Your Secret Creative Weapon — Constraints

What's going on everybody? Welcome to another episode of First Class Founders, the show where we dive into concepts, frameworks, and mental models to help build your problem-solving toolkit. Each episode is short and sweet, jam-packed with value. My name is Yong-Soo and I'm the founder of Urban EDC and GrowthJet.

In today's episode, we're talking about bottlenecks and constraints in your business. Let's start from scratch. What is a constraint and what is a bottleneck in your business? While these two terms may sound like they're related, they're actually quite different. It's important to know the differences between these two and understand how each of them can impact your business both positively or negatively, depending on how you look at it.

Do you know the difference between the two? Let's get right into it.

Okay. Let's talk about bottlenecks and constraints. Bottlenecks and constraints may sound like they're related, but they're actually quite different. Constraints allow you to create boundaries and rules in which you can unleash your creativity. While bottlenecks are found within the boundaries that's been created through constraints and they act slow down your business.

Let me summarize that again. Bottlenecks slow down your business. While constraints can empower your business. In a way, they're actually quite the opposite of one another. You might be thinking, Huh? How is that possible? Let's take a deeper look into bottlenecks First. But before that, if you enjoy this episode, please consider giving us a five-star review on Apple Podcasts or Spotify.

It really helps the show grow, which means better production quality, and more episodes for you. You can go to FirstClassFounders.com/review. Thank you. And now let's get back to the episode. Bottlenecks can be anything that slows down the flow of your business from input to output. Your job as the operator of the business is to remove the bottlenecks in your business.

So let's say you're about to open up a new coffee shop in your neighborhood.

Everybody loves coffee, right? You buy an espresso machine and of course several pounds of coffee beans. You put up flowers all around your neighborhood and promote yourself on neighborhood bulletin boards. You finally open and shop and all of your hard work has paid off. There's a line out the door and you're grinding away with a big smile on your face.

Then a week later, you notice something off about your coffee grinding machine. Instead of being able to grind a cup of coffee in 30 seconds, now it's taking twice as long. Even though it's only 30 seconds, you've actually cut your productivity in half while 30 seconds may not seem like much. You're serving a few hundred cups of coffee a day by now, and your customers are starting to notice the longer wait times.

They're losing their patients, and next thing you know, you're getting complaints and bad reviews about how slow you are. This is not good, so what's going on? You look inside your machine and you notice that there are a couple of stuck coffee beans, which is causing the machine to slow down. This is your bottleneck.

You remove the stuck coffee beans, and thus you remove your bottleneck. Now you're good to go again. Your customers are happy, you've increased your productivity, and everybody is happy.

Now bottlenecks can also occur when your business is growing too fast. So instead of your coffee grinder breaking down, let's say your coffee shop is booming and you can't keep up with demand, this is obviously a great problem to have. But in order to grow your business to take on more demand, you need to figure out what the bottleneck is and remove it.

You may need to hire more baristas or cashiers, or maybe everybody is ordering espressos and the bottleneck is actually not enough espresso machines. It's your job as the operator to identify the bottleneck and remove it. For most entrepreneurs and small business owners, they themselves are the bottlenecks in their own business.

And the problem is, if you're working in the business yourself, you may not even realize that you're the bottleneck. To increase output and increase productivity, you will need leverage. In the last episode, I did a deep dive into the four types of leverage you may need to increase your leverage and thus become more productive by hiring someone in order for you to work on the business and not in the business.

When you, as the business owner is the one working in the business, whether that's being the cashier, grinding the coffee, working the expressive machine, or even cleaning up the space after hours, you're trapped in the daily grind. You have to be able to take a step back and work on the business from a bigger picture so that you can identify bottlenecks and growth opportunities for your business.

As you go about your day, pay attention to when you're working in your business versus when you're stepping back and working on your business. You might be surprised at how often you become your own bottleneck in your business. Okay, now let's shift over to constraints.

All billionaires have one thing in common. They master the art of decision-making, and that is why First Class Founders exists. The main benefit, the reason why you want to listen to First Class Founders, the reason why you want to upgrade and gain access to all of the members-only perks is because First Class Founders gives you the tools to build your very own problem-solving toolkit so that you too can become a great decision maker like Charlie Monger, Jeff Bezos, and Elon Musk.

If you want to get the most out of First Class Founders, head on over to FirstClassFounders.com/join. Okay, let's talk about constraints. While they may seem like a bad thing, constraints are actually necessary components for creativity to flourish. Constraints are like boundaries in a playing field or the rules of a game.

Imagine playing soccer with no out of bound. I remember as a kid, I played pickup soccer, and the boundaries were set up by cones and there weren't very clear, so someone could get away with just going out of bounds here and there and keeping the play alive. Not very fair, right? Or imagine playing basketball, but there are no rules for fouls.

Not only would this be dangerous, but it would also actually change the game quite a bit. You can imagine how quickly things could get out of hand, but with clear rules, some of the best athletes in the world can make the most incredible plays within the boundaries of those. Constraints are the prerequisite to creating something out of nothing.

You actually need constraints. So instead of treating a lack of resources as a crutch, you can use limitations and constraints as tools to unleash your creativity. Let's talk about some constraints that you might be facing in your own business.

Hiring can be one of the hardest things to do. I know from firsthand experience in our own business, we had a difficult time hiring fulfillment associates. Just to give you a bit of background, I own and operate a Climate Neutral Certified third-party logistics company called GrowthJet, where we help other e-commerce brands ship out their orders.

Our fulfillment associates are a critical part of what we do. Unfortunately, it's also one of the hardest positions to fill. We've had quite a bit of turnover in the last few months for this role in the labor shortage for these types of positions is well documented all across the country, not seeing a lot of success through our regular means of hiring.

We decided to think outside the box. California, which is where we do our business, is a very employee-friendly state. This means that the state protects employees and keeps employers accountable for nearly everything when it comes to employees. While this is great to a certain extent, this adds another layer of additional costs for us.

With everything that we do, we always try to find a silver lining in all of our situations. With hiring our fulfillment associates, this was a constraint that we had. So instead of getting upset at the state of California or deciding to move to another state that's more business-friendly, we realized that California also had great state-run programs to help us grow our fulfillment staff.

Working with these organizations, we were able to find reliable staff members who are excited to be working. Now growing our fulfillment staff was no longer our bottleneck. It's this shift of thinking of utilizing our constraints and turning that into creative solutions that has constantly right-sized the company.

Let's take a look at another common constraint. Cash. As a bootstrapped company, it's absolutely critical to understand your cash flow. With an e-commerce business, it's common practice to pay your vendor before receiving your items. With this, you're paying upfront for your inventory. You must turn around and sell the inventory to your customers to get that cash back.

With a bootstrap company, there are some creative ways to avoid this exact scenario. You could do a pre-order on your website or a crowdfunding campaign through a platform like Kickstarter so that you can collect pledges prior to placing an order with your manufacturer. This way, you can test the demand for the product prior to placing a large order.

We're actually in the midst of a Kickstarter project ourselves. My wife and business partner Sandy, runs an e-commerce brand called Spotted by Humphrey. She developed an awesome, innovative product called Poopy Daisy, an accessory you can attach to your dog's leash so that you can walk hands-free during your walk instead of carrying your dog's used poop bag everywhere on your walk.

When the campaign ends, we will collect all the funds from the supporters and place an order with a manufacturer. If you're curious about Posy Daisy, I will link to it in the show notes. One last example I wanna share is when Urban EDC, our other e-commerce brand, primarily used Facebook ads to drive traffic to our website In the early days.

Through these ads, we drove record sales. I remember specifically celebrating this moment with Sandy, my wife, and my business partner. It was the end of the month and we had broken our all-time sales record for the month. We opened up a nice bottle of pinot noir and celebrated thinking that we had finally found some kind of magic formula to grow Urban EDC.

Then a week later I got an email from Facebook stating that our account had been banned because we were selling puck knives. I couldn't believe it. We had lost our primary growth engine. Our sales fell precipitously in the following weeks. How could we recover from this? I remember thinking at the time, I'd heard other stories of brands losing nearly all of their website traffic due to Google changing their search algorithm over.

I didn't think this could happen to us, but it did. As we scrambled to recover from this new constraint, we had to get creative and come up with some other plans to grow our business. So what did we do? We doubled down on our social media marketing with the goal of growing our newsletter. We found ambassadors who love our brand to become affiliates for us.

And we started opening up our wholesale channel for other retailers among other growth strategies. Looking back, the Facebook ads ban was one of the best things that could have ever happened to us to teach us this one important lesson. Never put all your eggs in one basket when it comes to your growth channel.

This is a common mistake for entrepreneurs, especially in the early stages when resources are tight and when you see something working well, you double down on that. Make sure you're mindful of the possibility that one day this can be taken away from you in an instant.

To summarize today's episode, constraints can feel like blockers that restrict your growth, but once you see the bigger picture, they may actually end up unlocking a different area of your business that you never thought possible. Are there any constraints in your business currently that are blocking you?

How can you use this constraint as an advantage to expand your business? Bottlenecks, on the other hand, are something to avoid and resolve immediately. You will want to be mindful of working on your business versus working in your business. Keep the big picture in focus and it'll be easier for you. Identify bottlenecks from a bird's eye point of view.

Before we finish up today, I want to tell you about the next episode of First Class Founders. As you may already know, we are a bootstrapped company, so why did we choose to stay bootstrapped? Should you bootstrap your business or raise funding? This is one of the most controversial topics, and I want to discuss the pros and cons of both scenarios.

I'll dig deeper and share my opinions on this topic. If you've found any of this valuable today, please help us grow this show by sharing it with your work colleagues, family members, or anyone else you think might find this show valuable. You can tell them to go to FirstClassFounders.com where they will be able to check out a few episodes and subscribe.

Thanks for listening, and I'll see you on the next episode of First Class Founders.