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How 1% can make a big impact and upend the way business is done

Find your force multiplier



Sometimes a question can change the way you think about everything. I’m not talking about the kinds of questions that can be answered too quickly or easily.


In the age of Google, we can ask just about anything and get the answer in .02 seconds. We can get instant results to just about anything we’re curious about. We just Google it.

Want to know what temperature gets you to medium rare for your steak? Google: “130–135 degrees.”
Should dogs eat bananas? Google: “Bananas are, in fact, actually healthy snacks for your four-legged friend because they are low in sodium and cholesterol.”

As Warren Berger writes in his book, A More Beautiful Question, “some of the most popular queries are which celebrity is or isn’t gay. In many cases, our Google queries are so unimaginative and predictable that Google can guess what we’re asking before we’re three words into typing it.”


The questions that change the way we think are not ones that Google can help us with. At least not yet. We still need to spend some time in those questions ourselves.


My change question was: How can I make 1% impactful? Google: “Is it possible to combine the processing power of 2 computers?”

Not too helpful.


But I probably need to explain the question and what I mean by making 1% impactful.


I am a financial planner. One of the important things that Certified Financial Planning practitioners do is help clients with their investments. 


If you can beat the market consistently by 1%, that is good.


In the industry lingo, it’s called delivering alpha. The ‘alpha’ is the additional performance that is above and beyond the market returns.


Let’s say that you have $1,000,000 in your investments. An extra 1% is an extra $10,000. Nothing to sneeze at. 


But to my way of thinking, it lacked impact and power. Often the alpha is even less and we still crow about it in this business.


“So and so fund beat its benchmark by 0.4%!”


So what?

Maybe a really outstanding money manager can deliver 2 or 3% alpha. That really would be exceptional performance if it is consistent. Year after year. But we’re talking about a $20,000 to $30,000 impact in a portfolio of $1,000,000. 


Exceptional performance. Yes. But does that truly represent a meaningful impact on someone’s life?


Maybe.


I would argue that it isn’t likely to greatly impact to most people. 


Especially if your portfolio value is much less than $1,000,000 like it is for many business owners.


I have always served a high percentage of business owners. 


And it got me thinking. How can I make a 1% improvement that would have a big impact and actually improve their lives? As I stayed in that question, the answer became clearer.


Stop focusing so much on the same thing that everyone else is. I should know better. There’s almost never any value in following the crowd. Groupthink always leads us down the wrong road.


I needed to make an impact on their business.


Improvements to the business are force multipliers to the owner’s wealth. 


Let me demonstrate. Of the different ways to value a business, let’s use discounted cash flow. It works for businesses that have income streams that are able to be reasonably projected into the future.


Using the Discounted Cash Flow method for a small manufacturing business as an example:

Let’s say the bottom-line earnings are $250,000. Keeping it simple and assuming all adjustments have been made for interest, depreciation, and everything.
Merely taking the growth rate of the company from 11% annual to 12% annual growth creates a value increase of nearly $460,000! 

This is extraordinary and the result of a mere 1% improvement in the company’s growth rate. And it only takes one year of growth into account. Applying the 1% to the right metric changes the impact.


What else might be possible?


Not every situation is the same and there are a number of inputs involved. But in the above example, I deliberately used low numbers. Profound impacts are possible for many business owners. 


The point is that there is much more impact potential in improving the business than there is in portfolio returns for an entrepreneur.


It was a moment of clarity and changed the way I serve.


Each 1% of improvement can be very powerful if applied to the right area of focus. I just needed to step back in order to see it. ‘How can I make a 1% improvement more impactful and powerful?’ was my beautiful question.


It has completely changed the focus of my business.


I believe that many businesses have their own version of the 1% question to ask.


Are you getting maximum impact out of the areas you’re putting your extraordinary effort into? What could you be doing to make a bigger impact on the lives of your customers?


Maybe it’s not all about numbers in your case. It could be something else more qualitative. You may be able to create a better experience or simplify their lives.


But don’t knock numbers.


As long as they are increasing.

Net worth is the scorecard we now use to evaluate our impact on our clients. If the net worth is increasing, we are having a real impact on the lives of clients.


It all started with a question. A beautiful question. 


Questions can be more valuable than answers. Had our focus stayed on answers, we’d be seeking to find that extra 0.1% of alpha.


Question everything you do. But make sure that your questions are really questions. 

Not statements disguised as questions.


What is your change question? Share your beautiful question below that changed the way you do your business.


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©2020 by Brent Rupnow, CEPA, CFP, CLU, ChFC