled thousands of dollars worth of work. I sat there for a moment thinking of all the hours (and years) that it had really taken me to create that “easy five minutes.”
There is a wonderful time when the ratio is totally in your favor: you put in 1 part effort and get 10 parts of return. You have mastered the learning curve and gone from novice to pro. The “rules of the game” are so invisible, you don’t think about them anymore. You just do them. And your business relationships are strong because you have spent years and years building them.
Growth Plan & Time: How the Golden Reversal Happens
The key ingredient that makes this ratio work is TIME. No one goes from 10-1 to 1-10 in a nanosecond. It takes time to get a return on your investment.
If you flit from one business to another, you never get a return on your efforts. It takes years to build a good business. You can never get to the 1-10 ratio where the Return Waves come splashing in unless you are willing to keep swimming and stay in the ocean!
Build your muscles. Understand the game (the ocean). Learn to swim.
The endless amounts of effort don’t last forever, but the return does.