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Why Dave Ramsey has the human psyche figured out

If you’ve done any reading in the realm of personal finance, and now even business finance, you’ve heard of Dave Ramsey. (If you haven’t, you should check him out. Your bank account will thank you someday.)

He’s probably most well known for helping thousands, probably millions, of Americans escape the pile of debt they’ve built for themselves. His get-out-of-debt secret? The debt snowball.

The basic idea behind the debt snowball is to start working toward paying off your smallest debts first, which builds momentum and keeps you going. Eventually, you work through each debt, enjoying small victories along the way to keep you motivated.

Why the debt snowball works

Now, thankfully, I’ve never had to work my way out of debt. But lately, I’ve been thinking about the snowball effect and how it applies to other things.

You see, the human psyche is a delicate thing. But it’s also a thing which can be easily manipulated.

If we let ourselves go too long without enjoying success, we quickly believe it will never happen. Then what do we do? We give up.

Yet, if we simply alter the order of our tasks, or make them manageable, we enjoy just enough success to build up our endurance for the next step. And that’s exactly what the snowball does.

Instead of staring up at a six foot snow drift and trying to dig a hole through it, you’re holding a chunk of snow in your hand, then pushing it up a hill, watching it grow.

Where I’ve seen the snowball

The snowball effect is quite possibly present every day. When I was out mowing an overgrown yard in the 100 degree weather a few days ago, I was beginning to lose heart, wanting to shut the mower down and rest a while. I knew I needed a small victory to keep me going. So, I mowed a line right through one corner of the yard, and finished it first.

I continued this across the yard, breaking one big task into smaller, more manageable ones. Soon enough, the whole yard was finished.

As a business owner, I often have a lot of tedious bookwork on my plate. Things like employer taxes, accounting software to update, checkbooks to balance, piles of bills to pay. I think updating that accounting software is probably the worst one.

I have started making a habit of updating it quarterly, which helps. Then I write down each month in the quarter on my to-do list, where I can scratch it out as it’s completed. Breaking this task down significantly improves my motivation for completing it.

So yes, I am completely convinced Dave Ramsey knows what he’s talking about with the debt snowball. It works with human nature, rather than against it.

Where can you see the snowball effect in your daily tasks?

Putting efficiency in perspective…

Some notes on efficiency…
As small business owners, my husband and I are always talking about new opportunities we might have in order to increase the efficiency of our business.
The “human” factor in our business is probably the one we most frequently discuss.
Can the business afford to hire another person?
Sure.
Will it really increase our efficiency to do so?
Time and time again, we settle with “Probably not.”
Why is this?
We know we work hard. We know what we are capable of. We know what we are willing to do.
We also know the same things about the employees we have had to date.
And we seem to always conclude it would probably take two to three employees to be willing and able to cover my husband’s work load. And probably 1.5 for mine.
What does this mean?
Well, there are two ways to look at this problem:
1. Daily activities of the business: From this perspective, we are most likely correct in our assumption that adding a spot on the payroll will not help us achieve the operating efficiency we are looking for.
2. Long-term growth potential of the business: From this perspective, we realize that the more time and energy the two of us spend focusing on daily operations, the less time we are spending making “big picture” decisions which, from a growth and wealth standpoint, truly affect our profitability.
It comes down to this:
Do we want to operate more efficiently at the $8/hour level, or the $20/hour level?
With that question, perhaps our “Probably not,” will be changing to a “Probably so.”

As small business owners, my husband and I are always talking about new opportunities we might have in order to increase the efficiency of our business.

The “human” factor in our business is probably the one we most frequently discuss.

Can the business afford to hire another person?

Sure.

Will it really increase our efficiency to do so?

Time and time again, we settle with “Probably not.”

Why is this?

We know we work hard. We know what we are capable of. We know what we are willing to do.

We also know the same things about the employees we have had to date.

And we seem to always conclude it would probably take two to three employees to be willing and able to cover my husband’s work load. And probably 1.5 for mine.

What does this mean?

Well, there are two ways to look at this problem:

  1. Daily activities of the business: From this perspective, we are most likely correct in our assumption that adding a spot on the payroll will not help us achieve the operating efficiency we are looking for.
  2. Long-term growth potential of the business: From this perspective, we realize that the more time and energy the two of us spend focusing on daily operations, the less time we are spending making “big picture” decisions which, from a growth and wealth standpoint, truly affect our profitability.

It comes down to this:

Do we want to operate more efficiently at the $8/hour level, or the $20/hour level?

With that question, perhaps our “Probably not,” will be changing to a “Probably so.”

What’s your passion?

My husband and I were chatting last night about a friend we saw recently. She is a second-year teacher, and absolutely loving it. (I know, we really need to thank teachers like this. And the best part? She teaches middle school.)

Once a teacher himself (who is begged to return weekly), and passionate about everything he does, my husband said, “You know, I really appreciated the passion she had when she was talking about her students. Not everyone has that about what they do. It’s nice to hear someone young really be passionate about something like that.”

Our passions

Obviously, I am passionate about writing. It’s what I do. I thoroughly enjoy waking up daily and finding opportunities to share my passion with others, hopefully helping them in the process.

But, I have other passions too. I may have mentioned we have a farm. It’s what my husband does every day. It’s what I do every other day (or sometimes every day, depending upon the season). It’s our business, our future, our livelihood. More than that, it represents something we both feel strongly about – preserving production agriculture. So, we are quite passionate about it.

Now, at least for the time being, neither of these passions are quite as fruitful as we would like, especially at this stage in our lives where we really need to be capitalizing on income. But, we rise each day knowing we are choosing what it is we do, and we’re pleased with the choices we have made. Most importantly, we’re passionate about them.

Pinpointing your passions

This can be awfully difficult, I know. Two or three years ago, as I was completing my graduate degree and my entrance into the “real world” became imminent, I couldn’t tell you what my passions were. I couldn’t tell you what it was I wanted to do with myself. Rather scary for a 22-year-old, especially when a lot of people are expecting relatively big things from you.

Sure, I knew I wanted to be involved in agriculture somehow, but I had no idea in what capacity. Likewise, I knew I had always enjoyed writing, but I had never contemplated my “passion” for it, nor did I have any clue how I could turn it into a “job”, or more importantly, a “career”.

I’m not going to lie. My husband had a lot to do with me figuring this out. First, he always knew he wanted to be involved in production agriculture. He just has a more forward-thinking, goal-oriented attitude than I do in general.

Which leads me to my first suggestion in pinpointing your own passions:  surround yourself with those who are uplifting, encouraging, and believe in you.

This has by far made the biggest difference in me finding my path.

Secondly, experiment.

In order to find out if you’re really passionate about something, you have to jump in and try it. What you find might surprise you. For example, in the beginning, I thought I was more interested in marketing, but it was the more specific aspect of writing that was my true passion.

Lastly, give yourself freedom to fully explore and enjoy your passions.

For you, this might mean turning your passion into a way to make a living, like it has for us. Or, it might simply be creating a weekend hobby or something you do in another form of “me time”. Whatever it is, make time for your passion.

You will be rewarded immensely. Trust me.

Always learning…

As I’m sure you already know, as a small business owner/manager or entrepreneur yourself, there is always learning to do.

2009 marked my first full year as a small business owner. With that, came many learning experiences. This year, I:

  • completed our first tax returns, for both this company and our farm
  • figured out the system for paying and reporting employer taxes
  • went through two private health insurance policies
  • finally set up all of our business endeavors in a real accounting system
  • issued our first set of W-2s
  • and the list goes on…

While none of these things directly relate to the work our businesses do, they are imperative for small business owners. Most of them are tedious, requiring lots of paperwork, calculations and days spent locating missing files and invoices.

I recently had someone ask me, “Are you really using any of that education you paid for on the farm?”

My response?

“Every day. Every time we create and analyze a crop budget, and better yet, a farm budget for the coming season/quarter/year. Every time we decide whether or not to grow a certain crop, whether to complete that extra irrigation or add extra fertilizer. And every day we’re in the office completing accounting tasks, payroll, taxes and other bookwork.”

Every day is a learning opportunity for a small business owner, no matter what your trade. Some days, it might be simply learning you would be better off delegating a certain task; other days, you are proud to learn how to accomplish something yourself.

I believe this “always learning” attitude is what sets us apart. The day I wake up not “always learning” is when I will begin to worry.

Are you a small business owner just getting started? Would you like some tips on how we manage things? Just get in touch with me. I’ll be happy to help.

Being transparent and authentic in a market that craves it

You’ve probably heard the words “transparency” and “authenticity.” Two big buzz words in Internet marketing.

What transparency really means is:

  • Who are you?
  • What do you believe?

You must be honest with these answers in order to achieve authenticity. Your readers will know if you’re being fake, no matter how good you think you are at covering it up. And fake is not good for business.

It’s important to remember your product or service helps your customers do something they’re passionate about, either in a better way or a less expensive one. If they’re passionate about it, they want you to be too. (And if you’re not passionate about it, why do you make/sell/do it in the first place?)

Why the need to be transparent and authentic?

It all comes down to the foundation of trust. Your customers want to believe you’re a good person. They want to believe you have a good product. And they want to believe you care about them. By giving them a little insight into your world, you help achieve all these things.

We all like to do business with friends, so throwing a little “get-to-know-you” at your customers – in a real way – is always good.

How does a business blog accomplish transparency and authenticity?

It doesn’t if you don’t write it correctly. Your business blog must be a reflection of you and your company in order to pass along the aura of transparency and authenticity.

Yes, blogs have been around for quite some time now, and millions of people around the world participate. Through writing, reading and commenting. But really, they’re still a relatively new concept in business strategy.

Especially in small business strategy. And who has the most interaction with their customers?

That’s right. Typically small businesses. Just like yours.

You can be transparent in your blog simply by being you. Tell them what’s going on with your business, why you do what you do, how you got started.

You can be authentic in your blog simply by being you, too. Be honest in what you’re saying. It’s also good to throw in some tips for your customers along the way to let them know you care about their success and have expertise in your niche.

You don’t know how to start a blog, you say? That’s what I’m here for.

But a blog is not the only place for you to be transparent and authentic.

It’s just a good starting point. You must practice these things in all you do. Every email, every postcard, every in-person greeting, every phone call and every sentence on your website.

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But times are tough.

I know. Believe me, I know.

I live and work on a farm, and my dad owns a metal building company. If anyone has felt the pinch of a slowing economy, agriculture and construction are certainly in the mix.

But guess what?

Now is just as good, probably even better, of a time to increase your outreach and promotional projects. That’s right. Increase.

Sure, the easy thing to do is nix “marketing” and “communications” and “advertising” as line items from your budget when you begin cinching the belt. But is it really a good business decision in the long-run?

The recession, or dip, we’re currently in is a short-run situation. Companies that survive the short-run must have a long-run strategy and way of thinking. If not, what’s the point of surviving the short-run to begin with?

If business has slowed some (or even a bunch), cutting advertising and marketing projects only removes you even more from your customers. Then, when things recover, if they haven’t already found a new supplier, there’s a strong possibility they will. That is generally what happens when you let them forget you.

But, if you just can’t justify that full-page color print ad anymore, there are alternatives. Maybe it’s just time to reevaluate your advertising strategy, rather than abandon it altogether.

It might make more sense to start an email newsletter. These are fairly inexpensive, and let you reach your customers quickly. If nothing else, just to say, “Hi. I’m still here. Doing well, how about you? Just wanted you to know we’re ready for your business when you are. We’ll be here.”

Because if there’s anything that makes a customer nervous, it is dealing with a company they don’t fully trust to stick with them.

Other simple projects might be a postcard, or even a phone call. Now there’s an idea. Talking with your customers one-on-one. It’s nearly unheard of these days. Which is exactly why it might be the thing to do. You will certainly stand out, and they will definitely remember you.

Need some more ideas? Or assistance implementing them? I’d be happy to help. You can give me a call today to get started.

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