Payoff versus Tradeoff – Which Do You Focus On

02/17/2011 |

Hi, Rich Schefren here and today I want to give you a very simple distinction that can make a world of difference in the effectiveness and the profitability and therefore the success of you the entrepreneur. This subtle distinction is the distinction between payoff and tradeoff. You see, way too many struggling entrepreneurs focus only on the payoff when making a decision about what activities to pursue; how long they should work on a project; how long they should they work on their product, etc. without really giving enough thought to the tradeoff. For example, early on in my career, I would be working on a presentation and I’d be thinking about all the potential possibilities that an amazing presentation could do for me. I could “wow” the audience. I could sell a lot of people. If it was really good, I could create a product out of it and so on and so on and so on. All payoff focused though. And by only focusing on the payoff it seemed only to make sense to continue working on it; to be a perfectionist because I could only see the payoff. However, when I looked at the tradeoff of spending day after day on that presentation, not getting done other things because of it, all of a sudden I saw that the perfectionism wasn’t really serving me. That in fact, there were other projects – what I was trading off, what I was no longer able to do – the opportunity cost was too high. So here’s the concept and I know it’s a little heady and I’m probably not describing it as best as I could, but it’s so important. I want you to understand it – is that if you are suffering right now from perfectionism; if you tend to get really myopic working on something way past the point that you’re getting diminishing returns; of if you even tend to spend too many hours doing something that’s just not really moving the business forward – once again, you’re thinking of payoff and you’re not thinking of tradeoff. What you need to do starting today is when you start to spend what you believe is an inordinate amount of time on something, step back, realize that you’re looking at the payoff and now ask yourself what is the tradeoff of spending all this time on that? What am I giving up? What’s the opportunity costs of actually continuing to spend time on this, trying to make this product even better, trying to do this email even better, etc.? Focus on the tradeoff and you’ll always make better decisions than when you solely focus on the payoff. I know this was a little bit longer than usual. Have a great day. Make today profitable. I’ll see you tomorrow on the drive to the office. To higher profits and beyond – Schefren out.

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