Leverage is the Key to the Big Bucks
Yaro from Entrepreneurs Journey has an article that I enjoyed called Kill the Bargain Hunter and Change Your Attitudes Toward Money and Time.
The story addresses a key issue to anyone wanting to transcend regular wages and build an income beyond what is possible trading hours for dollars.
To do this you need to build an asset that has the potential for leverage. Whether that is leverage because you have systems and people that multiply output and get things done without you, or you have access to network effects spreading your message far and wide, meaning one article, in the case of a blog, has the potential to make a huge impact on your bottom line, isn’t important as long as you have some form of leverage so your time-to-income ratio is multiplied.
You want to work with multiplication tables, not additions and subtractions, so you can leverage your time for significant rewards, not just flat discounts.
There are a couple keys involved in using the concept of leverage.
Create a Scalable System
This is the key point of being able to use leverage. You must create a scalable system.
In my previous picture framing business, I didn’t have a scalable system and what this created the very bizarre business situation of too much demand being a bad thing.
If you think of a simple website that sells widgets (acquired from a drop shipping company for example), then you can have a scalable business. It makes x dollars per visitor so the more traffic it gets, the more money it makes.
Once a visitor hits the site, the system takes over and for every 100 visitors the system is able to produce a predictable profit.
Blogging in itself is not an easily scalable business. Blogs require constant updates to retain their traffic. That’s one of the reasons I like information products.
Ways to Achieve Scalability
Blog: outsource content creation and development
Information or Digital Product: run an affiliate program, this offers incentives to others to send traffic to you.
Physical Product: outsource product manufacturing (this was what I needed to do in my previous business).
Think of scalability as an engine, what would it take for your business to go 5 times as fast. To go from 5 stories a week to 25 stories a week, I would need to spend every waking hour writing. But if someone else was writing, I could simply hire more writers.
This ties back into Yaro’s story, that not being able or willing to hire other people can greatly reduce your ability to scale your business and, ironically, lower the earning potential of your business.
Even since my picture framing business I have been aware of this principle, but still it is a difficult concept to let go begin to spend money creating a scalable system, when you are unsure of the returns.
I’ve been trying it out in small doses, allocating a certain amount each month for outsourcing and trying to pick the tasks that I either enjoy the least, or the ones that free up the most time for the least cost.