Rob is back to continue the discussion.
Come along as we delve into KPIs, fixed and variable costs, team management and other points of interest in his amazing business cheat sheet.
In the episode:
02:02 – Just how important are KPIs to success?
03:57 – What metrics really matter
07:21 – Achieving goals
08:40 – How to make sure you’re not chasing the wrong things
10:16 – It doesn’t matter how bad the operations are, if you get this right
13:29 – Which costs to keep low and when to shift to variable costs
15:49 – What’s the best way to get paid?
19:41 – Get real in assessing your operating environment
22:59 – You’re as vulnerable to threats as everyone else
25:32 – What you must do BEFORE you execute
29:00 – Where results come from, and what culture has to do with it
32:12 – Do you go for the long-term play, or a quick win?
34:49 – If your business ran solely on referrals…
38:42 – Does your team management have this important element?
41:28 – The little known yet highly effective loose-tight leadership technique
44:42 – Daring to invest emotionally in your people
48:56 – We’re not done yet
James: James Schramko here. Welcome back to SuperFastBusiness.com. This is Episode 762. And if you haven’t listened to Episode 761, you will want to go back and listen to that. And that’s because we’ve been going through a business cheat sheet with Rob Hanly.
Good day, Rob.
Rob: Hey, mate.
James: Welcome back.
Rob: Good to be here again?
Rob: Thanks, mate.
James: We started down the path last time of having a look at your secret special document that you posted on public social media.
Rob: Ha ha!
James: It caught my attention, and I said we should podcast about that. I think it’d be really interesting. It’s been a couple of days since we got the first part done. We went through it way slower than we expected. But we were sharing little anecdotes and stories on the way through, and I think this is going to be fun, because it’s kind of new and exciting.
Certainly not to you, because you’ve been collating this little, basically book in a paragraph for quite some time, I imagine. But for us, it’s really fun just going through your stuff. It’s like going around to your friend’s place and having a look through the garage, check out their new car, or, you know, see what their LEGO collection looks like, if you’re into nerdy stuff or whatever.
But in this case, we got up to the point where we were talking about, what does success look like in the future? We’re going to continue on now with part two. So again, if you haven’t listened to 761, go back and listen to that. If you’ve listened to that, and you’re on to this, we won’t hold you up too much.
KPIs count, but not in excess
We’re going to now be talking about using KPIs, but sparingly.
Rob: Yeah, so this one’s an interesting one. If I remember the first experience I had with KPIs was when I was working the last job I ever had, which is a long time ago. Now. That was in media, I worked in advertising and media. And all of a sudden we had all these KPIs, and they were just kind of thrown at me like, Hey, you’ve got to achieve these things.
And the first thing was, there was a bunch of them. Second thing is they really lacked context. And I think those are really important to keep in mind, is that if you create a KPI (so for those who don’t know, a key performance indicator, which is just a fancy way of saying measuring a result) and that result can be an input), and that depends on what you’re trying to achieve, for example.
And what you have is people have this desire to go, okay, KPIs are the way to success. So James, you’re going to have 20 KPIs, you’re going to manage all of them. Rob, you’re going to have 20 KPIs, you’re going to manage all of them. And it becomes this game of trade-offs and gamification.
You want to keep it simple. Just let someone know their three to five things. Five is the absolute max. Here’s what you need to achieve to be successful. Here’s how you measure your success.
And on any day of the week, I can pull open your dashboard or your results and say, oh, wow, James, you are killing it. Like, your volume of leads is hitting a consistent growth. Your conversion rate is nice and stable on a trailing five-day average. And look at this. You’ve made progress on the new product. Love it, fantastic. I don’t need to talk to you.
Otherwise, I’m like, Okay, I need to give more than a bit of positive feedback. We can start troubleshooting – what’s happening to the leads, where’s the issue in the inputs?
“KPIs give you a number that you can directly affect. They give you something to know you’re being successful on your own.”
I think that’s the idea of KPIs, is it gives you a number that you can directly affect. It gives you something to know you’re being successful on your own. And it gives a point of feedback for your direct report, or whoever you report directly to. And that’s really useful.
James: Love it. And you said, sparingly. You don’t want too many.
Rob: No. Don’t strangle things. In computing, there’s this concept called overfitting. I think maybe it’s machinery actually. It was overfitting. Where you’re trying to be perfect, and it’s like you’re squeezing it as much as you can.
Just focus on getting leverage, like we talked about in the last episode. Three to five gives you a lot of leverage. Ten, you’ve gone too far, and you’ve actually destroyed the leverage you’re creating. Now you’ve made it too rigid and too structured.
A look at other metrics
James: And have you ever gone maybe a layer deeper or sideways on it? Have you had a look at concepts like KRA, and OKR?
James: Or lead metrics and lag metrics within those KPIs?
Rob: Yeah. So, like I’ve played with OKRs, for a little while with some of my clients, my own businesses. And while I like the structure of thinking, I’ve often found that they may be a little too restrictive. And the other thing I look at is, lag and lead, is really good.
So for those who don’t know – James, you obviously would know this – but a lagging indicator is here’s what happened after I did some stuff, and I’m focusing on am I doing the right actions to produce a result. And a leading indicator is one where, if I do this, then I’ll get the result I want. It’s really just about knowing what’s appropriate to have your staff optimized for.
Something else that’s worth mentioning is, your KPIs today probably won’t be your KPIs a year from today, because the business will grow and evolve and change. And unless you’re really in there, like a steady, stable business, that’s it. It’s just kind of static. It’s about keeping it consistent. Well, then the KPI should be changed, because the business should be changing.
James: Exactly. So, I’ll have a couple of thoughts on this.
Rob: Yeah, go for it.
James: And KRA is key result area. You know, back in my day, KPIs and KRAs were the things that we were talking about. Then along came software companies, and OKRs came along, and that’s objectives and key results.
So they’re all very similar, but I’d say an OKR is probably a little more ambitious. It’s on what you’d love to get if you stretch a bit, whereas a KPI is sort of more realistic.
Rob: Yep. Yeah.
James: So I’m really interested in the lead and lag metrics. In our business, on a daily basis, none of the numbers we track is a financial number. I’ve mentioned this a few times on the podcast, and that surprises people. But we don’t need to track a financial number to know how successful our business is being. What we do is we compare yesterday versus the day before that and the day before that, and then a month ago, and then six months ago.
James: And it’s just on a little sheet. And someone in my team collates this and then screenshots it and posts it to our whole team every day. So a couple of points here.
James: Transparency across the whole business. Most people in our team can impact those numbers. They’re not dollar signs, but they are a split of lead and lag metric.
So a lag metric example would be, how many members do we have in our memberships? We have four separate memberships.
A lead metric might be, how many emails have we sent in the last 30 days? Because we know that number is going to contribute to how many people join our membership in the future. So we keep an eye on that. And if it’s dipping, it’s going up or down, then we get a good sort of lead into what the future of our business looks like.
Other lag metrics that might be interesting would be podcast downloads, if that’s your primary conversion driver. We also have unique visits to our website in the last 30 days. Because that’s a function of SEO, it’s a function of all promotions of any type leading people back to our website from social media, from emails, from SEO, from paid traffic coming to the website.
Again, if you run your conversion rates through, you end up with X number of customers, which is reported, and then that turns into revenue. And I do look at my revenue and costs definitely every month, like we talked about that earlier in the previous episode, but I also like to have a look at by-line item compared to the same time last month.
When I go meet with my accountant, he always says, You know your numbers better than any of my customers, bar none.
James: Like, I’ve got my finger on the pulse. I will know if my business is dipping before anyone else, because I can see it daily with this very simple reporting system.
Making sure metrics are achievable
But when it comes to team, I think one of the most important things with a KPI or KRA or an OKR is, if you allocate one to a person, they have to be able to impact it.
Rob: Yeah. Oh, critical.
James: I’ve seen people be bound to performance, you know, performance KPIs, or get paid according to an achievement, but they actually have no control over making that number different, and that’s one way to really piss off your team.
Rob: Yeah. It goes back to what we were saying before, about success, right?
There’s another interesting thing – it’s about this idea about OKRs. From memory, it’s like, you should be hitting 80 percent of your OKR. That’s the expectation. And 20% is a stretch.
James: That’s what I’m saying because they’re ambitious. And that’s like, you know, if you have a bull run, this is what we want to get to.
Rob: My only concern with that is, it’s a culture or potential for a culture of failure. Right? Like hey, you know what, you never really complete your OKRs. To me, that seems a little demoralizing, to set quarterly goals or OKRs, and never hit them. Where’s the win?
James: That’s like the horizon effect, you know? The entrepreneurs, they’re always chasing more and more and more, and you know, they never get there, because it’s always just out of reach. Dan Sullivan talks about that. And it’s something that comes up a lot when I’m talking to people and they set their goals. You know, we do five whys into the goals, and we get to the foot, we realized that they just didn’t get enough hugs when they were a kid or something.
Are you chasing the right goal?
James: It can end up being, you know, this goal might be the wrong goal. So if you’re going to set KPIs, use them sparingly. Make sure the people who have them can impact them, make them achievable, and, of course, make sure they’re the right ones.
I’ve heard other people, Noah Kagan, at one point, talked about how his big goal is to build a massive email list. And then when he built the email list, he realized that actually wasn’t the right goal for him.
James: It’s easy to do that, to have the wrong goal.
Rob: What’s really poignant is, sometimes the only way you find out it was the wrong goal, by doing it. I think this is the hard part. And people, I mean, I suffered from this, and we touched on this in the last episode, you know, your esteem if you’re a kid and all that programming, all this stuff.
“Sometimes you cannot know that a goal is the wrong fit without going after it.”
But for me, I know there are a couple of goals I had. And sometimes you make progress and you go, oh, this really wasn’t that important. And then you kind of beat yourself up, like I should have known. But there is no better way to know something than to do it. You cannot ride a horse by reading a book about riding horses. You cannot know that a goal is the wrong fit after, obviously, some deliberation, without going after it.
And it’s that idea that we talked about earlier, effectual thinking, effectual reasoning. Sometimes you need to do a sanity check and say, hang on. Does this matter right now?
Because, yes, there’s the best fit practices of hey, you know, get yourself super financially secure, and then do that as quick as you can and then do this and do that. But that’s like, in a perfect world. maybe you can’t reach financial security tomorrow, right, if you’re just starting out.
Trying to hit financial security when you’re in the first year of a business, it’s the wrong goal. It’s a step, you’re taking a step to that goal. But if you measure your success on financial security, by getting your business started, you probably will go through the J curve, you will burn a little bit of money up front, and you’ll feel like sh*t about yourself, which means it’s the wrong goal. You’re on the right path, but you’re measuring your success the wrong way. Maybe that’s a better way to put it.
Bad operations won’t kill a great idea
James: I like it. Let’s talk about ideas. You’ve got an idea. A great idea can survive despite bad operations.
Rob: Yeah, so this one I love is, I’ve mentioned before, I’ve been involved in a couple of turnarounds. And the thing about a turnaround is it can be caused by many things. Sometimes it’s a market issue. Like, just the market shifted and the business didn’t respond in time.
Other times, it’s that internally, the business is structured in such a way – and this is something I often teach people, is you might have the right idea but the wrong structure.
So you’ve got the right business model in terms of right customers, right product, you got product-market fit, you got the right partners, you know, that classic business model canvas, but you’re stuffing it up by spending too much on the wrong things and managing your cash flow poorly.
And what I’ve found is that almost the test of a good business is, if it gets to a turnaround stage, and it’s not a market issue, I can look at that and say, right, this is just pure operational issue. Let’s get in, let’s fix it, and do what you’re already doing.
And this isn’t written here, but my often piece of advice is, first plug the holes in the bucket. Let’s just make sure more of the top line falls into your pocket. And we do that by cash flow. We do that by P&L. We do that by operations.
And once we’ve done that, then we look at increasing your transactions – your transaction size, I should say – before we even look at volume. Because I don’t want to do anything that shifts the model (which is a huge shift) when maybe it just needs a bit of polishing. And this is what this means, is that a great idea can survive despite bad operations.
James: Nice. Can you think of a company that we might know that has got that scenario?
Rob: Can I think of a company that we might know that has the scenario? I’ll tell you one, actually. I can’t tell you their name, though. That’s the unfortunate one. It’s a private company. Is that going to be a good enough example?
James: I mean like, a big company. Like, I mean, would you say a company like Tesla might be something like that, where they’ve got a really good idea. It’s catchy, electric cars, we get it, they’ve got good tech, they’ve had some shitty operational challenges.
James: They put, you know, doors from a Ford on, they didn’t quite fit or whatever.
They are just starting to turn a profit and they are the highest stock value car operation.
Rob: Well, I think it’s a value, understanding where on the J curve you are.
James: They may get out of it if they’re lucky.
Rob: Exactly, right? Like, their idea might be so good, but that is tweaking the operations and the execution, and that’s it. It’s a great example, though, right? Netflix, so Netflix depreciates their content rapidly, but they’ve still got a fundamentally pretty solid idea. Like, talk to someone who doesn’t know what Netflix is or doesn’t have an account. It’s pretty rare. Right? Not everyone has one, but it’s…
James: Well, everyone at least shares one.
Rob: Right. Everyone’s got access to one, which is a bit of a difference, but it is huge, right? You can have a great idea with bad operations. Well, sometimes it’s figuring out the operations. And I think this goes back to a belief that you and I, maybe the belief is long-term, but the perspective we share is that perfection is not something you can attain, you are just adjusting constantly, just adapting.
James: Now, I don’t think perfection exists. Because the second something is complete or perfect, and then another period in time passes and it erodes. Like, if I walk out of this office and leave it for a couple of years and come back, there’ll be dust and rats and whatever. And my car would be out of registration.
Rob: Yeah, that’s it.
On managing fixed and variable costs
James: Keep fixed costs low and shift variable to fixed when you have leverage. I’ve totally got this. I love it, because this one comes up heaps for the types of businesses that I coach, especially agencies, where they’re hiring team members, and they’re reselling the labor of that team member.
So they have to hire a team resource, and then it’s up to them to manage that resource well to get a return on their investment. But where people don’t have leverage or they’re scaling in a precarious way, I’ll often suggest, pay a variable cost.
Like, you know, pay per piece of work or pay per customer service until you understand the model, till you’ve run the clock, so you know how long it takes, what you can expect, you’ve got enough volume to benchmark. And then flick the switch, because you know what you’re dealing with. And that’s exactly how we ran our SEO business. We hired a lot of people on a fixed wage. The only people on a variable cost were article writers, and it was a per-piece scenario.
Rob: Yeah, I couldn’t agree more. It’s, you used the word “precarious”. I think this is the idea about low-data environment versus high-data environment. When you’ve got low-data environments, that’s either you haven’t been collecting the data or it’s a startup or it’s a young business, you’re figuring out the model, which, you know, again, goes back to you can’t know everything, everything’s adapting.
But it’s a smart idea to start a business with variable costs. You know, pass as many costs off as possible so you’re not incurring more risk in the capital yourself.
I had a chat with a guy out of the US the other day, a multi-million-dollar business. And he said, Look, Rob, you know, I’m realizing through our discussion that one of the biggest mistakes I made was I’ve taken too long to switch from variable to fixed. Because variable made sense. You know, we started this on a shoestring budget and elbow grease. We’re at three mil, and they got there very quick. But I’ve let the variable costs get out of control.
And that’s okay, you can go back. This is the point. It’s like pruning, right? You just keep on pruning or clay or whatever you wanna call it. It’s a process. But once you have leverage, take the leverage.
Optimum ways of getting paid
James: And what about on the flip side, getting paid? I think this is an interesting one, because again, in the agency world, I’ve got some clients who are really successful switching from retainer model to a pay-per-lead model.
And in my case, I’ve got a good portfolio of retainer-style payments, monthly payments, annual payments, but I also now as you know, and as you do, I have variable income. I have performance-based income that is paid on a percentage of revenue. And I’m okay to take a variable income, because I believe I can increase the variable in my favor. But the customer always wins anyway because they’re always getting the bigger portion than me.
Rob: Yeah, yeah. I think it comes to risk, right? So you and I have spoken about this before in terms of cash flow and whatnot, but you know, I want the cash in my pocket, not someone else promising to give it to me, right? I don’t want a promise, I want the cash.
But beyond that is, I think that once you are aware of your skills, right, I’m a big believer that variable deals are better for everyone in that it lowers the risk to the partner. So I’ve got one deal in particular, very small business, they’re sub one million. And normally I wouldn’t touch it. It’s just so far out of my normal area of focus.
But when he and I were talking and I looked at his numbers, I was like, You know what? I think this is worth taking a risk on. Let’s do a deal. But I kind of used some of the tips that you and I had swapped last time I was in Australia.
And what we’ve seen is that we had to lay some groundwork first. So I’m “losing money”, if you think about an hourly swap. But I am taking the position, the contrarian perspective that in the long run, this will pay me far more money than my fee ever would have.
One of the things we did after ops was sorted out was we started executing on ops. We were using that new structure. And a lot of the marketing assets we got took a 20-fold increase in leads. And you know, you do that here, and you do a fourfold here and eightfold here, and the business transforms overnight.
“Variable equals risk management.”
But it’s about being willing to take that risk on your side. I really think that’s where it comes down to, is variable equals risk management and risk capacity.
James: And I love what you said before, it’s like, whether you know the data or not. Beautiful.
Rob: Yeah. You got to know it. I
James: It’s a skin-in-the-game scenario, if you’re getting paid that way.
James: If you’re paying out that way, it’s a really safe way to scale if you pay out variably in the short term. Like, you bring in the marketing, and then you know what your costs are going to be as a percentage of your marketing. You can factor that, and you can always be winning. And then you can take over that leverage.
It’s such a great point. I haven’t really seen it talked about that much. I’m talking about it all the time behind the scenes, but I totally get the beauty of that statement.
Rob: It is killer. I’ll make one last note which is interesting. We talked about agencies. There’s a media buyer who, for the right people, I will recommend in a heartbeat. And he is great in terms of, he will work with you if you have a proven offer, right? One that you’ve got some data on.
If you’re a mass market offer, he’ll look at it. And if he can look at it, he’ll just say, Look, I don’t take a percentage of spend. I hate that model. That doesn’t work for me, coming from a media background, it’s so easy to bastardize.
He doesn’t take a retainer. Typically what he does is, he takes a one-month fee, which is then credited. And he takes 15 percent or something of sales that come from the campaigns that he scales and grows. And every business I know that’s worked with him works with him for multiple years. They love the work he does.
And they recognize that giving the equivalent of 30 percent of the standard online or less affiliate commission per sale, the time, energy, effort, skills, IP, proprietary knowledge that he has, that he contributes, dramatically improves their business, and they pay him once for each customer, and then they get to monetize on the back end.
Everyone wins in that deal. And I think that’s so important.
James: Yeah. Several of my clients just sell their services on a per lead or per sale basis, no retainer, no upfront fee. It’s just they’re so good they can be paid on success, and that’s how I coach now as well. This model only works if you’re good. That’s something very important to mention. So that will exclude the 17,000 Facebook agencies that popped up in the last six months.
Rob: Oh. It’s a good test, though. It’s a really good test. A friend of mine was talking with, he’s got a multimillion-dollar business in health and fitness, he was talking with an agency. And they were like, you know, We want – a hefty five-figure-a-month fee.
And he just turns and said, Listen, guys, you’re asking me to take a lot of risk. You seem very confident. If you’re this confident, would you do a percentage deal? You’ll earn more in percent. And they were like, Yeah, okay.
And for them, you know, it’s so rare that people want to do the percent deals, because there’s all this fear and concern about the rules. But he was so willing to give them a cut that they were like, Yeah, okay, done. That’s how confident they were. And it’s a great litmus test.
James: I’ve found the more risk-averse customers prefer a revenue share deal than a retainer deal, because the risk is on me and not them.
James: It can work well.
Rob: Yeah, absolutely.
So, next one?
How do you assess your operating environment?
James: Be ruthless in your assessment of your operating environment. I love how you ask, the next one, and I’m telling you, but it’s your thing. Let’s keep this machine moving.
So what does that mean, be ruthless in your assessment of your operating environment?
Rob: Yeah, sure. So I had a conversation with a client of mine earlier, and this guy has exploded, right? He’s turned a multimillion dollar business in the short time we’ve been working together. He came to me as a service provider, and he’s now realized that he can scale up, on top of his services, a publishing arm.
And we were talking about the state of the economy, and what’s going to happen, what is likely to happen, what’s going to happen to his customer base. Now, if you’re someone who’s been watching the global economy as a whole, so watching currency rates, watching gold, watching bitcoin, whatever it is, you got to understand that these are representations for real people of their livelihood.
Now in the operating environment as a whole – and this is not political, this is more just the realities of the stock market in the US went up, then had a giant dip, and then has just been accelerating again.
And if you start to compare the US dollar value of the NASDAQ index, for example, against the value of gold, you get a very different picture. You get a very different picture of what’s been happening. But you have to understand then that there are people who are going to see this as well. And this is the economy you’re operating in.
Now, if it’s a bull market, and people are excited, then sell to the bulls; sell to the growth. If it’s a bear market, if people are scared, people are worried, sell the security.
“The market doesn’t care what you want. It really does not care about you.”
And as I’m fond of saying, to another one my clients is, the market doesn’t care what you want. It really does not care about you. It’s saying, I want X. And if you put your head in the sand and you say, Oh, well, you know, Henry Ford said, “If I asked my customers what they want, I would have made a faster horse,” they love to quote that but it’s a poor representation of what’s happening.
James: And it’s not even been factually backed up.
Rob: There you go.
James: There’s no evidence of that quote.
Rob: Yeah? There you go.
So my belief really comes from, you have to be very, very clear on what is happening. And that can be the introduction of new competitors into your operating environment. It can be the introduction of new features, you know, the introduction of this GPT-3 AI, while it’s still got a lot of flaws. If you’re not watching what’s happening on a global scale that could impact your ability to provide value – because that’s really what we’re talking about here at the end of the day, is value adding – you’re doing yourself a disservice.
And you have to be ruthless. This has something to do with my private clients, the one-on-one guys who pay me to sit down and go through this process with them. We really analyze what’s happening, what are the trends, what are the waves.
Because that’s what you need to be aware of. What’s going to crash, what’s going to pick up, and where you’re positioned. And if you can’t do that, you run the risk of being smashed out. So it means that you’ve got to be more focused on what’s happening versus what you want to be happening.
James: We’ve seen this happen with the change in the market. Almost all of my top-end clients are having the best months of their life, ever. And it’s because we’re constantly looking for threats and things that could take them out, and protecting against single-source dependency in their team, the market, their product line.
I’ve got one who’s absolutely crushing it right now. And our constant mantra has been, just maintain your vise grip on the market. Don’t let anyone rise up and be on the same platform as you. Because right now, he has got some of the biggest companies in the world begging him to provide more services, and he’s the only supplier of any merit in the market.
And people do pop up from time to time, but we constantly whack a mole and stay strong, and we’re just getting really strong.
Beware of thinking you’re special
But when I read this phrase about being ruthless in your assessment of your operating environment, I was particularly thinking, that’s like, not deluding yourself, or, you know, putting on some sort of halo thinking that you’re special and that you’re going to not have to deal with things that are going to affect other people.
Like, basically, it’s that little bit of, you should build in a little bit of paranoia and look for the trouble before it finds you.
Rob: Yeah. I’m a big fan of, you know the PESTEL framework?
James: I read it in your thing somewhere, but I don’t know what it is.
Rob: So the PESTEL framework is an old one, fairly well established, I should say, for understanding or slicing the world around you to look for threats. Right? So it’s like, what’s happening, for example, on a political basis, right? Is there going to be a risk to me in, say, an election? Because that can change policy; that can change operating environments.
We’ve got the economic side of things – what’s happening there? The social order, right? The US in particular is seeing massive forms of social upheaval. What’s happened in tech? GPT-3, I mentioned that before. Environmental – now that can be an actual physical, environmental, climate change, global warming type stuff, or it can be my immediate environment.
James: People can be working from home.
Rob: Working from home, people can’t go out. And then the legal environment – what kind of policies are coming in, as well as persuasion? So just having that perspective, you’re not seeking to, I think, get ahead of yourself.
Now, I don’t know about you, but I’ve made the mistake, and I’m sure most people listening to this can recognize they’ve done it too. I’ve made mistakes where I thought I was unique and I was special. There’s something wonderful about me. I’d be untouched.
And then the universe says, Oh, really? I’m going to teach you a quick little lesson, just a quick little nudge. And you know, you fall over, you scrape your knees, scrape your elbow, scrape your hands, and go, Ooh, okay. I am as exposed as everyone else if I put my head in the sand, or if I pretend that I’m wonderful.
It is, I believe, better to have a smaller perspective of yourself, or know your capabilities or your strength, your fortitude, and be a little more sensitive on risk, like you said, be paranoid, that it needs to go the other way around.
James: I’ve seen a lot of people get knocked off their perch. You know, it started with my family when I was a kid.
James: So I come from an environment of being, you know, having to go and get a job in a recession, and then seeing the global financial crisis. And I’ve navigated all around this as a young adult through to a family man.
Now, as an entrepreneur, I want to protect and save the things I’ve built up. I don’t want it all to be unwound. So I’m always keeping an eye out. We were talking about off air actually, before we were recording, you know, what you and I are doing to make sure that we’re untouchable when it comes to whatever could happen in the future. So it’s a trait I see in smart people, is sticking a few chestnuts away in case there’s another winter.
Determine how strong the market forces are
James: So, seek strong market forces before strong execution.
Rob: Yeah, I love this one. It took me a really long time to really comprehend or like, experience for myself. It really comes down to supply and demand. If you are, because it’s always an equation, right? How high is supply? How high is demand? If you’re on the wrong side of that equation, it doesn’t matter how great you are at execution. You’re in for a real tough battle.
James: So this is like Blockbuster versus Netflix.
Rob: Exactly, right? So Blockbuster, if you were a Blockbuster, you’d better be looking at what’s happening in demand. Bezos was the one who said, What doesn’t change?
James: Yeah, I really like that sentiment. Because people always asked him, you know, what do you think will change in the future? And he’s like, I look for what won’t change. People want the best products, the best supply, the best prices, the fastest delivery.
That’s why he’s looking at his own, drone deliveries and all that sort of stuff. And you know, automatic checkouts where the thing knows what you’d take off the shelf and put in your cart when you’re in a physical store. And those sort of things make sense.
Rob: Absolutely. Did we talk about the Doug Casey deal with the dairy farm last call? I don’t recall.
James: Remind me.
Rob: Yeah, it’s a weird enough story. Yeah. So it’s a weird enough story that I figured would trigger your memory.
But this is a great example of it, is in Latin America, there was a period where soybeans and corn, I think it was, were being subsidized. And this international investor guy, Doug Casey, talks about in an interview that he’d purchased a dairy farm but with no cattle, right? And there were shifts in policies and he found out the farm down the road had 130 cattle on its balance sheet, which were essentially a rounding error in comparison to their size.
And the owner of the farm turned to the general manager and said, Hey, like just get rid of the cows because essentially every square meter we’ve got a cow on is a square meter we can’t grow soy or corn on. And on top of that, the cows eat the soy and the corn. So they’re destroying that. So let’s get rid of them.
So there was a market demand to offload them, or it was supply. And Doug talked about doing this deal with him where he agreed to take it off their hands in return for a year of milk. That was it. That’s the whole structure of the deal.
And what he was looking at was, he talks about the belief that at the time, this was 10 years ago, that there was a likelihood of a beef shortage in Latin America and Argentina, because of different policies and weather. So he was seeking to get ahead of that market force, and then ride it so that when it came to its peak, he could sell the cows.
Now, I admit, I don’t know what happened and what his exit off that was. But again, he’s sniffing for the strong market position. Where’s the demand going to be? Where is the demand right now?
And I think this is why those Facebook agencies we spoke about before were so popular, was, at a time there was low supply in Facebook ad knowledge, and high demand for someone who knew how to make us money on Facebook. Because everyone’s making money on Facebook but me! What’s the demand?
And then a couple of people sold courses on how to sell Facebook ads, but never really taught you how to actually deliver Facebook ads in an economically viable way. Because most people, like, it’s better to teach a local chiropractor how to run his own Facebook ads in 15 minutes a day, or to hire his front desk member to do it, than it is to try and build an agency around it. That’s tough. That’s really tough.
But now all of a sudden we have an oversupply, and nowhere near as much demand. So I think that’s the same thing is, you know, seeking strong market forces.
And there’s one sort of addition to this is, one of the guys I know who’s going through a program by Roland Frasier at the moment was saying that Roland was discussing that a major contribution for them was seeking forces, seeking trends, going where there’s demand. Find a wave of demand, ride the wave of demand.
James: Well, that’s the very fact that Roland’s selling a course about buying businesses at this time is a classic example of that.
Results, behavior and culture
Rob: So, you know, James, you want to read this one out? Because you’re the pacemaker of the reading.
James: Yeah, results come from behavior. And behavior comes from culture and expectations.
Rob: When you have someone who works for you, if you pitch them on – Oh, you’re going to have so much fun! This is such an exciting, interesting job, you’ll learn so much! – but all they’re doing is manually inputting spreadsheet data, they’re not going to like you.
If you tell people you’ve got a wonderful workplace, and then you allow the environment to be cultivated where politics is okay and backstabbing is okay and lying is okay, it affects how people trust each other.
James: But it depends on if you have a foosball table or not.
Rob: Well, the foosball table and the lolly wall are critical.
James: Because you get those things, you’re now starting to talk. Blow them with all the goodies.
“Culture is how we treat each other and how we agree to treat each other.”
Rob: The dopamine. But it is critical, right? Because culture is how we treat each other. It’s trust. And look, none of us is perfect. I think this is really key, is none of us are perfect.
I’ve stuffed up plenty of times in my life, and I’ve always sought to make it right. Sometimes I haven’t been able to because people have been upset, rightly or wrongly with me, and that’s a decision to not seek collaboration or repairing, relationship with me.
And other times people have done things to me where I’ve said, I don’t trust you anymore. And I don’t seek to repair my relationship with you. That’s a good healthy boundary. But beyond that, understand that culture is how we treat each other and how we agree to treat each other. It determines everything that follows.
So if you create a culture where we, I think Dalio talks about you’re inviting dissent. Inviting dissent, you know, we need to have honest, open, hard, transparent conversations where we disagree with each other, but we do it because the greater culture is we’re all after the same thing. That’s how we treat each other. We do it respectfully.
James: Yeah, I think behavior, this one fascinates me because I’ve had animals, I’ve got kids, I’ve got a team, I’ve got customers, and I’m just getting so many lessons in human behavior. You can definitely change the outcomes and the results based on the behavior and the expectations.
James: A client of mine sent me an email today. And he said that someone just came on board with him as a client, because he was on my podcast. And this guy’s been following me for about 10 years and met me in an event a long, long time ago and is, you know, listening to the podcast. I think, that’s such a long time.
And one thing I just want to make a point about here is, when you say to someone, Oh, look, I think you’re sending quite a lot of emails, they’ll usually say, look, it works. I do it because it works.
But does it work? That’s the thing – how much revenue is being missed because you’ve switched that person off, and they’re never going to switch it back on? That’s my concern. You’re not really able to track that cohort, the people who would have bought in three years, five years or 10 years when they grow up and get to be a bigger fish that won’t buy because you’ve switched them off.
And I think, now more than ever, because we seem to be in a cancel culture, that it’s probably much easier to step on a landmine than it’s ever been in history. And even, you know, quite unfairly in some cases. I’ve seen some unbelievable examples of it, but I think it’s a good time to be respectful of your audience and to put their thoughts and empathy right there in the forefront of your actions and behaviors.
Long haul versus the quick win
And then I think you’ll get really good long-term results. And I’ve definitely built my brand around the long haul. I’m not after a quick win. I never push people past their limit, and I’ll often tell people to wait or don’t go ahead. And maybe I don’t bank as many millions but I do plan to be around for quite a while.
Rob: Yeah. Two thoughts that come to mind. The first is, years ago as a teenager, someone said to me, you know, I’d rather burn out and fade away. And that sounded so cool, but it’s dumb. Like I don’t want to burn out, actually, I want to stay around like you for a long time.
James: I like, “The candle that burns twice as bright burns half as long.”
Rob: Yeah, it is. The other thing is, it’s always that Japanese proverb, right? The nail that sticks up gets the hammer. I’ve really enjoyed cultivating a really low profile over the past decade.
And some people will say to me, like, you know, why don’t you go the guru route? Why don’t you do more? Why don’t you have a podcast? Why don’t you do this? Why don’t you do that? And you know, it didn’t suit where I was and it gave me a lot of time to work on my craft and be quiet. You know, I have a small internet presence…
James: You used to, up until now.
Rob: Ah, yeah, right. Thanks, James.
James: You go and pop up a little nugget on social media, and next thing you know, you’re getting in front of a new audience.
James: That’s the way these things work. It’s amazing how things happen. I actually had, here’s the series to an event that happened. Someone mentioned on Facebook about memberships.
James: Because a guy asked, you know, who knows about memberships? Someone mentioned my name. They asked me if I’d come on their podcast and talk about it. I did. That was Anik Singal. And one of the people listening to that was Mike Dillard. He got in touch with me, wanted to talk to me. And then he invited me to go on his podcast.
And from those two podcasts alone, I’ve got a bunch of paying customers at high prices who have heard me and now want to do business. So that’s just from putting in the work over the time and having other people endorse.
James: That’s what I would say is a strong market force. And now it’s time for the strong execution. That’s why I’m dropping a profitable membership course out in the marketplace and a book, because it’s clearly validated that people are interested in that, and that there’s already a groundswell that will support it.
So I like, you know, the results come from the behavior, that long-term behavior. And a lot of people, when they come online, expect an instant win. And partly it’s the copywriters and the marketers who are, you know, conveying this message that it happens very easily, very quickly, with almost no effort.
And I’m here to say it just didn’t work that way for me. You can certainly make it easier by consuming good information like this. I learned something great today, which was a fantastic framework around threats. So we’re always learning.
I love this podcast. It’s a bit of an education I’ve had. I’ve listened to every episode of my podcast, as I’ve recorded them, but never afterwards.
What if your business ran solely on referrals?
Rob: Never after that. It’s good.
I think you tapped on something which actually isn’t in this document, but it deserves a real highlight point, which is, what if you could only run your business on referrals? Right? You can’t do outreach, you can’t do Google organic, you can only do referral. So we’re talking podcast, joint ventures.
And it’s a tough nut to swallow. But I think it’s a really good guide on, how would you act?
James: I’d get people results. Like, first and foremost, I’d have an incredible product. I think having an amazing product takes care of almost everything. I mean, my wife’s business is pretty much that. It’s a recruitment business, they find VAs in the Philippines for my customers. It’s called VisionFind.com. Here I am referring it.
And it’s a hundred percent referral-based. They don’t do any ads. They didn’t even have a website in the beginning.
Rob: Based it on the back end.
James: It’s just referrals. Some people have seven, eight, nine, 10, 12 people from the same company hiring ongoing, because they just kick ass. So having a great product is just like step number one for getting repeat and referral business.
James: And when I was in the automotive trade, which is a notoriously crappy service industry…
Rob: Oh, horrible.
James: Like, every single person you’ll ever meet who’s bought a car will give you a horror story. I had 50 percent of my business was repeat and referral within two years.
James: And it was just from actually, like, caring about people. Can you imagine how, it’s so contrarian but it’s so obvious.
Rob: I don’t remember who it was, and I wish I could pin the name, but you gave someone a piece of advice. It might have been Kyle Gray, that you should follow up with people with a handwritten thank you note. There’s something as simple as that. I think it was Kyle Gray.
But it is. I send gifts to my clients, right? And sometimes a gift for their kids. Sometimes it’s a gift for them personally. Because they’re around the world, I try to make it what I can in their local markets to make sure they get it. But those little tokens of appreciation.
I don’t know if anyone here follows Craig Ballantyne, I sent him a pack of poker chips, a couple years back. And on them, they said, Take all your chips, bet them on yourself. And it came off the back of I was going through a real hard period in my life in 2018. You know, personally.
And Craig gave me this advice. Because he was one of the few people I shared this about, or shared the event of what was happening with me. And he just said, Look, you know, this is the period of time where you take all the chips and bet them on yourself. And that was a small gesture from him. It was a one-line email. That was it! It was just a one-line email. But it had this huge impact on me, and then I’ve sent him these poker chips, and now he uses them to get clients and it’s this wonderful thing.
It’s the same with my therapist. I work with this great therapist. We talked about mindset last episode. But I think everyone who’s struggling with something, you need someone to help you with that mental side of things. I work with a trained therapist, he’s unreal. I’ve sent him so many referrals, because he got great results for me, he was a wonderful supporter.
And most importantly is I trust him, because I had a great product, to work with other people. And now, I also know he’s not pushy. He made this comment to me that it’s a bit like standing under a palm tree in a rainstorm. At first, the drops are very slow, nothing really comes through. But if you just keep delivering a great product, time after time, you will soon be soaking wet and almost drowning, because it will just break through.
And I reckon that’s such wonderful advice. So I know we’ve got a little off script to that, but I think it’s killer.
James: Yeah, well, I didn’t ever expect we were going to stick fully to the script.
Like, I don’t know if it’s being selfish, but I’m really enjoying this type of podcast. And I’ve been promising my audience that I don’t want to do your standard bullsh*t interview with someone who just published something and they want to get a whole bunch of traffic. I want to do better stuff.
Like, I’m literally talking about having good product. I want my podcast to be better. I’ve been doing it for 10 years, and I know I can do way better. I’ve just been, I’ve been doing an okay job. But everything up until now I feel has been an apprenticeship, and I’m ready to start letting the handbrake off.
Keep up those management rhythms
And, you know, I’m enjoying this style where we can talk about things that have a, you know, we have a big emotional connection to this. And I know this is coming up, actually, but before we get to that part, let’s talk about using management rhythms in your business.
You know what would be fun, it’d be fun if I tell you what I got from it, and then you tell me what it actually means.
Rob: Love it. Go for it.
James: From this one. I remember reading a book called Jack, from the guy that ran GE. And he talked about beating the drum. Like on a constant basis, like the tribal council, like you’ve just got to constantly beat the drum within your business and, you know, have council get-togethers or whatever.
In our business, we have a weekly meeting, and I’m always banging the drum and just keeping the rhythm of what we’re doing. So that’s what I thought it might have meant, but you could tell me if it’s different.
Rob: Yeah, you’re pretty close with it. So I was introduced initially into the idea of one-on-ones and all this stuff through corporate culture. But to be honest, most of them suck. Like, they really suck. Hey, let’s just sit down for 30 minutes and waffle and not really get anything.
And a guy who we mentioned in the last episode, Matt Smith, he was the first one to give me a real in-depth understanding of management rhythms, and we actually put together, there’s a program on Early to Rise University called the Management Rhythms Blueprint, and it’s taking Matt’s knowledge and experience and condensing it down into these scheduled meetings, essentially, for accountability responsibility.
And then obviously these people have the authority to affect change. And for us, it’s, you know, five or six scheduled meetings across a 90-day period. Some are weekly, some are daily, some are quarterly, some are monthly, but then using those to drive performance, to keep a culture of success.
Now I even use these meetings with my assistant, because she shows up every Monday, we have a 30-minute period, check in with how she’s doing. What’s going on, how’d you go on the two goals we set last week, blah, blah, blah, blah. But it just keeps this rhythm of let’s move forward.
And while a lot of people think that it’s about getting performance out of their employees, the secondary benefit isn’t just performance. It’s showing your employees that you care, because you show up and you create an actual space for them, it’s sacred, they can sit and talk with you and share what’s going on. So that if someone’s got some problems at home, or if someone’s struggling with their parents, or if they’ve just got some stuff going on, you don’t always want them to have a problem, but you don’t want to be taken by surprise.
So the idea of the management rhythm really is having these regularly scheduled updates, accountability points and message transference that happen to drive the business and create a, like cyclical, like a weather pattern. You’ve got the four seasons, we’ve got the four meetings.
Rob: We come through them every week.
James: We’ve got a remote team, we use a lot of grapevine. We know if someone’s got a family member sick or they got something happening, like, instantly.
Also, in my case, a little bit unique because I usually visit the Philippines three or four times a year. So I have them over to my house, I cook them dinner, we talk, we go surfing together, like we do have a really close bond and relationship compared to a lot of team cultures. I’d put my team up against any other team in terms of how we get on. They’re so good.
Rob: That’s awesome.
The loose-tight approach
James: And the other thing, I don’t know if it’s mentioned anywhere else, but loose-tight management.
Rob: No, we haven’t got this in the doc.
James: So loose-tight is definitely rhythmic. It’s like, loose is letting them free range a bit, go out there and just like, all the shackles off, just roaming around, leaning into their own natural strengths or tendencies or things that are less productive, whatever. But just to see where they go and what they do.
And then tight is to bring them in. It’s like, you know, gather them all up, bring them in, get tight going, you know, have a good look through their stuff. Get up close and personal.
So again, like when I used to visit the Philippines and bring the team in, it’s like we gather them up, and I go, Okay, let’s go through a podcast edit. Can you show me what you’re doing?
And we go through on the laptop, and we have, And what happens then? Okay, now, this step here, I think, is there any reason we couldn’t just eliminate that one? Maybe we don’t need that anymore. We used to need it for this, but now that thing is no longer functional. Or I’ve identified that’s not an important part of the business anymore. Let’s just stop doing that.
So that’s like, loose, tight. Let them let them go and then bring them back in. Let them go, bring them back in.
Rob: Yeah, I love it. I think it’s as well that because – and this goes to culture again – because your team knows you care about them, you’re not there to punish them or tell them they’re doing a bad job. You’re not the boss getting them in trouble.
You’re like, how do I make it easier for you to get results and contribute and add your value? How do I make it possible for you to learn and grow? So when I come over here and say, oh, maybe we get rid of that, I’m doing it to clear the path for you, to make sure you’re up to date, because I care.
James: Like what I say to my team often is, I want you to have a great life. Like, imagine, they’re editing my podcasts and videos – I’m talking about surfing and having a good life, and the importance of sleep and not not being in a Draconian, Orwellian-type work environment.
I want them to have a good life. I want them to pick up their kids from school. I want them to go to the movies with their partner on a weekday. All these things that I do, I want them to enjoy life.
James: And I think that really leads into the next point, which is, invest in your people emotionally. Because I can’t remember who said this recently, but someone told me that they just realized that their team members, they’re not cogs in a machine. They’re actually humans. I’m like, wow, that just blew my mind.
And often when I’m coaching people, I ask them about their team. And, you know, they usually know the team’s names. They rarely know what part of the country they’re in. They have no idea what language they speak, they know nothing about the culture, and some of them haven’t even spoken to them for either forever, or for years, which, again, that’s not very emotionally tuned in.
Rob: No, and I think part of it’s the responsibility and the roaring 80s mentality, and hey, you’ve got to get in there, you’ve got to crush, bang bang bang. And maybe that was the case.
But again, going back to being ruthless in your assessment of your operating environment, we have a lot of incredible technology now. I don’t know if you’re still using Ontraport. I still use Ontraport, though, I love Ontraport.
James: I am.
Rob: It’s ripper. And the reason I love it, for every bit, like I get clients onto it if they’re using some weird stack, because what it does is it frees up time. The same activity occurs with less effort. And that free time, because you’re leveraging, either A, you’re working too much, now you can work less. Work Less Make More, as the title of a great book is, or you can use that time to invest in new projects. But it’s that freedom to leverage these tools, technologies and opportunities.
Dare to invest emotionally
I think when you talk about investing in your people emotionally, you really, I always catch this stuff because I’m aware that when I listened to podcasts or watched interviews or read books before, I felt like a bit of a failure, being like, oh my God, I’ve never thought of this. Like, it’s a learned skill, it’s a learned paradigm that you get better at, you mature at.
I’ve made plenty of mistakes. I remember back years ago, having a conflict with a girl who’s on my team and making her cry. And that wasn’t great. I was much, much, much younger. I’d come from this hard-charging, push, push push kind of environment. And all of a sudden I wasn’t in that anymore. And I brought the wrong thing, I didn’t adapt. I really stuffed up.
I think that’s part of investing in your people emotionally, is A, being able to say you stuffed up, being vulnerable; B, taking an interest in them. What are they trying to achieve in life? What do they care about? Really risking your emotional investment.
Because yeah, you will be sad if an employee leaves you. But as they talk about in the book, Superbosses, why is it that certain bosses have this incredible effect when they bring up almost an entire wave of individuals, entire class, cohort, in their industry? Because they cared. They invested, they developed and invested. Like, I’m not sure how much stronger I can make the point. But people care about people who care about them. It’s a natural law of reciprocity.
James, I care about you, so you probably care about me. Maybe not. But you’re more likely to than if I don’t care about you at all. And if you take that with you, and you look back over your own life and your personal relationships and your professional relationships, it’s the people who care most about you, the people who show up on a regular basis that you say, Okay, I’ll go to the wall for that guy. I’ll go a little further. I’ll make my life a little uncomfortable to take care of this guy, because he does the same for me. And I think that’s so important.
James: Yeah. I think it’s really important what you said about having to adapt. I know, I came from a tough industry. I came from a male-dominated, hardcore, established, competitive industry. And most definitely since I left that industry, I had to peel back a few layers of armor.
James: Like, if I’m not careful, I could just demolish someone. And it would be a reflex reaction. And it would just, you know, all the people who worked in my old industry have this sort of post-traumatic stress disorder or whatever it’s called, because it’s tough.
And there’s all this bastardly sort of hardcore threatening, violent… I mean, one of my bosses pulled a knife on me, spat on me, called me names. Like, if he did it now, in the year of social media and I filmed it, it would be unbelievable. So that’s an interesting one.
But you know, like, I locked it away for a while, but I have to just peel those onion layers off and soften up a bit. I’m a much better version of myself now, but I’ve had to get there over time. How I feel about my team, it really is a strong, deep emotion to the point like I have a very high empathy.
And I, I feel like our business is definitely, it’s an organization, it’s a collaboration of individuals coming together, and we’re definitely more powerful. Like, this podcast and all the things we’ve published in that, like people, they say we’re prolific and we’re busy and whatever. It’s just the team. The team just like, they just get the stuff out there. They do the job. They’re incredible.
Rob: I’ve got to say, you say when you think about your team, you can get on. I think, for my assistant, right? She’s so integral to my life, and the impact that she has on my life and the clients who she interacts with is, I could never be that great. I just accept that’s a giant flaw of mine. She fills it so perfectly. It’s complimentary.
And at the same time, you know, I want every success for her. You know, when I work with partners on different deals, I want every success for them like I care about them. And similar to you, I’ve had to go through that process of stripping back armor, getting rid of those knee-jerk reactions, posturing how to go.
So you can turn around, say to someone, I care. But caring isn’t weak. Caring is actually a very strong activity because you’re saying, I’m willing to be vulnerable, I’m willing to share, to be shared with. And I am ironically strong enough to have that “weakness”. I can share. And that took me a long time to learn that lesson as well.
James:The more vulnerable I became publicly, the more my audience just embraced it, too. I’ve noticed that it’s not a bad trait. And I think some people maybe overshare
Rob: Yeah. Instagram. If you’ve got an essay beneath your Instagram post. I do not want to hear about what’s happening. Go get a therapist.
James: Yeah, some people do overshare on the socials. I’ve talked about that a few times. And I think maybe they just go one step too far.
But wait, there’s more
But I’ll tell you what, like, we’re about halfway through this document. And I want to know if I can invite you back to continue this ongoing saga. Is this something you’re up for?
Rob: Absolutely. I feel like we owe it now as well. Like, we started this, we’re going to finish this. I’m a completionist at times.
James: I don’t want to undervalue the rest of the things. We’re going to be talking about sales techniques, we’re going to talk about automation, we’re going to be talking about cash flow. Like, there’s so much good stuff. I literally can’t believe that we’ve gotten a couple of hours already out of just half this one paragraph. So it’s incredible.
So thank you so much. This is part 2.
Rob: Yeah, Absolutely welcome, mate. Absolutely welcome.
James: Episode 762. This is part two of a multi-part series, as it turns out. I’m speaking with Rob Hanly. Rob’s going to drop his details here so you can follow him up, if you’re wondering who this mystery man is. Where do we find out about Rob Hanly?
Rob: If you want, the easiest way to find me is on Instagram. It’s @robhanly. So there’s no e. Everyone always thinks it’s me. It’s just Rob Hanly.
Or if you want a very basic bio? It’s RobHanly.com. I like to keep it very simple.
James: Thanks, Rob. I appreciate this.
If you liked this show, if you’re enjoying this type of content, could you do me a favor? Just hit reply to the email we send out when we let you know there’s an episode, and just let me know you’re enjoying this. And by the way, if you hate it, then tell me that, too. I won’t do any more of these. I’ll just let Rob know that the deal is off. And we’ll get back onto those interviews, or something else. No, I’m just kidding.
It was worth doing for me. I learned something really valuable today. And that’s an extra little acronym to put in my threats file. So I was joking with Rob before this. When I asked him where the file is, what was it called? And he said it was called screenshot, whatever. I said, Okay, yep. And I put, James Schramko’s cheat sheet, not for sharing.
And we had a little laugh about this, but I think it’s just gold, you know? Hope you think it is too. And we’ll catch up with you on the next episode, where we’re going through this incredible business cheat sheet, this amazing discovery that just floated up in front of my Instagram story feed one day, and I immediately recognized this has to be discussed.
So thank you, speak soon.
Rob: Thanks for having me. Cheers.
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