Entrepreneurs Can’t Move Forward With Costs, Only With Investments

Shannon Waller: Hi, Shannon Waller here and welcome to Inside Strategic Coach with Dan Sullivan. Dan, you said something earlier today which I found thoughtful and provocative. You said you can never move forward with costs, only with investments. You're talking about mindset here, mindset of something as a cost or something as an investment. Thinking one way can hold people back and thinking another way can move people forward. But I want to dive into this. So let's talk about costs versus investments and why that's so important.
 
Dan Sullivan: I would say that not understanding the difference between cost and investment is probably the single mindset that determines whether an entrepreneur is just always going to stay the same for the rest of their life, or they're going to continually grow for the rest of their life. It's just how they understand the distinction between these two mindsets, but also the activities that flow out of these mindsets. Okay. So first of all, you know, the average entrepreneur just based on internal revenue statistics in the United States makes about $45,000 a year. Okay.
 
Shannon Waller: That's not very much, Dan.
 
Dan Sullivan: No, and you consider that some of them make billions. So that means a lot of them are making $15,000 or $20,000 a year. And my sense is that they're an entrepreneur, but essentially all they've done is create a job for themselves that is a job that doesn't go anywhere. So they survive, but they never thrive. They're just putting in time. And usually they probably, if you looked at the hours that they spend, they're working for something like minimum wage. And it has to do with them not understanding the difference between the costs, because people who are little entrepreneurs, there's a reason why they're small entrepreneurs. And that is their whole goal is to cut costs. Costs are a bad thing that you want to eliminate. So they don't hire the person because it would make more sense to them to do the other person's work at nighttime or over the weekend, rather than have the cost of paying someone to do the thing that probably doesn't make any sense for them to do, okay, which is most things that entrepreneurs do when they're self-employed, is that 90% of what they do doesn't make any sense at all, you know.
 
This came up because I was giving an introduction to Strategic Coach today, and a husband and wife. At the very end of the question-and-answer period, they came up and said, we've been thinking about joining your program for five years, but we just can't get past the cost of it. So I said, well, let's name the amount of dollars. It's $13,500 for each of you. So two times, it's $27,000. And they said, well, what do you think we should do? And I said, I think what you should do is tomorrow, write two checks for $13,500 to our company, and then set a goal that within six months, you're going to, out of your higher capability and confidence that comes from Coach, that you would make five times that amount of money. So it'd be five times $27,000, so it'd be $135,000 in six months.
 
And they said, well, how do we know we're going to get that? And I said, well, you don't, you don't, but you have a commitment and you have the courage that if we write this check, we're gonna look at all the opportunities and we're gonna rethink things so that we get $135,000 back, okay? And they said, well, we just don't have the money. I said, no, but if you spent the money, you would have the money. But since you're not spending the money, you're looking at us as a cost. And it seems to me that five years from now, you'll still be faced with that cost. Our cost is always going to be our cost. Five years from now, the cost is gonna be higher. Our price is gonna be higher five years from now because we always raise the price. So you're confronted with an even greater cost in the future.
 
So I said, I'm not talking about you, so I'm going to separate the conversation from you. So I've hired people that are 60,000 a year, okay? And I don't see that as a cost. I see it as an investment that if this person comes on board and I get access to this person's talent, I'll get freed up to do massively better work that'll easily pay for the $60,000. I'll get 200,000 back because the investment isn't so much in the other person, the investment is in me. And if I can get freed up from doing these activities at the level of capability I have, I'll get the 60,000 back really, really quick. I don't know if you want me to go any further with that, but that's the basic structure of the thought.
 
But if I'm looking at the 60,000 as a cost, one, I'm just not gonna do it, which means I'm still doing things that that other person can do better. Or I hire that person, I bring him on board, but every day I communicate that I think he's a cost and he just doesn't deliver. He's just, I can tell right off the bat it's a big mistake and I've wasted a thing. Because I'm communicating that you are actually a cost and I'm watching you every day and I'm going to cut you and I'm going to cut you because my goal is to cut costs. I'm going to cut costs, okay, and you are a cost. So any question of how long I go along with you as a cost before I get rid of you. So I'm never going to get any return on investment from doing that.
 
Shannon Waller: Oh, that's very, I can feel it.
 
Dan Sullivan: Consider someone else as a cost. I can guarantee you they'll know that they're a cost.
 
Shannon Waller: Well, and when you treat someone as though a cost, you're treating them as a thing. You're not actually treating them as a human being.
 
Dan Sullivan: Aren't they?
 
Shannon Waller: I wish everyone could see us right now, Dan. It's funny, right? And as you pointed out in other conversations, what do we all try and do with investments in the markets?
 
Dan Sullivan: Grow them.
 
Shannon Waller: You want to grow them. Cost, a smart person will minimize the cost, but to do that to people.
 
Dan Sullivan: Yeah. So we have somewhere around 120 team members right now, and there's none of them that are a cost. They're all an investment. Now, some turn out to be not a great investment. And some of them turn out to be way bigger investments. So there's a risk in it and there's courage, but it's not around cost. It's just about investment.
 
Shannon Waller: Yeah. The couple of points I want to bring out here, you know, someone investing in Coach or anything else that's going to increase their capabilities, their investment is in them. And so I often see it as an indicator of someone's confidence in themselves to make the best use of that investment, which is kind of intriguing. So I think some people don't think of themselves as a very good investment.
 
Dan Sullivan: No, they aren't. And people who think about other people as cost are bad investments.
 
Shannon Waller: Ooh, so true.
 
Dan Sullivan: I would never invest in anyone who considers other human beings a cost because, you know, they'll just waste money to their way of thinking.
 
Shannon Waller: It simply justifies that people are, in fact, expendable, commoditized, not value contributors. It justifies that way of thinking. But they don't realize it's because of how they're treating that person, not because of the person themselves.
 
Dan Sullivan: But they're treating the other person the way they're treating themselves.
 
Shannon Waller: And those people don't grow. I mean, going back to the point, you can never move forward on costs, only with investments.
 
Dan Sullivan: Yeah, I mean, if you've lived your whole life thinking that you're a cost, you're a burden on the planet, you know?
 
Shannon Waller: Yeah, I mean, playing that mindset out to its end is not a happy ending. So, Dan, what can people do if they do feel stuck or trapped in that mindset, or they're listening to you and going, oh my gosh, that's how I've been operating, and I want to switch that around?
 
Dan Sullivan: Yeah, well, the big thing is just to get, you know, have an amount of money that the change is going to require. You know, it's going to require some money, and then multiply the amount that you want on the return. I'm going to write a check for $60,000, and I want to free things up so that we can get $300,000 back. Okay, and your mind will work on that. Either way, your mind will work on that. And if it works once, you're good for life. But you get real smart about who you write the check to. I mean, if it's gonna be a cost that down the road, sooner or later, you're gonna get rid of the person, you don't put much thought into who the person is.
 
So we have a great tool in Coach called The 4x4 Casting Tool. Our team, you, me, and a lot of other people, we just created a book called Casting Not Hiring. Don't hire people, cast people. They have a special role and go deep with the special role and how they can be a hero and how they have to perform and everything like that. But you wouldn't do that with someone who's gonna be a cost. Already it's costing you a lot of effort. But if it's an investment, you'll put an enormous amount of thinking into it to guarantee that this is successful.
 
Shannon Waller: On the receiving side, because that is our hiring process at the Coach.
 
Dan Sullivan: Our casting process.
 
Shannon Waller: Our casting process. Thank you, Dan. That is our casting process, and we invest in profiles. In interviews, you know, we have a multi-stage process for hiring people. But people know at the beginning, casting process, people know at the beginning that we are willing to make the investment in them. You know, we're spending money on Kolbe, we're spending money, you know, at some point in the process on PRINT and on CliftonStrengths and Myers-Briggs and all the things, because we wanna make sure that this is gonna pay off. You're not just a commodity. You're not just a warm body filling a slot. You're someone who we want to hire and grow within the organization. You have a role to play. You're being cast in a performance. We wanna make sure you're gonna win.
 
And people know that when they come in, even people who don't make it through the process or it's not a right fit for whatever reason, they thank us for what they've learned about themselves by going through this casting process for joining Coach. It's pretty cool. So Dan, my other takeaway from this, and you've said it before, but somehow it just hits more strongly today, is when you're making an investment, have a goal for the return and have it be a multiple.
 
Dan Sullivan: Well, I have a number, but also have a deadline that within this time period, I'm going to get a five times return or a double return. That's in terms of how you get freed up to do higher productive, higher profitable work as yourself. My entire team is my investment so that I can operate at a much higher level.
 
Shannon Waller: Well, and it's not just a one-to-one return or a one-to-two return, it's a five or 10x return, which is, again, another mindset shift to not just put one thing in and get one thing out. When you're getting leveraged, there needs to be a multiplier effect, which I think is another good standard to have for this mindset.
 
Dan Sullivan: Yeah, and I mean, you have to reverse the process. Earlier in life, we've been in job situations you know, how would you have liked to have been treated? You know, and what did you not like about that process? Well, you were a cost. Most people hate their job experience because they were considered a cost. But any rare situation that people had in life where the other person clearly said that, I'm treating you like an investment because we've got big plans for where we wanna go. I bet that was a very enjoyable experience if you were ready for it. I mean, sometimes we're not ready for the opportunities that are presented to us, but my biggest, longest job, I was treated really well, you know, and I learned from that, you know, that that's the way you treat people.
 
Shannon Waller: Well, certainly how you and Babs have built Coach, which means we have a very engaged team with a ton of longevity who attract other great people to the company. So that definitely plays true at Strategic Coach.
 
Dan Sullivan: Yeah, so today is our 35th anniversary of starting the workshop program at Strategic Coach. We've been through, I would say, six or seven downturns. Certainly the 50 years that I've been a coach, there's been six or seven downturns. And once we got to where we had a team around us, you know, we had a dozen, 15, 20 people. When we went into the downturn, I said the number one goal of going through the downturn is that when we come out of the downturn, we do it with the same team that we went in because all of our competition will have cut costs. What we'll do is we'll enhance our investments so that we come out really, really strong. And we did that with the two that I remember most were the 08-09 big subprime crises in the States, and then, of course, COVID. And we came out much stronger, both of those, than we went in. But I said, we want you to grow, and we want you to get better during this period when other companies are eliminating their people because of their costs. And we've shot ahead as a result of treating the team as an investment and not a cost. You don't cut down on your investments.
 
Shannon Waller: No, in fact, you double down.
 
Dan Sullivan: Yeah.
 
Shannon Waller: Fascinating. Anyway, Dan, thank you, because I think it's key to know the crucial mindset of not growing or growing as an entrepreneur. And as you said, it's really looking at things as investments, not cost, including yourself, your team, that also spreads to technology and every other part of the company, but to go into it with a timeframe and knowing that you want a multiplier return and exponential impact on that.
 
Dan Sullivan: Don't be an angry, anxious, resentful, $45,000 a year cost cutter.
 
Shannon Waller: No, I would be a winner. I love this. Dan, thank you so much. Always fascinating.