Counteract your natural biases and override your ego to make better decisions.
As an entrepreneur, you will face important decisions, some life changing; others perhaps world changing. Your future, the health of your family and the fate of others will hang in the balance. When the moment of decision comes, will you rely on logic, intuition or emotion to find the right answer?
Hopefully, the answer will be “none of the above,” because you’ll know that asking the right question matters more than finding the right answer, so you’ll use this Ultimate FIT Framework.
Pilots have checklists; cooks have recipes and computer scientists have algorithms. Entrepreneurs have frameworks. Frameworks provide a sequence of questions, asked in a certain order, to help you make better decisions.
Our philosophy for learning at Acton is simple:
- Clear thinking leads to good decisions;
- Good decisions lead to the right habits;
- The right habits lead to character, and
- Character becomes destiny.
The beauty of FIT is that its four fundamental questions help you see the “big picture,” counteract your natural biases, tamp down your fears and override your ego to make better decisions.
Question 1: Is this an attractive OPPORTUNITY?
We start with the opportunity because an attractive opportunity is at the core of every successful business, and seldom will hustle or clever deal making turn a poor opportunity into a good one. In order to decide if an opportunity is attractive, you need to drill deeper into the customers, costs, competition and context.
- Customers: Do we have attractive or unattractive customers? Just as a first rate opportunity is a necessary part of a successful business, attractive customers are the key to a good opportunity.
- Costs: Can we make and deliver it cheaply enough? Once we know exactly what “units of desire” customers need and have some idea of how many units our customers will buy, we can begin to estimate the investment needed and the total cost to produce each unit.
- Competition: Can we defend against copycats? Competition will become an issue as soon as you begin to sell products or services at a profit. Customers will try to force you to lower your prices, suppliers will try to increase your costs, and competitors and new entrants will try to steal your customers. Analyzing the intensity of competition will tell you how long you can sustain your sales and margins
- Context: Is now the right time? Often, we get so caught up in the chaos of starting a business that we fail to appreciate how outside forces may affect our business. What trends could affect demand? Is the economy strong?
While this is ultimately a set of simultaneous equations with far too many variables to solve, an entrepreneur must nonetheless choose the sub-set of customers he or she can serve best, while maximizing the return on his or her investment.
Question 2: Do we have the right PEOPLE on the bus?
Opportunity analysis is the section of FIT that deals with the “nuts and bolts” of an entrepreneurial machine. The people section of FIT deals with the “soul” that makes the machine a living venture. Here, you may want to dig more deeply into the following questions:
- Do your personal “calling” and the mission of the business reinforce each other?
- Do you and the team have the experience, skills, and personality mix to execute the KSFs better than anyone else?
- Does every person have so much intelligence, integrity, and drive that you would hire them again?
- Which one personality trait should all of your people share?
Question 3: Does the DEAL make the pie bigger?
You must always start with the Opportunity, then move to the People, and only then begin crafting a Deal. A clever deal structure will never rescue a poor opportunity or compensate for having the wrong people, but a well-constructed deal can increase the rewards, decrease the risks and give everyone involved the right incentives. To consider the deal, you should delve into these questions:
- Does the deal make the pie bigger? In other words, are incentives tied directly to the goals of each individual, have you found investors who bring more than money, and have you gotten everyone what they value most?
- Have we properly staged investments to reduce the risk of failure? Thinking of investments as “bets,” and investing as little as possible to answer the riskiest or most vexing questions early, can help you learn and adjust as you fail “early, cheaply and often” towards a more successful long-term strategy.
Question 4: Do our SYSTEMS keep us pointed in the right direction?
Systems can help in two ways. First, to provide the processes and funnels to allow you to efficiently grow your business and deliver more cash flow at scale, and second to give you “guardrails,” “mile markers” and a “speedometer” to measure whether you are on course and on plan.
As your business grows, you’ll need new frameworks to help you add and run new processes, funnels and systems.
Once you have explored deeply all of the questions, tools and analysis for your opportunity, it’s a good idea to step back and return to the four fundamental questions of FIT.
- Is this an attractive opportunity?
- Do we have the right people on the bus?
- Does the deal make the pie bigger?; and
- Do our systems keep us pointed in the right direction?
If the answer to all of these questions is a “yes” – it’s time to launch! A flexible and consistent FIT may not guarantee your success, but aligning the opportunity, people, deal and systems will greatly increase your odds of achieving it.