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How this “J” Can Help You Make Strategic Decisions Easier

by Tim Fulton, Small Business Matters

How often do you get “stuck” on a big strategic decision? If you are like many small business owners, the answer is “too often”. It may be a key employee hire, a capital decision, the purchase of a large fixed asset, or may be a decision to exit the business. None of these are easy decisions and easy to get paralysed in making the final call.

One of the best tools I have found for making tough strategic decisions is the “J Curve”. A popular blog for mid-size businesses, ShortTrack CEO, said the following about J Curves:

“The process of identifying, prioritizing, and managing J Curves is the most important determinant of entrepreneurial success.”

By definition, a J Curve investment is any strategic decision to spend money today for a benefit tomorrow. Any hiring decision is a J Curve. Any significant new customer is a J Curve. Any major allocation of capital resources is a J Curve. A marketing decision such as the offering of a new product or expansion into a new market is a J Curve. The list goes on…

Here are the 3 phases of the J Curve:

  1. The first phase of the J Curve is the “investment. How much will we need to spend in time or money on this investment? If it’s a new piece of equipment; this would include the cost of the new asset, set-up and training time, and any costs associated with ramping up the new equipment.
  2. The second phase of the J Curve is “catch up”. We have now moved based the bottom of the curve and we are trying to move towards break-even as quickly as possible. We again measure this phase in time and money. If it’s a new hire, the employee has completed his/her orientation and training and now is moving towards achieving the results we have set expectations for this new employee.
  3. The third phase of the J Curve is “blue sky”. We have moved past break-even on our investment and we are now moving towards achieving a maximum return on investment (ROI) on this big decision. The new sales rep starts making big sales. The new customer starts placing sizeable orders. The new piece of equipment has doubled our production capacity.

There are several important rules for managing J Curves:

It’s time to get “unstuck” on your big strategic decisions. Thinking of each one as a J Curve is a great first step. You now also have a new vocabulary in which to think of these decisions and discuss with your key executives. Good luck!