Building New Business

Pay Attention When You Are Picking Tomatoes

There was a time, many, many moons ago, when as a student in business school, I could have walked you through all the steps that explain how money gets transferred from a check you wrote at your local store to that very same store receiving the money represented by said check.

Understanding that process was a portion of one of my final finance exams and I remember that I knew it very well and ‘aced’ at least that particular portion of the test. I share that to say that I don’t remember much else of what was on that exam and am confident I would not come close to recalling that money path today. (Do people still write checks?)

However, there was one nugget of information I specifically remember from those days and that being the ‘Law of Diminishing Returns. I believe the reason I remember this so well is the visual example my professor used to illustrate this important pearl of wisdom…a one acre tomato patch.

Simply stated, the law of diminishing returns states there comes a point when additional efforts, after a certain level of performance has been reached, will result in a decline in effectiveness. To illustrate this point, the professor had us look at a one acre tomato patch ready for harvest. Bear with me while I get a bit ‘mathy’.

With one person harvesting tomatoes, we achieve an output of X.

If we can afford to hire another picker, we can achieve X + Y.

If we can afford another picker, we can achieve X + Y + Z.

As we add additional pickers, we will see our productivity increase. However, there will come a time when, by adding one more picker, our input will start to decrease. That is when we hit the point of diminishing returns.

Why would our productivity suddenly decrease? One reason could be that the one acre plot is no longer large enough to accommodate the number of harvesters. They will soon start getting in each other’s way, their ability to effectively pick tomatoes is compromised and our productivity/output will start to decrease.

What does picking tomatoes have to do with building new business? Not much. What does paying attention to diminishing returns have to do building new business? A lot.

If we spend X on ads in national trade publications, it is possible that we spend more than what our return will provide?

If we continue to hire sales people, will we eventually divide our competitive territory to a point where each sales rep is not as effective?

Suppose we subscribe to every possible lead service there is and we end up spending 35 hours per week reviewing, qualifying, and categorizing each lead so that we are only left with five hours to pursue these leads?

Just like my many golf examples, your business development, sales and marketing efforts may could use a nice review from a qualified, objective third party. Ask your employees, your partner, your accountant or someone in your network you trust to take a look at some of your processes and get a second opinion. It is kind of like when I write a new post on here, I read and re-read it before I send it to my proof reader who always sees mistakes I missed. (In fairness to my proof reader, I don’t always utilize her services and post away!)

The law of diminishing returns can apply to just about every facet of how one runs a business. Don’t be too focused on picking tomatoes to not be concerned about if we are picking tomatoes effectively.

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Bobby Darnell is the founder and Principal of Construction Market Consultants, Inc. An Atlanta based management consulting group specializing in business development, sales, marketing and profitability as well as executive placement for the Architectural, Engineering and Construction industry.

Bobby can be reached at bobbydarnell [at] cmconl.com

www.cmconl.com