In normal times, you might set a 12-month goal. You might make a 3-year business plan or even a 5-year business plan. But we haven’t been in normal times for a while. And when things are in a state of flux, setting long-term goals doesn’t always make sense.
Despite all that, a business needs direction. We need direction. So how do we stay on track, keep moving forward, and even help our businesses to thrive in these uncertain times?
Let me introduce you to Effectuation Theory. It’s an approach to entrepreneurship identified by Professor Saras D. Sarasvathy, as part of her research in the early 2000s. This University of Virginia academic found that plenty of entrepreneurs don’t follow the linear method of setting a goal and gathering the resources to work towards it.
A linear approach sounds logical, but many of us find it doesn’t work or it isn’t the fastest route to success. During these “interesting” times, the approach Sarasvathy uncovered makes even more sense.
You’re the Pilot-in-the-Plane
Essentially, think of yourself as the Pilot-in-the-Plane. Your actions influence the future of your business, and you create your own opportunities. That’s the global overview of the Effectuation Model, and there are four underlying principles:
That might be a touch abstract, so let’s talk about these principles in a bit more depth:
In practice, this could be the equivalent of the carpenter who finds a way to “sell the sawdust” that ends up on his workshop floor each day. What work are you already doing that you could sell in a unique way? What client data do you have that tells you the next service your clients are crying out for? Use every bit of your work and let nothing go to waste.
One example near us is a restaurant creating cocktails from their food waste. Today’s wasted marshmallows will show up in the flavours in your Christmas cocktail. Even Nigella Lawson uses banana skins in her recipes. Find the waste and put it to good use!
2. Affordable Loss
If you are feeling nervous about taking the next step, it's entirely understandable right now and it's worth digging into and giving it a bit more thought. What's really feeding the fear? If this strikes a chord, then the affordable loss concept is for you.
If there's something that you want to do but are afraid of it not working or losing money, ask yourself "what does not working mean?" Exactly how much money are you not prepared to lose? £5,000? None at all? If it's the latter, then I'm afraid to say that you may find being in business a really tough game because business is about taking risks without always having a guaranteed outcome. But there's good news. Getting comfortable with the concept of loss means know what feels right for you, at all stages of the business. You might also want to consider the sunk cost fallacy and if this sounds like you, then you may do well to have spend some time thinking about affordable loss.
Where’s your comfort zone when it comes to loss? It might be that you feel very uncomfortable when your business bank account balance dips below £10,000. Or if you have a big wage bill, you might feel uncomfortable below £100,000, or more. Or maybe you get uncomfortable when your overdraft reaches a certain point.
This can be quite visceral, and it can affect the way you do business and the way you price things, so keep in mind how you’re spending your money. Keep track of your finances so you can make informed decisions about purchases that will take you out of your financial comfort zone.
3. Crazy Quilt
How can you expand your resources with strategic partnerships? Or, put simply, how can you get all the right people on the bus with you? In one word "collaborate."
There are many different ways you can collaborate in business, whether you are part of a team or a company of one. You could form an alliance on a project. Create a community, perhaps within your customer base with you as the "expert," or perhaps a network of similar businesses who tap in to each others resources and leveraging them, making recommendations and supporting each other.
Ask yourself who you can call on, and who can you subcontract work to? If you collaborate with contractors rather than employing people, that makes it easier to dial up and dial down the number of people working for you and you've built your own business eco system right there.
And it’s not only about the services you need and the work you deliver for your clients. Where can you get support from people at the same stage? One example - if you’re working on B Corp Certification, can you create a group of like-minded business owners all working towards it together? That way you get help and accountability along the way.
Also take time to look at who your current collaborators are as it's highly likely you've been creating your own crazy quilt as you've gone along. Are they the right people? Are you getting what you need? If you don’t know where you are with your numbers, have you got the right accountant on board? Do you have a lawyer you can call for legal advice? What other services do your clients need and who could provide them?
But remember the golden rule of winning collaboration. Go for the win / win. Give as much as you get. Listen as much as you talk and keep an open mind for the dark horses. The books that are difficult to judge by their covers as this is often where the surprises are! It all makes it quite exciting really, after all, isn't this what collaboration is all about? The magic of symmetry?!
4. Lemonade Principle
Hopefully it’s obvious that this is an expansion of the well-known, “When life gives you lemons, make lemonade” quote. Essentially it’s asking you not to attach too much importance to successes or failures. Neither is finite.
It’s also about being open-minded about opportunities that come your way. For example, if a huge client parts ways with you, that might seem negative at first, but what if it creates space for you to take on a bigger and better client?
Ask yourself, what are the lemons in your business? It could be your audience who like what you do but never buy from you? Maybe there's an opportunity to create something for them to get them hooked and then buy one of your higher ticket items later. These type of products are often called "trip wires" although I'm not sure I like the name much. In short, they are a marketing tactic that encourages a target customer to buy a low priced, irresistible offer from you. The theory is that they have the opportunity to get to know, like and trust you, making a later sell easier.
Permission to rest
Ultimately if you find yourself feeling the pressure, then pause and take stock. You’re not a machine and you’re allowed to take a breather. Look at what you can control, and what you can do with the resources you already have.
It could be that your energy is low and you simply need to stop working 15 hours a day to give yourself a chance to recharge. I’ve been there and it’s easy to get into that pattern, but it’s unsustainable. If you’re in that boat, the first step is to look at your pricing. You can’t keep giving and giving when you’re not charging enough to warrant it.
Be bold, be brave, and put your prices up. And then take a look at the principles above.
How can you use Effectuation Principles to help you pilot your business through the clouds of uncertainty? You’re allowed to thrive, even in uncertain times. With the right thinking, planning and action-taking, your business can soar.