Company of One Page 7

  Workaholism, a term coined in 1971 by psychologist Wayne Oates, is the epitome of hustling. The workaholic’s need for work becomes so excessive that it creates disturbances in their health and relationships. Interestingly, Oates found that hustlers don’t outperform nonhustlers; the only noticeable impact of their hustling is higher job stress, greater work-life conflict, and deteriorating health. His research found no relationship between workaholism and greater financial reward or self-efficacy.

  Crew, a company that connects freelance designers and developers with companies that need contract work done, doesn’t believe in set hours for its employees. The company doesn’t expect employees to work eight hours a day, or to work between 9:00 AM and 5:00 PM. Crew lets its employees schedule work time when they are more energetic and focused — working as little or as much as they need to finish realistic tasks. Crew cares more about the work that’s accomplished than about the time it takes to do it.

  Do we really need to push our workers and ourselves to work longer hours to see better results? Or do we just need to get better at working the same amount or less?

  The value of leading a company of one is your ability to stay agile and nimble. However, this advantage requires constant vigilance, because as success happens, opportunities happen — mostly opportunities to grow and scale up. But to stay a company of one and stick to the definition of success you’ve set for yourself and your leadership, you will have to turn down opportunities that aren’t a good fit. Companies of one need to be relentless in what they say no to, since plans, tasks, distractions, meetings, and emails, though they may all seem productive to a team at first, can become counterproductive quickly if not well managed. In saying no to anything that doesn’t fit, you leave room to say yes to those rare opportunities that do fit — opportunities that align with the values and ideas of your business.

  DEBUGGING THE MYTH OF INDEFATIGABLE LEADERSHIP

  Historian Henry Adams stated that power is a tumor that ends up killing its victims’ sympathies. That assessment may seem quite harsh or excessive, but it’s backed by both psychological and neuroscientific studies.

  Sukhvinder Obhi, a neuroscientist at McMaster University, coined the term “power paradox” to describe what happens when we gain power through leadership: we subsequently lose some of the capabilities we needed to gain it in the first place — such as empathy, self-awareness, transparency, and gratitude. Dacher Keltner, a professor of psychology at Berkeley, had similar results from his twenty years of researching the behavior of leaders — the qualities that lead to the leadership roles we achieve are the exact qualities that diminish once leadership roles are attained.

  As the leader of a company of any size, you’re subject to the myth that you’ve got to be indefatigable. Entrepreneurialism idolizes workaholism and sacrifice of anything in service to the work and the company — and puts the weight and responsibility of the entire business squarely on one person’s shoulders.

  That seems bleak, right? But Rand Fishkin, the onetime CEO and now “wizard” of MOZ (a company that analyzes SEO and marketing data), is very hopeful. Rand grew MOZ from a blog to a consultancy to a product business in rapid succession, and revenue grew from $300,000 in 2006 to over $48 million in 2014, with 100 percent revenue growth year after year for several years in a row. By most societal and business measures, Rand seemed to have succeeded as a leader — but no external definition of success can prevent mental illness. When Rand became depressed, he had to step down as CEO of MOZ. Through this difficult experience, however, he gained a lot of valuable insight into what it takes to lead a company, whether large or small. Much of what he learned is backed by scientific research but nevertheless runs counter to traditional business advice and the mythology of infallible leadership. Let’s look at the role of empathy, self-awareness, transparency, and gratitude in growing into and, more important, maintaining a healthy leadership role.

  Rand’s first insight is that self-awareness is an absolute requirement. By fostering the ability to notice things about yourself — your own depression, for example — you can remove or put into remission the so-called power tumor. The more you get to know yourself, what your triggers are, and what personally drives you outside of external motivation, the more you can optimize a healthy role for yourself as a leader.

  By recognizing that we are all human — and that all humans are imperfect — we can break down and debug this idea that leaders have to be infallible. As leaders, our job is to be self-aware and to check in on ourselves regularly. For Rand, that means spending thirty minutes every Friday with his wife, Geraldine, to talk openly about the worries and stresses of their week. For others, it can mean seeking external or professional help. It’s crazy to assume that any one person can take on all of the stress and demands of a leadership role, and sometimes even the weight of an entire company, without having someone else to talk with and to help debug problems. This is how resilience, a major factor in building and sustaining a company of one, can be developed — by sharing the burdens as needed.

  Even companies of one should never try to do everything or deal with everything alone. And even working for yourself doesn’t have to mean working by yourself. As Rand says, “If therapy is good enough for Tony Soprano, it’s good enough for you.”

  Empathy, which is a large part of Obhi’s power paradox (and we’ll talk even more about this in Chapter 7), is feeling with people, according to Dr. Brené Brown. In many quickly growing companies, however, leaders feel that they are required to detach from human relationships and focus on using people as resources to achieve necessary growth by any means necessary. The problem is that a leader who stops feeling what is either motivating or demotivating within their team stops being able to lead.

  Finally, leaders need to practice gratitude. Adam Grant of Wharton found that when people take the time to thank their contractors, employees, and coworkers, they become much more engaged and productive. Even small expressions of gratitude work — like thankful emails or public recognition. Kyle at Hudl, for instance, gives out awards to the designers who have the most impact in the organization. Keltner’s research illustrates that even in professional sports, players who show their appreciation through behavior like bear hugs and fist bumps with other players inspire their teammates to play better and win nearly two more games per season (which is sometimes the difference between making the playoffs or not).

  So, by remaining self-aware, being open about our personal successes and failures in equal measure, empathizing with the people we work with, and expressing appreciation for them, we can work toward a cure for the “power tumors” of leadership. The glorification of indefatigable leaders is exactly the source of most problems, because their failures and flaws are ignored instead of debugged and learned from.

  Here is why Rand is hopeful about leadership — all of these attributes are slowly making their way into corporate and entrepreneurial culture. Companies like Google, Facebook, General Mills, Ford, and even Goldman Sachs now have training programs that debug and work at helping with the problems that stem from leadership. There’s still a long way to go, but great progress continues to be made toward a revised view of leaders as not so much the mythical heroes of modern culture as fallible humans who are just like everyone else.

  BEGIN TO THINK ABOUT:

  ■ Where you could strike a balance between autonomy and guidance

  ■ What areas you could learn more about that would benefit your business and make you a more well-rounded generalist

  ■ Steps you could take to strike a balance between hustlin’ and recuperation

  4

  Growing a Company That Doesn’t Grow

  If excessive and blind growth are the main causes of business failure, then how do we start and run a business to avoid all of that?

  Growth can definitely be enticing and exciting. Making more money, increasing a customer base, garnering national media attention — none of these accomplishments are inherentl
y wrong or bad. They just need to be balanced with meaningful, long-term strategies. A lot of “growth-hacking” (a Silicon Valley term for the kind of exponential growth that tech folks salivate over) employs pushy and even sometimes shady tactics to keep growing in spite of the excessive churn that’s produced.

  For example, by adding a pop-up message offering access to a free report on every page on your website, you might increase the number of subscribers to your company’s mailing list, but you might also end up with a list that has few email opens and more unsubscribes, making your net-net growth very low or even negative. A company of one would have a mind-set more in line with providing a great newsletter with lots of valuable content of interest to the people it wants to attract; its overall subscription rate might be lower, but the open-rate and retention would be higher.

  Kate O’Neill, a consultant to Fortune 500 firms and an accomplished speaker, understands the type of meaningful growth that companies of one need to employ. She shows companies like Netflix and Toshiba how to use data to make customer experiences better; with this strategy, overall growth is the result of careful planning around user happiness.

  Kate’s superpower is being able to look at data and then apply it to the human experience. She’s noticed a pattern where growth-hacking companies focus on exponential user acquisition. They prioritize attracting customers, not determining the type of customers they want or the experience they want to give people once they become customers. She has found that growth as a one-dimensional metric for success is useless in the absence of real reasons for it or ways to support customers once they’re acquired. Most companies don’t even need that kind of excessive growth to be profitable. Companies like Airbnb have to start with a huge inventory — Airbnb needed to amass places to stay before it could make a dent in the market — but most companies don’t require so large a market share to start.

  When Kate worked for Magazines.com, her role was to assume the overall strategy for acquiring customers. Previously, the strategy had been to grow right away to gain more customers, the thinking being that simply adding more customers would lead to more revenue. In looking at the collected data, however, Kate realized that user growth would cost more than user retention. By decreasing the number of subscription cancellations, Magazines.com would see better profits and gains than it would by trying to increase the number of subscribers. Since its whole business model was based on renewals, the company had to totally shift its thinking — from constantly searching for new customers to making sure existing customers were so pleased with the service that they’d renew for another year. Kate showed the company that the number of renewing customers was a far more important metric for success (and far cheaper) than the number of new customers acquired. Magazines.com also changed its home-page messaging in order to speak to existing customers, added more renewal offers, and improved customer support for paid users.

  Over and over again, Kate has seen that sacrificing customer experience for customer acquisition doesn’t work long-term and is not a sound strategy with which to start a company.

  THE FOUR REASONS GROWTH IS DESIRED FROM THE START

  It seems counterintuitive, but starting — and then staying — small requires examining growth from the outset. If a new company of one begins by looking at why most companies grow, it can determine whether those avenues are the correct course for it to take. Most companies grow for four reasons: inflation, investors, churn, and ego. By examining each, we can be ready for the decisions we’ll have to make and better able to prevent social or business pressure from swaying us into doing something we don’t want to do or something that isn’t right for our business.

  Inflation is as close to a constant as you’ll get in business. Everything eventually costs more. The five cents your grandparents paid for a soda is not the same price that you’ll pay at a vending machine today. My parents paid $50,000 for their three-bedroom house just outside of Toronto in the early 1980s, but there’s not even a micro-condo available for that price now. So inflation always happens, and if a business can’t keep up, its profits will shrink. The simple solution is to raise your rates each year to keep up and then invest any extra profit in those places that pay out higher than inflation (in other words, don’t keep the bulk of your business profits in a bank account that earns 0.001 percent interest).

  Investors, even if they own the company, are the biggest reason businesses want to grow. If a VC firm puts $1 million into your company today, it will want to see a return at least three times that much (and more if they’re early-stage investors) within a few years. To hit those goals, growth has to be excessive. Even if you invest your own money to start a company, you’ll want to see a good payoff for the risk you took. However, if you’re able to start small — with little to no upfront investments — you can focus on running your business and making it better for the customers you serve instead of being constantly aware of the need to be “paid back” for what you put in.

  As discussed briefly earlier, churn is what happens when existing customers decide they don’t want to be customers anymore. So the revenue they generated needs to be replaced with revenue from new customers. If your churn is higher than your user acquisition rate, then you’re in a downward spiral. Most of the time, companies try to fix churn, as we saw with Kate O’Neill, by focusing on adding more customers to the mix instead of working at reducing the reasons existing customers are leaving. According to the Econsultancy/Responsys Cross-Channel Marketing Report, adding a new customer costs five times as much as keeping an existing one. So while prioritizing acquisition over retention can aid growth, it’s also extremely expensive. The same study found that companies are still much more likely to put their efforts into finding new customers than keeping existing ones.

  Ego is the final reason most companies want to grow. It’s also the trickiest, because it’s harder to overcome. As a society, we give people more clout and respect if they own a large company, so building one is a desirable goal. Many of us dream of being in charge of a large company but fail to look at the bigger picture and think about the impact of such growth on our personal lives, or even on the type of work we enjoy doing. Growth adds complexity, often strains relationships, and ratchets up stress. Not all of us have a father who’s got a sticky note on the family computer monitor that says, “OVERHEAD = DEATH.” When we start to examine why we want to see more and more growth, we may conclude that the main reason is wanting to appear more respected than we really are. Ego is usually overcome once we determine what our reason was for starting our business in the first place.

  Staying small and not focusing entirely on growth keep your own integrity and personality at the heart of the business, making it much easier to run your business or team in a way that suits you and helps customers.

  As Gary Sutton, author of Corporate Canaries, says, “You can’t sell your way out of an unprofitable business.” So starting your own company of one with a focus on profitability right from the start, when you’re at your leanest, is imperative. Your measuring stick for success doesn’t have to be growth as a one-dimensional metric; it can be something more personal and focused on your specific company of one — like the quality of what you sell, employee happiness, customer happiness and retention, or even some greater purpose.

  IN THE BEGINNING …

  People sometimes tend to focus on the wrong things when starting a business, like office space, scaling, websites, business cards, computers. You can add expenses or bigger ideas later, once revenue is coming in. But if your idea requires a lot of money, time, or resources to start, you’re probably thinking too big too soon. Scale it down to what can be done right now, on the cheap and fast, and then iterated upon.

  The comedian Steve Martin has had similar thoughts about starting out and immediately focusing on the wrong things. Budding comedians have asked Martin, over and over again, “How do I find an agent?” or, “Where do I get photo headshots done?” or, “What comedy clubs should I st
art at?” The only question they should be asking, Martin notes, is: “How do I get really good at comedy?”

  To start a company of one, you should first figure out the smallest version of your idea and then a way to make it happen quickly. Automation can happen later. Scale, if desired, can happen later. Infrastructure and process can happen later. Focus on where you can test the waters without a massive investment of time or money, and then pay attention to what happens when casual contacts turn into customers, even if it’s only a handful at first. Why did they buy? What motivated them to do so? How can I keep them happy? And most important: How can I help them succeed?

  To emphasize that last point, customers really don’t care if you’re profitable. But if what you sell them can help them become profitable, they’ll never want to leave your business. They’ll stay on as customers and then probably tell others to become your customers too. When you treat your relationship with your customer base as simply transactional, you’ll be preoccupied with how much you can sell them and how often. The more you begin to treat new customers as real relationships that you can grow and foster, and the more you can figure out how what you do can help them, the more likely they are to want to stay on as customers. Customer success is the cornerstone of a profitable company of one.