By Dan S. Kennedy
Entrepreneurs, by nature, instinct, conditioning, competitive spirit are very into “more”. So are sales professionals. More gross revenues. More sales. More customers or clients. More web site traffic. More leads. Even more square footage, more employees. But more is not necessarily better, not necessarily more profitable or even proportionately profitable. The unbridled lust for growth of any kind at any cost gets a lot of business owners into a lot of trouble. For salespeople, it can lead to burn-out. For both, their best clientele being poorly served and neglected as quality thins to accommodate quantity.
Few business owners take the time and trouble to carefully and analytically study their present customers or clients, account by account, for contribution to net profit. Few entrepreneurs analyze their own activities and time useage the same way, in terms of contribution to net profit. When they do, they discover the classic 80/20, 20/80 Rule is alive and well, and further, that there’s a 95/5, 5/95 Rule too. In brief, 80% of profits tend to come from 20% of clients and time. Usually about 5% of clients and 5% of time use prove infinitely more valuable than the other 95%. The results of this rarely done analysis are often: getting rid of the least profitable clients, stopping or delegating or otherwise altering the least profitable time use. In many instances where I’ve come in as consultant to a business, coach to an entrepreneur, I’ve made less into more, by pruning away the clientele consuming 80% of the resources but contributing only 20% of the profits, creating fewer customers rather than more, and enhancing the relationships with the 20% who contribute 80% of the profits. Most business owners are being supported by a relatively small, often shockingly small number of “best” customers; all the rest, the bigger number are illusion. Most entrepreneurs are also producing 95% of their income and wealth from only 5% of their time. Even a slight re-adjustment in time investment can multiply income.
In my NO B.S. TIME MANAGEMENT BOOK FOR ENTREPRENEURS, we begin in Chapter 1 with some math exercises, to accurately determine what your time is worth, what it must be worth to achieve your goals. Together, we shift your thinking about time to investing, to allocating, managing and measuring results in terms of investment and return on investment. The business operation changes and behavioral changes this provokes are frequently radical, dramatic, exciting and extremely beneficial. I promise, you’ll do some very serious thinking about the ways you invest your time if you read that Chapter.
The big questions are these – do you actually know what your hour must be worth, in order to reach your desired income goal for the year? Do you accept and prioritize responsibilities, projects, opportunities, reject, delegate away, based on that number? Do you have good ‘future banking’ statistics so you can judge the value of what you just did with the last hour? In short, are you doing your best to consciously, deliberate, mathematically, financially hold yourself accountable for the ways you invest your time?
I hate the near extinction of full serve gas stations. In the ten minutes required to pump gas and wipe windshield and windows myself, I could have sat comfortably in the car and listened to an informative tape, jotted an answer to a memo, read an item from a newsletter or magazine or just thought about a business matter – any one of which infinitely more valuable than the minimum wage job of pumping gas. It is example of the fact that we let ourselves do low wage work much too frequently. You wouldn’t take it as a part-time job and go pump gas or clean your house or mow your grass for $8.00 an hour, would you?
If you mow your lawn as recreation, as exercise, as a hobby that you genuinely enjoy, that’s one thing. But if you do it because you’re too cheap to find and pay a kid to do it, that’s another.
Add to this the “more problem”, the piling on of “more” that produces on more low wage work and low value consumption of time for you. This you must be very, very careful of. The more successful you become, the more your entire approach to opportunity and to time must evolve.
Consider something as simple as the client who requires an excessive amount of time, access, coddling. As your time and your staff’s time grows more valuable, he becomes less valuable. If, to reach your goals, your hour must be worth $1,000.00 and your staff’s $100.00, and he consumes 10 hours a year of each more than the next client, he costs you an extra $11,000.00. But if your time has to be worth $2,000.00, your staff’s $200.00, the same 10 hours of your time plus 10 hours of staff time leaps to $22,000.00. If his contribution to income stays the same, he’s instantly worth $11,000.00 less. At what point does he cost more than he’s worth? At what point are you better off without his revenue altogether? Your gross might dip, but your net might improve. And/or that vacuum fill with a more profitable account.
The all-time champion worst idea for doubling your income is to double your work.
You’ll be a rich corpse.
This is also the most unimaginative, uncreative, non-analytical approach. Consider farmers. At one time they all plowed with mules. They tried to get the mules to pull harder, move faster. They hitched two, three or four mules together. Then tractors. Then faster tractors. All the same brute force multiplied. One of my earliest consulting clients in the 1970’s was a company that did very complex, detailed soil analysis of farms. Their sales rep collected soil samples in test tubes from every part of the farm. In the lab, they analyzed each sample. On a color-coded map, they depicted nutrient and mineral deficiencies — different in soil only a few feet away from another hunk of ground. They prescribed different fertilizers for different parts of the farm. The soil’s ability to produce was greatly multiplied. Not by the farmer working longer hours, not by more mules pulling harder, not by a bigger tractor. By scientifically, strategically, cleverly leveraging the real asset: the soil.
Now consider salespeople. To increase income, they will try to generate more leads, squeeze in more presentations, run more appointments, work longer hours, talk on the cellphone while driving, eating, even while peeing! But that’s not leveraging the real assets: time and sales skill.
Consider the business owner. Same approach. More advertising, more leads, more customers, more products, longer hours.
It is all too common to attempt reaching bigger financial goals simplistically, by adding more customers to beget more sales even if you must personally work more hours and juggle more responsibility and absorb more stress, and add more overhead. But this IS simplistic. Almost unthinking. Certainly uncreative. A more creative, cerebral, interesting approach is to search for ways to achieve more with less.
About The Author: Dan Kennedy is the author of nine business books, including his newest, NO B.S. TIME MANAGEMENT FOR ENTREPRENEURS, available in bookstores or from online booksellers. Additional information and free chapter previews at www.nobsbooks.com. Included with the book, a coupon for a free kit of peak personal productivity tools. Kennedy is also a busy entrepreneur, consultant, speaker and direct-response advertising copywriter. Info at www.dankennedy.com.