Why You Don't Matter

Posted March 06, 2007 in Leadership, Management, Finance, 13 Comments »

Scenario: "Dude, everything has to go through me. I'll single-handedly make billions for us. Yay!"

Most entrepreneurs -- and we love 'em -- try to get their hands on every-frickin'-thing.

  • "My reputation's on the line!" they say.
  • "Only I know how to provide the best service!" they scream.
  • "I have the experience!" they think.

But when you do everything, you destroy your freakish potential to fatten your company's profits like a mofo with wings.

"But, why don't I matter?"

First, we'll qualify: You do matter, you-sexy-you -- but not like how you might expect.

If you're like most business-builders, the dollars you generate for your company correlates to the time you spend working.

  • That is, the ratio of "You/Profit" always equals a non-zero number -- meaning that your business generates cash only when you're working.

(We define the variables specifically as - "You": time you spent working; "Profit": company profits generated)

For instance:

  • If your crazy ass fell off a cliff, your business generates: $0.
  • If you took a vacation, your business generates: $0.
  • If you went to a conference, your business generates: $0.
  • If you celebrated your birthday, your business generates :$0.
  • If you went rock climbing, your business generates: $0.

Unless you're some supernatural badass, you're running on limited time.

You can only do a certain number of things -- to generate the company $$$ -- before it's sleepy-sleepy time.

Time limits you to how much money you can generate for your business.

But...but...but....

What if your badass could generate profits while:

  1. You're sleeping?
  2. You're snorkeling in the Bahamas?
  3. You're auditioning on American Idol?
  4. You're watching Oprah?
How financially sweet would that be? Oh-so-sweet:
  1. Your business would generate income without your blood, sweat, and tears (i.e. your presence, time, energy).
  2. More importantly, you'd free yourself to work on additional opportunities to fatten your business's profits even further.
(The best of both worlds. Sexy-fab.) Folks, getting to #2 separates the ridiculously-filthy-rich companies from the "just-getting-by" folks. That's the secret to all the high-flying companies you see gracing the covers of Forbes, Fortune, BusinessWeek, Time, and Newsweek.

"So, how can my company generate profits without my booty there?"

Simply, fatten profits by making: "You/Profit" = 0. That is, find ways to make your business rake in $$$ regardless of your presence. Consider this demonstration:

Grammie and The Chocolate Coffee Factory

Grammie serves delicious chocolate coffee in the Midwest. The town raves about her customer service. For every transaction, she:
  1. Gives a menu.
  2. Takes the order.
  3. Makes the coffee.
Without her presence, her company generates: $0. Now after reading this article, Grammie seeks fatten profits by making "You/Profit" = 0 -- meaning her coffee business will generate cash without her presence. How?
  1. She hangs a big-giant-frickin' menu in a prominent place for customers.
  2. She hires young college kids, and gives them a sweet manual on (1) making coffee, and (2) taking orders.
  3. She incorporates a 100% satisfaction-guarantee -- adjusting for lost sales by reducing the wages of an offending employee. (That ensures consistently great customer service.)
Result?
  1. While she's not there, her coffee business: "Ka-mutha-ching!"
  2. Net-effect: "Hey, let's work on an additional Tea business. Yay!"
She goes on to build a super-dope business that rocks the world like it ain't no thang but an juiced-up ostrich on a string.

The Billion-Dollar Cycle

To build your ridiculously-filthy-rich company:
  1. Step #1: Automate the business.
  2. Step #2: Work on additional opportunity.
  3. Step #3: Repeat Step #1.

Sexy.

The simple equation to rock your business:

Fatten profits by making "You/Profit" = 0.

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13 Comments on Why You Don't Matter

The Trizle Team

Posted @ 06:28 AM on March 06, 2007

Just a quick note to you fabulous people: This is one of favorite articles, ever. We hope you find it useful. If anything seems unclear, please let us know.

Oh, and we can't forget: A hearty shout-out to Grammie! Thank you for being an amazing contributor to Trizoko.

Hendy Irawan

Posted @ 06:36 AM on March 06, 2007

I really like this article. Some people call this the difference between "self-employed" and "business owner". (a "higher" level would be "investor", who doesn't actually run the business they get income from)

I'm puzzled by the equation though.

Saying profit/you = 0, when followed, means:

profit = 0 x you
(no matter how much time you spend working, you'll always generate 0 profit)

you = profit / 0 = infinity
(you have to work infinite time to get any profit)

Maybe I just don't grasp the equation.

But the concept fits in really well. :-)

The Trizle Team

Posted @ 07:10 AM on March 06, 2007

Great catch, Hendy. I fixed it ;)

I have an electrical engineering degree, and I can't even do simple math. My apologies, man.

Just incorporated the correct equation, which is reflected in the article. Thanks again for your eyes, Hendy!

-Andrew

Grammie

Posted @ 09:14 AM on March 06, 2007

I can't tell you how flattered I am for the personal dedication. You're the best, Andrew!
This is another excellent and very practical article. I can relate to it because my husband is in business for himself and he is a one man show. He recently had a fall (not quite off a cliff, but close) so now his business is generating $0. He has to re-think how he will operate in the future - maybe hire a few people to help out? It's a hard lesson to learn, for sure.

AL

Posted @ 09:23 AM on March 06, 2007

I swear I don't have a business and this kind of advice seems irrelevant to me at this stage in my life, but gosh is the way this is written really entertaining!

Damn you Trizle Team, you got my "bad-ass" really hooked! :)

The Trizle Team

Posted @ 05:38 AM on March 07, 2007

We're honored you're flattered, Grammie! -- and we're praying your husband gets better. Business is tough if it's totally dependent on one person. But as the saying goes, where there's a will there's a way. If you or your husband ever need anything from us, please don't hesitate to let us know. Hope all is well!

-Andrew

The Trizle Team

Posted @ 05:39 AM on March 07, 2007

Hi AL,

Thanks for your compliment! We're glad we hooked you in. If you ever open your business, we'll be the first one to support you. Thanks for your awesome feedback, AL!

-Andrew

Hendy Irawan

Posted @ 08:08 PM on March 07, 2007

Hehehe... Thanks Andrew...

Now let's start a debate :-)

I have my own version of the equation:

profit = (your multiplier ^ your time) + (employee time x employee multiplier) + (fixed or automatic profit)

This profit model is composed of three elements. Here we have several variables:

employee time and multiplier: Profit is parallel to the total employee time and their multiplier (each employee might have different multipliers, better employees mean better profit/time ratio). This probably what Andrew had meant originally: maximize profit per time working. Or concisely:
profit/second > 0.

I'd all this "Employee Profitability Index" or "Employee Profit Velocity" :-) [velocity since it is divided by time, just like your car's speed]. But what's measured as "velocity" is not the employee's velocity (how fast they work), but how much profit they generate during a single time frame. The goal should be: less work, less time, more profit. :-) [yeah, easier said than done]

Alright, on to the next variable... This is getting kinda boring.

fixed or automatic profit: You have fixed costs, electricity, water, TV, internet, gas, taxes, and these things. Why not have fixed profit? It's kinda' hard to pull off but it's suprising that (maybe?) few people consider this option. Put an automated soda machine in/near your office and you'll get "free" income. (yep, it costs a bit for maintenance/electricity, but at one point it will become not a burden but a "fixed profit", although small.)

Another fixed profit could be providing completely automated services. A web site, phone service, mobile services, or something like that: let the users generate their own content, outsource the maintenance when problems arise, use cheap lower-level services. I actually use this "technique" for my site gauldong.net, [a devil's confession:] it's been over a year (I guess) since I touched its code (or even login!), yet the users are still alive and AdSense is still sending me money, which pays itself for hosting. :-)

Why wouldn't anyone want a business that pays itself first?
(considering that humans aren't aware that they have to pay themselves first in order to spend anything, let alone "machines" or businesses)

your time and multiplier: This is exactly like employee profitability index, but it applies to you, not your employee. For added dramatism, I used exponential rather than linear multiplication (your multiplier to the power of your time). Which empirically speaking, you should struggle to have this kind of potential:

working for 10 minutes = $3

working for 20 minutes = $9

working for 30 minutes = $27

working for 8 hours = mutha-*(%*&@^$ profits!!!

:-)

[yeah, dream on...] :-P

Hendy Irawan

Posted @ 08:21 PM on March 07, 2007

I also want to add that to have "fixed profit", you may want to "piggyback" on another company. I know some companies do this. Commonly called "investing."

I really don't know much about investing as much as Andrew does (I do hope one day Andrew would talk about investing for personal/business finance), but as far I know you could (e.g.) buy other company's shares and put it either to your personal portfolio or your company's, or both.

Investing isn't easy (from the rumors) but the theory goes: should your company lose profits from its operational revenues, ran out of cash, then having some investments at that point may be one of your (and your company's) life savers.

Besides, while the other company soars, no matter you also in good business or going bankrupt, you'll still get a part of their money. :-) Don't be too late to buy a share of Trizle before it surpasses GOOG [1]... ;-)

[1] http://www.google.co.id/url?q=http://finance.google.com/finance%3Fq%3DGOOG&sa=X&oi=stock&ct=title&usg=__yrXS4k8GqeKcEmaNxGkZaL4a3Dg=

Hendy Irawan

Posted @ 08:28 PM on March 07, 2007

To Andrew

Sorry to make this burden.

When you moderate my previous comment please edit it and change the URL I attached at the bottom to:

http://finance.google.com/finance?q=GOOG

Please delete this comment. Thank you and I apologize for the inconvenience. :-)

The Trizle Team

Posted @ 05:39 AM on March 09, 2007

Wow, Hendy! You're awesome man.

I gotta review your stuff before I give you a hearty reply when I get back tonight. Thanks for the thoughts, man!

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