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5 Principles Businesses Can Learn From Moneyball

Moneyball Business

Moneyball is a film about baseball, but on a deeper level, it’s about how to succeed in life through a series of broader principles, which can be applied to many areas, including business. Here are five such principles that business owners can utilize.

1. Use cold hard facts, not arbitrary belief – In Moneyball, Atheltics General Manager Billy Beane repudiates a roomful of scouts and tells them the As are going to start using statistics and objective analysis. Human beings have a tendency to make decisions on something they believe without always having facts to base these decisions on. Call it what you will, a gut feeling, a hunch, some kind of inherent belief you feel is right. There’s nothing wrong with having these feelings, but it’s important to back them up with facts before acting on them. Facts and numbers are objective, unlike subjective feelings and beliefs.

2. Learn to accept luck for what it is – Even though the Athletics put together a great team, they still lost in the playoffs. Although it’s disappointing, Billy Beane realizes that luck is a factor, and that the solution is not to overreact but to stick with the processes that got the As that far in the first place. It's important to put yourself in the best position to succeed but the game isn’t played on paper. Just having the best product doesn’t always mean everything will break the way you want right away.

3. Know when to have benefits of group, and benefits of individual in control – Even though Billy Beane starts to question his scouts judgment, he doesn’t dismiss them altogether. He also relies heavily on the input of his assistant, who is steeped in statistical analysis. Still, he knows that when he has to make a decision on a trade or a signing, it’s ultimately his call. Sometimes there's a benefit to having a number of minds working on a problem, and sometimes there's a decision that requires bold action by one person. Knowing when to use each can be essential for successful decision making.

4. Take advantages of inequalities in the marketplace – One of the ways the Athletics are able to gain value even though they can’t afford to pay players the same amount as the Yankees or the Red Sox is by looking for areas that other teams aren’t taking advantage, such as on-base percentage. Do what’s not being done, find under served markets with room for growth.

5. Know when to wait, and when to be dynamic – As mentioned above, Beane is generally patient, but he’s not conservative and afraid to make a big move when he feels the times call for it. There's a difference between waiting long enough to let your plan fully going into action and waiting too long when there's some way you can affect it. Rather than overhauling an entire plan, there are always ways to tweak and improve subtlely to help the bottom line.

Social Media Will Sell Your Next Franchise. Just ask the Former VP of Marketing at the IFA

Franchisors need to have guidelines for franchisees when it comes to using social media, but to date, most have not put together formalized play books for franchisees to follow. There are plenty of things you can do so your franchisees can create innovative marketing strategies using Twitter, Facebook, location based networks, blogging, etc., as long as they understand the guidelines of the franchisor first.

Why I Have an Issue with the Forbes Franchise Rankings

The 5-Year Growth Rate and 5-Year Franchise Continuity are both great independent metrics of how a franchise is doing on average. As a potential franchisee both of these statistics are vital for selecting a franchise - you want to select a franchise that will provide you with a high return on investment and which will survive in the long run. I think these are, as FRANdata and Forbes suggested, two of the biggest (if not the two biggest) and most obvious metrics for whether or not a franchise is a “good” opportunity for a franchisee. But how do you use these to determine which franchise is BEST? This is the fundamental difficulty in coming up with a ranking system - it isn’t the difficulty in separating the good from the meh from the bad - it’s separating the great from the good and the best from the great. In the case of these rankings I found it to be pretty difficult to comprehend how they differentiated between the top ranked franchises. For instance, if you look at the difference between Discover Map (Forbes #4), Just Between Friends (Forbes #5), & Seniors Helping Seniors (Forbes #6) they all have extremely close continuity ratings and substantially different growth rates. In fact, in the case of these three, the overall rankings are opposite the growth rate rankings. Seniors Helping Seniors is ranked at the bottom of these three franchises despite having a growth rate that is 31 percentage points higher than Discovery Map and a continuity that is only 2 percentage points lower. This suggested to me that continuity was viewed as the dominant factor. But that logic didn’t hold for the rest on the “Economy Class” Top 10, as BrightStar Care (Forbes #7) had the same growth rate as Pop-a-Lock (Forbes #8) but a continuity rate that was 12 percentage points lower. These comparisons show that these were not the only two factors that went into the rankings, which is understandable, but no other factors that are explicitly listed in their results seem to be major factors.

Know Before you Go – Non-Compete Provisions in Franchise Agreements

In general, non-compete provisions state that the franchisee will not, during the term of the franchise agreement and for a reasonable period thereafter (typically two or three years), own or be involved in any “competitive business.” What constitutes a “competitive business” will vary from franchise system to franchise system, but most franchisees can generally expect to be prohibited from taking part in any business that offers goods/services that are either identical to or competitive with the goods/services offered under the franchise system. Non-compete provisions must be limited in geographic scope, and generally cover a set radius (usually somewhere around 5 to 25 miles) around the former franchised outlet, and possibly also the outlets of other existing franchisees.