Not All Business Owners Are Alike

If you’re an economics major, you become proficient in the definition of Comparative Advantage. Comparative advantage is an economic concept that highlights the benefits of specialization and trade between individuals, regions, or countries. It suggests that when entities focus on producing goods or services in which they have a lower opportunity cost compared to others, overall economic efficiency increases. Each entity should specialize in the production of goods or services where they can produce at a lower relative cost or with a higher efficiency compared to others. By doing so, they can maximize their productivity and resources, leading to higher output levels and economic growth. Comparative advantage recognizes that even if one entity is more efficient in producing all goods or services, there are still gains to be made through specialization and trade, allowing entities to benefit from the differences in their relative efficiencies.

A great example of this is, If I make $15 per hour and I could pay someone $5 per hour to mow my lawn, I would be losing $10 per hour if I mowed my lawn by myself. Because my time is better spent working and earning $15 per hour. This is also related to opportunity cost. Placing inputs (including your own labor) in the right positions to optimize efficiency and ultimately maximize profit (or output) is the cornerstone of business.

This relates heavily to business owner types. Some are skilled in different ways based on personality, knowledge, etc. Where they spend their time is critical to growth of their operation. Placing their strengths in the right places with a disposition of remaining tasks should be a key priority. You wouldn’t want an engineer trying to sell the product they designed nor would you want a salesperson to pick up CAD drawings and make suggestions. Smart but soft business owners should maintain a healthy level of separation in managing people.

While business owners can have diverse personalities, here are some common personality types and recommendations on where they might best spend their time to maximize efficiency in their operations:

1. Visionary/Entrepreneurial Personality:

• Characteristics: Creative, risk-taking, innovative, big-picture thinker.
• Best Time Allocation: Focus on strategic planning, business development, and identifying new opportunities. Delegate day-to-day operations and detailed tasks to capable team members.

2. Analytical/Detail-Oriented Personality:

• Characteristics: Methodical, organized, data-driven, attention to detail.
• Best Time Allocation: Engage in financial analysis, performance monitoring, and operational efficiency improvements. Spend time overseeing processes, quality control, and ensuring compliance. Delegate more creative and visionary tasks to team members.

3. People-Oriented/Leadership Personality:

• Characteristics: Strong interpersonal skills, empathetic, team builder.
• Best Time Allocation: Invest time in team management, employee development, and fostering a positive company culture. Engage in customer relationship management, networking, and sales. Delegate detailed tasks and operational responsibilities to trusted team members.

4. Technical/Subject Matter Expert Personality:

• Characteristics: Deep knowledge in a specific field, expertise-driven.
• Best Time Allocation: Focus on technical aspects, research and development, and staying updated with industry trends. Act as a mentor or consultant to team members, providing guidance and expertise. Delegate administrative and non-technical tasks to others.

5. Results-Oriented/Action-Driven Personality:

• Characteristics: Goal-focused, driven, decisive.
• Best Time Allocation: Allocate time to setting clear objectives, creating action plans, and monitoring progress. Engage in decision-making, problem-solving, and driving initiatives forward. Delegate routine tasks and administrative duties to others.

It’s important to note that these are general guidelines, and business owners often possess a combination of multiple personality traits. The key is to understand one’s strengths and weaknesses, delegate tasks that others can handle effectively, and focus on areas where the owner’s unique skills and expertise can create the most impact. Maximizing efficiency requires finding the right balance between personal involvement and delegation, allowing the business owner to play to their strengths while effectively managing the overall operation.