The Business Growth Shadow

No matter how much time you spend thinking through a decision…

How many scenarios you can think of…

How many spreadsheets you create to calculate the probabilities of each scenario playing out…

You’ll never be 100% sure of the outcome.

I call this The Business Growth Shadow.

It’s the constant doubt at the back (and sometimes front) of your head.

Like a shadow constantly following you around.

It’s the lingering feeling that stops you from making decisions.

“What if it doesn’t work out?”

We know it…we all know it.

But we can’t help it sometimes.

Recently I came across an old Tim Ferriss podcast episode featuring Nick Kokonas.

Nick was a former Wall Street banker who co-founded The Alinea Group of restaurants, including the successful restaurant The Aviary.

He mentioned using a 3:1 framework to help him make decisions.

What’s the 3:1 framework? 

It’s a criteria where you only decide to do something when the upside risk is at least 3-4x the downside risk.

Using this framework, Nick was able to go from an industry outsider to a co-owner of one of the most successful brands in Food.

And he even did it with a partner he barely knew before opening their first restaurant together.

I was recently planning for the next phase of our agency business growth.

We could explore 3 paths:

  • Coaching local-based agencies to build a remote team
  • Packaging our agency service into a hybrid service-coaching model to help coaches and course creators who want to bring their marketing function in-house, but prefer to use the help of experts at the start
  • Turning one of our core functions into a service for other agencies and businesses

I listed the pros and cons for each path, spoke to my spouse, a few friends, and team members to hear what they thought of the ideas.

Ultimately I decided to go with one of the three options above.

What gave me the confidence in moving forward was Nick’s 3:1 framework.

Using the framework, I measured the potential upside of the business idea working out versus it not taking off.

The upsides included:

  • Alignment with team’s values
  • Opportunity to make one of our team members’ dreams come true
  • Ability to work with someone on our team as a cofounder of the business
  • Sizeable addressable market
  • Easy access to the market opportunities which means fast and low customer acquisition cost
  • A close proximity to the market means we understand the needs of our target audience more closely than potential competitors in the future

On the other hand, the downsides were limited:

  • This business idea requires adding a new team member into our current team and promoting one of them so he could step up to fill a larger role. If this business idea doesn’t work out, we would add one person’s salary to our payroll, which isn’t all that bad, since the agency’s expansion requires a new manpower in this area sooner or later
  • We’d also need to put in extra effort to manage the training and transition process, so we do not affect the delivery of our agency clients’ work

We also mapped out the possible price points, the number of clients it’d take us to reach breakeven, and the strategic partnerships we could make to kickstart this new product offering.

Eventually, we decided that it met the 3:1 criteria and set our mind on this idea.

So that’s where we are at the moment.

Are you interested to know what our new offering is going to be?

Make sure you subscribe to our email list.

We’ll send out private invitations to email subscribers (we won’t be publishing it here) for 4 people to join us and do a trial run.

Photo by Reinhart Julian on Unsplash

Subscribe below to get future posts from Jason How