It’s a common trope to claim that entrepreneurs don’t sleep well. Is it true? More often than not. Unfortunately, it’s a dismissive and dangerous commonplace for entrepreneurs. Lack of sleep shouldn’t be bucketed into the “Hustle Harder” or “Stay Busy” culture that started the company. When an entrepreneur client or a professional comes to me and says they are not sleeping well because of business stress, that usually is a red flag that they have not built a business or profession with eliminating ambiguity as a primary objective.
Will an entrepreneur or business executive have bouts of sleep disruption? Absolutely. However, insomnia should not be the norm if they have built an organization with a high level of predictability. When I owned and ran my companies there were moments in the first 2 stages (Wonder, Blunder) of a company’s cycle where not sleeping just kind of happened. What caused a high level of anxiety for me was when sleep disruption occurred in the later stages (Thunder, Plunder) of my organizations. What the anxiety typically indicated to me was a high level of company, marketplace, or people ambiguity.
In this post, I’ll provide a guide that will help reduce ambiguity and anxiety, set a focused direction on what to work on within the business, and hopefully improve sleep for the hypervigilant professional.
Internal Business Ambiguity
No Depth/Breadth in Management: If you can’t trust your employees to run the company without you, how can you relax? How can you take those important resetting vacations where you turn off everything and spend time with loved ones? How can you be present at night with your family? If a company does not have a professional leadership/management training program, that responsibility lands on the shoulders of those on the top. Now, I understand that an entrepreneur probably didn’t start a company to build a training program, just as an expert in their field didn’t excel at their role only to be promoted to management and tasked with the job of training or making direct reports better, but here we are. If you’re a leader and you don’t dedicate your time to train, empower, and hold accountable direct reports, there is no way the business will operate without your direct interaction. Delegate and elevate to free yourself from micro-managing your organization.
1. Train, Empower, and Clear Metric Accountabilites for direct Direct Reports
Weak Employment Contracts / Loose Employee Handbook: Two things that kept me up at night more than most. (1)Worried key employees would leave and (2)HR issues that were not addressed in the employee handbook. Knowing what motivates and aligns employees with a company’s vision is critical for retention. It also helps to understand employment contracts, and market payscale, while providing an engaging role with clear success metrics to retain your best employees. People will leave. Departures are part of owning a business. However, having a great professional relationship will retain your best employees for the longest duration. Part two of this issue is employee handbooks. A poorly constructed employee handbook is ambiguous at best and confusing for the employee at worst. If a company doesn’t have clearly defined rules for the road (culture and norms), then chaos can ensue at any moment. The fear of the unknown can keep you from relaxing and getting the rest you need to perform at your best.
2. Develop professional purpose with direct reports and develop a clear employee handbook
Operational Processes and Pricing Standards: It is incredibly difficult to price products and services unless you have clear operational processes. The lack of operational processes will not only increase workplace ambiguity, it could also put the company at financial risk in the process. The more documented, trained, and managed processes a company has, the more profitable it will become because the company will know with clarity what human and resource capital is needed to create products or services the customer desires. The knock-on effect of clear operational processes is greater job satisfaction from employees. We are hardwired to seek positive affirmation. If we don’t know if we do well, how are we supposed to know how to keep doing well? The clearer the processes, the clearer the pricing, the better the sleep.
3. Develop processes for all core company functions. Standardize pricing for all services/products
External Business Ambiguity
Client Contracts/Terms/Relationships: In my last business, we operated on a quarterly PO system. When we initially converted to this system, per our client’s request, we found ourselves scrambling every quarter to secure the next month’s POs. Revenue could swing violently in either direction which made it very difficult to strategically plan for the long term. As we matured and progressed, we began instituting contracts and terms with our clients as well as annual budget agreements (even if they were paid quarterly). The point here is that if you are a smaller business servicing a client, they will likely try to push their risk onto your company. Meaning, if the payment terms are more than Net 30, they have made you a lending bank without paying interest. Strengthening your contracts to ensure shorter terms and clearly defined deliverables will vastly diminish scope creep, cash crunches, and write-downs. If you find yourself making minimal margins or even worse, negative margins on a project/product, your contracts could be the source.
4. Develop clear client contracts with clearly defined deliverable and payment terms
Cash crunch and debt management: Debt is not bad. Lack of access to debt is bad. Banks make money lending money. They are incentivized through the federal government and market conditions to lend out as much money as possible. However, there’s a catch. You can’t ask for it when you need it if you want the best terms. I advise all my clients (assuming they have a line of credit) to ask for an increase in their line(s) of credit regularly. Your bank should get tired of you asking. Use whatever parable you want (build the boat before the flood, etc.), but the businesses that weather storms, are the ones with access to capital. Facebook took a $240 million funding round from Microsoft in 2007. That might have saved their existence as it killed off many of their competitors. Cash is king when a crisis happens. Capitalize when you don’t need it and continue to increase your access as you succeed. An extra caveat on this section: make sure you have a great relationship with your banker and the bank is well capitalized as well. In 2007, many banks called back their notes right when their clients needed them the most. Picking a good bank can be the difference between bankruptcy and survival during times of crisis.
5. Capitalize your business through bank lines and investment. Increase them regularly
Client Concentration: The percentage of revenue from one client can weigh heavily on an entrepreneur’s mind. In the initial stages of a business, client over-reliance is inevitable. However, at a certain juncture of the business cycle, the company should be strategically diversified. Diversification creates many strategic advantages for the company with some of the primary advantages being: A) de-risks the company’s reliance on a single source of revenue B) creates project diversification for your staff C) increases professional connections that could lead to sales opportunities. For me, client diversification doesn’t mean industry diversification. Companies should concentrate on one or a handful of symbiotic industries where they can compete and specialize. Besides the advantages of diversification (lower anxiety, greater creativity, etc.), diversification also increases the value of the company when it’s time to sell. Company buyers heavily discount businesses with over-reliance (10-25%+) of revenue.
6. Diversify client portfolio - Goal: > 25%
If I could boil down what causes insomnia in a professional it would be ambiguity and dependency. The work that comes next will not only lower personal anxiety, it will also increase the value of your company (and role). The 6 topics I addressed in this post are easy to write about but can be challenging to implement. If you are an entrepreneur that continually doesn’t sleep well, or is constantly hitting the ceiling, there might be something on this list that needs to be addressed. It’s important to remember that what got you to where you are, will probably not get you to where you want to be. Focus your efforts on eliminating ambiguity and dependency and you’ll build an organization that lasts.