How To Get Paid More: The Problem Size Framework - BigDeal

BigDeal Podcast Episode Summary: "How To Get Paid More: The Problem Size Framework"

Release Date: May 26, 2025
Host: Codie Sanchez

Introduction: The Importance of Solving Big Problems

In this pivotal episode of BigDeal, host Codie Sanchez delves into a crucial strategy for entrepreneurs and business owners: identifying and solving significant problems to drive substantial financial growth. Right from the outset, Sanchez emphasizes that solving big problems is directly correlated with making big money. She states, "If you aren't solving big problems, you won't make big money." [(00:00)] This sets the tone for an in-depth exploration of the Problem Size Framework, a structured approach to prioritizing business challenges that can unlock greater revenue.

Reframing Problems as Growth Opportunities

Sanchez introduces a fundamental shift in perspective: transforming how we view problems. Instead of seeing challenges as obstacles, she encourages listeners to reframe them as growth opportunities. "We're going to reframe. I no longer wanna hear you say, in your business, problems. Instead, we're gonna say there's a growth opportunity." [(03:45)] This mindset change is pivotal, as it aligns problem-solving with business expansion and financial success.

Insights from Marc Andreessen on Elon Musk's Problem-Solving Approach

A significant portion of the discussion centers around insights shared by Marc Andreessen regarding Elon Musk's method for tackling issues across his various ventures. Andreessen highlights Musk’s relentless focus on identifying and addressing the biggest problem each week at his companies. "What Elon does is he shows up every week at each one of his companies. He identifies the biggest problem that the company's having that week, he fixes it. Then he finds a new problem." [(05:30)] This approach, termed the "relentless problem loop," underscores the importance of persistent and proactive problem-solving at the highest levels of an organization.

The Problem Prioritization Matrix: A Framework for Decision-Making

Central to the episode is the introduction of the Problem Prioritization Matrix, a tool Sanchez employs to categorize and prioritize business challenges based on their size and risk. Drawing inspiration from Brad Jacobs, Sanchez explains how to evaluate problems to determine which ones offer the most significant financial rewards with manageable risks.

The matrix consists of four quadrants:

Big, Low-Risk Deals: Highly desirable but often non-existent.
Small, Low-Risk Deals: Easily achievable but offer limited financial gain.
Small, Hairy Deals: High difficulty with minimal rewards, typically to be avoided.
Big, Hairy Deals: High rewards paired with significant challenges—the ideal focus for growth.

Sanchez emphasizes, "The bigger the earnings potential, the bigger the problem." [(15:10)] By targeting Big, Hairy Deals, businesses can position themselves for substantial growth while navigating significant but solvable challenges.

The Rice Formula Adapted for Revenue Prioritization

Sanchez introduces a customized version of the Rice Formula to quantify and prioritize problems based on their Revenue potential, Impact, Confidence, and Effort. Unlike the traditional Rice formula that includes "Reach," her adaptation replaces it with "Revenue" to align directly with cash flow and financial outcomes.

Components of Sanchez’s Rice Formula:

Revenue Impact: Potential earnings from solving the problem.
Cost Impact: Expenses associated with addressing the issue.
Confidence: Level of certainty in the estimates (e.g., 80% confidence represented as 0.8).
Effort: Time and resources required to implement the solution.

Calculation:
[ \text{Rice Score} = \frac{(\text{Revenue Impact} - \text{Cost Impact}) \times \text{Confidence}}{\text{Effort}} ]

For example, "If you have a revenue opportunity of a million dollars, minus a cost of $500,000, with 80% confidence, divided by four weeks of effort, yields a Rice Score that helps prioritize this problem." [(22:45)]

This numerical approach allows businesses to make data-driven decisions about which problems to tackle first, ensuring that efforts are directed toward initiatives with the highest financial return relative to their cost and required effort.

Practical Application: Categorizing and Solving Problems

Sanchez shares her personal methodology for applying the Problem Prioritization Matrix within her teams. She advocates for categorizing every issue and focusing exclusively on solving the high-impact, high-reward problems. "Everybody wants a to-do list like this. They want 452 things that they can do to check things off their list to feel good. But what they actually need to do is solve one problem." [(30:20)]

By adopting this focused approach, businesses can streamline their operations, eliminate bottlenecks, and drive significant growth. For instance, Sanchez describes hiring a new executive team member as a Big, Hairy Problem that, once resolved, can lock the business’s future success.

Embracing a Process-Driven Approach to Business Ownership

Sanchez underscores the isolating nature of business ownership and the importance of having a structured process to manage problems effectively. "If you don't know what to do next, it helps to have a buddy to figure out what to do next. And oftentimes I think that buddy can be an equation. You can have a process..." [(35:00)] By implementing the Problem Size Framework and Rice Formula, business owners can reduce anxiety and make informed decisions, fostering a more resilient and scalable business model.

Conclusion: Leaning Into Challenges for Greater Rewards

Wrapping up, Sanchez reiterates the necessity of embracing big challenges rather than avoiding them. She encourages business owners to lean into big, hairy problems, using the Problem Size Framework to identify and prioritize issues that will drive the most significant financial benefits. "If you want to win, you have to rearrange your brain to lean into those big hairy problems." [(40:15)] This proactive and structured approach to problem-solving is positioned as the key to unlocking substantial business growth and financial success.

Notable Quotes:

"If you aren't solving big problems, you won't make big money." — Codie Sanchez [(00:00)]
"What Elon does is he shows up every week at each one of his companies. He identifies the biggest problem that the company's having that week, he fixes it." — Marc Andreessen [(05:30)]
"The bigger the earnings potential, the bigger the problem." — Codie Sanchez [(15:10)]
"Everybody wants a to-do list like this... But what they actually need to do is solve one problem." — Codie Sanchez [(30:20)]
"If you want to win, you have to rearrange your brain to lean into those big hairy problems." — Codie Sanchez [(40:15)]

This episode of BigDeal offers a comprehensive guide for business owners aiming to scale their operations and increase their earnings by focusing on solving the most impactful problems. By adopting the Problem Size Framework and utilizing the adapted Rice Formula, entrepreneurs can systematically identify and prioritize challenges that offer the greatest financial rewards, positioning their businesses for sustained growth and success.

Transcript

Cody Sanchez (0:00)

This episode is super, super important. How to pick big problems. You aren't solving big problems. You won't make big money. When you find a problem, that's where the money is. That's not a mindset, by the way. It's a skill set. Big, hairy, solvable. This is where most scaling problems and opportunities live. This is the exact moment where most people run, and thus you get to lean in. This is a big Deal podcast and I'm Cody Sanchez. Welcome back. Today we're talking to you builders about how to make more money. The truth that we have today is if you aren't solving big problems, you won't make big money. And I wish I had heard this sooner, that if you want to make more, the easiest way is to find the hardest game and to play it. You know, the truth of the matter is, in business, you're always going to have problems. If your business doesn't have problems, it's probably dead. So I want to teach you a framework I use that helps me find the right problems that will make you lots of money. And this is why what I'm talking to you about is so critical today. If your business picks the wrong problems to focus on your, you will lose all your money and not make any more of it. If your team picks the wrong problems, you're dead. And if you as an employee pick the wrong problems, you'll never make more money. So this episode is super, super important. How to pick big problems. Oftentimes we run away from big problems, right? We wanna beat our head against the wall when you come up to them. But I think this story started to reframe it totally for me. So a few months ago, Marc Andreessen was asked why Elon Musk is able to build rockets, electric cards, brain chips, tunnels so effectively. And whether you like his politics or not, the answer was so good. Mark said simply, what Elon does is he shows up every week at each one of his companies. He identifies the biggest problem that the company's having that week, he fixes it. Then he finds a new problem. And he does that every week for 52 weeks in a row. It's a relentless problem loop. Simple in theory and brutal in practice. It requires proximity, so. So a willingness to actually live inside or right next to friction. And most people don't operate that way. Most companies definitely don't. Problems are treated like biohazards. Stay away. Okay, so rule number one, we are going to reframe. I no longer wanna hear you say, in your business, problems. Instead, we're gonna say there's a growth opportunity. Here's the truth of the matter. When you find a problem, that's where the money is. The second you find a problem, you should be like, oh wait a second, this was a bottleneck in the way of the flow of money funneling. To me it sounds woo woo, except it's real. We're going to process them and then we're going to actually welcome them. This is different than what the rest of corporate America does because we've become professionals at problem avoidance. But at SpaceX they do the opposite. They send a 400 square foot skyscraper into the sky, knowing full well it will probably explode spectacularly publicly. But they want to know exactly what breaks when and why. Because every failure will help incapacitate dozens of future problems. So Andreessen describes Musk's ideas something like this. Like incredible devotion from a leader to fully, deeply understand what the company does and being the lead problem solver in the organization. And that last part really matters, the lead problem solver, because it isn't really glamorous. I mean, if you understand this, you know the uncomfortable truths is that as a founder you're going to do the thing that no one else wants to touch. That's it. But that's where all the leverage is. What you earn usually reflects what you solve. And that's why like prioritization, which sounds kind of fluffy, is actually super, super important. If you let low level problems become what you do, you get low level pay. You have to be able to outsource the low level problems, otherwise you'll never be able to build rockets. Now you don't need to like Elon to understand this. I don't think you don't need to agree with him. You don't need to launch rockets either in a $3 million H Vac business or a 20 year old manufacturing brand. One constraint, one fixable pricing model, one key hire, one broken ops process can change the trajectory of the entire company. What you probably do need to do is move towards the problem that's going to move the needle. I want you to think about it like this. On the left hand side of the graph, up and down you have your earnings size, how much money you can make. On the right hand side of the graph you have the problem size. I want you to realize that they're directly correlated. The bigger the earnings potential, the bigger the problem. The smaller the earnings potential, the smaller the problem and vice versa. So we are going to actually figure out how to prioritize problems using what I call the problem prioritization matrix. It's a mouthful, but this is what I use. So Brad Jacobs has built multiple billion dollar companies in logistics and just about everywhere. He wrote a book called how to Make a Few Billion Dollars, which I thought was cute. But what I love is he talks about this in a very specific Brad only way. So Brad says, essentially think of M and A. So mergers and acquisitions, something we talk a lot about is having four quadrants. This is the same for any business and any problem. They're defined by size and risk. So first you can see on the graph if you go to YouTube, you have big, low risk deals are the ones everybody wants, right? You can make a lot of money, but not a lot of risk. But they don't actually exist. The second is small, low risk deals. They exist, but you can't make much, much money from them because of their size. Then you have small hairy deals. That's the worst quadrant. That's like they're not going to make you much money and they have a ton of problems. The reward is super limited. The odds are stacked against you. So why bother the bingo? What you are looking for in your business is the big hairy deal. If you can find a big hairy deal with solvable problems, that's where the real money is. And Jacobs didn't win by being perfect. He won by getting really good at solving the right problems. So he's like, I'm not surprised when things don't go perfectly. That's kind of the nature of this thing we're doing. That's not a mindset, by the way. It's a skill set. Big, hairy, solvable. This is where most scaling problems and opportunities live. Now, you don't want it to be fatal, not unsolvable. We're not looking for like cancer solving. But you hit growth and suddenly your cash conversion cycle turns sour. Your ops leader is underwater. Your CRM looks like it was built by a bunch of rabid raccoons. You've got customer demand, but no clean way to deliver. Revenue's up, morale's down. Your systems scream at you every time you find five new clients. You guys, those aren't problems. That's not failure. That's actually your growth unlock. Every time you find one of those, you should be silently thanking yourself because Jacobs would argue, and so would I, that this is the exact moment where most people run and thus you get to lean in. So if you want to win, you have to rearrange your brain to lean into those big hairy problems. But and figure out how to cut off the hair and de risk. He would say that's the job. Not avoiding the hard problems, but identifying them and selecting the right ones to solve. By the way, if you're building a business right now and you're stuck or you want to break out to the next level, maybe you're not where you want to be today. Believe me, I've been there many, many times. I want you to know I got you. We help thousands of business owners a year figure out how to scale to the next level. One of my favorite mentors said, every level you have, there's just a higher level and a higher devil. And. And so if you've been in business for a while and you're doing six, seven, or eight figures, there's probably one thing standing in the way of your next level. That's why we host growth and scale workshops four times a year throughout the year in Austin, in Miami, in San Diego. And you may be a fit to come to one of them. If it sounds interesting to you to get help on how to scale your business to the next level, you can reach out to my team at the link in the show notes. We believe in you builders, but we also believe that it's a lonely road and you can't do it by yourself. So I like to take every single problem that I have and put it in that quadrant. I need to hire a new administrative assistant to answer email. Well, it's kind of like a small problem with a small reward. Okay, that's fine. I could spend a small amount of time on it. I need to find an entire new exec team because my exec team isn't functioning right now. Well, that's actually a big hairy problem. But if I figure it out, holy crap. I spent six months looking for the president of this company. Contrarian thinking I spent $80,000 on the search just for the recruiter to find him. And the reason I was willing to spend all that time and all that money is because I knew when I found him, even if I paid a lot to find him and then I had to pay him a lot, that that one person would lock my entire business. So I like to do this to myself. I'm like, every time I get a problem, I'm like, self, remember? It's funny, like, how people get upset about finding problems in their business. That's what business is. It's constantly finding and solving problems and learning to enjoy the process. If the issue is real, but solvable, keep going. I think most business owners waste years Trying to avoid these moments and the best ones move towards them. I have our teams use this matrix all the time. Print this out, put it up on the wall, have them categorize their own problems and only solve the big ones. I constantly am asking my team, why are you in here? Steve Jobs was actually really famous for this. He was famous for holding a meeting. A bunch of people would be in there and then he would look at somebody and if they weren't adding value and it didn't seem like they were relevant to the meeting, he would what are you doing in this meeting? Which seems kind of rude, but actually what was he doing? He was freeing them up to leave if it wasn't relevant to them. He was saying, this isn't your problem set. So for instance, here's how I did it this week. I literally this week was working on some funnels that we have for one of our businesses. So most businesses have some sort of funnel that leads to a product. You get your original lead and you move it through the process until they finally, until they finally buy. Well, a lot of times if you're talking to executives, they name all these different reasons why stuff is going on. But I start with this multi step process first. Name your potential problems. Okay, so we listed out every single problem that marketing had. Then we picked the biggest one to solve. How we wrote down how much money we could drive from each one and we wrote down how much cost we could have from each one and we wrote down all the potential solutions. So this is called the Rice formula. So this model helps organizations make better data driven decisions by scoring based on four key factors. Reach, impact, confidence and effort. But I change mine to revenue. How much money will this problem that I solve make me impact? How much cost impact will we have for doing this? Like how much will it cost me? Confidence. How much confidence do we have or you have in your estimates, like percentage or decimal reflecting certainty. So like if you're 80% confident, that's 0.8. And then effort. How much total work, personal months, weeks or hours will this initiative require? So let's use an example. So a Rice score. Let's say here that you have a revenue opportunity of a million dollars, you put a million dollars up front minus the cost, $500,000, you put that all in parentheses times 0.8. I am 80% confident in both of these numbers. The revenue I can drive plus the cost. Then I divide all of that by four because I think it'll take me four weeks to do that gives me a score now, every single thing that I'm going to do, I score this way. Why? Because your ability to choose the right problems will make you more money. Now, some companies lay this out with reach as opposed to revenue, but I really care about cash flow, as you guys know. Here's the truth. If you don't know what to do next, it helps to have a buddy to figure out what to do next. And oftentimes I think that buddy can be an equation. You can have a process, and process limits anxiety. Follow the process, and you know that you're going to hit this right step at some point. If you don't get up. In business, one of the loneliest things you can be, I think, is an owner of a business. A lot of people think that it's hard to be an employee. Having been both, I would say an employee is a lot easier. And sometimes you make more money because you're not spending in order to eventually one day have the potential ability to make money. We know that it's hard to be an owner, but it gets a lot less hard if you have a process and you have a principled way to do just about everything you do. That's why I use the rice score. If I go, okay, Cody, when a problem comes into my head, I'm not stressed about it because I know a problem is hiding opportunity. I almost visually think about a problem like a curtain, where if I understand the problem, I pull back the curtain, and behind that curtain is money. Now I just need to figure out how much money is hiding behind the curtain. So I use the Rice score so that I can make that curtain transparent. I'm like, all right, there's this amount of revenue, the cost. Here's my certainty, my fix. I think we should go after this problem. This will also really help you if you have other team members or employees on your team. Why? Because everybody wants a to do list like this. They want 452 things that they can do to check things off their list to feel good. But what they actually need to do is solve one problem. And if you get that one thing out of your way, you probably have a different business in front of you entirely. All right, let me know if you liked this episode this week, you guys. And if you're struggling with your one thing in business, we are here to help you. This is my entire life mission, is that you never stand alone in your business, and you get to follow proven data and systems in order for you to grow. So if you wanna talk to our team about coming to one of our scaling and growth workshops. If you wanna talk about different resources and communities we have for builders, then you can hit the link in the description. We are here to help to help you as owner nation. All right, see you next week. Hey, I have something special for you for being such a loyal listener. Because you're here with me all the time, I get asked by a bunch of you, how do I tell if I should buy a business or not? Should you buy a business or not? What price should you buy a business at? How do you structure your deal? I got you, fam. So I'm going to gift you our deal calculator. Every time I look at a deal, I grab the numbers, plug it in here and see how much money I could make or lose if I did a good or bad deal. So this is my gift to you. And if you're serious about buying a business, we want to help you. You can talk to my team about if you're a fit for our business, buying community or curriculum. No matter what, here's your free gift. And if you need a hand to hold, I got you too. Hey, crew. This is so cool. The podcast is growing like crazy. And it's only actually because of one thing. You. I don't know if you know this, but the only way the big deal pod grows is when you share it with somebody else. We don't do ads, we don't do pay for play. We don't go on other people's podcasts and talk about it. So if you think there was something helpful here, if we made you money, we made you think about your business or life differently. The most beautiful thing you can, for me, is share it. And the most beautiful thing you can do for someone that you care about is to share it with them. Help them grow alongside you. So please share the pod. That's how we grow. And also tag me on anything you share. I love resharing other builders across Instagram, Twitter and all other platforms. Thank you from the bottom of my heart. You're super important to me.