Finding Constrictions In Your Business Will Lead To Growth Ep 548

Summary Notes


In this insightful discussion, the host of "The Game" podcast shares a valuable lesson from his experience with, emphasizing the importance of identifying and solving the right problems in business. He recounts a pivotal moment during a leadership meeting where he realized that his sales team's stagnant goal of adding outbound reps was due to a misdiagnosed constraint in their hiring process, not the sales manager's performance. By shifting focus to the HR department's recruitment strategy and implementing group interviews, the company unlocked a potential $10-12 million in annual revenue. The host further introduces the "quad marketing calendar," a framework for internal and external marketing to both employees and customers, underscoring its significance in talent acquisition and overall business growth.

Summary Notes

Missed Revenue and Problem Solving

  • Speaker A reflects on missing out on potential revenue due to solving the wrong problem in business.
  • Business is viewed by the wealthiest as a game, and Speaker A aims to share learned lessons.
  • The goal is to help listeners grow their business and potentially partner with
  • Speaker A emphasizes the value of using a problem-solving framework to avoid mistakes and solve the right problems.

"And so the reason I tell this story is because I just missed out on a bunch of revenue that I should have been able to make because we were solving the wrong problem."

This quote explains the consequence of not accurately identifying the correct problem to solve, which resulted in a significant revenue loss.

"The wealthiest people in the world see business as a game. This podcast, the game, is my attempt at documenting the lessons I've learned on my way to building into a billion dollar portfolio."

Speaker A draws an analogy between business and a game, indicating that the podcast is a medium to document and share strategies for success.

Quarterly Leadership Meeting and Revenue Goals

  • Speaker A was frustrated during a leadership meeting in Vegas discussing company goals.
  • The same revenue goal was set repeatedly without being achieved, causing Speaker A to question the approach.
  • Each outbound rep is estimated to generate $2 million in annual revenue, making the goal of six reps worth $12 million.
  • The sales manager's goal of adding six outbound reps was not met for two consecutive quarters.

"I was sitting in my quarterly leadership meeting where everyone had flown into Vegas for two days to talk about the next quarter and our goals for the company."

This quote sets the scene for the leadership meeting where important company goals were discussed, including revenue targets.

"What transpired next was a problem solving process that I want to share with you because it unlocked 10 million to $12 million in annual revenue for us that we had not been able to unlock for two quarters because of one simple misdiagnosed problem."

Speaker A introduces a problem-solving process that led to unlocking a significant amount of revenue that had been previously inaccessible due to an incorrectly identified problem.

"So inside of our quarterly meeting for two quarters in a row, my sales manager set the goal that they wanted to add six more outbound reps two quarters in a row. Quarter came, quarter left. Quarter came, quarter left."

The quote indicates the repetitive nature of the goal-setting process without progress, highlighting the need for a new approach.

"And I stopped and I was like, guys, we've had this goal for two quarters. Why do we expect it to be any different this time?"

Speaker A challenges the team on their repeated failure to meet the goal, prompting a reevaluation of their strategy.

"To set the same goal and nothing's going to happen? And for context, the reason I said ten to 12 million is because every outbound rep generates is about $2 million a year in revenue for my business."

The quote provides context for the revenue goal, explaining the financial impact of each outbound representative on the company's earnings.

"Back to the story I asked him. I was like, why weren't you able to do this? He's like, well, we lost a couple of reps this last quarter, even though we hired some new ones, and we pretty much have the same amount."

Speaker A recounts questioning the sales manager about the failure to meet the goal, revealing that turnover was an issue despite new hires, which kept the team size stagnant.

Understanding System Constraints

  • In every system, there are potential and constraints.
  • Entrepreneurs often focus on adding potential to their business rather than solving constraints.
  • A system will only grow up to its constraint and not beyond it.
  • Identifying the business constraint is crucial for growth.
  • Solving problems in the correct order is what leads to macro speed, not frenetic energy.

"In every system, you have potential and you have constraints. Most entrepreneurs spend all their time trying to add potential to their business, thinking that they are solving the constraint. But we will always grow. Any system will grow up to its constraint and no further."

This quote explains that a business or system has inherent limits (constraints) and possibilities (potential). Entrepreneurs mistakenly focus on expanding potential without addressing the actual constraints that limit growth.

The Importance of Problem Identification

  • Correctly diagnosing problems is essential for business growth.
  • Misdiagnosis can lead to missed revenue opportunities.
  • The speaker's company could have added significantly more to their top line had they identified the constraint earlier.
  • People often attribute failure to surface-level issues rather than the root cause.

"Had we identified this problem two quarters ago, we would have added 10 million to our top line for this year, which we won't have."

This quote highlights the financial impact of not identifying the root problem earlier. The speaker's company missed out on potential revenue due to this oversight.

Recruitment Process Bottlenecks

  • The speaker discusses a bottleneck in the recruitment process.
  • A significant number of initial candidates are required to hire one outbound representative.
  • The churn rate for frontline positions is generally higher than for management and leadership roles.

"So I then turned to my HR director, and I said, how many people are you sending the sales manager per week? She was like, well, I sent him about one qualified candidate a week. I was like, okay, how many interviews does it take you to send one qualified candidate? She said, it takes five. I was like, okay, manager, how many of these final interviews does it take for you to get one person hired? And he was like, four. I was like, so it takes us 20 people that we got to get through to get one new outbound rep?"

This quote delves into the recruitment process and reveals a bottleneck where a large number of initial interviews are needed to result in a single hire. This inefficiency is identified as a constraint on the business.

Churn Rate in Frontline Positions

  • The churn rate is an important metric in understanding business constraints.
  • Frontline positions have a higher churn rate compared to other roles within a company.
  • The churn rate directly affects the number of hires needed to maintain or grow a team.

"Just FYI for everybody, frontline positions in general tend to churn more than manager and leadership positions. Just this name of the game."

This quote provides context on the nature of employment churn, emphasizing that frontline positions typically have a higher turnover rate, which is a factor in the recruitment bottleneck.

Employee Turnover and Hiring Goals

  • The company experiences a 20% employee turnover rate per quarter.
  • With ten outbound workers, this translates to losing two employees every quarter.
  • The current hiring process yields one new outbound representative per month.
  • To meet the goal of six new hires per quarter, the hiring process must be improved.

"If we have ten people who are working outbound, that's not the number, but let's just say it's ten and we lose 20%, then it means we're losing two people a quarter."

This quote indicates that the company is currently facing a high turnover rate, which is causing them to lose 20% of their outbound workforce each quarter. This turnover rate is a significant challenge for the company's growth.

"If right now the process that you have gets us one new outbound rep per month, and we're losing two a quarter. That means we would net one new person per quarter."

This quote demonstrates that the current hiring process is insufficient to compensate for the turnover rate, resulting in a net gain of only one new person per quarter, which is inadequate for the company's hiring goals.

Hiring Process Improvement

  • The hiring process was identified as the key issue to address in order to meet hiring goals.
  • A miscommunication with the HR director led to an inefficient one-on-one interview process.
  • By switching to group interviews, the sales manager can more effectively and quickly onboard new hires.

"And so what we did was we actually asked the HR director, I said, why are we doing these one on one? She's like, well, I thought we had to do that miscommunication, right?"

This quote reveals that a miscommunication with the HR director resulted in an inefficient hiring process, which was a one-on-one interview approach that did not meet the company's needs.

"What she now did, the solution to this problem was that she's setting up, she's still running the ads, she's still organizing the interviews, but she set them all up for the sales manager to do group interviews."

The HR director's solution to improve the hiring process involved organizing group interviews, which allowed the sales manager to evaluate multiple candidates simultaneously and expedite the hiring process.

Revenue Impact and System Constraints

  • The company missed out on potential revenue due to focusing on the wrong problem.
  • The constraint was not the sales manager's performance but the talent acquisition process.
  • A shift in focus to the hiring process is crucial for overcoming the system's constraints and achieving revenue goals.

"And so the reason I tell this story is because I just missed out on a bunch of revenue that I should have been able to make because we were solving the wrong problem."

This quote highlights the speaker's realization that the company's revenue shortfall was due to focusing on the wrong area of the business, which was the performance of the sales manager instead of the hiring process.

Quad Marketing Calendar Framework

  • The speaker hints at a framework called the "quad marketing calendar" for future discussion.
  • The speaker suggests that most companies lack a marketing calendar, while smart companies have one or two.
  • The framework is presented as a solution to organize marketing efforts more effectively.

"And so I'll give you a framework that I wrote down somewhere that I'll probably share in another, but it's something called the quad marketing calendar."

The speaker introduces the concept of a "quad marketing calendar" as a framework that they have developed, implying its importance in organizing marketing efforts and hinting at a more in-depth discussion in the future.

Quad Marketing Calendar

  • The quad marketing calendar is a conceptual framework that divides marketing efforts into four distinct areas: internal employee marketing, internal prospect/customer marketing, external prospect marketing, and talent acquisition.
  • Internal employee marketing focuses on communicating the company's vision, mission, and purpose to maintain employee engagement and motivation.
  • Internal prospect/customer marketing aims to retain customers by encouraging repeat purchases and loyalty.
  • External prospect marketing is the widely understood practice of attracting new customers.
  • Talent acquisition is likened to customer acquisition but is often neglected; it involves advertising for employees, nurturing leads (potential employees), setting interviews (sales), making job offers, and managing onboarding and employee development.

Here you've got internal and you've got external. So here you have employees and you've got prospects internally, which is this way.

This quote introduces the concept of internal versus external marketing, distinguishing between employees and prospects as target audiences for marketing efforts.

You should be marketing to your employees so that you tell them about the vision and about the mission, about why you do what you do.

The importance of marketing to employees is highlighted, emphasizing the need to communicate the company's vision and mission to keep them engaged.

Internally to your prospects, which are now customers over here, you need to continue to market them, to get them to buy again and again.

The quote discusses the need for ongoing marketing to existing customers (internal prospects) to foster repeat business and loyalty.

And I'll tell you the one that people miss the most, this one is that they don't have an acquisition process for getting new talent.

This statement identifies talent acquisition as the most commonly overlooked aspect of the quad marketing calendar, emphasizing its importance.

You should be able to run ads for new employees. You should be generating leads, you should be working those leads. You should be setting interviews, which are sales.

The quote draws a parallel between the processes of customer acquisition and talent acquisition, suggesting that similar strategies should be employed for hiring.

And then, just like you continue to ascend and resell your customers, you ascend and continue to manage your employees.

The speaker compares the process of developing customer relationships with managing and developing employees, suggesting that both should be ongoing efforts.

And it was because we were missing this framework, my HR director did not understand this framework that we lost out on ten to $12 million revenue.

The speaker attributes a significant revenue loss to the lack of understanding and implementation of the quad marketing calendar, particularly the talent acquisition aspect.

And so the reason I made this is so that you can recognize which of these four in the quad marketing calendar you are not using so that you can shore up that part of your business and ultimately scale it and make all of your auto streets control.

The purpose of introducing the quad marketing calendar is to help businesses identify weaknesses in their marketing strategies across the four areas, with the goal of strengthening these areas to scale the business effectively.

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