4 Business Heuristics For Making Business Decisions
You’ve probably heard statements before like:
“What works in one instance may not in another – you need to test it.”
“Iterative changes ensure you’re growing in the right direction.”
“Don’t go in with assumptions – let the split/multi-variant testing speak for itself.”
You know the drill.
Know what’s fascinating about this? A lot of it is bullshit.
You’d be surprised at how often entrepreneurs make decisions based on their gut – it’s just not as sexy to talk about. – Click to Tweet This!
I’ve talked to many successful entrepreneurs about this behind closed doors and almost all admit that it’s experience and guts that drive many of their decisions – not iterative testing.
If that’s the case – why the false narrative?
We’re worried that what worked for us may not work for you. Nobody wants to be responsible for misleading you.
Still – there is a way for us to wrap up our years of experience and painful mistakes into bite-sized chunks you can use to avoid the same. We’ll share a few of the heuristics we use regularly and hope that other experienced entrepreneurs will share theirs as well.
1. If We Can’t Verify Your Identity, We Won’t Be Doing Business
This simple heuristic has saved us countless hours and has pulled us out of dozens of rabbit holes. If someone contacts us claiming they run various successful companies and they’re using a Yahoo/Gmail account, they have virtually no online presence with an uncommon name, or use a name like “John Smith” and have no reference to any work or companies they’ve worked with – this person and the deal is a complete waste of time.
It’s 2014. I don’t care if you’re older, still worried about having your information public on the internet, etc. If we can’t find ANYTHING about you online (even in trade journals, niche publications, local newspapers, etc.) there’s something wrong.
There could be a few different options here:
A) It’s a scam. Consider it a complex Western version of the 419 scams out of Nigeria. It’s another “I Want Your Monies” email, but it’s more insidious – they want your money AND a bunch of your time wasted.
B) They have something to hide. Maybe it’s a criminal record, a civil dispute, going around their employer’s backs – whatever. In any scenario it’s a big enough concern to them that they’re willing to hide their identity from you at the start – not the sign of long term thinking and a healthy business relationship.
C) It’s an AMAZING deal that you’ll be KICKING yourself over not landing. This is the worst of the bunch and the one that probably gets you down the rabbit hole in the first place. It’s rooted in greed and is exactly what the A and B crowd are hoping you’ll think. Guess how many times this has played out well for us? Zero. Zilch. None. Not even once.
I hear what you’re thinking – if you don’t at least investigate these prospects you may be missing out on some great opportunities, right?
The truth is we’ve tried these deals. We’ve tried to land these deals for years and in many different scenarios. They were all bullshit. Every. One.
That’s not to say that we might not have missed ONE magical unicorn-of-a-deal that was out there, but I sleep just fine at night thinking about all of the time not wasted on scammers and sketchiness.
2. If You Can’t Follow Directions When Applying To Work With Us, We’ll Never Hire You
Do you use easter eggs in your job descriptions? You really should. This is the easiest way to sift through applications at a glance and has saved us countless hours of reviewing applicants and potential hires that can’t follow the simplest of directions to land the job.
Think of the hiring process as a funnel. You want to spend the least amount of time at the top of the funnel where MOST of the applicants are and the most time at the bottom of the funnel where the BEST applicants are headed. Anything you can do to sort, sift, and disqualify applicants at the top of the funnel moves you closer to your best hire and getting the deal done.
We’ve handled hundreds of applicants in the US, hundreds (close to a thousand?) in the Philippines, and around 70+ for our apprenticeship positions in SEAsia. We’ve found, across the board, that a full 50% or more won’t follow the directions you’ve laid out in the application process. I LOVE this. They make the decision easy and get me that much closer to the “right” person.
If you’re looking to show me you can think out of the box and aren’t the “typical” applicant, do that in your writing, your video, or in the interview. If you’re hoping to do that by not following directions, you’re not helping yourself.
For some GREAT analysis and a case study on this, check out Part 1 and Part 2 of Mark Manson’s posts regarding his recent hiring experiences.
3. If Your Offer To Work Together Is Long, Complicated, And/Or Confusing Right From The Start, We’ll Never Work Together
This one’s a bit tough and I’ve been guilty of this myself. Still, if the deal starts off overly-complicated, the chance that something will come out of it so close to 0% that it’s probably not worth attempting.
What usually happens is that an ambitious partner-hopeful will cook up a deal and try to work through all of the details on his or her end first. They try to account for every scenario, each potentiality, and end up with much more than they initially envisioned.
Finally after a few iterations, he’ll reach out with a 1,500+ word email covering his backstory, how the deal came to him, the opportunity, the risks, a few scenarios, some outlier possibilities, and a FAQ section to head off any potential questions you might have.
Hopefully the deal is at least clear; but it’s often cluttered, has too many moving parts, and is way too ME focused instead of Us/You focused.
I used to try to work through these to see if there was some value. (I still do sometimes…Shhh…don’t tell Joe.) It would take quite a bit of brainpower and several read-throughs until I could pick up the gist. Even then, I’d probably have to ask anywhere from 4-8 follow-up questions myself to make sure I really understand what’s being offered or presented.
I now (mostly) realize these conversations are soul-sucking for BOTH parties and I try to avoid them entirely. These rabbit holes run DEEP and take up most of the creative energy and juices that are the lifeblood to driving your own business forward.
4. Don’t Let Business Contracts Get In The Way Of A Good Deal
You shouldn’t get caught up on the details of a contract if the deal is good. Large companies often use overly-protective lawyers who use language nobody else can read, much less understand. You might come up with a few questions regarding pieces or phrases that seem too restrictive. It may be worth asking about briefly, but don’t let the language of the contract talk you out of doing business if you know the deal is good. (There’s a fair value exchange, both parties have leverage, etc.)
We recently dealt with this situation ourselves. Our designer for the re-brand of Empire Flippers sent over a contract template with plenty of legalese. Joe was digging through the contract and came up with a few questions/concerns. We discussed them and ultimately decided it wasn’t worth the hassle of slowing down the deal. We’d rather get busy moving forward than spend hours and emails back and forth ironing out a piece of a contract that won’t even come into play 99% of the time.
There’s another piece to this.
Business deals rely completely on fair value exchange, not overly-restrictive contractual obligations. We’ve written about this extensively in our blog post In Contracts We Trust, but the basic idea is this:
Don’t let your single greatest point of leverage in a new business deal be the contract.
It may work for your partner or customer today, but once the value exchange (perceived or actual) goes south on their end, they will not (and probably should not?) honor a contract that is punitive and no longer in their business interests. That’s a hard fact and one that will have Mothers and Sunday School Teachers frowning and shaking their heads.
It goes both ways, too. If you truly want a strong and equitable deal, you’re going to have to ensure the other side has leverage on you as well. Joe likes to refer to it as the “mutually assured destruction” button, and both sides must have access.
So – what heuristics have you found to be valuable in your business? Disagree with any of the above? Let us know in the comments and please share if you found this valuable!